Bitcoin mining site near Grundy Center uses more energy than town

Magnus Anderson, site manager for MiningStore, shows the components on April 19 for the company’s mining machines at the MiningStore bitcoin mining facility at Grundy Center. (Geoff Stellfox / The Gazette)

Magnus Anderson, site manager for MiningStore, poses for a portrait on April 19 at the MiningStore bitcoin mining facility at Grundy Center. (Geoff Stellfox / The Gazette)

Giant fans cool bitcoins mining machines on April 19 at the MiningStore bitcoin mining facilities at Grundy Center. (Geoff Stellfox / The Gazette)

Containers with bitcoin mining machines run next to an electrical substation on April 19 at the MiningStore bitcoin mining facility at Grundy Center. (Geoff Stellfox / The Gazette)

Containers with bitcoin mining machines run next to an electrical substation on April 19 at the MiningStore bitcoin mining facility at Grundy Center. (Geoff Stellfox / The Gazette)

Magnus Anderson, site manager for MiningStore, takes a tour of the company’s bitcoin mining facilities on April 19 at the MiningStore bitcoin mining facility at Grundy Center. (Geoff Stellfox / The Gazette)

GRUNDY CENTER – About 8 miles west of here is a white Quonset hut humming with the sound of industrial fans.

Unlike other rural outbuildings equipped with fans, this one does not house pigs. It is full of computers that spend all day and night working on complex mathematical problems that create bitcoin, the best known cryptocurrency.

“I knew there was a place out there,” said Jill Krausman, owner of Landmark Bistro at Grundy Center, who doesn’t know much about the site unless an employee stops for lunch. “I don’t have enough knowledge about it. It didn’t affect me.”

This little-described installation is one of the first, if not the only o first: large-scale cryptocurrency mining site in Iowa. But the company wants to expand with five more locations in eastern Iowa, taking advantage of open spaces, low property taxes and cheap electricity.

Cheap electricity is especially important because cryptographic mining uses a lot of juice. The Grundy County site uses more electricity than all of Grundy Center’s 2,800 residents.

Massive energy use by the industry at a time when the world is trying to curb climate change should be a red flag for Iowa services and residents, said Kerri Johannsen, director of the Iowa Environmental Council’s Energy Program.

“There’s a bigger fundamental question about why we need to use energy in the first place to create cryptocurrency,” he said.

How it works

Bitcoin was created in the late 2000s, after the Great Recession, as a way for people to send money directly to each other without a bank or a third party. Other cryptocurrencies followed, such as ethereum and litecoin.

Bitcoin transactions are verified and monitored by standalone computers that run a secure algorithm to resolve blocks of numbers representing groupings of transactions. These computers, or “miners,” run to solve each block, with payment being the next block of bitcoins, worth hundreds of thousands of dollars.

The Grundy County site is too small to handle blocks on its own, so miners work there as part of a mining group that pays a daily fee based on the amount of work, or “hash” that computers do, he explained. JP Baric, founder. and executive director of the MiningStore, which owns the site.

“Bitcoin is important to me because it is a monetary system that cannot be influenced by the government and cannot be changed,” he said.

JP Baric, founder and CEO of MiningStore, which has a bitcoin mining facility in Grundy County. (Photo sent)

Baric, 24, left the state of North Carolina in 2017 to move to Texas, first Houston, then Austin, which he calls a “cryptographic mining paradise.” With his parents and grandparents, Baric invested $ 1 million to start the MiningStore, which owns and operates the Grundy County site as its main facility.

Right now, each of the site’s 1,900 computers draws $ 17 a day, but that amount varies with the value of bitcoin. It was as high as $ 35 a day. But at current rates, the site earns about $ 32,000 a day. The light bill is more than $ 5,000 a day, Baric said.

Energy needs

Baric found the Iowa site through a Colorado economic development group that identifies areas with low energy costs.

“I’m not surprised they’re settling in Grundy County because they have very cheap energy there,” said Jim Martin-Schramm, a professor emeritus at Luther College who focuses on energy and climate policy.

At 4.05 cents per kilowatt-hour, the Grundy County REC has one of the cheapest industrial electricity in the state, according to files with the Iowa Utilities Board. The MiningStore bought an acre of land in 2019 right next to an electrical substation.

Magnus Anderson, manager of the MiningStore’s Grundy County site, explains how electricity moves through a 1,500-kilowatt underground transformer directly to the site. The company’s contract with the REC states that six months a year the MiningStore will agree to temporarily turn off electricity when there is a peak in electricity use, such as on hot summer days.

“It’s a cargo ship for the network,” he said of the mining site. “We use it (electricity) until everyone needs it.”

The site uses 6 megawatts of power during operation, which is 24/7 unless part of the system is under repair.

To put this in perspective, Luther College, with 1,800 students at Decorah, uses about 2 megawatts for most of the year, rising to 2.8 megawatts in the summer, Martin-Schramm said.

An average Iowa home uses about 11,000 kilowatt-hours of electricity a year, Johannsen said. The MiningStore uses about 54 million kilowatt-hours a year, or the equivalent of 4,900 homes.

“The entire county of Grundy in the census has 5,146 households,” he said. “We’re talking about 95 percent of Grundy County households.”

Energy source

So where does power come from?

The Grundy County REC is one of nine rural electric cooperatives and a Humboldt-based Corn Belt Power Cooperative that serves 41 counties in northern Iowa. Corn Belt owns the nine substations within the Grundy County REC, including the one that feeds the MiningStore.

Corn Belt’s energy mix in 2019 was about 50 percent coal, 18 percent purchased energy, 15 percent renewable energy and smaller parts of natural gas, hydroelectric and nuclear, according to the website of the cooperative.

Half a dozen wind turbines are visible from the MiningStore site, but those turbines are owned by MidAmerican Energy and do not feed the cryptographic mining facility, said REC CEO Mike Curtis.

The cooperative’s electricity sales to large commercial and industrial customers have more than doubled, from 16.5 million kilowatt-hours in 2018 to 36.9 million kilowatt-hours in 2020, which Curtis said is largely due to the MiningStore.

Crypto in the news

One of the ways the United States has tried to stop the war in Ukraine is by sanctioning Russia’s cryptocurrency industry, one of the largest in the world.

The U.S. Treasury fears Russia may take advantage of its oil reserves with cryptocurrency mining to circumvent sanctions, CNBC reported on April 22.

Ukraine is accepting donations for its war effort in 14 cryptocurrencies, which are easier to transfer as traditional banks have taken over, The Economist reported on April 5.

Cryptocurrency is not immune to theft. In February, the U.S. Department of Justice accused a couple of conspiring to launder about $ 5 billion, which was the proceeds of 119,754 bitcoins stolen from the Bitfinex platform in 2016, Forbes reported.

Future of cryptocurrencies

For bitcoin to become a viable currency around the world, some environmental groups say it should reduce its energy use.

A group called Change the Code Not the Climate says changing the “working test” needed to validate transactions to a “participation test,” meaning miners commit coins to verify transactions, would reduce energy use by a 99 percent, according to a March article. in the Guardian.

Energy use is not the only challenge.

“Because cryptocurrencies are too volatile to be used as real currency, people treat it as a kind of investment scheme,” wrote Jon von Tetzchner, co-founder and CEO of Vivaldi Technologies, in a January 13 blog post.

“The problem is that to get real money out of the system you have to find someone who is willing to buy the chips you have. so on “.

The same day The Gazette toured the Grundy County mining site, Baric showed it to Josh Terry, an Austin YouTuber whose channel, JoshTerryPlays, explores cryptocurrencies, game theory and other related topics, and has more than 5,000 subscribers.

Terry used social media to hire 1,000 people to invest $ 100 to be part of a “mining team” within the company, Baric said.

Bitcoin mining operations that want to grow must continue to add up to investments because computers cost thousands of dollars, Baric said. But it is not like a pyramid scheme that new investments are needed to integrate previous investments.

“People buy bitcoins because they believe more people are going to believe that bitcoin has value,” Baric said. “That’s why people put money in.”

Iowa expansion

Baric and his investors would like to open five more bitcoin mining sites in eastern Iowa: one in Grundy County, one in Black Hawk County, and three in Tama County.

The Grundy County Planning Board has recommended that the Board of Supervisors deny the request to change the zoning from agricultural to commercial to allow the center there. There will be a public hearing on May 9 at 9 a.m. at the Grundy County Courthouse in Grundy Center.

“With any type of expansion like this, there will be concerns that you take into account, such as environmental concerns or concerns about land,” said supervisor Lucas Halverson. “We are interested in seeing what the public has to say. We would love to know about Mr. Baric. No one has approached us directly about this company. We would love to learn the positives and negatives.”

Baric said he plans to be in sight.

The MiningStore pays property taxes, employs nine people full-time, and hires electricians to help with the site, Baric said. Business leaders are also looking to do more community outreach, such as conducting school visits and talking about bitcoins.

The Iowa Economic Development Authority does not offer incentives for cryptocurrency mining sites that want to open in Iowa. The agency does not track them either, said spokeswoman Kanan Kappelman.

That should change, said Johannsen of the Iowa Environmental Council.

“If there is a planned expansion, it would be something the state would do from the perspective of what we can expect in terms of (energy) load growth,” he said. “It’s not that the organization is anti-crypto or we have a particular reason for it. But if we’re going to use our energy resources more efficiently, is this really the most efficient use of energy resources?

This hangar is the hub of a Grundy County bitcoin mining operation owned by MiningStore. (Bailey Cichon / The Gazette)

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