Towns in upstate New York move to regulate cryptocurrency mining

UPDATED: April 2, 2018 at 2:33 p.m.

For decades, the people of Plattsburgh have paid some of the cheapest electricity rates in the country. That changed in recent months, when a surge in bitcoin mining sent electric bills skyrocketing hundreds of dollars.

An agreement made in the 1950s guarantees the city a set amount of electricity from a massive hydroelectric dam on the St. Lawrence River. Bitcoin mining operations pushed Plattsburgh over its energy allotment in December and January, forcing the city to buy power on the open market, which is more expensive, said Dale Dowdle, a member of Plattsburgh’s Common Council.

In response, the council passed an 18-month ban on new cryptocurrency mines on March 15, citing safety concerns due to the large amounts of heat they produce. Villages and towns in northern New York are considering whether to pass similar measures that would stop cryptocurrency miners from taking advantage of low electricity rates.

Cryptocurrencies, such as bitcoin, are digital currencies designed to make transactions more secure through cryptography, the process of converting information to codes that are almost impossible to crack.

Bitcoin mining is the process by which transactions made with bitcoin are added to the public ledger, a shared but encrypted list of transactions. At any moment, thousands of mining computers, called rigs, are rushing to complete complicated calculations that add a transaction to the ledger. The miner whose rigs solve the problem first receives a certain amount of bitcoin as a reward.

Running mining rigs requires large amounts of electricity, which produce a lot of heat. Dowdle said the rigs get so hot that front doors of buildings are left open in the winter for heat to escape.

In Plattsburgh, bitcoin miners were using 10 percent of the city’s total 104-megawatt monthly allotment, Dowdle said.

In comparison, the average American household uses 897 kilowatts per month. That means Plattsburgh’s bitcoin mines use the same amount of electricity as about 8,441 households.

“There’s no opportunities for them (that) I know of to give back to the community in any way,” Dowdle said. “They don’t employ many people.”

David Bowman, who owns a bitcoin mine in Plattsburgh, said he and other cryptocurrency miners are working closely with the city to figure out how to prevent residents from paying more than they need to.

“The city council and the mayor seemed very willing to work with us, and they were very receptive to some of my friends who are local experts in blockchain and bitcoin,” Bowman said of a public hearing held by the council.

One of the solutions suggested by miners involves using the exhaust from mining machines to heat other buildings, such as the city’s hospital or the SUNY-Plattsburgh campus. Plattsburgh, though, doesn’t have the necessary infrastructure to transfer heat in that way, Dowdle said.

The city council has also proposed having miners shut down their operations on peak days to prevent going over the allotment.    

Bowman’s mine uses 26 kilowatts, an amount he considers “negligible” compared to Coinmint, a Puerto Rico-based mining company that operates next to a Family Dollar in a shopping center.

Coinmint is the largest mining operation in Plattsburgh, but it only employs six workers, according to a Jan. 30 memorandum from the New York Power Authority. North Country Data Center, a subsidiary of Coinmint, plans to invest $165 million into a facility in Massena just two hours from Plattsburgh.

Another company, Blockchain Industries, pulled out of a $600 million investment in Massena after New York state’s Public Service Commission ruled on March 15 that municipalities could charge higher electricity rates for cryptocurrency companies.

It’s unclear how that would help Plattsburgh’s situation. Even if commercial ratepayers such as Coinmint start paying a higher rate, all the city’s ratepayers would see their costs go up once the city goes over its allotment, Dowdle said.

The village of Rouses Point, about 30 minutes from Plattsburgh, also offers inexpensive electricity at 4.59 cents per kilowatt per hour. The village board announced it would stop reviewing applications for cryptocurrency mines only five days after Plattsburgh passed its moratorium.

Rouses Point only has one bitcoin mine with another coming soon, but both of those sites are smaller operations, said Village Administrator Steven Peters.

Peters said that, unlike Plattsburgh, Rouses Point’s power grid is limited in its ability to supply individual customers with a greater amount of electricity.

“We’ll get requests from people who want to set up multiple megawatt systems, and generally those requests fade out once we explain we don’t have any property you can do that with,” he said.

In the Adirondack Mountains, the small town of Lake Placid also has cheap power and an allotment.

Lake Placid Mayor Craig Randall said the village is still in the “preliminary research stages,” but he expects the village board to pass a policy similar to that of Plattsburgh or Rouses Point, in regard to cryptocurrency mines.

CORRECTIONS: In a previous version of this post, the location of Coinmint’s operations in Plattsburgh was misstated. The operations were held next to a Family Dollar. The energy unit used to describe the amount of energy David Bowman’s mine uses was also misstated. Bowman’s mine uses 26 kilowatts. Also, the amount of electricity Plattsburgh’s bitcoin mines use in comparison to American households was misstated. The mines use the same amount of electricity as about 8,441 households. The Daily Orange regrets these errors.