Written by Kayla Matthews
Two Australian companies, IOT Group and Hunter Energy, are aiming to bring a decommissioned coal-fired power plant back online. What’s particularly interesting about their plan is they want to use the property as a power source for a new cryptocurrency mining base — which they’ll use to mine Bitcoin.
IOT Group has plans to develop a “Blockchain Application Centre” and sync it up with the Redbank power plant, long decommissioned at this point. The plant will then to supply energy directly to the crypto-mining operation.
Redbank closed in October 2014, and has been empty and quiet ever since. Hunter Energy wants to change that by bringing it back online through its partnership with IOT Group. Currently, the goal is to get the plant up and running by the first quarter of 2019.
This partnership will be a historic moment for the cryptocurrency world, advancing the industry forward like so many events before it. To understand why that is, however, you first need to understand what a direct and off-grid energy source means to a crypto-mining operator like IOT Group.
Why Does a Cryptocurrency Mining Operation Need a Direct Energy Supply?
Bitcoin is one of the most popular and lucrative coins currently. However, cryptocurrency mining requires powerful, energy-consuming hardware. Due to the nature of the process, the more machines and devices you have mining, the more chances you have of acquiring the digital currency.
For those unfamiliar, cryptocurrency mining is one of the most common processes of acquiring digital currencies like Bitcoin. Like fiat currencies, you can trade and exchange amounts with other parties, but unless you have excess capital at the ready, it’s more lucrative to mine. That is, of course, if you have the necessary and capable hardware.
Mining is akin to a complex puzzle. Collectively, the mining community works to solve equations — called hashing — to find hidden coins within the blockchain. Those who solve the puzzle receive the rewards — yet the reward gets split among all involved parties, with more of it going to those who used more processing power. Therefore, it behooves miners to have multiple systems simultaneously mining for coins.
In addition, the difficulty of a mining operation gets adjusted after miners find specific numbers of blocks. This adjustment helps ensure the discovery rate of blocks remains constant and fair, but it also means the computational power necessary to find even a single block raises considerably.
That’s the gist of it. However, cryptocurrency and mining are complicated concepts, and we encourage you to research them further if you have an interest.
At this point, the difficulty of mining Bitcoin is much too high for any single piece of hardware. In the past, it was possible to mine for coins using an average desktop and GPU setup. However, that is no longer the case. Now you need exclusively designed hardware for mining currencies and working with blockchain systems.
As you can guess, this also requires a steady stream of power to ensure hardware and equipment remains operational and consistent. Simply put, mining and the processing power necessary require huge amounts of energy. In Australia, the cost of energy is higher and would quickly surpass the benefits of mining, if you don’t have a cheap and reliable source.
In addition, you need temperature controls to keep the heat down within your operations center. That’s why mining operations are common in regions where it’s cold year-round, and power is incredibly cheap. That includes areas like Siberia, Canada and Iceland. Australia is the opposite of that, with expensive power fees and warmer climates.
Will Connecting an Exclusive Power Plant Work?
In theory, the idea of syncing a power plant directly to a cryptocurrency mining operation is a smart one. Due to the energy expenditure of mining, it makes sense to have a steady, reliable and cost-effective energy solution at the ready.
Australia is no stranger to high price spikes and an incredibly volatile energy market. So, direct access to an off-grid power source is a great way to boost your profits, at least when it comes to mining cryptocurrencies.
But will this work? The biggest issue plaguing the project is that some parties involved have a history of legal trouble, leading many to speculate that the project may never get off the ground.
The other question is what impact this will have on the local economy. Obviously, re-opening a decommissioned power plant or operations center is good in most cases. It means refreshed funds, new work opportunities for the locals and a bustling business for the national economy.
But crypto-operations are a bit different than traditional businesses. It would seem most of those characteristics will prove true, but we’ll have to wait to see the true impact.
Kayla Matthews is a senior writer at MakeUseOf and a contributing writer to Digital Trends, The Next Web and VentureBeat. To read more posts from Kayla, subscribe to her blog, Productivity Bytes.