
Bitcoin backlash as ‘miners’ stress power grids in Central Washington - danso
https://www.seattletimes.com/business/bitcoin-backlash-as-miners-suck-up-electricity-stress-power-grids-in-central-washington/
======
mindfulplay
It's hard to explain the levels of stupidity in this.

\- people trading 'coins' in the same way Pokemon / WWF kids trade cards.

\- thinking this is actually a long-term 'investment' strategy (well its
idiots trading with each other ...)

\- to top it off, siphoning off electricity and giving a load of shitty
excuses 'it could be like Seattle's.

I don't know where to begin with this Bitcoin crap; it's gotten crazy that so
many naive people are into this plopping their hard-earned money into a well-
functioning sinkhole.

~~~
josu
This comment applies to any revolutionary technology. Let's substitute
cryptocurrencies with "the internet" in 1999:

\- people trading 'stocks' in the same way Pokemon / WWF kids trade cards.

\- thinking this is actually a long-term 'investment' strategy (well its
idiots trading with each other ...)

\- to top it off, siphoning off capital and giving a load of shitty excuses
'it could be like Detroit at the beginning of the 20th century.

Many people were left holding pets.com stocks, but others were left holding
Amazon stocks.

Most of the things that you point out are truisms that the people that have
been in the bitcoin space for a few years also see. I would suggest you make
an effort, and try to see through all the bullshit projects or outright scams,
and you will see that there is real value in what bitcoin and a handful of
other projects are trying to build. If you want to avoid the current noise,
read what cypherpunks were writing about in 1998:
[http://cypherpunks.venona.com/date/1998/12/msg00203.html](http://cypherpunks.venona.com/date/1998/12/msg00203.html)

~~~
acdha
The difference is that the Internet had clear useful applications at that
point and billions of dollars in real business (not just speculation) was
happening annually. Yes, there were plenty VC misfires with no plausible path
to profitability — my favorite was cement.com, with free shipping! — but there
were tons of existing businesses finding significant value from it and new
companies like Amazon, eBay, Travelocity, etc. who were making money on each
sale. The daytraders were indeed chasing bad deals but anyone who paid
attention to basic market fundamentals wasn't buying those stocks[1].

10 years into Bitcoin there's still no reason for someone to buy in other than
speculation. It's not competitive as a currency and the current “store of
value” pivot is undercut by the lack of fundamentals. One particular reason
why that comparison doesn't work is that if you had, say, bought AMZN in 1997
even if the stock didn't do great you owned part of a profitable book seller
which could carry on just fine even if it never saw rapid growth. Bitcoin
doesn't have any value other than its current popularity so there's no floor
on the losses if people switch to something else.

1\. I actually sat in on some calls with Pets.com around the time one of our
clients was thinking about buying them and it was quickly evident that they
had no strategy beyond cashing out at the IPO.

~~~
beagle3
Bitcoin, at this point in time (and for the last two years or so, though not
really for the preceding eight) is digital gold. It's a version of gold that,
with proper preparation, can be carried inside your head when you move from
place to place, or transferred by voice or text message.

Most people in the west have about the same use for gold[0] and bitcoin -
speculation, gamble, "investment". However, people of Venezuela, Turkey,
Libya, Iran and even Russia have a lot of use for gold (and bitcoin): A store
of value they can take with them if they leave. And unlike gold, bitcoin can
be made confiscation proof. The official currencies of these places have more
volatility and less stability than BTC.

[0] Gold does have ornamental and industrial use, but that's NOT why people
buy it, and not why it is valued the way it is. The "investment" claims on
gold outnumbers the industrial/ornamental claims by some 3 or 4 orders of
magnitude.

~~~
bradleyjg
Everything you say about bitcoin is equally true of a bank account in pounds
in London. There’s zero reason in principle that it is any harder or easier
for an oppressive government to prevent capital outflows to bitcoin than to
British bank accounts. At very best there’s a temporary advantage in bitcoin’s
favor as oppressive governments take time to understand and lock down the
newer avenues for evading their controls.

~~~
beagle3
I started with "at this point in time". At this point in time, it is easy for
a person not suspected of crime (or otherwise being on the wrong side of the
government) to move their british pounds from their London account to e.g. one
in New York or Switzerland, convert them to USD or CHF either before or after
the transfer, and generally hedge against government by betting on other
things.

At this point in time, the same is certainly not true for the people of Iran
or Venezuela, where there are capital controls, and the only way to get a
different currency is on the black market. Effectively, compared to the west,
everyone there is "on the wrong side of the government".

> There’s zero reason in principle that it is any harder or easier for an
> oppressive government to prevent capital outflows to bitcoin than to British
> bank accounts.

In principle that's true, but that just makes bitcoin's raison d'etre more
evident. _At this point in time_ it does not seem to be needed, but it _may_
become needed with less than a day's notice. This has happened to the people
of Cyprus (a "western" European country). Even the US confiscated gold in the
1930's.

History does not repeat, but it rhymes. Bitcoin is a hedge; it's far from
perfect, it has a lot of drawbacks, but _at this point in time_ , it is more
useful than gold for people who might have to flee.

~~~
bradleyjg
You seemed to have missed the point. There’s nothing to stop an oppressive
government from preventing its people from buying bitcoin the same as they
prevent them from buying pounds and wiring them to British banks.

The dark hints about how any government may become oppressive is a red
herring. The issue isn’t that bitcoin isn’t needed because my government isn’t
currently oppressive, it’s that bitcoin’s utility in the face of an oppressive
government is wildly exaggerated.

You are attributing magic powers to bitcoins that they do not have. Black
markets are not invulnerable to government crackdowns because they are
digital. On the contrary, digital networks are in many ways easier to control
centrally than distributed underground physical networks.

~~~
acdha
That area of magical thinking just amazes me: look at the Chinese Great
Firewall or Erdogan’s Turkey to see how this would actually work. People get
arrested for visiting websites or having the wrong app on their phone and
there’s no reason to believe that capacity wouldn’t be used the same way.

This especially bad for Bitcoin since unlike cash they’d get your full history
and quickly deanonymize everyone you know.

~~~
beagle3
This area of magical thinking just amazes me: Look at the recent two years!
The big run up in bitcoin value has happened _because_ people were moving
money out of China despite capital controls put in place.

Is it still as easy? Probably not, I'm not up to date. Could people who have
done that get in trouble for that in the future (thanks to bitcoins long
memory)? possibly, if their opsec wasn't top notch and even if it was top-
notch but they were unlucky enough to use a mixer that cooperates with the
chinese government.

And Erdogan's turkey is also a great example; While the "coup" was happening,
it was possible, even easy, to move money out of the country using bitcoin
(not so fiat money). Quite a few people left the country afterwards, and many
were arrested regardless of phone app. I don't know how many of them took
their wealth with them in bitcoin, but they had much easier time doing that
than any other way. _at the time_

~~~
acdha
That’s just telling us that it’s easier to get away with something before the
authorities take it seriously. Once something grows big enough that window
closes, which means it’s not much of a selling point for mainstream adoption.

~~~
beagle3
You can keep moving the goal posts if you enjoy that. Yes, everything becomes
harder once the authorities take note.

But if you have managed to acquire bitcoin, e.g. before a government
crackdown, or some other way through help from people in other countries, it
still provides the "cross border value store" function that gold cannot by
virtue of being hard to move.

------
johnm1019
I like how it is done by the utility in San Francisco. Depending on the size
of your place, and your main method of heating (electric or not), there are
tiers setup (based on average weather in each month) where the first X kWh are
the cheapest and correspond to what they think a dwelling of that size should
need. Then the next Y kWh are about 30% more expensive, then after that there
is a final tier which is 60% more expensive. In this way by saving energy you
save doubly - you pay for less kWh, and what you do pay for is on a cheaper
tier. I think this seems like an easy way to handle these miners, while
allowing non "electricity-based" to continue unimpeded.

~~~
pmorici
The majority of the demand is almost certainly from industrial sized
operations in warehouses and not rouge miners overloading residential
electrical circuits.

~~~
detuur
I'd say that's baseless speculation, considering the amount of people who
treat bitcoin mining as a grow-op.

Sure, the industrial operations are the ones getting articles and showcases
and blog posts, but at the same time I've seen plenty of news articles of
police busting some kid for scamming/drug charges and catching him with 100
gpus in his room.

~~~
pmorici
More like basic math and direct experience. My business sells power supplies
to this industry. Say the average home or apartment has 200 Amp electrical
service (24 Kilowatts). A typical miner takes about 12 Amps meaning you can
run about 16 units maximum on home electric service. 16 units isn't really
enough to reach the scale you would need to be long term profitable in the
industry. That isn't to say there aren't a few fools who don't realize that
and are running a small scale operation out of an apartment but this article
is citing requests for _Megawatts_ of demand from single customers. That is
unquestionably industrial scale.

Anecdotally i've shipped a ton of equipment to Wenatchee and every operation
I've done business with has been in an industrial warehouse.

------
JamisonM
Subsidising energy prices for local consumers based on export revenues is
widely practiced but is bad policy. The utilities should charge market rates
for consumption and cut local rate-payers a cheque annually using a scheme
that encourages energy saving practices.

~~~
CPLX
It's not necessarily bad policy it's just policy. The local residents are also
the ones that generally live with the consequences and externalities of the
local power generation industry.

~~~
JamisonM
Low-cosumption residents are then forced to live with the externalities of the
generation infrastructure as well as the externalities of the behaviour
induced by the electricity subsidy while benefiting the least from the subsidy
- it seems like a pretty bad policy.

~~~
dahdum
If it’s a public municipal utility, any dividend in lieu of price reductions,
should go to the local government, not the individual residents.

The local government could then issue out checks to everyone if they want, but
more likely it would go towards general budget and benefit everyone.

~~~
JamisonM
I wouldn't be fussy about the rebate mechanism but funding a government based
on energy prices can also be a tricky business - but even a poorly managed
local government subsidised by energy exports is far better than local energy
consumption subsidised by energy exports.

~~~
dahdum
Yes, nonzero chance they'd sell off the revenue stream for pennies on the
dollar to some private financiers to stopgap irresponsible deficit spending.

See Chicago for an incredible example of this:

[https://chicago.suntimes.com/news/parking-meters-garages-
too...](https://chicago.suntimes.com/news/parking-meters-garages-took-
in-156m-but-city-wont-see-a-cent/)

------
mondoshawan
I don't quite understand something: why are the terms "unpermitted",
"unauthorized", and "bootleg" used in the article? When I signed up with
Seattle Public Utilities, I didn't sign an agreement saying I wouldn't mine or
run servers out of my apartment.

~~~
slivym
Running industrial equipment off your local residential power grid is both
against the terms and conditions of every power company under the sun and also
incredibly stupid to do.

~~~
casefields
A few asics is not industrial equipment. Oh please.

~~~
neilalexander
How many is "a few"? What if you were running 300 of them?

The term "industrial" usually applies to scale.

------
apo
_Hanging over May’s hearing was the fate of the Basin’s last big electrical
customer: the Alcoa aluminum smelter, which employed more than 400 workers
before it was idled several years ago thanks to competition from cheaper
Chinese imports. Cryptocurrency mining won’t replace all those jobs — the
process is heavily automated. But backers insist that a local mining sector,
if allowed to grow, will attract other ancillary services, such as software
development, and ultimately provide the Basin with some of the tech-fueled
prosperity that Seattle has enjoyed._

There's a lot to chew on here. The Alcoa plant story is practically a cliche.
Yet another instance of what a world overflowing with cheap stuff looks like.

The loss of the Alcoa plant means an ever bigger oversupply of electricity.
Chelan County seems to have nothing to fill the gap. Why not sell the surplus
to a buyer who will use the power locally?

Who decides that an aluminum manufacturer is any more or less a legitimate
business than an Bitcoin miner?

~~~
therealdrag0
It's just a part of our culture that speculators are looked down upon. They
appear to be "predatory" and not produce anything of value. A manufacturer on
the other hand, it is clear that it produces things that are valued by society
at large. Similar reasons wall-street gets all the hate-er-aide.

------
Havoc
Easy...increase rates and set off profits directly against municipal levies.

That way the average person on the street doesn't lose, yet the miners are
encouraged to get lost.

~~~
tsaoutourpants
This. Your first 1,000kWh in a month are at a reduced rate. Each kWh
thereafter is at a premium rate. Easy.

~~~
jldugger
This solves the rogue operator problem, but doesn't solve the bit where an
operator comes in expecting to build a large mining installation. Even if they
paid something close to the export premium (perhaps lower due to diminished
transmission losses), the asks are larger than the utility currently provides.

This leaves the utility with a dilemma. Bitcoin miners can up and move pretty
easily, but the hydro dams are stuck for life. If somewhere cheaper pops up,
or if a double spend attack causes a bitocalpyse, the utility has little
recourse but to pass on the costs to remaining consumers.

------
pm24601
Commentators talking about solutions.

There are already solutions in the article:

> The three PUDs have been experimenting with policies that force miners to
> shoulder these extra costs and risks, while insulating ratepayers and the
> utilities themselves.

>1 .Chelan County, for example, created a special rate for miners and other
so-called “high density loads,” or HDLs, back in 2015, that was effectively
twice the residential rate.

> 2\. Douglas County, meanwhile, began requiring miners to pay up front for
> any new infrastructure.

> 3\. Grant County PUD is establishing special rates applied to companies
> “whose primary revenue stream is evolving and unproven” and whose product is
> “vulnerable to extreme value fluctuations.”

------
rb666
The problem is simple, power is too cheap in too many places. Fix that.

~~~
darkstar999
Your solution to bitcoin mining is to raise power rates for everyone? Wow.

------
SlowRobotAhead
I’ve seen THREE cities in my state (cheap hydro power) invest money and land
into “tech jobs” around cypto-commodities...

Which is a roundabout way of saying my state is giving away money to people
intentionally wasting power for personal gain under the false impression this
is good for the economy.

------
hapnin
Miners could organize and generate some goodwill by offering to pay more for
their power use.

So that'll never happen.

~~~
casefields
Warren Buffet and other billionaires love to complain that they pay too little
in taxes. They could band together and give the IRS more revenue yet they
don't. If billionaires won't do the right thing, why the hell do you think
small town Joe Schmoe should?

~~~
asdsa5325
Because donating tax money doesn't fix the core problem, and will barely make
a dent anyway.

------
louprado
Some more info on kwh price.

"Beginning Jan. 1, 2012, Chelan County PUD moved to a flat residential rate
for electricity of just 2.7 cents per kilowatt hour."[1]

"energy costs can run as low as 2.88¢ per kWh and average 4.13¢ per kWh
statewide for industrial customers." [2]

[1] [https://www.chelanpud.org/my-pud-services/rates-and-
policies](https://www.chelanpud.org/my-pud-services/rates-and-policies)

[2] [http://choosewashingtonstate.com/why-washington/our-
strength...](http://choosewashingtonstate.com/why-washington/our-
strengths/low-cost-energy/)

[edit] The parent article does state a price of 3cents/kwh.

------
nodesocket
Wouldn't a sliding scale that get's more more expensive beyond typical medium
household levels prevent penalizing normal household/commercial usage? For
example, a simple rule like 90th percentile usage and above is charged 25%
more.

------
testplzignore
> But backers insist that a local mining sector, if allowed to grow, will
> attract other ancillary services, such as software development, and
> ultimately provide the Basin with some of the tech-fueled prosperity that
> Seattle has enjoyed.

Wow. Any municipality who falls for this crock of shit would be crazy.

~~~
tass
It sounds good to people who don’t understand how mining works.

Since this argument has been made however, they could make local prices
contingent on number of jobs. If you consume x power employing less than y
local employees, pay the export rate.

~~~
zbentley
In my limited understanding, that sounds like a highly unusual type of
regulation by US standards. Are there any other practices/industries regulated
in similar ways?

~~~
tass
I’m not sure, though not allowing “crypto mining” specifically is also pretty
unusual.

In this way, they can protect their power industry and still remain attractive
to other businesses who might bring other benefits to the area without having
to redefine who is and isn’t allowed.

------
angel_j
When it comes to public utilities, commonwealth, and natural resources, the
more you use, the more you should pay per unit.

------
amorphid
At what point will miners just start building there own power plants? And I
wonder if environmental concerns will start forcing good and/or bad
regulations of crypto mining.

~~~
pandasun
They sort of are:

[https://www.trustnodes.com/2018/04/28/australias-dirtiest-
co...](https://www.trustnodes.com/2018/04/28/australias-dirtiest-coal-plant-
reopened-bitcoin-mining)

------
HillaryBriss
three cents per kWh. nice.

------
ResearchAtPlay
The problem boils down to: What is a fair electricity price to charge a
company that adds very little benefit to the local economy? Two approaches
would be: 1) charge the going local rate and treat them like any other
business. 2) Charge the export rate to recover the lost revenue from outside
electricity sales.

1) This is unfair, because it drives up local costs for everyone without
providing local economic benefit.

2) I argue this is still unfair, because the export rate alone does not
capture the value and revenue of the ability to provide backup power services
(i.e. load shaping+ and firming generation++).

Across the northern border, BC Hydro has also been flooded with miners asking
to purchase power. The province is powered ~98 % by hydro and residential
electricity rates are ~0.07 – 0.09 $US/kWh. Power export services subsidize
local rates. Revenue from export services (~15 %) & revenue from local rate
payers are set to recover utility costs, while maximizing economic benefit to
the province. The export rate (i.e. the price of electricity that physically
flows across the border) represents only a fraction of the revenue from export
services. Hydro exports have the ability to shape load+ and firm contracts for
power++. The key is that power doesn’t necessarily flow across the border when
load shaping and firming contracts are in place. But customers pay good money
for the ability to call upon that power when it is needed. That ability is
diminished by the additional electricity demand of miners. The value of that
ability is not captured in the raw export rate.

+load shaping service: Import/export power so that the net-load a customer
sees matches that customer’s contracted or self-generation.

++firming generation: Provide backup power to a customer who has agreed to
provide power to a third party at a certain time. Should the generators of the
customer fail, the exporter will quickly ramp up production to fill the gap.

\---

To those calling for “free markets”:

Determining a fair rate to charge miners is difficult, because the economics
of hydro power systems work differently than most other liberalized
electricity markets. In liberalized markets, all generators bid how much
electricity they are willing to supply at which cost, for the next hour or so.
Then you stack all the cheapest generators until your demand is satisfied and,
voila, that last dispatched generator dictates your market price for that
hour. Large consumers can buy electricity at that fluctuating market rate, or
choose to shut down. Here, miners would pay the marginal cost, fair enough.
Markets with large hydro power stations can’t work like that. Withholding a
large dam from generating electricity gives the operator enough “market power”
to be the price-setting generator every hour year round, which gives that
operator the ability to dictate prices.

(edits: formatting)

------
bsaul
FWIU next gen DLT moving out of proof of work will probably change the
electricity consumption profiles anyway. it would be really stupid to spend
just a dime trying to meet that demand.

------
blazespin
Another strain crypto currency creates is on GPU resources. Resources that
could be going to AI projects. It’s why prices haven’t fallen as fast as they
should.

------
Semirhage
_Those bargain rates are possible largely because the Basin’s five dams
generate around six times what the region can use locally. Much of the surplus
is exported, at premium prices, to outside buyers such as Puget Sound Energy,
and those outside sales subsidize local rates.

But if the utilities are selling more of their power to local Bitcoin miners,
they’re exporting less power at those premium prices, which makes it harder to
keep local rates low. Further, because much of the surplus is currently
committed in long-term contracts, supplying miners with all the megawatts they
want might require the utilities do something virtually unprecedented: buy
power on the open market, at prices far above what locals have come to
expect._

Solution: pass a law to charge miners export prices. It’s not as though
Bitcoin mining helps the local economy, so you either return revenues to pre-
mining levels, or drive the leeches out. Either outcome is equivalent.

~~~
tradedash
Why is the solution to everything "pass a law"? there is an ocean of possible
solutions to this problem yet people somehow always jump to "pass more laws"
before other options are considered. I find that rather weird.

~~~
skybrian
This is like asking why the solution to bad software is to commit more code.

It's because the way to fix a bad law is to pass another law. Otherwise you're
saying we should keep the bad laws we have and work around it some other way.

Sometimes fixing the symptoms actually is better, but it's not surprising when
people suggest changing the code.

~~~
abecedarius
Patches on top of patches are not the only way to maintain software.

~~~
skybrian
Some commits are much better than others, but they're all commits.

~~~
latexr
Sounds like something out of a motivational poster. I say this positively.

