Legislation to draw cryptocurrency banks to Wyoming may turn out to be great for billionaires in New York and San Francisco, but as I have written before, do little to create good paying jobs for Wyoming’s miners, construction workers and truck drivers.
Meanwhile, it seems our biggest opportunity is still in mining — bitcoin mining — where our wind, sunshine and clean coal confer massive advantages. Embracing that burgeoning industry will create jobs for those Wyoming families most affected by the reduction in coal production.
To make a bitcoin, a “miner” must first solve a puzzle called “proof of work.” This is not an intellectual exercise. The puzzle solves itself by running an algorithm that anyone can access. To mine, one needs a building, computer hardware and software, and lots of electricity.
I mean, lots of electricity.
If bitcoin were a country, it would use more energy than all of Argentina. And that consumption won’t decrease over time. This is because the fella that invented bitcoin designed the puzzles to get harder every 14 days, with the target to limit the number of bitcoins produced to one every 10 minutes — no matter how efficient the computers become.
As the difficulty of making the next bitcoin increases, so too does the required computing power. This design principle cannot change. Which is why every year, bitcoin mining uses more energy. As David Gerard, author of “Attack of the 50 Foot Blockchain,” explains, “Bitcoin is literally anti-efficient…bitcoin’s energy use, and hence its CO2 production, only spirals outwards.”
That explains how in 2017 bitcoin used about 7 terawatt-hours of power, while today that number is about 120 terawatt hours. All to make the same number of bitcoins.
The critical resource in mining bitcoins is cheap electricity, not computer smarts. Today nearly 75% of bitcoin mining is in China and Russia, where during the wet season miners rely on cheap hydroelectric power, and in the dry season by burning some of the world’s dirtiest and highest-polluting coal. In just the last three years the share of bitcoin production using Chinese coal has doubled, while bitcoin production in countries like Norway and Canada is becoming insignificant. Bitcoin is the gas-guzzling SUV of currencies.
That’s where Wyoming comes in.
There are only so many bitcoins that can be made per day. This means that every bitcoin made in Wyoming using our abundant wind, sunshine and low-sulfur coal is one less bitcoin made using higher-polluting energy sources elsewhere. Instead of using legislation to force coal plants to stay open, Wyoming could use those same plants to power bitcoin mining operations, reducing the world’s carbon footprint while preserving Wyoming jobs.
At the same time, the days of a computer geek staying up all night mining bitcoin on his or her couch are over. Bitcoins are produced in massive, air-conditioned buildings. Such facilities need to be constructed and maintained, creating good-paying jobs which can be in those counties most affected by the reduction in coal consumption.
In charting our economic future, we need to consider the confluence of growing markets, our competitive advantages, and our existing workforce. As it relates to cryptocurrency, we’ve made the mistake of trying to compete with cities like London and Boulder, hoping to attract bankers and software developers to our state. Not only are we at a disadvantage in those labor markets, but those jobs won’t do an out-of-work coal miner in Gillette one bit of good.
We’re not going to be able to regain our economic footing through lawsuits and regulations that try to stem the shift in world energy consumption. But if we’re smart and creative, which I know we can be, there are plenty of markets out there that we can win.
David Dodson is a resident of Wyoming and an entrepreneur who has helped create over 20,000 private sector jobs. In 2018 he was a candidate in the Republican Primary for Wyoming’s US Senate. He is on the faculty of the Stanford Graduate School of Business where he teaches courses on small business and entrepreneurship. He is a frequent guest on Fox Business and CNBC.