No, it’s not because they will agree Bitcoin is a new and better form of money.
In fact, it won’t be altruism uniting bitterly divided left-wing and right-wing politicians in their advocacy for the technology. Rather, the reason Democrats and Republicans will embrace Bitcoin is because Bitcoin will create jobs – high-income jobs, particularly, in heartland and rural America.
If you’re new to Bitcoin, it might not be clear why this is the case. Understanding what Bitcoin achieves, why it matters, and why it differs from other cryptocurrencies remains difficult, and for some like myself, it’s been a career-long pursuit.
Simply put, Bitcoin requires energy. A truly decentralized monetary system, Bitcoin allows anyone in the world the opportunity to provide the computation it needs to update its global ledger of transactions.
A decade ago, this energy could be provided with a graphics card (like the one in your gaming computer) or on a laptop (like the one you might be reading this article on), and the Bitcoin you received wouldn’t have been worth much. In 2010, the 50 BTC you received for adding a block to the ledger might have netted you just $50 at most.
But that’s no longer the case. As Bitcoin has become more popular, it has become more valuable. Today, those who mine Bitcoin blocks receive 6.25 BTC worth $250,000, a figure that’s incentivizing advances in the business of mining Bitcoin.
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This has encouraged America’s entrepreneurs to do what they have always done, take advantage of opportunity to build profitable businesses. Yet, it’s becoming clear the kind of businesses Bitcoin entrepreneurs are creating are novel within our economy.
Just take a look at the following chart, which shows the distribution of new Bitcoin mining operations. It doesn’t take much to see this differs from the hiring profile of the average Silicon Valley unicorn or Wall Street upstart.
As the co-authors of a new book on Bitcoin policy, we’ve seen this transition firsthand, and we have to admit, it’s even surprised us to see the large number of public U.S. companies that are now mining Bitcoin and serving our energy grid.
In the following article, excerpted from our book, Bitcoin and the American Dream, we detail how Bitcoin is making economical new forms of energy production, revitalizing American towns, and incentivizing the use of formerly wasted energy.
Bitcoin Creates Jobs and Revitalizes Industry
In gritty, proud, blue-collar communities across middle America, the decline of domestic manufacturing is a major concern.
At the dawn of the 1980s, US manufacturing accounted for one-fifth of all American jobs. More significantly, it supported the livelihood of one-third of American men between the ages of 21 and 55 with a high school education or below.
Georgia, Indiana, Michigan, Minnesota, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, West Virginia, and Wisconsin were decimated, losing 5.5 million jobs since the start of the new millennium.
For too long, this has been a problem without answers for America’s Middle Class.
The struggle to replace these jobs has been an unrealized priority of presidents from both political parties. Politicians blame foreign competition, burdensome regulation, technical automation, and corporate outsourcing, but for Rust Belt Americans there has been too much talk with too little progress.
However, there is hope. Bitcoin is uniquely poised to address this problem. Its industry thrives in exactly the communities domestic manufacturers abandoned long ago.
Bitcoin Mining Is Big Business
Bitcoin mining is a process where large numbers of specialty computers are deployed to secure the monetary network. The business is not wholly different from large-scale data center operations. Miners generate the computations necessary for Bitcoin’s operation and security, and receive new money issued by the software. They secure transactions on a global public ledger, which anyone can verify.
Bitcoin miners consume megawatts of electricity. The power requirements are similar to auto factories or smelting plants. Hence, these businesses are finding the factories of the Rust Belt an attractive destination.
This is a notable trend. No other industry currently offers a competing vision for how to revive these decommissioned facilities.
Unlike today’s manufacturers, which are reducing jobs through specialization, Bitcoin miners have the need for a large variety of employees. Jobs are centered on equipment repair, and facilities management. They may also require expertise in construction, HVAC, and electrical engineering as well as finance, sales and marketing.
Jobs in the Bitcoin sector are also high-paying. The industry average for salaries is around $108,000 per year. That could go a long way in areas that badly need to replace manufacturing employment.
Rebuilding Manufacturing Towns
A great example of the revitalization Bitcoin mining can bring comes from the small town of Rockdale, Texas. Rockdale was hit hard when one of the nation’s top aluminum smelters, the town’s largest employer, shut down.
Today, the story couldn’t be more different.
This former manufacturing town had just the abundant energy Bitcoin mining facilities needed. Attracted by this infrastructure, Riot Blockchain, a publicly traded company, was inspired to build a brand-new 300-megawatt mining facility in the town.
Two hundred construction workers were dedicated to the revival effort, and as of 2021, Riot is producing 500 bitcoins per month ($22 million) at this facility.
Emboldened by this success, Riot is expanding further. It is building more facilities in Rockdale and creating even more local jobs as its business grows.
Promoting Renewable Energy
Offsetting excitement about job creation in rural America are concerns about the demand Bitcoin miners place on our vital national electrical grid. Environmental justice and climate change are concerns for voters, including many swing-state independents.
But the facts on Bitcoin mining do not match accusations leveled by critics.
Bitcoin is not dependent on how its energy is supplied. There is nothing about mining equipment that needs to use coal or burn oil. What’s more, miners are portable and can go directly to untapped green power sources. Say an American energy business wants to build a new facility to harness our untapped wind, hydro-electric, or solar energy, they can now mine Bitcoin to recoup costs prior to connecting to the grid.
A lot of renewable energy is not portable, so energy costs vary significantly based on location and timing. Wind energy outside Fargo is worth less than wind energy outside Chicago, and solar energy in the middle of the day is cheaper than in the morning.
Miners, however, are highly flexible. All miners need to sell Bitcoin to the global market is an internet connection and a supply of energy.
Already, this is having a powerful impact. A 2021 report shows that 57% of all American Bitcoin mining is conducted with sustainable power sources.
Bitcoin mining finances the construction of renewable energy production by providing a guaranteed consumer.
Once connected to the grid, miners can balance out the fluctuating energy supply from renewables like solar and wind. They are responsible consumers of energy, mining bitcoins during times of low demand, and serving the grid during times of peak demand. This ensures other electricity customers do not suffer rolling blackouts. Utilities call this a “controlled load resource,” and miners are a fast-responding, large-scale resource.
Both Bitcoin mining and gas turbines close the gap between supply and demand, but gas turbines do it by raising supply, whereas Bitcoin miners do it by reducing demand.
Mining finances the initial buildout of renewable energy production, ahead of connection to the grid, and once connected, it continues to finance the operations of the utility.
This addresses a key challenge for renewable energy: matching supply and demand.
Even more promising is how Bitcoin mining makes investing in stranded and renewable energies more cost effective for entrepreneurs and energy consumers.
Bitcoin miners can set up at the site of energy production, and use energy that would otherwise go wasted. This is called stranded energy, because there’s no economical way to get the energy to where it might be used.
One example of stranded energy is flare gas. Petroleum wells are located in remote rural areas, and there are often no pipelines that can transport this gas to the market. This means most producers vent or flare that gas into the atmosphere, adding pollution and wasting a potential source of energy.
Because Bitcoin miners are portable, they can run off of flare gas, and this has already become an industry of its own. There are companies that mine Bitcoin using shipping containers and tractor trailers filled with specialty equipment. These can pull into a remote oil field, even one surrounded by snow, farms or desert, and mine Bitcoin.
Dairy and pork farmers are even using animal waste, processing it on site and using the energy to mine Bitcoin, as an alternative to risking water table contamination in landfills. This naturally occurring methane product, which has high amounts of greenhouse gas emissions, is now being repurposed as fuel for mining. Utilizing an overlooked stranded resource, mining could benefit the balance sheets of America’s farmers, an industry with notoriously slim margins.
In short, with Bitcoin, there is now a viable use for America’s stranded energy. If aided by smart policy, it could bring revenue to rural communities, strengthening our energy grid and reducing pollution.
Alternatives to Bitcoin Mining
The environmental impact of Bitcoin mining is not it’s only popular misconception.
Many politicians want to encourage the development of alternative cryptocurrencies on the basis they are less energy reliant. But while these ambitions are well-intentioned, the investors backing these networks lack an understanding of Bitcoin’s design and the drawbacks that come from these modifications.
As outlined before in this book, Bitcoin is decentralized. No individual enjoys special privilege over any others. This is unlike our current financial system where there are distinct advantages for gatekeepers and the wealthy.
Key to Bitcoin’s decentralization is the free market competition for Bitcoin enabled by proof-of-work, the consensus method that requires Bitcoin mining. Proof-of-work allows anyone from anywhere in the world to mine Bitcoin, whether this is a farmer in rural Iowa or an ambitious stranded energy producer in remote Alaska.
Miners just have to follow the rules and provide computation.
Alternative models do away with this system, removing the need for energy, and they do not create jobs or stabilize our energy grid. These systems share many of the same pitfalls as our traditional financial system, only with new gatekeepers.
“Bitcoin and the American Dream” is now available in full on Amazon.