GRUNDY CENTER, Iowa “About eight miles west of here is a white Quonset hut humming to the sound of industrial fans.
Unlike other rural outbuildings equipped with fans, this one does not house pigs. It’s filled with computers that spend all day and night working on complex mathematical problems that create bitcoin, the most well-known cryptocurrency.
“I knew there was a place there,” said Jill Krausman, owner of Landmark Bistro at Grundy Center, who doesn’t know much about the site other than whether an employee stops there for lunch. . “I don’t know enough about it. It didn’t affect me.
The Cedar Rapids Gazette reports that this nondescript facility is one of the first – if not the first – large-scale cryptocurrency mining site in Iowa. But the company wants to expand with five more locations in eastern Iowa, capitalizing on large spaces, low property taxes and cheap electricity.
Cheap electricity is especially important because crypto mining uses a lot of juice. The Grundy County site uses more electricity than all residential customers in the Grundy center, or 2,800 residents combined.
The massive consumption of energy by industry at a time when the world is trying to curb climate change should be a wake-up call for utilities and residents of Iowa, said Kerri Johannsen, director of the energy program. of the Iowa Environmental Council.
“There is a larger fundamental question about why we need to use energy in the first place to create a cryptocurrency,” she said.
Bitcoin was created in the late 2000s, after the Great Recession, as a way for people to send money directly to each other without a bank or third party. Other cryptocurrencies, such as Ethereum and Litecoin, followed.
Bitcoin transactions are verified and monitored by independent computers running a secure algorithm to resolve blocks of numbers that represent groupings of transactions. These computers, or “miners,” race to solve each block, with the payment being the next block of bitcoins, which is worth hundreds of thousands of dollars.
The Grundy County site is too small to solve blocks on its own, so miners work there as part of a mining pool that pays a daily rate based on how much work, or “hash” the miners do. computers, explained JP Baric, founder and managing director of MiningStore, owner of the site.
“Bitcoin is important to me because it’s a monetary system that cannot be influenced by the government and cannot be changed,” he said.
Baric, 24, moved from the state of North Carolina in 2017 to Texas, first to Houston and then to Austin, which he calls a “crypto-mining paradise.” Along with his parents and grandparents, Baric invested $1 million to start the MiningStore, which owns and operates the Grundy County site as a flagship facility.
Currently, each of the site’s 1,900 computers is mining $17 a day, but that amount fluctuates depending on the value of bitcoin. It was as high as $35 a day. But at current rates, the site earns around $32,000 a day. The electric bill is over $5,000 a day, Baric said.
Baric discovered the Iowa site through a Colorado economic development group that identifies low-energy-cost areas.
“It doesn’t surprise me that they’re moving to Grundy County because they have very cheap energy there,” said Jim Martin-Schramm, a professor emeritus at Luther College who specializes in energy and climate policy.
At 4.05 cents per kilowatt hour, Grundy County REC has the cheapest industrial electricity in the state, according to filings with the Iowa Utilities Board. The MiningStore purchased an acre of land in 2019 right next to an electrical substation.
Magnus Anderson, Grundy County Site Manager at MiningStore, explains how electricity runs through an underground 1,500 kilowatt transformer directly to the site. The company’s contract with the REC states that six months out of the year, MiningStore will agree to temporarily shut down in the event of peak electricity consumption, such as on hot summer days.
“It’s a cargo ship for the grid,” he said of the mine site. “We use it (electricity) until everyone needs it.”
The site uses 6 megawatts of electricity during operation, which is 24 hours a day, 7 days a week, unless part of the system is being repaired.
To put that into perspective, Luther College, with 1,800 students, at Decorah, uses about 2 megawatts for most of the year, rising to 2.8 megawatts in the summer, Martin-Schramm said.
An average Iowa home uses about 11,000 kilowatt hours of electricity per year, Johannsen said. The MiningStore uses approximately 54 million kilowatt hours per year, or the equivalent of 4,900 homes.
“All of Grundy County in the census has 5,146 households,” she said. “We’re talking about 95% of Grundy County households.”
So where does the power come from?
Grundy County REC is one of nine rural electric cooperatives and one municipal cooperative that owns the Corn Belt Power Cooperative, based in Humboldt and serving 41 northern Iowa counties. Corn Belt owns Grundy County’s nine REC substations, including the one that supplies the MiningStore.
Corn Belt’s energy mix in 2019 was about 50% coal, 18% purchased electricity, 15% renewable energy and smaller shares of natural gas, hydroelectricity and nuclear, according to the website. of the cooperative.
Half a dozen wind turbines are visible from the MiningStore site, but those turbines are owned by MidAmerican Energy and do not power the crypto-mining facility, REC chief executive Mike Curtis said.
The co-op’s electricity sales to large commercial and industrial customers more than doubled from 16.5 million kilowatt hours in 2018 to 36.9 million kilowatt hours in 2020, which Curtis says is largely due to the MiningStore. .
For bitcoin to become a viable global currency, some environmental groups say it needs to reduce its energy consumption.
A group called Change the Code Not the Climate says changing the “proof of work” required to validate transactions to “proof of stake” — meaning miners pledge coins to verify transactions — would reduce the consumption of coins. 99% energy, according to a March article in the Guardian.
Energy consumption is not the only challenge.
“Since cryptocurrencies are too volatile to be used as real money, people treat them like some sort of investment plan,” Jon von Tetzchner, co-founder and CEO of Vivaldi Technologies, wrote in an article. January 13 blog post.
“The problem is that to extract real money from the system, you have to find someone willing to buy the tokens you hold. And that’s only likely to happen as long as they believe they can resell them to someone. ‘one who will pay them even more. So on.’
On the same day The Gazette visited the Grundy County mine site, Baric showed it to Josh Terry, an Austin-based YouTuber whose channel, JoshTerryPlays, explores cryptocurrency, game theory and more related topics, and has over 5,000 subscribers.
Terry used social media to recruit 1,000 people to invest $100 to be part of a “mining team” at the company, Baric said.
Bitcoin mining operations that want to grow need to keep adding investors because computers cost thousands of dollars, Baric said. But it’s not like in a pyramid scheme that new investors are needed to make previous investors whole.
“People buy bitcoin because they think more people will believe bitcoin has value,” Baric said. “That’s why people put money into it.”
Baric and his investors would like to open five more bitcoin mining sites in eastern Iowa: another in Grundy County, one in Black Hawk County, and three in Tama County.
The Grundy County Planning and Zoning Commission recommended the Board of Supervisors deny the application to change the zoning from agricultural to commercial to allow the center there. There will be a public hearing on May 9 at 9 a.m. at the Grundy County Courthouse in Grundy Center.
“With any sort of expansion like this, there will be concerns that you take into account, like environmental concerns or land concerns,” supervisor Lucas Halverson said. “We are interested to see what the public has to say. We would be delighted to hear from Mr. Baric ourselves. We were not approached directly by anyone by this company. We would love to hear the positives and negatives.
Baric said he plans to be at the hearing.
The MiningStore pays property taxes, employs nine full-time people and hires electricians to help out on site, Baric said. Business leaders are also looking to do more community outreach, like organizing school tours and talking about bitcoin.
The Iowa Economic Development Authority does not offer incentives for cryptocurrency mining sites to open in Iowa. The agency isn’t tracking them either, spokeswoman Kanan Kappelman said.
That should change, said Johannsen of the Iowa Environmental Council.
“If there is an expansion planned, it would be something that the state would have to control from the point of view of what we can expect in terms of (energy) load growth,” she said. . “It’s not that the organization is anti-crypto or that we have any particular reason to be. But if we want to use our energy resources as efficiently as possible, is that really the most efficient use of energy resources? »