A Toronto company that claims to be among the world’s largest publicly traded cryptocurrency miners has signed a deal with the city of Medicine Hat to purchase 42 megawatts of electricity to power its second Alberta mining project.
Hut 8 Mining Corp.’s $100 million mining operations will be set up next to the southern Alberta city’s new $55.7 million natural gas-fired power plant, the 43 MW Unit 16, which only came online in November.
The company, which began trading on the TSX Venture Exchange earlier this month, already operates an 18.7 MW facility in Drumheller, where it had mined 750 bitcoins as of March 16. Bitcoin was valued at about $11,700 as of Tuesday.
Hut 8 said the mining facility will result in the creation of more than 42 local full-time jobs, including electricians, general labourers, systems technicians and security staff. Construction activity will peak at about 100 jobs. The electricity supply agreement and the company’s land lease have a concurrent term of 10 years.
The company has secured mining technology and operational expertise through its partnership with full-service blockchain technology company Bitfury Group. It plans to have a full complement of 57 BlockBox Data Centers with an aggregate power capacity of approximately 60.7 MW by fall.
Cryptocurrencies are mined by computers that are tasked with solving complex mathematical equations that confirm the validity of transactions and add them to a permanent blockchain ledger. Miners are rewarded with cryptocurrencies such as bitcoin and ethereum.
But the processing power to create cryptocurrencies worldwide consumes enormous amounts of electricity—collectively as much as a small country uses by some estimates—incentivizing miners to locate in low power cost jurisdictions. Quebec Hydro has been inundated with requests for its relatively cheap, and renewable, hydropower.
Power supply concerns
The Hut 8 deal comes as a New York town just south of the Canadian border instituted an 18-month moratorium on cryptocurrency mining in order to preserve natural resources, the health of its residents and the “character and direction” of the city, Bloomberg reported last week. Residents of Plattsburgh had become fed up with Bitcoin miners using up so much of its low-cost electricity.
Plattsburgh ordinarily gets cheap hydropower from the St. Lawrence River. It was reported power bills balloon as much as $300 in recent months after the town of some 20,000 exceeded its power allotment, creating a backlash among residents.
Medicine Hat appears to have no such power concerns. “As a utility owner, City of Medicine Hat provides a sustainable, competitive advantage with low cost and reliable service that is attractive to our customers,” Medicine Hat mayor Ted Clugston said in a statement.
“We’re committed to growing and diversifying our economy and welcome Hut 8 and the Bitfury Group as a new customer and business in our community,” Clugston said.
Hut 8 already has 100,000 machines in operation representing 127.5 peta hashes per second of computing power. Its facilities currently operate on power secured at an average price of 3.5 cents per kWh.
The company said resources in the Medicine Hat area will also be used to improve infrastructure to the area surrounding the data centre site and in the funding of technology programs and grants in local educational institutions to ensure that the local job force has the skills needed to participate in this new industry.
“The signing of the electricity supply agreement and the land lease represents a key component in achieving our business plan for the roll-out of our BlockBox Data Centers in low-cost energy jurisdictions,” said Bill Tai, chair of the board of directors of Hut 8.
The city offers stable cost-competitive utility rates and has been supportive of Hut 8’s fast paced growth plans, Tai noted. “We’re excited to work with the City of Medicine Hat to introduce a new industry, with new revenue channels for the city and its residents.”