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Bitcoin is eating Quebec

Bitcoin is eating Quebec

A Canadian hydropower operation put out the welcome mat for bitcoin miners. Shortly thereafter, it was overrun.

At first glance, nothing looks particularly cutting-edge about this aging industrial park in Saint-­Hyacinthe, Quebec, about 60 miles east of Montreal. The air is thick with the smell of roasting cacao, which billows from a massive chocolate factory and seeps into tractor-­trailers and forgotten offices. Nearby, an audiovisual repair shop and an agricultural lab specializing in the detection of livestock pathogens vie for space with a massive disused dairy processing plant. Tucked behind all three sits a worn, low-slung building that previously served as a warehouse for a soup company and, before that, a factory producing diapers. You might think it, too, had since been forgotten, were it not for the plastic sheeting hinting at new construction inside and the small fleet of shining company cars stationed in the parking lot. But the biggest clue of all that something both new and decidedly high-tech is happening here can be heard while standing next to those cars: an omnipresent hum, audible well outside the building, created by thousands of computers, each one completing the same singular task again and again and again, day after day, without change or interruption.

These computers are the property of Bitfarms, one of North America’s largest cryptocurrency mining operations. Here in the once-abandoned factory, about 7,000 shoebox-size machines (as of April, but that’s expected to rise to 14,000 by July) sit tightly shelved in a single floor-to-ceiling row that bisects the building. On one side of the stacks, a mess of wires and routers exiting the rear of each computer sits exposed to the cold Canadian air. On the other, thousands of identical fans roar as they push hot air past a heap of empty cardboard boxes and into the otherwise vacant space. A handful of busy employees move between the two sides wearing thin T-shirts and jeans, their faces flushed. Even on a raw, gray day, the heat on the fan side is stifling.

These computers, often called “rigs,” are purpose-built. Able to withstand dramatic shifts in temperature and humidity, they are singularly programmed not only to perform just one computation trillions of times each second, but to repeat those computations around the clock and without pause. They are also energy hogs: the 7,000 in Saint-Hyacinthe alone consistently draw more energy than the Montreal Canadiens’ nearby hockey arena, even on a sold-out game night.

Globally, millions of these computers are in operation, part of the cryptocurrency boom that began in 2009. In the decade since the inception of Bitcoin, most of this mining work has occurred in countries like China and Romania, which offer plentiful electricity and little regulation. In 2016, Hydro-Québec announced a formal plan to woo data centers like those run by Microsoft and Amazon. Cryptocurrency miners also came calling, and began submitting proposals in September 2017. Interest from them soon became overwhelming, with more requests than the power company could accommodate. Were Quebec to accept even a fraction of them, the province could well become the new global hub of cryptocurrency mining. That has raised questions about how well Hydro-Québec’s grid can sustain these energy demands, particularly in the winter. Meanwhile, environmentalists and social-justice advocates worry about the ecological and cultural impact of this campaign. And that, in turn, raises difficult ethical questions about the real value of a wholly virtual currency.

Worthless puzzles

Cryptocurrencies are energy-intensive by their very nature. As decentralized ledger systems, of which Bitcoin is the largest, most rely for their security on an approach known as “proof of work.” About every 10 minutes, Bitcoin releases new currency in exchange for successfully solving computational problems that verify a “block” of transactions. Participants do this by converting the data representing those transactions into a sequence of code known as a “hash,” trying again and again until they arrive at one that meets certain criteria. And while it doesn’t require an immense degree of sophistication—insiders liken the process to guessing lottery numbers—it does require an immense quantity of wrong guesses.

“You’re essentially solving worthless puzzles that we cannot solve mathematically,” says Christian Catalini, associate professor of technological innovation at MIT and founder of the university’s Crypto­economics Lab. “You can only brute-force your way into it.” And the muscle behind that force comes in the form of electricity used to power miners’ computers.

Resource intensiveness is inherent in a decentralized system like Bitcoin’s, says Catalini, because it is based on a fundamental lack of trust between participants. Instead of being guaranteed by a central bank like, say, the US Federal Reserve, cryptocurrencies like Bitcoin combat fraud by making all transactions transparent and verifiable by all participants. Attempts to tamper with such a ledger must be made self-defeating.

“Basically, you’re placing an economic cost between a user and an attacker,” says Catalini. “If someone wants to subvert the system by faking a transaction, or revert a legitimate transaction, they would have to expend a tremendously high amount of energy and computation—to the point that no rational economic actor would do that, because the cost of doing an attack would be far greater than the benefit.”

But that means legitimate transactions must also expend extensive energy to prove their validity.

David Malone is a senior lecturer at Ireland’s Maynooth University, where he specializes in the mathematical modeling of network systems. The current global Bitcoin hash rate, which is to say the total number of mining computations, is approximately 25,000,000,000,000,000,000 per second, or 25 million terahashes a second. That’s an increase from 300,000 terahashes a second just four years ago, and the figure is expected to continue growing in the months and years to come. Factor in additional energy consumption required to cool the computers (they can’t function in temperatures over 40 °C), and Malone estimates that Bitcoin alone is consuming as much electricity as the entire nation of Ireland at any given moment. And while Bitcoin is the largest proof-of-work cryptocurrency, it’s far from the only game in town: at last count, there were nearly 1,500 in operation, each with its own energy demands.

Without a doubt, electricity is the single greatest expense for any mining operation. And so, to be profitable, farms must be able to source power on the cheap. That’s a big reason why China has led the mining boom: its electricity rates are as low as nine cents per kilowatt-hour. But increasing government regulation and concern that grid resources could run out have many miners there looking for other places to set up shop. Growing concerns about China’s contribution to climate change only hastened that exodus, as mining companies sought to promote their operations to potential investors as environmentally friendly.

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