How Riot Blockchain capitalized on a hot Texas summer to make more money selling power than mining crypto | Fortune

riot and other producers also siphon dollars from no fewer than three other texas “demand response” plans that pay to shut off power in emergencies or reduce their transmission costs. By blacking out its data centers for thousands of hours this summer, Riot pocketed a windfall from those programs that handsomely reward miners for providing backup power that helps ensure the network runs smoothly.

Due to the shutdowns, riot produced only 318 bitcoins in July, a fifth less than the 402 it would have generated running at full capacity. Therefore, the revenue from the bitcoin that Riot produces on its own account amounted to $6.9 million at the average price of the signature cryptocurrency of $21,634. but riot received many more dollars for the closure. demand response programs contributed a bonanza through $9.5 million in “energy credits,” payments that reduce the cost of electricity that makes up the majority of their gross mining bill. Riot doesn’t specify which “demand response” shows got the credits. but lucas pipes, analyst of b. Riley believes that selling megawatts to the grid at those big spot rates under “price response” accounts for the bulk of the profits.

Reading: Ahead riot blockchain bitcoin texas

During those 31 days, Riot earned that extra money to shut down 11,717 megawatt hours of production, or about 14% of its usual operating time. In total, between its bitcoin production and energy sales, Riot posted revenue of $16.4 million in July. Note that Riot also sacrificed bitcoin production in exchange for selling power. if he hadn’t pumped 24/7 and generated those extra 84 bitcoins, he would have amassed $8.7 million from mining instead of the $6.9 million he made. So by shutting down and diverting power, Riot posted a net profit of $8.1 million (the $16.4 million it made minus the $8.7 it would have made by not selling power and just making bitcoins). ), or more than 90%.

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In effect, the $8.1 million increase in electricity sales is equivalent to $964 for each of the 84 bitcoins lost. that’s 42% above its all-time high of around $680. from another perspective, its total revenue of $16.4 million for the month yields an average price of $40,700 per coin based on the 402 it would have made without the closures. Simply put, by producing less and selling power at enormous prices, Riot (symbol: Riot, $1.3 billion market cap) effectively garnered twice the price per coin, based on its potential output, than if it had been minted. at full capacity. everything is big in texas, including ten gallon hats full of dollars to put out their bitcoin compatible programs that they hand out to miners.

texas is now the bitcoin capital of the world and its programs greatly benefit miners

although the july stunner demonstrates how much the texas energy system can increase profitability, the additional dollars earned are deceptively small compared to what riot and other miners can earn in the future. Riot is leading a cryptocurrency craze that is making Texas the bitcoin mining capital of the world. A large part of the state’s appeal is based on the various programs that make miners earn big money on top of bitcoin production, in exchange for switching power to help stabilize the network. The recent drop in bitcoin prices makes those demand response bonuses much more valuable to miners. The more bitcoin slips, the more hours placing megawatts on the market generate higher revenues than minting bitcoin, providing miners with a great means of diversification, the wonder we just witnessed at riot.

Much of Riot’s production recently went offline due to disruptions to its giant expansion initiative at its Whitstone facility north of Austin. That data center is believed to reign as the largest mining hub in North America. In July, Whitstone’s “self-mining” capacity, producing for its own account instead of “hosting” for a fee to outside customers who contribute their own equipment, hovered around 110 megawatts. Early next year, Riot expects internal scale to triple to 350 MW as part of the goal of achieving total capacity, including hosting, of 750 megawatts.

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riot is also building a second, even larger, $333 million facility on a 265-acre site in corsicana, north of dallas. Expected to open in July next year, Corsicana will surpass Whinstone by one gigawatt, or 1,000 megawatts, in size. today, the university of cambridge puts the global grid at 10 gigawatts. If that number remains constant, Riot alone would control 17% of all the world’s Bitcoin capacity by mid-2023. Many of the biggest names in Bitcoin are serving as longhorns. Privately owned Bitdeer, controlled by China’s crypto pioneer Jihan Wu, is mining in a repurposed, former giant Alcoa plant across the street from Whitstone. Core Scientific (Corz; market cap: $1.1 billion) is building a new 300 MW data center in Denton, north of Dallas, which is slated for completion in December. In May, London’s Argo Blockchain (NASDAQ: ARBK, market cap: $300 million) began production at its 200 MW Helios hub on a 320-acre parcel in North Texas near Lubbock. Argo also revealed plans to add 600 MW of production in the coming years.

ercot predicts that the total capacity in texas could exceed six gigawatts by 2023. of course, the global scale of mining could grow well above the current 10 gigawatts if the price of bitcoin rebounds strongly. but if mining activity stays anywhere near current levels, texas could be home to something like half or more of the global bitcoin industry less than a year and a half from today.

In this time of falling bitcoin prices, the Lone Star State’s mega-dollar miner programs are rewarding miners like the boom times never ended.

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