The Redbank coal power plant situated in Australia’s Hunter Valley will reportedly be reopened with the sole purpose of powering cryptocurrency mining rigs. The owner of the power plant, a utility company named Hunter Energy, has entered an agreement with a local tech company, IOT Group, to restart operations for the first time since 2014.
IOT Group plans to set up cryptocurrency mining operations under the title of Blockchain Operations Centre once the plant begins producing electricity again. The 151 Megawatt power plant is located at a two hours drive from Sydney and is expected to be operational by 2019. Renewing this defunct coal power plant will make bitcoin mining a whole lot cheaper for IOT Group.
Converting Electricity into Digital Money
Most cryptocurrencies operate on either one of two primary consensus mechanisms, proof of work or proof of stake. Any cryptocurrency dependent on the proof of stake protocol does not need to be mined. Instead, all coins are already in circulation when the cryptocurrency is launched. On the other hand, cryptocurrencies such as bitcoin and Ethereum are based on the proof of work concept where dedicated miners verify blocks on the blockchain containing transactions. These miners use computational power to solve a series of mathematical problems. The first such mining rig to arrive at a unique solution is rewarded with a specific amount of bitcoin.
When bitcoin was launched in 2009, early cryptocurrency enthusiasts could mine bitcoin using their desktop and personal computers. However, as more and more computers flooded the network, the mining difficulty skyrocketed. Miners were forced to invest in more powerful hardware to continue making any profit. Today, these advanced processors used for mining, popularly known as ASICs, tend to pull a great deal of power from the electric grid.
Worldwide Mining Power Woes
Cryptocurrency mining has spiralled into being an extremely power intensive process. A recent report highlighted that bitcoin mining now consumes more electricity than the total consumption of 159 countries combined. Miners across the globe have been on the search for a cheaper source of power.
It is clear that IOT Group aims to solve this electricity cost problem purely by providing itself with a dedicated power plant for its mining rigs. Hunter Energy will reportedly sell the power produced from the plant to the company at a discounted price.
Plattsburgh, a small municipality in America, recently moved to halt all bitcoin mining operations for 18 months temporarily. According to the city council, bitcoin miners were consuming a significant chunk of cheap electricity allocated for the region. Consequently, the local power company was forced to buy additional power at market prices. The higher cost was then passed on to residents as an additional burden.
Should the Redbank power plant be successful in providing cheap electricity to miners, it is possible that the city may become a cryptocurrency mining hub. Nevertheless, there are apparent environmental concerns that stand in the way before the power plant resumes operation again.
Coal power plants release tonnes of carbon dioxide gas in the air, furthering the problem of global warming. Several countries, including Australia, pledged at the COP21 Summit in Paris to voluntarily shut down coal-based power plants. It remains to be seen whether or not Australia will take a closer look at this particular plant before it starts producing coal-based electricity once again.