Bitcoin mining and Texas: Solving energy crises while producing wealth
At this point, the reorganization of the global Bitcoin hashrate isn’t raising any eyebrows. Some Chinese miners have migrated. Others have yet to choose their destination. Among the possibilities, Texas takes the lead as the most attractive. What are the reasons for this?
Context: Texas and Bitcoin
Texas’ love for cryptocurrency is nothing new. Just a month ago, Governor Greg Abbott announced he had signed a law to acknowledge and protect cryptocurrency transactions. Not only that but he’s been very vocal on social media about his support and optimism about crypto. As early as the end of March, the head of the Lone Star State was already suggesting that he would implement crypto-development policies.
Moreover, in an effort to promote the institutionalization of digital currency, the Texas Department of Banking cleared state-chartered banks to provide custody for these assets.
Government officials have a clear intention to attract mining investments, and they have done a great job so far. Big players like Blockcap, Bitmain, Argo Blockchain, and Compute North have chosen Texas as their base and have already invested millions in setting up their mining operations.
However, mining companies have a fundamental factor besides the government’s friendly stance to make their decision: Texas’ unique energy market.
Texas deregulated energy market
The energy market in Texas is deregulated. This means that electricity is like any other good or commodity. Private companies can compete to produce, buy, and sell electricity and infrastructure. Power generators sell their wholesale electricity to retail suppliers, who in turn sell them to customers.
The scenario implies a couple of consequences: Firstly, it drives energy prices down, as customers have many options to choose from, forcing suppliers to lower their prices and stay competitive. Secondly, it motivates generators to reduce their costs. Also, the government offers incentives for those that choose to use solar electricity. As a consequence, generators often turn to renewables.
The downside: Texas energy crises
Despite driving prices down and encouraging green energy, this type of market has many setbacks.
First of all, Texas is the state that most power consumes in the country. You may think this is logical, as Texas, along with California, is one of the most populated and industrialized states. However, Texas consumes almost twice as much electricity as the Golden State.
Growing demand can lead to two possible outcomes: Either supply grows with it, generating more power as consumption increases, or blackouts start occurring. Furthermore, wind and solar energy generation fluctuates depending on the weather, increasing the possibility of power outages.
Just increase generation then, right? It’s not that easy. Texas often experiences extreme weather conditions — freezing cold in the winter and scorching heat in the summer — spiking demand to levels that render the power grid fragile. Rising generation to cover consumption during the most demanding seasons would leave the state with enormous amounts of unused energy the rest of the year. These would all go to waste and drive significant losses to the whole energy industry.
The unexpected yet perfectly fitting solution: Bitcoin mining
At Titan, we always say three factors drive hashrate migration and concentration on a particular geographical location:
- Proper infrastructure.
- Clean, cheap energy.
- Friendly government regulations.
Texas has all three of them, so it already is an attractive destination for miners. However, in this particular case, it also works the other way around: Bitcoin mining is also attractive for Texas.
We’ve just described how rising demand leads to power outages and why increasing generation is not an option. With Bitcoin in the equation, the situation changes radically.
Chad Everett Harris, Whinstone US CEO, explained how in the first Bitcoin Mining Council meeting: “Bitcoin mining facilities in Texas truly should be thought of as virtual power plants.” He explained that “similar to how generators ramp up power during high demand and need, a Bitcoin mining facility can actually ramp power down and create the same net benefit to the grid.”
The advantage Bitcoin mining has over almost every other industry is that it can halt operations in the blink of an eye. By merely flipping a switch, all the energy that Bitcoin mining consumes can return to the grid.
“Bitcoin mining facilities in Texas truly should be thought of as virtual power plants.”
Lee Bratcher, President of the Texas Blockchain Council, is convinced that “Bitcoin miners can help address overcapacity issues by creating more consistent demand during normal times. Then, during times of especially high demand, they can turn their machines off.”
Indeed, Bitcoin mining provides a customer for that excess energy we mentioned earlier during low consumption seasons. When demand spikes up again (and with it, energy prices), miners can switch machines off and re-sell the energy they purchased back into the grid while providing electrical support to Texan households that are not as price-sensitive as Bitcoin miners.
More than just a monetary network
Bitcoin network’s flexibility and ease of use were already great features for users, but they turned out to be even greater for unexpected purposes.
It’s doubtful that Satoshi Nakamoto had “Solving energetic inefficiencies” on his checklist when he came up with Bitcoin mining, but here we are. Almost involuntarily, proof-of-work can rebalance unregulated power grids like Texas’ and absorb waste and excess energy while providing wealth at the same time.
If win-win situations are uncommon in today’s global economy, a win-win-win situation is Halley’s Comet-level rare. However, Bitcoin managed to do it. Bitcoin mining in Texas helps miners become more profitable and efficient thanks to friendly regulations and cheap energy. It helps power generators by providing them with a stable, all-year-long customer. And it helps the Texan people, balancing the power grid to prevent outages and blackouts, and stimulating the use of renewable sources, reducing air and ground pollution.
Titan’s vision: Bitcoin mining in every household
Renewable energy is becoming cheaper with each passing day. Consequently, it’s common to see homeowners installing solar panels on their roofs, looking to reduce costs and produce their own energy. Furthermore, they can sell unused power back to the grid for credits, just like Bitcoin miners do.
But what happens when everyone is creating excess energy? Balancing the power grid is critical for energetic stability. With more renewable energy producers joining the grid, we need extensive coordination to maintain balance. Production must always equal demand. Otherwise, the grid either overloads or falls short.
So what is Titan’s view for the future? We believe that instead of selling excess energy back to the grid, Bitcoin mining could take up any amount of surplus power generation and provide long-lasting credits to purchase power during low generation periods.
Just like it happens in Texas right now, Bitcoin could balance power grids worldwide, absorbing excess energy during low demand times, using otherwise wasted power to produce hashrate. Zero loss, zero downtime, complete balance. A fully functional, global “hashrate grid.”
In that scenario, only one thing is missing: If households use excess energy to produce hashpower, what happens during high energy demand times? We would need a distribution layer that enables everyone to sell, buy, and transfer that hashpower.
That is where Titan Protocol comes in. A decentralized, smart-contract network that enables hashrate re-routing, allowing miners to sell their hashrate and buyers to redirect it as they please.
Decoupling hashpower control from production, Titan aims for greater decentralization, which equals greater security and stability for the “hashrate grid.” In the future we envision, anyone can set up a mining operation, no matter how small, and contribute to the Bitcoin network and the global power grid while creating wealth.
Sounds interesting? Read more about Titan’s vision here.
Titan is actively working to optimize mining and make proof-of-work cryptocurrencies more accessible and democratic. If you liked this story, make sure to subscribe to our blog and sign up for our weekly newsletter. You can also visit our social media through the links below. We’ll be glad to have you!