Alex Owen spent a lot of time explaining to his parents and anyone interested about his growing mining business in rural Foley.
But instead of picks and shovels, Owen and his partners mine digital cash or cryptocurrencies – Bitcoin and Ether to be exact. The operation takes place inside a nondescript warehouse they recently rented for the sole purpose of running dozens of computers in hopes of adding to the so-called “blockchain.”
“A lot of people hear too much on TV that it’s being used in nefarious situations and different things like that,” said Owen, who co-owns Natural Block Chain, a growing crypto-mining venture with his partner, Rick Fletcher, CEO of Fletcher Petroleum in Fairhope.
“I try to explain to them that it’s not, and that big banks and retailers of all kinds are taking bitcoin,” Owen said. “That means we move on where everyone accepts it.”
While bitcoin and other digital currencies have been more commonly used terms over the past few years, “mining” it remains a somewhat newer and complicated enigma.
Mining is the process by which ordinary people with computers run specialized software to verify a cryptocurrency transaction.
For bitcoin miners, verification is handled by cracking a complicated mathematical code and adding a record of a bitcoin transaction to a shared online ledger, called the blockchain.
If the miner adds to the ledger, it can yield a lucrative profit: the standard reward is 6.25 bitcoins, which are placed in the miner’s “wallet”. One bitcoin on Friday was worth around $23,700.
Natural Block Chain is owned by Slush Pool, the oldest Bitcoin mining pool established in 2010, in which rewards are distributed among cooperating miners based on their “hash” power, or how powerful and fast their operation is. runs.
“The computer, itself, does (the calculations),” Owen said. “You just plug it in and it runs itself. You want to make sure you’ve entered the settings you like. We have linked with our pool and every time a pool finds a block, (the rewards) are distributed to you.
He said: “We receive bitcoins which are paid to us every day.”
Roller coaster complexity
Bitcoin – the leader in the cryptocurrency universe, founded in 2009 – has a broad reach which in recent years has included PayPal, AT&T and Overstock. Even those using the Starbucks app can dip into their crypto wallets to pay for their lattes or other specialty drinks.
Celebrities are in the game. Quarterback Tom Brady and his wife, model Gisele Bundchen, appeared in an ad touting cryptocurrency. Actor Matt Damon, in an ad for Crypto.com, said “fortune smiles on the brave”.
But rollercoaster values, an outright ban on cryptocurrencies in China and eight other countries, and restrictions in mining-rich areas like Texas, have sparked unwanted attention for cryptocurrencies and their miners. over the past year.
The energy-intensive nature of the mining process – not to mention the noise the operation creates – has also put next-gen currency in a negative light.
Bitcoin is also not a tangible commodity, which means that cryptocurrencies do not exist in physical form and their supply is not determined by a central bank.
It is also difficult to understand for people long accustomed to a centralized monetary system.
Goofy terminology is also part of it all: have you ever heard of “halving”? It is a crucial event for the demand for Bitcoin because when it occurs, it drops the reward for mining it. The next halving isn’t expected until 2024, with the last taking place in 2140 – the last year for Bitcoin mining.
For those who are tech-savvy and not afraid to use sophisticated hardware to solve complex calculations, the painstaking process of mining cryptocurrencies can be rewarding.
“It’s really hard for people to understand,” Owen said. “You cannot see a bitcoin other than on an electronic device. And the only way to send it is via phone or computer. It’s a newer, more convenient way to send money that’s safer.
He added, “You have all these miners installed all over the world. You cannot tamper with Bitcoin.
So what does Natural Block Chain do?
The mining process involves the use of unique computers – Owen estimates that each of their Bitcoin computers cost $10,000 each, and slightly more expensive for the graphics processing units that mine Ether – to verify the legitimacy of crypto transactions. -change.
Ether, which is part of the Ethereum network, is second in terms of cryptocurrency market capitalization behind only Bitcoin.
Cryptocurrency mining is only considered sporadically rewarding, but it is increasingly attracting investors looking for the potential reward.
The process is often compared to the modern equivalent of the California Gold Rush of the 1840s, during which tens of thousands of people flocked to the West Coast and engaged in an equally laborious task of seeking gold.
The California Gold Rush has also been criticized for being harmful to the environment. The same has also been said about cryptocurrency mining, due to its consumption on the power grid and the noise and heat emitted by computers.
For Natural Block Chain, timing and good luck could mitigate some of these effects.
Foley-based Riviera Utilities actually gave the deal the go-ahead.
“We found this warehouse in Foley that was easy for (Riviera Utilities) to supply us with power and there’s plenty of room to grow,” Owen said.
Scott Sligh, chief engineer at Riviera Utilities – which provides power to parts of Foley, Daphne, Magnolia Springs, Elberta and Lillian – said the site had “big transformers that weren’t doing anything” and that it was easy to help them get up and run.
“We usually look at the electrical plans (for a company) and size the transformers accordingly,” Sligh said. “These guys do it backwards. They asked what capacity to give this place and come back to the numbers themselves. They are aware of the capacity needs. Yes, they use a lot of energy, but they approached it the right way with us. »
Sligh said Natural Block Chain is using 5 megawatts of electricity, which is a “surplus” from the warehouse’s former tenant, meaning it’s currently not emitting more power than it was. used on the site before.
But more power should allow the growing number of machines to operate on a 24-hour cycle.
Natural Block Chain has 32 Bitcoin machines running around the clock, 24 hours a day. Because prices have dropped and the machines have become a bit cheaper, Natural Block Chain plans to add 18 more by next week. .
24 additional machines extract ether.
“They’re asking if we can give them 15 megawatts on this site,” Sligh said. “’Yes,’ was the answer. Our typical substation is 30 megawatts. We are talking about half a substation and it loads lightly. We can do this without straining our system.
One substation can power 1,200 to 1,500 homes, Sligh said.
Owen said the goal is to keep adding more machines. “Thousands,” he says. The first phase of the operation is to add 500.
“We were very lucky to find this particular space with the Transformers already there,” Owen said. “If you were to go out and look for a transformer of this size, it could take two years for one to become available. Riviera was able to help out and get that for us.
In June, Fletcher and Owen took a big step in mitigating the noise and heat produced inside the warehouse.
On a hot day in June, the two built a large “wind tunnel” out of foam board and hooked it up to their farm. The tunnel is intended to remove the excess hot air produced by the computers.
The tunnel also dampens the noise produced by the machinery to the point that it is not too noticeable outside the warehouse.
Additions are occasional. Criticisms of the industry’s huge carbon footprint and noise pollution in rural areas have attracted media attention in recent years.
In Texas, cryptocurrency mining was halted this summer because it was taxing the state’s power grid. The Lone Star State is one of the top five most popular states for crypto activity, while large-scale activity in Alabama has been rare.
“We are in no way trying to do anything negative for the environment,” Owen said. “We are also trying to take advantage of a cheaper electricity tariff.”
In Alabama, cryptocurrency mining has been mostly smaller-scale operations. The activity drew attention in May, when former Mobile Mayor Mike Dow announced that the GulfQuest Maritime Museum in downtown Mobile will house a future cryptocurrency mining operation.
Dow on Monday said the GulfQuest mining system was configured for 100 bitcoin miners. Installation should take place within the next 30 days.
“I think it was a good idea for them if they were trying to increase their income,” Owen said. “If you have the space and the ability to get electricity and if you have the capital to get it started, Bitcoin mining can be profitable.”
He added, “For us, we strongly believe that Bitcoin will be used in the future and will be there to take our world forward.”