Bitcoin Hubs Bask in Entergy’s Glow | Arkansas Business News
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There’s no gold in the Arkansas hills, but cryptocurrency developers are staking their claims in the state, drawn by cheap electricity and the open arms of financial developers.
The progress of three multimillion-dollar bitcoin mining projects in Newport contrasted with Pine Bluff’s recent rejection of a proposed hub in a residential community, offering a local example of the prospects and dangers cryptocurrency entrepreneurs face in a new and hotly contested industry.
United BitEngine, Juice Tech and GMI Computing have all announced plans to open cryptocurrency mining centers in Newport this year and early 2023, and United BitEngine quietly began operating a hub in Conway County in June. Juice Tech, which has a bitcoin hub operating near Dallas, is also installing centers in Walnut Ridge and near the State Fairgrounds in Little Rock.
“Our real business operations are in Arkansas,” said Scott Yu, CEO and president of United BitEngine, which is chartered in Delaware. “We have the project already operational and we have the project underway in Newport,” expected to start in the fourth quarter. He declined to say where the Conway County hub is, but the Morrilton Planning & Zoning Commission approved a site plan in May for a project near an Entergy Arkansas power station west of downtown. Mayor Allen Lipsmeyer described it to KVOM-FM as a million dollar investment.
Entergy, the state’s largest utility with more than 700,000 customers, will provide power to all of the Newport projects, the United BitEngine site in Morrilton and all three Juice Tech centers.
“The key factors for our business were a cheap and stable electricity supply, relatively cheap land near a substation and enough space to develop a site for our containers,” said Yu, a former corporate lawyer who lives in New Jersey. “You can’t get too close to residential areas, because there is some noise from cooling fans, but there’s really no pollution other than noise.”
Demanding process
The process of creating bitcoin wealth (see sidebar below) requires enough electricity to power thousands of homes. Thousands of special mining computers the size of old video players guzzle power, connected to nodes and either housed in warehouse space or housed in modified shipping containers that are networked on pads at a networked mining center.
Concern over fan noise helped sink California real estate developer Joe Delmendo’s plans to turn the old Pine Bluff Commercial building at 300 Beech St. into a bitcoin mine. Delmendo’s Commonwealth Real Estate in El Segundo bought the old newspaper building and armory, equipped with a dedicated one-megawatt line that once powered the printing press, at auction last November for $619,000. The City Planning Commission, after hearing complaints about potential noise, property damage and excessive electricity use, rejected his proposal. One megawatt is enough electricity to power about 800 homes, and GMI officials estimated their Newport project will consume 15 megawatts — worth 12,000 homes.
Delmendo told the Pine Bluff Commercial last month that he might sue the city; the mayor’s office told Arkansas Business that the Commonwealth would be able to reapply for zoning approval after 12 months as long as the new proposal is significantly changed.
The three companies building in Newport, Walnut Ridge and Little Rock, all Asian-owned, do not mine bitcoin on their own account; they sell their powerful data crunching services to crypto mining clients. The services have grown in the US since mainland China essentially banned crypto-mining, ostensibly because of excessive electricity use and environmental damage, objections the industry faces worldwide.
Despite the power and data requirements, generating bitcoin can pay well. A single bitcoin, which has no physical reality, traded for more than $20,000 last week, albeit well below its November high of $64,400. States as diverse as New York, North Carolina and Utah are competing for projects.
Job expectations
Bitcoin hubs are generally not large employers, another issue critics cite to counter economic arguments for cryptomining. But every website requires security, security, maintenance and some technical services. Yu said there are four workers at United BitEngine’s 2-acre site in Morrilton, hired through a contractor, but plans call for hiring local technical workers once they’ve been trained. Hubs could eventually have eight to more than a dozen local workers, industry experts said.
The three Newport operations are expected to employ 45 people at an average salary of $50,000 to $70,000, said Jon Chadwell, executive director of the Newport Economic Development Commission. He works with the Arkansas Center for Data Sciences and Arkansas State University-Newport to provide job training.
Juice Tech bought this building at 3300 S. Woodrow St. in Little Rock and plans to convert it into a bitcoin mining center. It plans other centers in Newport and Walnut Ridge.
“Arkansas was the right place for us,” said Yu, whose United BitEngine secured a 10-acre site in Newport. “Entergy can supply a stable flow of energy, land is relatively cheap, and the whole political environment is friendly to us.”
Entergy Arkansas, the state’s largest electric utility and a major force in economic development, will operate bitcoin operations in Morrilton, Newport, Walnut Ridge and Little Rock. The investor-owned utility wants to attract power-intensive industry, while being sensitive to critics’ concerns. The Arkansas Public Service Commission is reviewing a proposed Entergy rate plan for cryptocurrency companies.
“Entergy Arkansas has teams that work with potential customers who need specialized services to find solutions for their business needs,” the company said in a statement. “These efforts have recently included working with several crypto mining firms that have been attracted by low prices.” As new industries such as cryptocurrency mining become mainstream, the utility is working diligently to manage these types of power needs and costs while keeping the entire system safe, reliable and economical, it said.
GMI Computing, led by Frederick Huang and Alex Yeh, wants to start operations in Newport within a few weeks. The company is a US division of GMI Technology Inc. in Taipei, Taiwan. Huang and Yeh spoke at length about the company’s plans but declined to be quoted directly for this article. The Newport operation will be the first of many the company is planning nationwide.
Chadwell, the NEDC chief, singled out Chris Murphy of Entergy’s business development team as a key driver in cryptocurrency. “Our partnership with Entergy is important as we work with new industries in emerging sectors such as cryptocurrency technology,” said Chadwell. “Entergy and NEDC are working to manage these evolving businesses to maximize the benefits to the local community.”
Two approaches
While GMI and United BitEngine will use containers for their cryptocurrency hosting services on engineered pads for their Newport hubs, Juice Tech is setting up buildings in Newport and Walnut Ridge and putting racks and a cooling wall into the Little Rock property at 3300 S. Woodrow St .Juice Tech paid $675,000 in May for the 61,429-SF space on 10.5 acres on the edge of the woods west of Barton Coliseum.
Mitchell Constructors LLC of Hot Springs, led by Rick Williams, is working on all three projects, said James Babb of Malvern, a former financial planner in Russellville who represents Juice Tech in Arkansas. “The company learned from doing both container and warehouse operations in Texas that using the rack system inside a building is best for hot and humid locations,” said Babb, a former Ouachita Baptist University basketball player.
“We were shown a couple of substations with enough capacity, plus the prices for power in Arkansas are very competitive. The business model in Little Rock is a little different, since we’re rebuilding an existing building. In Newport and Walnut Ridge, we’re building from the ground up.” Construction costs for the new metal-fabricated buildings will be about $2 million each, Babb estimated. “But the capital outlay is for the cryptominers,” he said, giving no cost estimate. Professional cryptomining units with application-specific integrated circuits can sell from $10,000 to $20,000, according to online price quotes .
Solving puzzles for profit, at a cost to the environment
Pressed to define bitcoin mining for idiots, Cornell University professor Eswar Prasad said the key is to keep thousands of specialized computers running and cool enough to stay efficient. This in turn requires megawatts of electrical power.
“Bitcoin transactions are validated through a mechanism called proof of work, and this removes the need for third-party institutions like banks and credit card companies as intermediaries,” said Prasad, a senior fellow at the Brookings Institution and author of “The Future of Money.” The race to solve complex numerical problems both verifies transactions and creates new bitcoins, with the miners keeping a fraction of each.
