Bitcoin mining in Texas is illuminating the inextricable link between crypto and fossil fuels

Hiding in Plain Site

Bitcoin mining in Texas is illuminating the inextricable link between crypto and fossil fuels

Cryptocurrencies have found a haven in the Lone Star State. (Pixabay/Pexels)

In 2018, Bitmain, a Chinese company that makes specialized computers for mining cryptocurrency, took an interest in the small town of Rockdale, Texas. Within a shuttered aluminum plant, the firm envisioned the world’s largest Bitcoin mining operation. Bitmain planned to invest half a billion dollars in the venture, promising 325,000 mining rigs consuming 500 megawatts of power and creating up to 600 new jobs for the Central Texas area. But in the winter of that year, Bitcoin tumbled in price to just above $3,000 per share (it had been $6,300 that fall, after peaking around $20,000 late the prior year), and the company was forced to lay off thousands of staff globally and dramatically scale back its Rockdale operation. It was a blow to the town of 5,800, which had lost a long-shot bid to be the home for Amazon’s HQ2 project and was desperate for business to save its languishing postindustrial economy. Amid a renewed Bitcoin boom, things are starting to look up again for Lone Star State cities like Rockdale.

Texan weather might not seem conducive to stacking thousands of electricity-hungry computers, but in many ways Texas provides an ideal landscape for cryptomining: A deregulated and decentralized power market, a low-regulation and low-tax environment, an active crypto lobby, abundant power from fossil and renewable sources, open land, disused factories. While other places, such as upstate New York, have had greater incredulity when it comes to setting up mining operations in outmoded power stations or factories (often requesting subsidies and tax abatements for vague promises of renewed employment), Texas has gone in the opposite direction, betting big on Bitcoin and other blockchain currencies. Now a proposed law, written with help from the Texas Blockchain Council, would enshrine virtual currencies in the state’s commercial code. If successful, Texas would join Wyoming, which enacted a similar law in 2019.

Since the Bitmain fiasco, cryptomining companies have been flocking to the arid locale in droves.

This past winter, the London-based Argo Blockchain announced plans to purchase a 320-acre plot in West Texas for a 200-megawatt mining facility. (Argo acquired a New York-based corporation that will give it access to up to 800 megawatts of electrical power in March.) HODL Ranch, a purportedly wind-powered computational center for Bitcoin mining and other GPU-driven applications, such as machine learning, is another West Texas operation. Run by the Lone Star State–based data-center company Skybox, the website promises customers an “UNMATCHED WEST TEXAS EXPERIENCE.” The Peter Thiel–backed Layer1 start-up launched its Texas enterprise last year. And just this spring, the U.S.–based Riot Blockchain acquired a 100-acre facility for $80 million cash plus $571 million in shares. (Riot has also been developing immersion cooling technology to fight the sweltering summer temperatures.) As of this writing, Bitcoin clocks in at just under $32,000, a number that has dropped more than $10,000 from yesterday and more than $20,000 since I began researching this article, before Elon Musk turned on crypto. One might laugh if it weren’t so apocalyptic.

It’s hard to overstate the climactic impact of cryptocurrency. Bitmain’s Rockdale facility alone would have demanded as much power as roughly 400,000 homes. Globally, Bitcoin mining uses more electricity than medium-size countries like Argentina and the Netherlands. And the specialized computers used by miners can’t be put to work for much else and rapidly become outmoded. In a sector that prioritizes computational speed and scale above all, e-waste is a ballooning issue.

Crypto’s comparability to Texas’s rapacious oil economy is so obvious that it exceeds analogy—companies have been connecting mining machines to oil wells, using the natural gas flares that go otherwise wasted to power them. According to Matt Lohstroh, the cofounder of one such East Texas–based firm, Giga Energy Solutions, flared natural gas is “some of the cheapest energy around.” Giga gets it for free or pays a “nominal” fee.

While the viral images of wired crypto mines feeding off fossil fuels from oil wells represent to many the absurd reality of the 2020s, Lohstroh sees it differently, telling me via email that “natural gas will continue to be flared whether we are in the picture or not,” although “it is by no means economical to start drilling for natural gas as the cost for drilling a well is ginormous.” But for data scientist and tech columnist Alex de Vries, using this wasted “excess” from oil drilling isn’t merely making the best of a bad situation. “I don’t see it as a good thing to make a byproduct of fossil fuel extraction more profitable or profitable at all,” de Vries has said of these projects. “It’s still producing emissions.”

Texan cryptomining has also laid bare vulnerabilities in Texas’s energy infrastructure. During the historic storm in February that forced nearly 70 percent of state residents and businesses into darkness, and cost more than 100 lives, some cryptomines had to go off-line as the power grid buckled. Others, though, sold electricity back at a profit.

As architectural theorist Keller Easterling argued in her 2014 book Extrastatecraft, infrastructure is not just hidden mediums between physical modes of transportation, utilities, or communication but also overlapping signals, systems, standards, laws, and management styles. “Far from hidden,” she writes, “infrastructure is now the overt point of contact and access between us all—the rules governing the space of everyday life.” For instance, when HODL advertises its proximity to a highway, an airport, and a wind farm alongside an image of its private substation, it is entangling prototypical infrastructure—transit and power lines—with that of the economic and legal systems.

The crypto landscape emerges not only from technological conditions but also from a specific regulatory regime; cryptomining exists within a context of capitalist globalization and asymmetrical labor rights and costs that has emptied some of the world’s factories—like those of Rockdale—to fill others. Its infrastructure is much larger, much more encompassing, than “mere” hundred-acre data centers and wind farms and oil wells.

Data’s manifestation as physical systems undermines the common conception of crypto—or the cloud or the internet—as intangible ideas. But these ideas exist through globe-snaring, ocean-crossing, world-warming, land-using, mineral-extracting material substrates. Cryptomining exposes an infrastructure of data, power, and exchange that reveals what money—crypto or conventional—really is: an abstraction. Cryptocurrency makes literal the fact that most glittery tech is merely the mystification and monetization of relatively unnovel modes of energy control. As Vicky Osterweil put it in “Money for Nothing,” a recent essay on NFT art for Real Life, “Without the extractivists, there is no way that the innovations of Silicon Valley, which amount to little more than privatization by way of electrification, would produce any profit.” When it comes to crypto, “mining” represents less an anachronistic metaphor than actuality. The digital is never in the end dematerialized, and these new currencies represent not a paradigm shift but a predictable next step in the capitalist race to the bottom. Down we keep digging.