On the other side of the Cascades, a new kind of miner is striking gold. Our region could pay a stiff price.
Wenatchee, 148 miles east of Seattle, calls itself the “Apple Capital of the World.” But thanks to the inexpensive hydroelectric power from five massive dams on the Columbia River, it is becoming something else: A center of bitcoin mining.
As with almost everything else with so-called cryptocurrencies, reality is knocked sideways. A bitcoin isn’t a physical coin, but a complex code, validated by a blockchain, to turn it and copycat cryptocurrencies into a medium of exchange. And the “mines” around Wenatchee aren’t digging or employing large numbers of workers.
Instead, as reported in a fascinating Politico story, the mines can be anywhere — old buildings, a car wash, a shipping container. Anything that can contain the large numbers of computers needed to derive the complex, cryptocurrency-generating codes that compete for a coin in the decentralized system. And this takes lots of electricity, the cheaper the better. It attracted to the Wenatchee Valley aluminum smelters like Alcoa — whose decline was chronicled in the Seattle Times by Paul Roberts, author of the Politico piece. Later came data centers. Since 2013, this region has been among the few in the world to offer such a good deal to the digital miners.
The article details the near-bust, boom, tension with the towns and utilities, and the miners’ ever-greater need for more power. There are “rogue operators,” small operations without permits. And the appetite for greater scale keeps growing. A single cryptocurrency mine can consume as much power as one of Amazon Web Services’ colossal data centers.
By the end of 2018, one miner predicts, the region will have an astounding 300 megawatts of mining capacity. That’s the equivalent of the average use of 360,000 houses, according to the Lawrence Berkeley National Laboratory. Beyond that boast, Roberts writes, “Over the past 12 months or so, the three public utilities reportedly have received applications and inquiries for future power contracts that, were they all to be approved, could approach 2,000 megawatts—enough to consume two-thirds of the basin’s power output.”
The mighty Columbia — home to rich tribal cultures before the arrival of whites, the storied path of Lewis and Clark — is among the most dammed rivers. Among the consequences has been a decline in salmon. But these dams were built for the public good, not for what New York Times columnist and Nobel laureate economist Paul Krugman calls a Ponzi scheme.
What’s been happening across the Cascades from Seattle and Olympia requires more than local permits. It needs a state regulatory response before one of our most important renewable, clean-power resources is “mined” away.
Today’s Econ Haiku:
Ask Larry Kudlow
He’s wrong about everything
Just like his new boss