After grappling with a myriad of problems caused by a cryptocurrency mining frenzy, the former mayor of Plattsburgh, New York, questioned the economic benefits of miners settling in a region on Thursday.
“Counties and cities are drawn to all of these job creation promises that – if you look at this, and I have – just won’t happen,” Colin Read said on CNBC’s The Exchange.
“We had one of the largest Bitcoin operators in the world here and only created a handful of jobs,” said Read, who was elected in 2016 and served a four-year term. He is Professor of Economics and Finance at SUNY Plattsburgh.
Bitcoin mining is an energy-intensive process that generates new bitcoins when miners use powerful computers to solve arithmetic puzzles to verify transactions over the blockchain network.
Some politicians like Miami Mayor Francis Suarez have been pushing to lure bitcoin miners into their cities or states, especially after China recently took steps to restrict miners’ operations in the country.
But when a few years ago bitcoin miners flocked to Plattsburgh, a small town of about 19,000 people in upstate New York, to get cheap power from the Niagara River, it wasn’t long before the town saw a huge spike in the numbers Electricity prices.
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After the crypto miners began to consume the energy quota – which Read said was 1.9 cents per kilowatt at an hourly rate in the industry – he said it “put the ingredients in an absolute turmoil due to the much higher electricity costs” . Once that quota ran out, Read said Plattsburgh would have to pay the entire city bill for the difference.
In 2018, the city passed a moratorium on new commercial cryptocurrency mining operations after residents complained about their bills. The ban ended the following year.
“We only have to transport a certain amount of electricity,” Read told CNBC. “If you start using 10%, 15% of your supply as if we were switching to Bitcoin, it will very quickly increase prices everywhere for everyone and also put a lot of pressure on the network.”
Read said he was a fan of cryptocurrencies and called them “the wave of the future”. At the same time, he said he believes other places can learn from Plattsburgh’s experience with an influx of bitcoin miners.
“We have put in place a whole bunch of building and safety regulations,” Read said, highlighting a sustainability policy where some of the heat generated by the breakdown process is recycled for other purposes.
“Perhaps with good planning you can avoid some of the problems we had to solve ourselves,” said Read. He admitted that the rules enacted by the city had severely limited the interest of new companies in starting mining operations in Plattsburgh.
“Before that, we had a number of applicants every week trying to break our door down to get in,” he said.
With China’s recent restrictions on cryptocurrencies, Bitcoin mining could become easier and more profitable elsewhere. Crypto experts previously told CNBC that if more Bitcoin miners go offline after crackdown, the share of other miners on the Bitcoin network will increase, which could make mining even more lucrative. However, the value of Bitcoin has seen volatile changes over the past few months, which has affected miners’ profits.
“We will certainly see nations and central banks embarking on this, but it just has to be done right,” Read said, referring to the introduction of cryptocurrencies. “It’s not that we should do it, it’s how we should do it well, and we’re just not doing it very well yet.”