Cryptocurrencies like bitcoin are based on blockchain technology.
What is blockchain, again? “Blockchain” refers to the encoded digital accounting or ledger that tracks any kind of transaction. These can range from a foreign investment — tracked in multiple places to avoid fraud or discrepancies — to a simple purchase of goods. (IBM offers a good primer.)
Blockchain is used across many industries to provide indisputable proof of transactions online.
The Goal: Cryptocurrency
One way to obtain bitcoins (other than being paid them for a transaction online) is to “mine” them.
“…it’s similar to gold mining in that the bitcoins exist in the protocol’s design (just as the gold exists underground), but they haven’t been brought out into the light yet (just as the gold hasn’t yet been dug up),” writes Noelle Acheson at Coindesk. “The bitcoin protocol stipulates that 21 million bitcoins will exist at some point. What ‘miners’ do is bring them out into the light, a few at a time.”
Bitcoins themselves are just snippets of code. When bitcoin became the first cryptocurrency, “the idea was to produce a means of exchange, independent of any central authority, that could be transferred electronically in a secure, verifiable and immutable way,” writes Acheson.
The Mining Process: a Real Power Drain
Since not everyone is going to run a mega-fast and smart computer to do the bitcoin mining themselves, often they farm out the task to cryptocurrency hubs. Hundreds if not thousands of computer processors run 24/7 trying to solve these complex mathematical problems.
So to mine, you need a lot of space and power. And you want them as cheap as possible since you’re going to suck up a TON of both.
“Mining is a very energy-intensive process; by one estimate, bitcoin requires 215 kilowatt-hours of energy for each transaction,” writes Ryan Vlastelica at MarketWatch. “According to Morgan Stanley data, the total energy consumption of the bitcoin network consumes as much electricity as 2 million U.S. homes.”
Finding Bitcoins Where You’d Least Expect
In three small towns in Montana, two of which were sites of major mining and logging operations, cryptocurrency farms are quietly setting up in formerly vacant warehouses on cheap electrical grids.
Once home to the nation’s largest copper mining industry, Butte has closed most of its earthworks.
“The city of Butte and its 30-odd thousand people, down from nearly 100,000 during WWI, is no longer the Richest Hill on Earth. Changes in technology and society, the depletion of immense orebodies, and the discovery of even more incredible deposits elsewhere have stolen that crown,” notes the Mining History Association.
But bitcoin has found Butte.
“CryptoWatt Mining LLC of Montana started operations on March 14 with 2,000 servers at a site south of Butte that was formally known as the Mike Mansfield Advanced Technology Center,” writes Kim Briggeman in the Missoulian.
By June 2018, that number had increased to 12,000 servers, and “the noise is formidable inside the buildings,” writes Susan Dunlap at The Montana Standard. “In at least one building, the wind from the fans can blow a visitor’s hard hat off.”
Located near the college town of Missoula, Bonner closed its lumber mill and saw its dam replaced by the EPA as a major Superfund site of potentially catastrophically contaminated water from milling chemicals. Now, a company mines bitcoins beside the Blackfoot River.
“Project Spokane’s operation at Bonner was the state’s first and one of the largest, if not the largest, in North America. It has 12,000 toaster-sized computer servers inside the immense old planer building alongside Highway 200, and 450 fans to keep them from overheating,” notes Briggeman.
Now the community is fighting the noise generated by all those computer cooling fans, which is creating quite the racket in the small town.
The company has fired back, noting that it is paying over $30,000 in property and business taxes so far this year. After they were denied access to TIF funds that normally would be used to abate pollution, the company is now looking to install different fans on their machines — to the tune of several hundred thousand dollars.
This will hopefully reduce the amount of noise they generate. Or the company might just relocate somewhere else.
On the Crow Reservation in southeast Montana, bitcoin miners court tribal coal mining operations to supply the juice to crypto farms.
“The amount of electricity already in use by these operations helps to explain why one might acquire its own power plant,” writes Matt Hudson at The Billings Gazette. “It would also allow for more control over the power supply.”
In fact, these crypto farms are feeding on electricity provided by Montana’s coal-fired power plants. Could bitcoin be the hungry consumer that coal is searching for?
Looking to the Future for Mining
In all forms, mining might be a real sock in the arm for communities where land and electricity are cheap.
“Montana needs to start focusing on the next generation of technology; that’s where the growth is economically,” says Dan Burrell, the owner and founder of CryptoWatt.Bitcoin mining might be a real sock in the arm for communities where land and electricity are cheap.Click To Tweet
Communities are still wary. Power suppliers don’t want to strain their operations too hard (or sell it off TOO cheap). City councils are putting a hold on crypto operations so that the bubble doesn’t burst in their backyards.
However, the temptation to fill vacant space and add jobs may prove more powerful than concerns over new technology. Butte’s operations are looking to employ up to 50 people full time, which is good news for the city.
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