How does Bitcoin mining keep the lights on? Some companies may have solutions

Picture that it’s June 30, 2021, Baltimore’s hottest day of the year at 99°F.

Imagine every house with AC cranking it to 65°. Suddenly, everything goes dark and the cool air cuts off from all the demand on the power grid. A second later, electricity returns because, somewhere, a major power consumer (like a factory, industrial plant or Bitcoin mine) shut off the power.

Also in 2021, China, which has more crypto mining activity than any country, decided to ban Bitcoin mining because it deemed the industry highly pollutive. This opened the door for the United States to become the top location for Bitcoin mining in the world. States like New York, Texas and Pennsylvania, as well as small towns like Coshocton, Ohio, eventually became places where industrial-size Bitcoin mines want to set up shop.

Bitcoin mining essentially involves computers doing intense math to validate transactions because the decentralized nature of cryptocurrencies needs a verification process to prevent bad actors from manipulating the currency. The process is called “proof of work.” The first person to solve the math equation and add their validated transactions to the overall ledger — that is, the blockchain — receives cryptocurrency as their reward.

“They use a lot of energy. That’s both a problem and a solution, in that they can also turn off very quickly if needed to”

The computational power needed to be first and reap the benefits is what drives Bitcoin mining energy demands to 132.48 terawatt-hours (TWh) annually across the world, according to estimates from the University of Cambridge that were reported by Business Insider. Those energy demands in the US, where 35.4% of Bitcoin mining takes place, translate to 0.85 pounds of carbon dioxide per kilowatt-hour (kWh) and 40 billion pounds of carbon dioxide.

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That energy usage is not lost on utility services companies like Baltimore’s CPower Energy Management, a company that acts as a liaison between Bitcoin miners and power companies.

“They use a lot of energy,” David Chernis, a CPower account executive, told Technical.ly. “That’s both a problem and a solution, in that they can also turn off very quickly if needed to.”

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CPower offers grid reliability and demand response services. On days over 90 degrees or during intense cold, there’s stress on the power grid; high-energy consumers need to curtail power consumption so the community at large continues to get power smoothly.

“If they were to turn off a traditional data center, imagine turning off Google. What’s going to happen? You’re going to see webpages go down,” said CEO Daniel Lawrence of Baltimore-based cryptocurrency software firm OBM Inc. “If you turn off a Bitcoin mine, the mine stops generating Bitcoin, but that’s about it. There’s no user impact.”

OBM Inc. created the crypto-mining management platform Foreman to help miners better manage the power consumption of their hundreds of devices that process transactions on the blockchain. This process aims to offset an environmental impact that enabled bans in countries like China, Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia and Bangladesh.

“If you turn off a Bitcoin mine, the mine stops generating Bitcoin, but that’s about it. There’s no user impact.”

The software allows companies like Standard Power, which builds and maintains enterprise-level Bitcoin mines for clients, to automate shutting down Bitcoin mines in five minutes (it used to take two hours to get this done manually).

In 2018, the company bought 125 acres of what used to be a paper mill to create a data center for bitcoin mining in Coshocton, a town roughly 78 miles northeast of Columbus. The WestRock Paper Mill had shut down in 2015, leaving hundreds jobless. It’s an age-old story of manufacturing leaving a small town and its residents out to dry. Places like Coshocton are hoping the new market of cryptocurrency infrastructure can revitalize the town. Coshocton’s Mayor Steve Mercer even boasted that refurbishing the plant into a cryptocurrency operation would lead to 100 jobs and $100 million of technological infrastructure.

“At that level of scale, we have a community development project, essentially,” said Maxim Serezhin, CEO of Standard Power.

What makes towns like Coshocton attractive to Bitcoin miners is the old industrial infrastructure, the proximity to natural resources (like Utica and Marcellus Shale gas formations) creating excess energy capacity for the state and the proximity to fiber data centers to reduce latency. In rural Pennsylvania, Bitcoin mines have set up shop using waste coal as fuel, sparking debates about issues ranging from the carbon footprint to the noise pollution from Bitcoin mine power generators using natural gas. These debates echo a larger conflict about what it takes to actually mine Bitcoin that has played out elsewhere as the recent crypto crash dovetailed with calls for more oversight.

OBM, CPower and Standard Power want to change the stigma around Bitcoin mining by offering a solution to energy concerns instead of a problem.

“It’s a partnership with the community where we give to the community the thing it needs most, at the time it needs it most, right at the time that the community needs power the most,” Serezhin said. “At those times, we are able to turn our business off and say, we can share the resource that we own with the community and our ability to do that fundamentally changes everything.”