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Plattsburgh, New York, perches on the shores of the vast Lake Champlain on the US-Canada border. It’s a small city – population less than 20,000 – with clapboard houses and an impressive city hall. During the Cold War, the busy local air force base hosted B-52 bombers, F-111 fighters and air-refuelling tankers - but since the base closed in 1995, the town has relied on tourism and the small industrial businesses that fill the hangars and halls left unclaimed by the city airport. Back in 2016, the city seemed to be turning the corner with a $10 million development grant from the state’s governor to revitalise the weary downtown district. Then the bitcoin miners arrived.

“The resident hobbyists are no problem,” says Plattsburgh mayor Colin Read. “But when out of towners noticed cheap rates just as bitcoin prices began to spike they flocked here. Currently 15 per cent of our power supply is used by the large bitcoin operations – which pushes us over the city’s quota on cold winter days – meaning we have to buy power on the open market to meet demand, increasing costs by 30 to 50 per cent.”


Thanks to nearby Niagara Falls, Plattsburgh has a quota of cheap electricity available at a low rate - 2.7 cents/kwh for residential or five cents/kwh for industrial use – against a US average of seven or eight cents. The general rule of thumb for those wanting to compete with Chinese miners is to keep electricity costs at four cents or less, according to Shone Anstey, co-founder of Blockchain Intelligence Group. And so Plattsburgh’s prices have attracted cryptominers to the region since late 2016 and the city now hosts two large miners, six medium-sized operations and hundreds of hobbyists. This added nearly $10 to residents electricity bills for January.

Read, a former economist, says his main concern is that – unlike traditional industries or even server farms – the electricity demand of cryptomines don’t correspond to jobs or investment in the city. “Per MW of capacity, cryptominers create one one-hundredth of the jobs we would typically see from an industrial user with the same power needs,” he argues. “Typically, if a company moves into the area they’ll build a factory – that takes six months, offers jobs and invests them in the area. Cryptominers can come and go in a weekend – it’s the most footloose industry I’ve ever seen, the most energy intensive industry and the least labour intensive.”

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The city struck back in March, banning the launch of new bitcoin mining firms for 18 months and asking the local power regulator - the New York State Department of Public Service - for permission to raise electricity rates for existing miners. In May and June, the Department agreed - allowing Plattsburgh and neighbouring counties to impose extremely high-density load tariffs on bitcoin cryptocurrency miners.

“These companies are using extraordinary amounts of electricity – typically thousands of times more electricity than an average residential customer would use,” according to a spokesperson for the department. “The sheer amount of electricity being used is leading to higher costs for customers in small communities because of a limited supply of low-cost hydropower.” WIRED contacted the two largest cryptominers in the city - Plattsburgh BTC and cryptomining company Coinmint's subsidiary North Country Data Center for comment, but neither offered a response.


Plattsburgh was just the beginning. In spring, the People’s Bank of China started shutting off power to large server farms mining bitcoin while, in June, the regional government in the Canadian province of Québec blocked all new requests for hydroelectric power from cryptocurrency-mining operations. In Iceland, the finance minister has warned that cryptocurrency mining – which uses more power than the nation’s entire residential demand – could severely damage its economy. Is the libertarian dream of bitcoin as an unregulated global currency about to be destroyed by municipal electricity companies?

“This is a crucial moment for Bitcoin – and, by extension, the blockchain,” argues Steve Davies, blockchain leader at auditing firm PwC. “As the original cryptocurrency it is important that bitcoin endures and it’s damaging to the whole promise of blockchain if there is this sort of major hiccup. The strength and the weakness of a truly decentralised model is that when something like this comes up there is no a central body to regulate when things go wrong.”

Bitcoin miners use enormous amounts of electricity to power the kit engaged in a computational race to find a particular answer to an algorithm. The solution is so complicated that the best way to solve it is a series of guesses. The more guesses a computer makes, the better its chances of winning – but each guess uses computational power and thus electricity. The bitcoin network is designed to automatically adjust the difficulty of mining to ensure that one block is produced every ten minutes, no matter how much computing power there is on the network.

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According to Digiconomists Bitcoin Energy Consumption Index, the world’s bitcoin miners currently require 71.95 terawatt hours (THh) – roughly the same as Austria’s 72 TWh and ahead of Chile (71.7 TWh), the Czech Republic (67.3 TWh) and Switzerland (62.1 TWh). The amount of energy required to process a single bitcoin transaction could power 100,000 Visa card transactions.


In most communities, electricity costs are shared – tariffs are set on a balance of use, need and contribution. As the cryptocurrency boom continues, energy companies and local councils have started to resent the unprecedented imbalance. China’s attempts to regulate bitcoin miners through cutting off power supply represents a dramatic escalation. The country accounts for more than two-thirds of the world’s bitcoin mining processing power and is home to leading mining hardware companies like Beijing based Bitmain. Coal-rich regions like Xinjiang and Inner Mongolia welcomed cryptominers in a bid to transform their less-developed economies. Pan Goshang, vice governor of the Chinese Central Bank and China’s internet finance regulator, has asked local government agencies to ‘guide’ operations in making an orderly exit from the business using strict regulation of electricity.

The solution – at least in the US – may be for miners to purchase electricity directly from power stations. “Typically, when a miner makes an investment of millions of dollars in servers they want to keep them close,” says Aaron Tilton, president and CEO of Utah based energy company Powerblock, which operates in the unregulated wholesale – or bilateral contract – markets that allow two parties to sign direct electricity supply contracts with each other. “US miners want to mine in the US or Canada.”

While new bitcoin mining will end automatically at some point – to ensure the longevity of the cybercash, the mysterious bitcoin inventor Satoshi Nakamoto capped the number of Bitcoins that could be mined at 21 million of which some 17 million have been mined so far – there’s a host of rivals that employ the same techniques, including Cash, Ethereum, Dash, Litecoin, Monero and Steem. And while no new bitcoin will be mined once the cap is hit, the mining process will continue as people keep authenticating transactions for a fee.

“For this mechanism to survive and thrive it can’t continue consuming this level of electricity,” says Davies. “There are a lot of alternative frameworks that provide for the same level of functionality for less energy. There are lots of central banks around the world looking at working with cryptocurrency – this electricity tussle should help them decide what will work and what won’t work.”

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