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Data Mines and the Loud Buzz of Money

7 min read

With bitcoin prices rebounding, cryptocurrency mines are popping up around the state and meeting resistance from Arkansans and local governments worried about their noise, power use and sometimes shadowy foreign ownership.

Officials in Harrison and Pine Bluff have blocked crypto-mining plans recently, and Faulkner County is addressing complaints about a cryptocurrency site that went online without warning in the unincorporated community of Bono, west of Greenbrier.

Vilonia city leaders had lively public meetings after approving a similar center there in April, with citizens voicing worries, and county judges in Clark and Garland counties are looking to impose noise limits before a state law protecting data mines takes effect Aug. 1.

Reacting to citizens’ objections, Tom Harford of the Arkansas Blockchain Council, an industry group, said the council is researching all active and proposed operations in the state with the goal of vetting their ownership, technology and openness.

Harford said that since the passage of the Arkansas Data Centers Act this spring, “we’ve seen growing interest from entities wanting to do business” in Arkansas.

“There’s also been a moment of narrative clarity mostly centered on issues in Harrison and other places where sites have been in development,” said Harford, the council’s founder and also relationship manager for Cryptic Farms LLC of Malvern. Cryptic Farms has mining operations in Malvern, Mountain Pine and Russellville.

Harford said complaints about noise and hidden ownership in the Harrison and Vilonia proposals led the Blockchain Council to “develop protocols and norms” and offer expertise to municipalities “so they can successfully vet any interested crypto-mining companies.”

“To put it bluntly, you’re dealing with good actors who are transparent and working hard to engage in the community and doing the right measures in terms of noise abatement, or you’re dealing with bad actors” willing to ignore concerns. “We want to give [good companies] a stamp of approval for commitment to best practices.”

Bitcoin at $30K

Crypto-mining facilities comprise hundreds or thousands of computer servers clustered in warehouses or shipping containers using 10 megawatts and more of electricity a day to solve complex mathematical problems.

Eswar Prasad, a senior fellow at the Brookings Institution and author of “The Future of Money,” said they use a process called “proof of work” to verify blockchain transactions and create new bitcoins, with the mining companies keeping a fraction of each.

“Solving these puzzles has no other benefit to humanity,” Prasad told Arkansas Business, but with bitcoins trading at $30,000 apiece, the highest price since the cryptocurrency crash of last year, “there is a strong economic incentive to devote vast arrays of computers to this purpose.”

“By some estimates, 1% of the world’s electricity is now devoted to cryptocurrency mining,” he said, calling it “a misguided and environmentally destructive race to the bottom.”

Bitcoin’s value is now nearly twice what it was in November, but still far lower than its peak of $65,648 in November 2021.

The noise associated with crypto-mining sites comes from thousands of small fans that keep the computer servers cool enough to run efficiently.

Advanced crypto companies are also turning to immersion cooling, which submerges the mining equipment into a thermally conductive liquid bath, eliminating noise. One of the companies in the Blockchain Council, Immersive BTC of Jonesboro, specializes in the technology. The other current council members are Cryptic Farms and Block Ops of Austin, Texas.

Source: Arkansas Business and Faulkner County Reports, faulknercountyreports.com

Noise generally hasn’t been a problem at sites far from homes or buffered by natural or man-made barriers. Two bitcoin mines in Newport — run by GMI Computing and United BitEngine Inc. — have drawn no complaints, Newport Director of Economic Development Jon Chadwell said.

“One [GMI Computing] is near the downtown area on the outskirts of town,” he said. “There is a residential area 300 feet from the miners. However, there is a buffer created by an elevated railroad track and a 95-foot strip of woods. The other one [United BitEngine] is not anywhere near a residential area.”

Faulkner County Administrator Randy Higgins said he had toured United BitEngine’s fan-cooled cryptocurrency site in Morrilton, opposite Elmwood Cemetery.

“It is next to a set of railroad tracks and across the street from the cemetery, so it’s not bothering anybody,” Higgins said. “That’s not the case with the Bono facility. I think the closest house is within 100 yards, and the people can actually hear the noise inside their home. It is really unacceptable to those people.”

Noise-Mitigating Walls

Higgins said County Judge Allen Dodson pressed the operator of the Bono mine, Newrays LLC, to hire an acoustical engineer to consult on putting sound-dampening walls at the site. Higgins said he has consistently measured the sound emanating from the freight container complex at 65 to 70 decibels, about as loud as an electric weed trimmer.

“They hired an acoustical engineer who did a study and suggested a mitigation plan,” Higgins said. “The barrier walls are supposed to mitigate the noise by up to 50%.” But there is a 50- to 60-day lead time for construction. “Judge Dodson said that that was way too far out for folks who live close by this site.” Neighbors said a temporary wall of hay bales had been promised.

The county has been working with Newrays representative Ethan Wang, whose business card calls him business development director for MetaHash. Metahash Global is also tied to Green Digital and Gang Hu, CEO and president of Greenland USA, a Los Angeles real estate development company that’s a subsidiary of the Greenland Holding Group of Shanghai. Wang is also the point man on the Vilonia project.

Green Digital, the company behind the Harrison project, “traces back to a parent company based in Shanghai,” said Harford of the Blockchain Council. “A lot of the information that got revealed was through some really impressive amateur sleuthing by concerned members of the community.”

He said the council is looking at several ways to vet cryptocurrency companies. “One is transparency in terms of their place of origin and ownership. We also want to get a sense if they’ve operated before, what kind of technologies they’ve used” for noise abatement and sustainable operation, and “to make sure that it doesn’t represent any issues in communities.”

The council also wants companies to commit to partnering in workforce development initiatives, and to use local workers as much as possible for construction and IT support.

A Rush to the U.S.

Global bitcoin miners began turning to the U.S. after mainland China essentially banned the practice, ostensibly because of excessive electricity use and environmental harm.

Many states, including Arkansas, began actively recruiting miners, though New York has put a moratorium on new operations and Texas is reconsidering the incentives it offered for locating there.

Cheap Electricity

Companies have been drawn to Arkansas because of its inexpensive land, a lack of zoning in unincorporated areas and a good deal on bulk power from Entergy Arkansas, the state’s largest electric utility.

Entergy offers a special tariff for the miners with a low energy charge: about three-quarters of a penny to a little over a penny per kilowatt-hour, as opposed to 10 or 11 cents for residential power, but that is just part of the rate. Demand charges typically make up a third or more of commercial power bills, and big customers also pay riders for energy cost recovery, energy efficiency, etc., a spokeswoman said. Entergy also requires a three-month deposit from miners, along with a surety bond or irrevocable letter of credit.

In 2022, the Pine Bluff Planning Commission shot down a proposal  by California real estate developer Joe Delmendo, who hoped to put a crypto center in the old Pine Bluff Commercial building downtown. He had spent $619,000 for the building. Commission members cited community complaints about potential noise and excessive energy use. The proposed crypto mine in east Vilonia would be on Entergy Way Road, south of U.S. 64 and near an Entergy Arkansas electrical substation. Residents speaking against the project, by a company called ViLoAr LLC, told city leaders they’re wary of noise and fear their property values will plunge. ViLoAr appears to be a site-specific LLC connected to Green Digital, the same company whose plans were quashed in Harrison.

Vilonia Mayor Preston Scroggin and several members of the City Council did not respond to requests for comment for this article.

“The bitcoin mining industry contends that it will bring jobs … but the employment benefits are minuscule,” said Prasad, the Brookings Institution scholar. “By some estimates, 1% of the world’s electricity is now devoted to cryptocurrency mining.”

But Frederick Huang and Alex Yeh of GMI Computing told Arkansas Business last year their company is environmentally conscious, and that Entergy guaranteed that 70% of their power would come from non-emitting nuclear sources. Bitcoin centers also operate under agreements to shut down any time the local grid is dangerously overloaded.

Harford said that crypto mining isn’t going to generate jobs on a large scale as a new factory would, for example, but they do require a few on-site workers and local governments benefit by expanding their tax bases.

“We feel that in some towns we could help alleviate or, after several years, eradicate any debt issues that a town has.”

He said crypto-mining centers can be operated as partners to local entities and economic and technological beacons for the state.

“If folks just notice a loud noise coming from an area that was under development, but they weren’t sure what was going on there, well, that’s going to create friction and problems for long-term growth,” Harford said. “It’s a bad approach. We’re trying to promote an approach of engagement and openness with the community.”

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