Texas, the second-largest state in the U.S. known for its southern hospitality, is embracing the droves of Bitcoin (BTC) miners that have recently flocked to the region. Following China’s crackdown on crypto mining that occurred in May, a number of Bitcoin mining companies have relocated to The Lone Star State to conduct business. 

This shouldn’t come as a surprise, though. Texas could very well be the ideal location for Bitcoin mining, due to obvious reasons such as its deregulated power grid, increasing renewable energy and political leaders that are publicly pro-crypto. Texas Governor Greg Abbot recently tweeted his excitement about how Texas is becoming the next “crypto leader,” with the recent addition of cryptocurrency kiosks available in grocery stores.

Yet, while all of these elements make Texas appealing to Bitcoin miners looking to set up shop, rural communities seeking economic growth have become another less discussed feature that is luring mining companies to Texas.

Texas counties welcome Bitcoin miners to boost economy

Chad Harris, chief executive officer of Whinstone Inc. – the operator of the largest crypto facility in North America that was recently acquired by Riot Blockchain – told Cointelegraph that his team came to Rockdale, Texas to build Whinstone after reading an article in Wired Magazine detailing the failure of China’s Bitmain mining facility in that very location in 2019:

“As soon as we came to Rockdale, we didn’t want to leave. We built Whinstone in 183 days. We started in January 2020 and turned on the facility in June 2020. We now have three buildings, 300 megawatts substations and are expanding 400 additional megawatts with four new buildings.”

While the abundance of wind and the deregulated power grid in Texas have helped the company grow, Harris also attributes a good deal of Whinstone’s success to Rockdale — a small city in Milam County with a population of close to 6,000 people.

And although it may not be obvious, Harris shared that the largest benefit for Whinstone, next to the cost of power in Texas, has been the state’s workforce. “Whinstone is unique from other mining companies because we have our own staff consisting of 120 employees, all with paid healthcare and 401k benefits." He added, "We also use Texas employee incentives and send our workers to Texas’ Temple College to train and get certified in areas like construction, human resources and more.”

Overall, Texas consists of 254 counties, ranging in population from more than 4 million people to some areas with just over 100 people. While the State of Texas provides a number of local development programs to boost the economy in certain communities, the influx of crypto mining companies is making a real impact.

For example, Milam Country Judge Steve Young told Cointelegraph that Whinstone has become an integral part of Rockdale and Milam County. He explained, “Whinstone has made a concentrated effort to be a part of the community by being involved in local activities.” Young further noted that Harris and the Whinstone founding team came to Milam County with little funds, but with courage and determination, they put together the largest Bitcoin mining operation in North America.

While Whinstone may have been one of the first Bitcoin mining facilities to have accomplished this, others are following suit. Peter Wall, CEO of Argo Blockchain, told Cointelegraph that Argo has broken ground on a highly anticipated renewable energy-focused 200-megawatt cryptocurrency mining facility in Dickens County, Texas.

Wall noted that Argo has initially been interested in mining crypto in West Texas due to the abundant nearby renewables, allowing Argo to have the ability to host renewable generation at the site. “As there is no local load, we’re improving the economics for renewable generators in the area and allowing for even more renewable development,” Wall commented.

Equally as important, Wall explained that Dickens County is a “Qualified Opportunity Zone,” meaning that the region is a distressed community experiencing difficult economic conditions. Wall elaborated:

“Argo’s operations in Dickens County will support the local community. We believe we can reinvigorate the community through the creation of jobs and will continue to explore opportunities to further support and develop the County while establishing Dickens County as a leader in redefining energy for a greener, cleaner, renewable future.”

According to Wall, establishing Argo’s mining operations will serve as a huge growth opportunity for both Argo and the community of Dickens County. Wall shared that Argo’s facility is expected to be completed in the first half of 2022. In addition to building in West Texas, Argo has also begun applying for an initial public offering in the United States.

Joining the ranks of Whinstone and Argo, Bitcoin Mining operations giant Core Scientific told Cointelegraph that it’s set to acquire Blockcap, a BTC mining company headquartered in Austin, Texas. Core Scientific is also set for a public listing on Nasdaq soon.

Darin Feinstein, co-founder of Core Scientific, a blockchain infrastructure company, told Cointelegraph that the company was drawn to Texas for all the practical reasons including the vast amounts of land, renewable energy and sustainable sources. However, the Texas community was also a major factor for Core Scientific to expand its operations to Texas.

Feinstein noted that Texas Governor Abbot has created a “world class business friendly environment that not only encourages entrepreneurialism and technology, but has been welcoming to the blockchain industry.” According to Feinstein, crypto friendly leaders like Governor Abbot are necessary to deploy capital behind.

This is an important point, considering the amount of capital the Bitcoin mining business requires. For example, the Digiconomist’s Bitcoin Energy Consumption Index estimated that one BItcoin transaction takes 1,720 kWh to complete, which is equivalent to almost 59 days of power for the average U.S. household. “A crypto mining facility requires a lot of capital and you have to make good choices when it comes to business partners and long-term growth,” said Harris.

With long-term success in mind, The Lone Star State’s electricity operator — the Electric Reliability Council of Texas, or ERCOT — has started to pay Whinstone for an agreement to stop buying power during heightened energy demand, which typically occurs during overly hot Texas summers. Harris explained:

“Historically, in the ERCOT market over the last several years, we could expect to power down between 50-72 times during June to September, based on grid conditions. Think of a Bitcoin miner as a virtual power plant, we literally can provide power (by not taking it) within 5 seconds of a click of a button. Where traditional generation suppliers can take hours to power up to support extra demand.”

Texas is welcoming, but the mining industry faces new challenges

Even with its welcoming environment and seemingly abundant natural resources, major Bitcoin mining companies currently coming to Texas are bound to face new challenges that have been heightened by the COVID-19 pandemic.

According to Harris, the biggest challenge the crypto mining industry currently faces is commodities shortages. “Commodities like transformers, wires and other parts are really difficult to acquire now. We were ahead of the game and started ordering supplies 6-8 months ago to expand Whinstone this summer. We ordered everything last October."

The Federal Reserve’s latest Beige Book survey found that businesses were blaming COVID-19 disruptions in production and supply chain logistics as the reason for commodities shortages and price spikes for things like agricultural products and building materials. “Delivery for products on pre-engineered buildings are coming in 32 weeks instead of 14 weeks. Big transformers in substations take 64 weeks to arrive. Every company that wants to build a crypto mining facility today will have a delivery material problem,” remarked Harris.

Related: A green revolution in crypto mining? Industry answers wake-up call

Although this is the case, it’s important to note that cryptocurrency mining is still largely decentralized. As such, major Bitcoin mining facilities are not the only players contributing to the Bitcoin hash rate. In fact, data shows that the hash rate distribution is increasingly in favor of small, anonymous miners.

Moreover, large mining companies have also benefited from China’s ban on Bitcoin mining. Sam Tabar, chief strategy officer at Bit Digital — a publicly-listed miner — told Cointelegraph that China’s Bitcoin mining ban resulted in an unintended gift to the United States. “Now, the mecca of Bitcoin generation has moved from China to North America, along with massive capital investment, energy innovation and jobs.”