A brutal heatwave bearing down on Texas has caused the majority of Bitcoin mining farms across the state to voluntarily power down their servers to alleviate grid pressure.
Record temperatures have pushed mercury upwards of 39°C (103°F) this week, greatly increasing the likelihood of mass blackouts across the Lone Star State as energy demand skyrockets.
“It is the right thing to do to be a good ‘grid citizen,’” Lee Bratcher, president of the Texas Blockchain Council, told The Verge.
Although given the soaring price of electricity, miners are likely driven by economic concerns too.
Texas was already battling with surging utility bills after ramping up natural gas exports when Russia’s Ukraine invasion sent global gas supplies into a spin.
Affected companies include Riot Blockchain, the mining giant whose 400 MW Whinstone facility is among North America’s largest.
A single #bitcoin company is helping provide enough energy to power 13,000 households! ????⚡️
When the heat wave ends, @RiotBlockchain will flip the switch and turn their machines back on and continue making a profit until the next time the energy grid needs to be stablized. https://t.co/A1b5YWjhRA
— Documenting Bitcoin ???? (@DocumentingBTC) July 10, 2022
Despite RIOT shares falling 4.75% in Wednesday’s pre-market trade, the NASDAQ-listed company struck an altruistic tone, boasting of providing enough capacity to power 13,000 Texas households after powering down.
Security drops, revenue rises
The widespread lights out caused a subsequent 2.6% hashrate drop across the entire Bitcoin network.
Hashrate refers to the amount of computing power being applied to network security; a higher hashrate makes Bitcoin less prone to attacks.
While a 2.6% drop might sound negligible, hashrate was already falling amid adverse market conditions.
On a month-on-month basis, Bitcoin network security has now fallen by over 11%.
Source: Blockchain.com
But with a smaller pool of miners snapping up the same amount of rewards, some active miners stand to gain from the Texas power down.
Data supplied by Blockchain.com shows that per-block rewards shot up over 16% on Tuesday July 12 alone.
As for the price of BTC, while no direct correlation can be drawn between the sweeping shut down and its 3.59% Wednesday plunge, a potential knock-on effect may hurt the market yet.
Texas miners could decide to hive off a large portion of their BTC reserves to cover costs, which would have a far greater price impact than any temporary hashrate drop.
Miners dig into Texas
Despite rising energy costs, Texas remains one of the cheapest US states for electricity.
Data supplied by Energybot shows an average price of $0.085 per kWh compared to a countrywide average of $0.104.
Only Vermont, Washington and Wisconsin are cheaper.
This, combined with vast swathes of unpopulated desert, made Texas a primary jurisdiction for mining fugitives fleeing China’s 2021 crackdown.
The US has emerged as the greatest contributor to Bitcoin’s hashrate per country by a wide margin.
Iceland also became a popular mining destination, owing to the abundance of cheap geothermal energy and a cold climate requiring less air conditioning, until a supply crunch caused the island to fall out out of favour with the industry.