PLATTSBURGH — Two years after cryptocurrency miners were pouring into this college town near the Canadian border, the boom in this exotic new high-tech industry hasn’t quite turned to bust. But it has calmed down, and a sense of reality has settled in.
One of the main players in the business left town amid a price dispute. But Plattsburgh residents have filled some of the gap, buying their own “mining” computers to seek out this new form of currency and help with their home heating bills.
Yes, you read that right: “There are dozens if not hundreds of small miners who use the excess heat to replace electric baseboard heaters and generate some revenue at the same time,” Plattsburgh Mayor Colin Read said in an email.
Because the powerful, purpose-built mining computers use lots of electricity and throw off heat, people have actually purchased them to perform double duty as radiators.
This appetite for electricity also explains why Plattsburgh and other North Country communities are so attractive to miners of Bitcoin and other forms of cryptocurrency. These towns have long-standing agreements with the New York Power Authority to get cheap hydroelectric power from the dams along the St. Lawrence River. Electricity is so cheap in Plattsburgh that homeowners use it for heating, which in most parts of the state would be prohibitive.
Big players in the world of cryptocurrency mining are always seeking the lowest-cost power. Some of them actually put their banks of computers in shipping containers, making them easy to move. The North County’s low energy prices were the reason that one of the first and biggest of these mining companies, Coinmint, came to Plattsburgh — and the cause of its decision to largely pull out amid a fight over electricity prices and a $1 million deposit the city wanted.
Late last year, Coinmint packed up most of its computers in container trailers and moved its operations 80 miles west to Massena, another North Country city with cheap, plentiful electricity and — another plus — empty buildings.
Cryptocurrency mining exploded through the growth of blockchain technology, in which participants make entries like deposits and withdrawals in an open online “ledger.” The transactions are recorded in “blocks” linked together through cryptography, or complex math equations that act as a kind of key.
Because of their distributed, open nature, blockchains have been described as a Wikipedia-like system in which members of the public can make entries.
Futurists see the system as a way to eventually record things like real estate sales, business contracts and other transactions in an efficient, paperless and transparent manner.
But blockchains are best known for the cryptocurrencies that live there. About a decade ago, a Japanese programmer known as Satoshi Nakamoto — possibly an alias — created the first and still best-known cryptocurrency, Bitcoin.
Because it can be exchanged on a blockchain, where the deposits and withdrawals are open for all to see and access, it’s viewed as a millennial kind of currency, free from governmental constraints or manipulation that would drive its value up or down.
The coins or tokens can be exchanged for cash, or in some instances used to buy goods and services.
There have since been several brands or variants of cryptocurrency — fancifully branded as Ethereum or Ripple — but Bitcoin remains the best known, the product that is to this new monetary system what Kleenex is to facial tissue.
Bitcoin miners use special computers to run exotic and lengthy math calculations to unravel the cryptology that link the blocks together. When they do so, they are rewarded with their own tokens or shares of Bitcoins.
Bitcoin made national headlines in late 2017 when the price of a coin jumped from about $900 to almost $20,000.
That created a frenzy, with newly formed companies scrambling to find places with low-cost power to host their computers.
“People started calling from all over the world,” recalled Jonathan Cote of Hydro-Quebec, the provincially owned utility that provides cheap electricity throughout Quebec, just across the border from Plattsburgh.
Little job impact
The mining posed some problems for the host communities.
For one thing, the industry was never seen as a major job creator, since the actual math wizards who program the computers can live anywhere. A Bitcoin mine needs only a small number of staffers to oversee and monitor the machines.
Coinmint, for example, is based in Puerto Rico. There are Bitcoin miners based in New York, California, Russia and China, where most of the computers are made.
Due to the lack of local jobs, the New York Power Authority two years ago rejected requests to sell directly to miners since they didn’t meet their requirements for job creation.
There were also worries that some miners would consume so much electricity that utilities might have to seek other, costlier forms of power if their hydro allocations were used up.
“That’s exactly what we wanted to avoid,” said Cote, who noted that Hydro-Quebec ended up limiting the number of miners they would sell to.
That’s also what happened in Plattsburgh in 2018, when miners used up so much cheap hydropower that residents saw their electric heating bills rise as the city’s utility had to buy extra power on the open spot market.
When some residents saw their costs jump, they complained to the city.
Plattsburgh responded with a moratorium on new miners, and the state Public Service Commission the same year allowed cities like Plattsburgh to charge a higher rate for Bitcoin miners if they go above a set threshold of power usage.
Worries about the impact on local ratepayers led to other changes, including a boost in the security deposit that Coinmint was charged.
For a while, it looked as if the industry had gone bust — but homeowners were still mining, and Coinmint remained in town until late 2019, when they moved out much of their equipment.
Coinmint officials couldn’t be reached for comment. But a filing with PSC sheds light on the company’s feud with Plattsburgh, which is ongoing. It notes that Coinmint’s local subsidiary had as of November already paid more than $4 million for electricity. It also put up a $250,000 security deposit.
And a news release in late 2019 noted that the excess charge was running 5.4 cents per or kilowatt hour (KWh), which is larger than the going rate of 2.1 cents per KWh.
For comparison, most rates in New York state can exceed 10 cents per KWh.
Across the border, Quebec’s cryptomining industry gets 160 megawatts (MW), compared to 80 MW for the province’s data centers — networked computer servers that store, process and distribute large amounts of information. Due to their large hunger for cheap power, data centers have been setting up shop in Quebec for 15 years, while miners have been there about two years.
Move to Massena
Despite their fight with Plattsburgh, Coinmint was welcomed in Massena. Due in part to the decades-long downsizing of the region’s aluminum plants and other industries, Massena has plenty of cheap excess hydropower.
Town Supervisor Steve O’Shaughnessy said the company’s arrival helped ensure that one of Alcoa’s unused aluminum smelters wouldn’t be torn down, which would have decimated the property tax base of the city and local school district.
“We worried they would demolish the building and lower the (taxable) value,” O’Shaughnessy said. The building generates more than $400,000 a year for the local schools, according to published reports.
Massena has seen what tax losses can do. When a former General Motors plant was removed a decade ago, the town’s school tax payments plunged from more than $224,000 to $18,000, according to earlier reports.
Cryptocurrency mining has also created some opportunities for local entrepreneurs.
A recent high school graduate from Plattsburgh has grown a business, Zafra LLC, in which he supplies the racks and other mining infrastructure needed to run the computers. He has already expanding to Illinois, converting a closed steel mill into a mining center.
“We’ve grown a lot,” founder Ryan Prienza said from Hennepin, Ill., about 50 miles north of Peoria, where he was setting up shop.
Cryptocurrency prices aren’t what they were in 2017, but they haven’t stayed depressed. As of Friday, Bitcoin was trading for $10,297 per coin, according to Coindesk, an online publication that follows the industry. That’s half of its 2017 high, but far above its lowest point.
And Bitcoin will likely be in the news this May, when the cryptocurrency will be “halved.” Bitcoin’s underlying code calls for its supply to be cut in half every four years — which means that computers will have to work twice as hard to earn the new coins.
At its outset, Bitcoin is programmed to only have 21 million coins; more than 18 million have already been mined. But as it is halved, it will take twice the computational power to mine a coin, explained David Crouse, an electrical engineering professor at Clarkson University who follows blockchain technology.
“You’ll see a new resurgence of interest,” Crouse said of the halving.
And that will ensure the continued need for ever-faster computers, and the power to run them.
email@example.com 518 454 5758 @RickKarlinTU