Mayor Scott Conger Declares Jackson Tennessee a Bitcoin Friendly City

Toby Hazlewood

Bitcoin - Not just a financial tool, but a means of using energy more efficiently too?

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Bitcoin Image by mohamed Hassan from Pixabay

There are many ways that a politician can win favor with their citizens - leadership, decisiveness, empathy, compassion and an optimistic and positive outlook are all key traits. In taking a bold stance when it comes to cryptocurrencies like Bitcoin, Mayor Scott Conger has demonstrated many of these.

The Federal Government continues to flip-flop in formulating and enacting its formal stance towards Bitcoin. Janet Yellen, Jerome Powell and others in key positions within the Biden administration seem to get repeatedly distracted by bluster and rhetoric, resorting to the same tired headline statements - it's a tool of criminals, it uses ridiculous amounts of energy, or that it's too volatile to play an active role in the monetary system.

Meanwhile, political leaders within states around the nation including Kentucky, Florida, Wyoming and now Tennessee are seeing the possibilities that Bitcoin offers, not just in bolstering the finances of their states, but as a means of encouraging economic growth too.

In Jackson, Tennessee on April 21st Mayor Scott Conger laid out his intentions clearly on Twitter, before then adapting his profile picture to incorporate the customary 'Laser Eyes' adopted by Bitcoin and crypto fans online:

Source: Twitter

What does this mean for Tennessee?

Conger, a third generation mayor in Jackson has taken a similar stance as Miami mayor Francis Suarez before him - Suarez too has been bullish about declaring his city Bitcoin-friendly. The beneficial uses that these visionary mayors see arising from Bitcoin are numerous but include offering it as part of employee-payroll, offering citizens the means of paying bills, taxes and for services using Bitcoin as well as using it as an investment vehicle to protect city treasury from inflation.

The treasury angle is particularly significant in light of the relentless printing of additional dollars that has been carried out by the Fed in order to stimulate the ailing economy after COVID-19. The resulting inflation and a need to recoup this money (such as via Biden's new capital gains tax) will undoubtedly have fiscal implications across the country for years to come.

Particularly interesting is the notion of city governments like Miami and now Jackson positioning themselves as serious Bitcoin mining hubs.

Bitcoin mining for the benefit of the city

Bitcoin mining is the process by which new Bitcoin are 'generated'. Mining also supports the global, decentralized network of computers that is the lifeblood of Bitcoin in itself. Bitcoin miners devote high-specification computers to the activities of maintaining copies of the ledger of ownership and transactions completed using Bitcoin, as well as solving complex computing calculations. The reward for carrying out these activities is the award of newly minted Bitcoin as well as the reimbursement of transaction fees for maintaining the ledger.

For cities like Jackson and Miami that are contemplating running Bitcoin mining operations, the opportunity seems clear - computing power can be managed centrally and responsibly as a means of generating an income for the cities. The activity gives it a stake in the Bitcoin network as a means of bolstering its financial stability as it builds up a portion of its treasury held in Bitcoin - an asset that has climbed in value by as much as $29,000 per coin in 2021.

The state of Kentucky have taken a slightly different approach - the state governor has signed a Bitcoin mining incentive bill into law which offers preferential energy tariffs to mining firms in the hope of drawing them to the state.

The cost of mining besides the hardware costs comes from the energy usage, and it's this aspect of Bitcoin that draws the most criticism. This energy usage is also one of the most widely misinterpreted, misunderstood and misquoted 'effects' of Bitcoin. While the energy costs can be perceived as high, particularly by those who don't understand its beneficial effects, there are ways in which mining can be a way of more efficiently using energy.

Bitcoin as a positive force for the environment

The first benefit of Bitcoin in energy terms is that mining operations don't have to be located near to population centers. The computing power can be housed close to sources of renewable and clean energy that wouldn't otherwise be viable as power sources due to the distance the energy would need to be transported between generation and use.

Many Bitcoin mining operations worldwide use green and renewable energy sources already - around 74% of all energy used according to this survey by Coinshares. Half of all Bitcoin mining is operated in the Sichuan region of China and of this, 95% of all power comes from hydroelectricity. While the energy used by Bitcoin is undoubtedly high (some comparisons equate it to that of a nation like Argentina), it seems apparent that mining operations are committed to using as many renewable sources as possible both for ethical as well as economic reasons.

The flexibility of Bitcoin mining operations to move and scale depending on the availability of clean and renewable energy means that mining operations in regions of China relocate at certain times of the year when wet weather increases the availability and reduces the cost of hydro-electric power, offering further efficiencies for the miners and reducing impacts upon the climate too.

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Bitcoin Mining Computer and BitcoinImage by WorldSpectrum from Pixabay

Bitcoin mining enables more efficient use of variable supplies

Thanks to the ease with which mining operations can be established and relocated, they are good ways of making the best use of variable power supplies. Power generation, particularly from renewable sources can vary - power is generated plentifully at certain times but isn't always required and so it goes to waste as it cannot be stored. Conversely, at other times when demand is high production cannot always be scaled up without costs being increased and passed onto the end consumer.

To overcome this, Bitcoin mining operations are a useful means of flexible demand and usage of such energy - at times when supply is limited, miners simply scale-down their operation. Conversely, when supply is plentiful then miners are pleased to be able to access and use the energy that would otherwise go to waste.

Such usage is enforced via energy contracts between the miners and suppliers. A scheme where this is already in operation is at the so-called HODL-Ranch in West Texas.

Bitcoin mining to reduce carbon costs

The energy benefits of Bitcoin go even further than using cleaner energy sources. In some instances, Bitcoin mining has actually proven a means of reducing emissions and lowering carbon costs from oil mining. Typically oil mines will 'flare' excess dry gas that is generated as a by-product from oil mining - burning it on site. This polluting activity, together with the direct venting of methane can be avoided by Bitcoin mining that is sited next to oil wells. The gas that would otherwise be burned is instead used to generate energy to power the mining rigs, avoiding waste and pollution.

Gaz Prom, the Russian oil and gas corporation has recently announced its piloting of such an operation in West Siberia.

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Wind Generated Electricity TurbinesPhoto by American Public Power Association on Unsplash

Bitcoin mining in Tennessee

Given that Tennessee generates around one eighth of its energy using hydro-electricity, the opportunities seem positive for Jackson's mining operations to be powered by clean sources. The prospect of being able to scale mining operations to flex based on availability of such sources of energy would be an efficient means of the city accessing electricity when supplies are plentiful and costs low - this would make their mining operation more profitable, benefitting the city financially.

Moreover, taking a positive stance towards Bitcoin and seeking ways to benefit from it rather than treating it skeptically and cynically as the Federal Government has done, seems a visionary move. It means the state can position itself as a national leader, just as cities like Miami and states like Kentucky and Wyoming have done.

There are of course risks presented by bold and visionary actions, particularly for politicians - their decisions will likely find critics as well as fans. In this case, it seems like Scott Conger has taken a bold but potentially rewarding step that could benefit the city of Jackson enormously.

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