The bitcoin bubble in Grant County

Washington State’s Grant County Public Utility District has very low electricity rates. Responding to this basic commodity price, a great arbitrage is underway in a relatively poor rural county. Its cheap power is being used to create cybergold.

Bitcoin mining is basically an open-source record keeping service that’s rewarded by issuing the record keeper with newly issued bitcoins. Requiring a significant amount of computer processing power, and thus a lot of electricity, miners keep the blockchain consistent, complete, and unalterable by repeatedly verifying and collecting broadcast transactions into what’s called a blockIt has been estimated bitcoin mining uses up 24.5 terawatt hours, which sounds big to people who don’t know what a terawatt hour is, but actually, that’s slightly less than the electric load on Nigeria’s grid, and probably less electricity than is required to produce new US currency.

It is, however, having an observable impact in places like Grant County. “The total new service requests we have outstanding right now is around 500 megawatts of power, which would represent about an 85 percent increase over our current average load,” Ryan Holterhoff, public affairs officer for Grant County PUD recently told NPR.

At its current price in dollars, I smell a bubble in bitcoin, but that does not mean its inevitable correction will make it go away. As a curious student of monetary economics, I cannot help but think we’re seeing a glimpse of the distant future, possibly a future world with a more stable financial system, but it will be a bumpy ride before that day comes.

Eric Shierman lives in Salem and is the author of A Brief History of Political Cultural Change.  

 

 

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  • Jeff Kropf

    Eric, can you please translate so that a former legilsator and current farmer can understand? Thanks.

    • Eric Shierman

      My apologies if that was too technical, here’s my 3 sentence synopsis. A computer-based currency has been rising rapidly in value relative to the US dollar, but it takes a lot of electricity to create. Grant County Oregon has very low electric rates. Therefore, we see what’s perhaps the future of money being minted in one of Oregon’s poorest counties.

  • Marvin Parker

    A currency that is not backed by any government, created from nothing and based on nothing but a wink and a promise. Sounds like scam and soon to effect a lot of people in a bad way.

    • Many currencies backed by governments have ended badly throughout history. In fact, as economist Ludwig von Mises noted, “Government is the only agency that can take a valuable commodity like paper, slap some ink on it, and make it totally worthless.”

  • Bob Clark

    There are a couple of serious problems with Bitcoin as a currency/store of value. There are other crypto currencies which can and may eventually dilute Bitcoin, as Bitcoin is nothing but a set of computers and code at this point; nothing really distinguishing other than being one of the first to market. The second drawback for those who want to cut loose from government tracking, is Bitcoin is a ‘public’ record and eventually you don’t need a government brute like Mueller to track you down in the Bitcoin record.

    Crypto currencies like Bitcoin do offer an economizing of debit and credit card processing, potentially whacking down the card fees now charged retailers and the like by the banks. In fact, the latter are looking at adopting portions of this technology.

    Also, another problem is government will most likely intrude and take bitcoin another direction, not its current path. China acted to do so only this year.

  • Lois

    Grant County Oregon doesn’t have a P.U.D. you must have meant Grant County Washington.

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