Digital Gold: How a coastal Alabama partnership has led to a growing bitcoin mining operation

Alex Owen spent a lot of time explaining to his parents and anyone curious about his expanding mining business in rural Foley.

But instead of picks and shovels, Owen and his partners are mining digital cash or cryptocurrencies – Bitcoin and Ether to be exact. The operation takes place inside an anonymous warehouse that they have recently rented for the sole purpose of running dozens of computers in the hope of joining the so-called “block chain”.

“A lot of people hear too much on TV that it’s being used in nefarious situations and things like that,” said Owen, who is co-owner of Natural Block Chain, an expanding cryptocurrency firm with partner Rick Fletcher, CEO of Fletcher. Petroleum in Fairhope.

“I try to explain to them that it isn’t and that big banks and retailers of all kinds are taking Bitcoin,” Owen said. “That means we’re moving on to where everyone else accepts it.”

While Bitcoin and other digital currencies are more commonly used terms in recent years, the “mining” of it remains a somewhat newer and more complicated conundrum.

Mining is the process where 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 a blockchain.

If the miner adds to the ledger, he can bring profitable loot: the standard reward is 6.25 bitcoins, which is placed in the miner’s “wallet”. One bitcoin, as of Friday, is worth around $ 23,700.

Natural Block Chain belongs to Slush Pool, the oldest Bitcoin mining pool established in 2010, where rewards are divided among the miners who have collaborated based on their “hash” power, or the power and speed with which it is. running their operation.

“The computer itself is doing (the calculations),” Owen said. “You plug it in and it starts up on its own. You want to make sure you’ve entered the settings you like. We have connected to our pool and every time a pool finds a block, (the rewards) are distributed to you.

He said: “We get paid for bitcoins every single day.”

Complexity of the roller coaster

Bitcoin – the leader of the cryptocurrency universe, founded in 2009 – has an expanded reach which, in recent years, includes PayPal, AT&T and Overstock. Those who use the Starbucks app can also tap into their crypto wallets to pay for milk or other specialty drinks.

Celebrities are in action. Quarterback Tom Brady and his wife, supermodel Gisele Bundchen, appeared in an ad advertising cryptocurrency. Actor Matt Damon, in a commercial for Crypto.com, said that “luck favors the brave”.

But roller coaster values, an outright ban on cryptocurrencies in China and eight other countries, and restrictions in mining-rich areas like Texas have generated unwanted attention for cryptocurrencies and their miners over the past year.

The energy-intensive nature of the mining process – not to mention the noise created by the operation – has also put the next-generation currency in a negative light.

Bitcoins are also not a tangible product, which means that cryptocurrencies do not exist in physical form and its offer is not determined by a central bank.

It is also difficult to understand for people who have long been accustomed to a centralized monetary system.

Whimsical terminology is also part of it all: Ever heard of “halving”? This is a pivotal event for Bitcoin demand because, when it occurs, it knocks down the reward for mining. The next halving is not expected until 2024, with the latest in the year 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 meticulous cryptocurrency mining process can be rewarding.

“It’s really hard for people to understand,” Owen said. “You can’t see a Bitcoin except on an electronic device. And the only way to send it is via a phone or a computer. It’s a newer, more convenient way to send money that’s safer. “

He added: “All these miners were created all over the world. You can’t fake Bitcoin. “

Natural block chain

So what is Natural Block Chain doing?

The mining process involves the use of unique computers – Owen estimates that each of their Bitcoin computers costs $ 10,000 each and slightly more expensive for the graphics processing units they are mining for Ether – to verify the legitimacy of cryptocurrency transactions.

Ether, part of the Ethereum network, ranks second by market capitalization of cryptocurrencies behind only Bitcoin.

Cryptocurrency mining is only seen as sporadically rewarding, but it has growing appeal for investors looking for the potential reward.

The process is often compared to the modern equivalent of the 1840s California gold rush, in which tens of thousands of people flocked to the west coast and engaged in an equally painstaking task looking for gold.

The California gold rush has also been criticized for being harmful to the environment. The same has also been said for cryptocurrency mining, due to its drainage on the power grid and the noise and heat that computers emit.

For Natural Block Chain, timing and good luck could mitigate some of these effects.

The Riviera Utilities of Foley, in fact, has given the green light to the operation.

“We found this warehouse in Foley that was easy for (Riviera Utilities) to bring us electricity and has a lot of room to grow,” Owen said.

Riviera utility

Riviera Utilities in Foley, Ala. (John Sharp/jsharp@al.com).

Scott Sligh, chief engineer at Riviera Utilities – which supplies electricity to portions of Foley, Daphne, Magnolia Springs, Elberta and Lillian – said the site had “some great transformers out there that did nothing” and that it was easy to help them get up. and running.

“We typically look at electrical plans (for a company) and adapt to transformers,” Sligh said. “These guys do it backwards. They asked how much capacity to give at this point and go back to the numbers themselves. They are aware of the need for capacity. Yes, they are energy intensive, but with us they approached it the right way. “

Sligh said Natural Block Chain uses 5 megawatts of electricity, representing a “leftover” from the previous tenant of the warehouse, which means it does not currently emit more energy than was previously used at the site.

But more power is expected to keep the growing number of machines running on a 24-hour cycle.

Natural Block Chain has 32 Bitcoin machines constantly running, 24 hours a day. As prices have dropped and machines have gotten a little cheaper, Natural Block Chain plans to add 18 more within the next week.

Another 24 machines are mining Ether.

“They are asking if we can give them 15 megawatts at that site,” Sligh said. “’Yes’ was the answer. Our typical substation is 30 megawatts. We are talking about one half of a substation and that is lightly loading. We can do it without putting a strain on our system ”.

One substation can power 1,200 to 1,500 homes, Sligh said.

Owen said the goal is to keep adding more cars. “Thousands,” he said. The first phase of the operation involves adding 500.

“We were very lucky to find this particular space with the transformers already here,” Owen said. “If you were to look for a transformer of this size, it could take two years for one to become available. Riviera was able to help us and get it for us.

Mitigation issues

bitcoin mining

A step-down transformer inside the rural warehouse in Foley, Ala. The transformer provides the energy needed to run 32 bitcoin mining devices on a constant 24-hour cycle. (John Sharp/jsharp@al.com).

In June, Fletcher and Owen took a big step towards attenuating the noise and heat produced within the warehouse.

On a hot June day, the two built a large “wind tunnel” with foam panels and connected it to their business. The tunnel is intended to remove the excessive hot air produced by computers.

The tunnel also dampens the noise produced by the machines to the point of not being excessively perceptible outside the warehouse.

Additions are timely. Criticism of the industry’s huge carbon footprint and noise pollution in rural areas has captured media attention in recent years.

In Texas, cryptocurrency mining was halted this summer because it was taxing the state power grid. The Lone Star State is one of the five most popular states for crypto activity, while large-scale activity in Alabama has been scarce.

“We’re not trying to do anything bad for the environment in any way,” Owen said. “We are also trying to take advantage of a cheaper electricity tariff”.

In Alabama, cryptocurrency mining has mostly been small-scale operations. The business received attention in May, when former Mobile Mayor Mike Dow announced that the GulfQuest Maritime Museum in downtown Mobile will host a future cryptocurrency mining operation.

Dow said on Monday that the GulfQuest mining system has been set up for 100 bitcoin miners. Installation should take place within the next 30 days.

“I think it was a good idea for them if they are looking to increase revenue,” Owen said. “If you have the space and the ability to get energy, and if you have the capital to start, Bitcoin mining can be profitable.”

He added: “For us, we firmly believe that Bitcoin will be used in the future and will be available to our world in the future.”

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