The Bitcoin Mining industry, made up of powerful companies, continues to cause controversy in the United States. Some organizations claim that these large companies hijacked the Texas power grid and demand that this activity be stopped.
Some Republican representatives are beginning to look askance at the business in that state and a new problem could be just around the corner. The curious thing about this is that it is the Republicans themselves who promote the mining business in their jurisdiction.
Bitcoin mining companies have enormous power in Texas
According to a report published by The Economist, the digital mining sector in Texas will face problems, even from Republican ranks. The state’s power grid is increasingly dependent on the operations of these companies and politicians and environmental organizations are exerting pressure.
During times of high consumption peaks, mining companies like Riot Platforms and others become energy providers for cities. They also tend to stop their operations in exchange for payment from the authorities. Basically, the local energy distributor, ERCOT, pays these firms to stop their operations.
Local Republican representatives denounce this situation of dependency. However, crypto leaders claim that it is a win-win relationship. As a result, paying mining companies for energy during times of high consumption is more profitable for authorities than generating it from scratch.
No one can match the prices derived from this agreement, Lee Bratcher of the Blockchain Council told the aforementioned media. For detractors, this reality must be addressed, since a particular industry cannot be the de facto arbiter of the electrical system. Thus, the Tech Transparency Project organization denounces that Bitcoin mining companies are holding the Texas electrical grid hostage.
A greater danger for Texas
As mentioned above, some Republican leaders echo these complaints and warn of the dangers of this relationship of dependency. For example, Lieutenant Governor Dan Patrick criticizes the mining sector for not producing enough jobs in relation to the magnitude of energy consumption.
Other representatives denounce that mechanisms should be explored to stop an industry with close ties to China. As can be seen, there is a storm brewing within the main enthusiasts of this industry, namely the Republican Party.
If a crackdown were to occur, it would be a radical ideological shift by the Republicans in relation to a business they swear to defend. In fact, the Republican presidential candidate, Donald Trump, recently reiterated that he will fight tirelessly to protect the right to mining. Likewise, the governor of Texas, Greg Abbot, has expressed himself as a faithful believer in this business.
It is important to remember that part of his gubernatorial campaign was funded with money donated by Cryptocurrency companies. While all this is going on, Bitcoin mining and AI companies are ramping up their data center projects in Texas.
The average cost of producing a BTC exceeds $73,000. Source: MacroMicro
A profitable business for mining companies
One thing that stands out in this reality in Texas is that mining companies’ business with the state is remarkably profitable. While the profitability of the digital mining sector is going through a bad moment, income from the sale or return of energy is increasing.
Since the halving last April, the mining business has suffered a 50% drop in profits. This reality has worsened with the poor performance of the Bitcoin price, which alternates between stagnation and strong volatility. Thus, the cost of producing a Bitcoin is far above the profits from its sale.
In the case of RIOT, the company receives a payment from ERCOT every time it stops its production and that energy goes to cities. This payment is demonstrably more profitable than continuing to operate in digital mining. By August 2023, for example, this company received $32 million in this agreement and only $8.6 million from the sale of BTC.
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