PLATTSBURGH | City officials are considering putting a moratorium on any new cryptocurrency mining operations for the next 18 months.
The push to temporarily curb the development of new commercial mining operations, often rooms packed with rows of computer boxes designed to solve complex equations, stems from concerns over what Mayor Colin Read characterizes as the large amount of electricity those operations use and what he sees as a possible health and safety issue.
“One operation can be roughly equivalent to placing 1,000 space heaters in a room of this size,” Read told The Sun, pointing to the Common Council chambers. “Do we have the proper ventilation?”
A public hearing on the proposal, which Read believes may be a first for an American city, is scheduled for March 15 at 5 p.m. at City Hall.
Municipal Lighting Department Manager Bill Treacy said the high electricity usage can prove costly for every city resident and business.
Treacy said that the city’s two registered commercial bitcoin operations can use up to 11.2 megawatts a month, or around 10-16 percent of the city’s total energy consumption.
That’s higher than what Georgia-Pacific, one of the city’s largest factories, uses in a month.
“We suspect there are also others we might not know about,” he told The Sun in a phone interview.
A single megawatt can power anywhere from 400-900 homes for a year, according to a report obtained through the federal Nuclear Regulatory Commission.
In the City of Plattsburgh, that level of energy consumption, paired with residents’ electric heat during the winter months, can mean higher energy bills for everyone, according to Treacy.
The city is guaranteed a fixed amount of electricity each month under a rate of $4.29 per megawatt hour.
When the city’s collective consumption runs over that fixed amount, the city has to purchase more at a rate of $36 per megawatt hour — a nearly 800 percent increase, a cost that’s spread out among every resident and business that uses city electricity.
In the winter, that can result in an average added fee of $30-40 on everyone’s bill, Treacy said.
This past December, the city had to purchase an additional 11 million kilowatt hours. That’s equivalent to 11,000 megawatt hours — or approximately $396,000 worth.
And in the following month, the city had to purchase an additional 16 million kilowatt hours.
“That’s a lot more than normal,” Treacy said.
The city didn’t have to purchase any additional power the last two Januarys, he said.
Read believed residents at times were forced to subsidize cryptocurrency miners.
“One bitcoin company can fill a large garage or a store in a mall with 10,000 processors, and consume about a quarter of the city’s power usage on a typical day,” he wrote on Facebook. “On a very cold or very hot day, they push our city over our power quota, and force the rest of us to briefly pay exorbitant electric rates until demand drops below our quota.
Read continued: “I have some ways to do this right, make the industry an asset for us all, and help our financial problems while we protect adjoining citizens, warm our residents and ensure our ratepayers are not subsidizing their operations by partnering with the industry in the best interests of city taxpayers.”
The city’s proposed local law putting a moratorium on any new commercial cryptocurrency mining operations is primarily based on the health and safety factor.
“It is the purpose of this local law to allow the City of Plattsburgh time to address thorough planning and legislation, the promotion of the protection, order, conduct, safety health and well-being of the residents of the city which are presented as heightened risks associated with commercial cryptocurrency mining operations,” read the proposal.
Plattsburgh BTC, a family-owned Plattsburgh-based mining operation, is run by David Bowman, a medical student.
Bowman called the heath and safety argument “completely ridiculous.”
“Aside from being reactionary and short-sighted, I think this is also from ‘fear of the unknown,’ but no, there aren’t issues with health and safety concerns regarding heat,” he said.
Bowman acknowledged mining does produce a lot of heat: he once used the boxes in his home to “basically work like space heaters that make money.”
But in commercial settings, large-scale heat dissipation is a major issue and vital to sustaining a mining operation.
“If you don’t, your machines are going to start failing left and right, so there is a lot of motivation to make sure the machines and the area is relatively cool,” he said.
“To not do so would obviously be destroying your investment.”
Read told the New York Times in a story published March 1 that he’d rather sell the city’s supply of cheap power to companies that employ large numbers of people.
Cryptocurrency mining operations often have few staff, where a factory in the city would employ hundreds of people.
“They hire a security guard,” Read told The New York Times of mining companies. “And a guy who comes when something breaks.”
Bowman said that comparing mining to manufacturing was “not a fair comparison at all.”
“They are apples and oranges. It would be more fair to compare us to data centers,” he said. “And besides, increased automation will continue to replace jobs in the future and likely reduce the number of people needed even in manufacturing.”
The local law would only apply to new commercial operations, and according to Read, won’t effect either of the two previously registered companies in city limits.
If enacted, the law will bar any new mining operations from registering in the city, and impose a fine of up to $1,000 per day of noncompliance.
Photo courtesy Flickr user Marco Verch under Creative Commons licensing
Cryptocurrency — often called bitcoin, though there are well over 40 other denominations — is a form of digital “money” that can be exchanged and used to make purchases.
“Mining” operations stationed all around the world, anyone from a single person to an established entity, collectively act as a ledger to record every transaction that uses cryptocurrency, essentially policing and maintaining the system.
Because cryptocurrency isn’t overseen by any one entity, its records are decentralized, and miners are essentially rewarded with bitcoin for verifying, making and keeping those transaction records. Only the fastest operating system — the computer that solves complex equations the quickest — receive bitcoin, and mining is progressively getting more difficult as the number of bitcoins released into the system grows.
A single bitcoin was valued at $11,198 as of March 3. Similar to gold, only a limited amount of bitcoin will ever be available. The cap on new bitcoin is expected to be 21 million.
Photo courtesy Flickr user Marko Ahtisaari under Creative Commons licensing
Bowman said that he’s aware many people may view mining cryptocurrency as a waste of resources, but he sees it as an avenue for innovation.
After all, people said the same thing at the dawn of the internet:
“How much electricity does the internet use today, and what’s the economic impact of the internet now?” he told The Sun. “Cryptocurrencies are in the very beginning of development and Plattsburgh could miss an opportunity to be on the ground floor and emerge as a leader in the sector.”
One of the primary intentions behind bitcoin — which was first launched just weeks after the fourth-largest investment bank in the country, Lehman Brothers, filed for bankruptcy in 2008 with a reported $613 billion in debt — was taking power away from large banks and giving it back to individuals in a very empowering way, he said.
Though he conceded that huge bitcoin operations may have moved this in another direction.
“One of the problems is the unintended centralization of bitcoin mining,” he said.
But that’s slowly being corrected with other cryptocurrencies, along with the excess electricity needed to generate them, he said.
“These currencies, often called ‘scrypt’ currencies, use much less electricity and can’t really be ran on specialized circuits, they require more general computing power,” he said. “They can be used for smart contracts or by giving that computing power to real life applications that require data processing, like running simulations. They are also much more difficult to physically build and that requires a fair amount of time a knowledge to do.”
Bowman’s operation isn’t one of the two commercial operations concerning city officials, according to Treacy.
Plattsburgh BTC only consumes around 26 kilowatt hours in a month, or around 0.0026 megawatts, on average.
“The people I pay to run my machines recently finished laying the lines for about 1.7 (megawatts) of power,” he told The Sun in an email. “All local people basically putting their earnings to grow it in a kind of co-op.”
Consumption hovering anywhere around 10 megawatts or higher would definitely be categorized as commercial.
“I think that would be considered above average for Plattsburgh, as that represents a sizable capital investment,” he wrote, referencing Coinmint, a large proposed mining operation in Massena.
“(Coinmint) is going to be about 15 (megawatts), that’s a $165 million build out.”