Bitcoin exploded into global consciousness in 2017 when it rose from under $1,000 to nearly $20,000. It then dropped out of the limelight almost as quickly as it plunged to below $4,000 and investors started doubting claims it would become the future's global currency.
Yet though bitcoin may have fallen off the front pages, the cryptocurrency itself and the underlying mining industry are alive and thriving. Bitcoin miners, who saw a surge of bankruptcies as prices plunge in 2018, are expected this year to return to profitability. Most of those miners will maximize their profits by constructing their heat producing mining computers in a cold climate and close to a cheap energy source. But one groundbreaking company is doing things differently in West Texas.
Layer1, a company backed by the billionaire Peter Theil, set up operations in one of the country's hottest cities, and now it's making money even when it's switched off computers. The key to the success of this company was its ability to turn its mining operations into large Bitcoin batteries which will sell power back to the grid when demand shocks occur. Texas will see a doubling of its peak usage of electricity in summer, which brings infrastructure under tremendous pressure in the state. Layer1 will turn off its mining operations during these peaks and let its 100mw load flow to the grid. The organization earns an annual fee amounting to about $17 million in exchange for this service.
That reduces the all-in power price of Layer1 by 75 per cent, which means that the business pays just 10 per cent of what residential customers will pay for electricity. Although this may sound like a huge cost to be charged as protection against demand spikes, it remains cheaper for grid operators than constructing a new power plant or adding a backup battery.
With an annual energy footprint slightly greater than Switzerland's, Bitcoin miners around the world can soon consider acting as a backup to seasonal fluctuations facing energy grids. Texas, which is both the largest oil producing state and the largest wind producing state in the United States, has plenty of cheap energy to exploit for miners. And with its big spikes in the demand for electricity in the summer, it seems that bitcoin miners may soon have to rethink where they set up shop.
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