Note: views are original and my own. Not investment advice.
This article examines the potential that the state of Texas has to become the most dominant player in the Bitcoin (BTC) mining space.
In 2021, after major countries including China, India, and other EU nations banned BTC mining, many companies moved to Texas.
Why Texas? — Because Texas has an abundant supply of cheap energy.
What is BTC mining?
Bitcoin “mining” is the process by which new BTC are entered into circulation. The process of “mining” is performed using sophisticated hardware and software that solve extremely complex, computational math problems. Bitcoin miners confirm new transactions and are critical maintaining the ledger of the blockchain. The first one to find the solution to the problem receives rewards in the form of BTC.
Success favors mining rigs consisting of extremely sophisticated hardware and software setups. Because mining is usually energy intensive, the cost of electricity is paramount to maintaining decent profit margins.
In order to understand BTC mining, the concept of hash rate comes into play. The hash rate is the total computational power being used by a proof-of-work cryptocurrency network to process transactions.
A high hashrate is an indicator of a network’s security, it is also an indicator of where the greatest mining operations are occurring.
According to the University of Cambridge Bitcoin Electricity Consumption Index, the nations which have the greatest proportions of the hashrate share:
United States (35.40%)
Kazakhstan (18.1%)
Russia (11.2%)
Canada (9.6%)
Ireland (4.7%)
Texas has 1/4 of all of the Bitcoin hashrate in all of the United States. This will be a huge for some of the major publicly traded companies in the Bitcoin mining space including Riot Blockchain, Marathon Digital, Hut8, and others.
Of note, Riot Blockchain currently operates a 400 MW facility out of Rockdale, Texas, and is developing a 265-acre site for a digital currency mining operation near Corsicana slated to open July 2023.
Fort Worth will become the first city in the United States to mine BTC.
How BTC mining can potentially play into the existing energy space:
The electrical grid in Texas (Texas Interconnection) is unique in that it is distinctly separate from the grid that powers the rest of the United States.
Operated by ERCOT, the organization supplies power to more than 25 million Texas customers and represents 90 percent of the state’s electric load.
However, aging infrastructure and a severe winter freeze resulted in a power failures that affected the entire state, claiming 246 lives in February 2021.
In an age of severe, prolonged, and unpredictable climate change, the uncertain energy demands placed on the power grid could be solved through Bitcoin.
With Houston being an energy hub, Austin being a tech startup hub, and with the Texas Blockchain Council, the future remains bright for the State of Texas to become a leader in the Bitcoin mining space.
About: Dr. Christopher Loo is a physician who became financially free at the age of 29, and retired early at the age of 38, as a result of making strategic investments after the 2008 financial crisis. A graduate of the MD-PhD program offered jointly through the Baylor College of Medicine and Department of Bioengineering at Rice University, he is the author of “How I Quit My Lucrative Career and Achieved Financial Freedom Using Real Estate”, and is the host of the Financial Freedom for Physicians Podcast. He is a regular contributor to KevinMD and has spoken about the importance of financial literacy for Passive Income MD, the White Coat Investor, Board Vitals, SEAK Non-Clinical Careers, SoMe Docs, Doximity, Medpage Today, FinCon, and other high-profile financial brands geared towards high-income professionals. He is passionate about the role that crypto, fintech, and innovation will play in enabling financial freedom, economic inclusion, access and opportunity for the entire world in the upcoming decades.