While many have heard of Bitcoin, few understand Bitcoin mining and its relevance in the world. Bitcoin mining is a vibrant, growing, worldwide competitive data processing business that is here to stay, and Missouri sits on a golden opportunity to attract digital gold miners to the Show-Me State.
Bitcoin mining is thousands of specialized computers called ASICs, competing to find the solution to cryptographic hashes in a race repeated every 10 minutes. This process is called Proof of Work (PoW). The winner of each race gets to construct the block that holds all transactions on the network for that period, rewarded with Bitcoin. Every 10 minutes the Bitcoin network pays 6.25 Bitcoin valued at ~$190,000 USD to miners.
As Bitcoin’s hashing power continues to rise to new highs, Bitcoin miners seek low cost energy to add processing power to the network. Key to Bitcoin mining competitiveness is electricity cost, the only controllable variable expense. The Bitcoin network incentivizes miners to be good actors, requiring significant investment in hardware and electrical infrastructure used by machines for the Proof of Work process.
Electricity is the largest production expense, and data centers, with dozens, hundreds, sometimes thousands of computers, run continuously every day. Therein, lies opportunity for rural Missouri. Traditional data centers are usually in urban areas with high bandwidth network access to carry data. Bitcoin miners prioritize lowest energy rates wherever those opportunities exist. Not for profit, rural Missouri co-ops keep costs low and profit above operating costs is returned to members.
While rural Missouri enjoys low industrial electricity rates, there is opportunity for efficiency improvements. In winter, people run high energy devices like electric furnaces, adding demand to the electrical grid. This is called peak demand and happens only a few days of the year. Power generating plants must forecast this peak demand and cooperatives are charged for the year based on the previous year peak. Put simply, they are charged for electricity demand that only exists for a small portion of the year.
The golden opportunity is to invite Bitcoin miners to build data centers where these peak demand imbalances occur and sell them low-cost electricity. Attractive to miners, lowest energy costs will be optimized, adding an additional revenue stream to co-ops. When peaks happen, Bitcoin miners can switch off their computers on demand and immediately free up the electricity for other uses. When the peak event passes, the miners come back online.
Rural coops can recover power “lost’ because of peaks and rural Missouri Bitcoin miners can be competitive with lower energy costs. Mining opportunities create jobs, pour money into rural economies and tax revenues to the state. Utilizing power already purchased and wasted, Bitcoin mining can provide tremendous value to rural electric cooperatives throughout the state.
Jeff Shawan is a former Missouri State Representative and Bitcoin advocate. Roger Dixon has been mining bitcoin since 2017 and is CEO of Ozark Hosting, a Bitcoin mining company.