PLATTSBURGH, N.Y. – In a rundown strip mall, behind a Family Dollar store and a plastic recycling facility, tens of thousands of specialized computers packed into shipping containers mine bitcoin 24-7.
Unless they were looking for it, visitors to Skyway Plaza might not even notice the cryptocurrency mining operation, run by Coinmint, a firm based 1,860 miles away, in San Juan, Puerto Rico. There are no obvious signs bearing the operator’s name, no telltale giveaways save the whirring hum of the computers and the constant whoosh of industrial fans.
Some doors to the facility are left propped open day and night, probably to prevent the computers from overheating. Others are covered with metal grates, pocked with sun-faded candy wrappers and other trash blown in by the wind.
This article is part of CoinDesk's Mining Week series
During multiple trips to the 10-megawatt facility, CoinDesk didn’t observe any staff or security guards (cameras and bright spotlights might be enough to deter would-be thieves). Locals told CoinDesk that during winter months, homeless people are known to wander in through the open doors, seeking a warm place to sleep.
Three miles away, at the Imperial Mill, a former wallpaper factory-turned-industrial park, another miner called Zafra LLC is building a 2-megawatt facility. When CoinDesk visited in early March, the facilities were clean, well-lit and overseen by a uniformed security guard.
Zafra’s CEO, Ryan Brienza, showed off a newly installed cooling system and explained how heat generated from the operation was being used to warm neighboring units in the industrial park. Brienza’s high school friend, a full-time Zafra employee, was at work painting the company’s custom-made metal mining containers a vibrant blue.
The contrast between these two outfits helps illustrate why Plattsburgh, a sleepy college town in New York’s North Country about 20 miles from the Canadian border, became a poster child for the hot-and-cold relationship between local communities and crypto mining operations.
But far more important than their contribution (or detriment) to the quality of life is the strain these businesses place on the cost of living.
Plattsburgh’s 18-month mining moratorium
Plattsburgh made international headlines in March 2018 when it became the first U.S. city to ban cryptocurrency mining. Mining operations had flocked there the year before for its dirt-cheap electricity, but residents soon began complaining of skyrocketing energy bills and loud noises from whirring computers and the industrial-grade fans used to cool the mining facilities.
The municipal government, under the leadership of then-mayor Colin Read, a professor of economics and finance at the State University of New York at Plattsburgh, voted to enact a 18-month moratorium on commercial crypto mining in the city.
The moratorium wasn’t meant to push the miners out of Plattsburgh, Read recently told CoinDesk, but rather to give the city time to sort out how to make them better neighbors – neighbors that wouldn’t keep passing on ballooning power costs to residential users every month, or drive locals mad with constant noise.
In February 2019, the moratorium was lifted – seven months ahead of schedule. Read’s administration had come up with a host of solutions aimed at reducing the burden the miners had placed on the community.
The biggest step was the passage of Rider A – a fresh tariff structure agreement with the New York Public Service Commission that ensured that if the city had to purchase extra power on the spot market, the costs would be passed on to miners, not residential users.
The city also passed a local ordinance that set noise limits and required mining operations to find a way to recycle the heat generated by their machines.
That could also extend outside New York and across the country. Mining bans and crackdowns in other countries including China have led to a rise in North American crypto mining. In late 2021, the U.S. became the leading destination for bitcoin miners, accounting for over a third of the global hashrate.
Cities across the U.S. are now grappling with what it means to have mining operations in their communities. And while concerns will differ from city to city (Plattsburgh’s residents were worried about their wallets, not the environment, for example, while operations in New York’s Finger Lakes region are running into environmental concerns about rising water temperature and fish-killing algal blooms) – Plattsburgh answers a question that more and more lawmakers will soon be asking themselves: What happens when you ban crypto mining?
Cheap and abundant hydropower is a draw for mining farms
Like many cities in New York, Plattsburgh gets its electricity from the Niagara River, which generates abundant and renewable hydroelectric power.
Through a long-term contract with the Niagara Power Authority set in the 1950s, Plattsburgh is able to sell industrial power for a mere 1.9 cents per kilowatt hour (residential users pay 4.5 cents) – one of the lowest prices in the U.S. and a fraction of the nationwide average cost of 13 cents per kilowatt hour.
The bottom line is simple: The cheaper miners can get their power, the more they will make in profits.
Read, the former mayor, told CoinDesk that by his calculations, Coinmint was earning about $19 million per month in profit at the height of its operation in Plattsburgh before the moratorium. Coinmint didn’t respond to CoinDesk’s requests for comment for this story.
But while Plattsburgh’s power might be abundant, it is not unlimited.
The city’s monthly quota allowance of 120 megawatts, also set in the 1950s, is more than enough for Plattsburgh’s roughly 20,000 residents, who typically use less than half the quota in the summer months.
But in the winter, when Plattsburgh’s residents are all using electricity to heat their homes in below-freezing temperatures, there’s less to go around. That’s when the problems began.
The winter months straddling the end of 2017 and the beginning of 2018 were particularly cold in the North Country – and particularly good for the price of bitcoin.
For several months in a row, Plattsburgh’s miners, in combination with high residential power usage, pushed the city to the brink of its power quota, forcing the municipal power authority to buy expensive power on the spot market to keep the lights on.
Residents and other local businesses were outraged to see their bills skyrocket. The city hosted town hall meetings where residents complained of bills hundreds of dollars more than expected. The chief financial officer for Mold-Rite Plastics, a large local manufacturer, reported bills $60,000 higher than the typical rate in January and February 2018.
“We had a lot of very upset public testimony,” Read told CoinDesk. “We realized we needed to do something to protect our ratepayers.”
By March 2018, the moratorium was in place.
A tale of two mining companies
Coinmint, the biggest mining operation in Plattsburgh, pushed back against the new rules.
The company sued the city to avoid paying a million-dollar security deposit required by Rider A, and citing rising electricity costs, it moved the majority of its computing activity, or hash power, to Massena, N.Y. – a former industrial town in the Finger Lakes region with more expensive industrial power.
Coinmint purchased a former Alcoa aluminum smelting facility in Massena, where it reportedly operates an 80-megawatt mining operation. In Plattsburgh, it still maintains the 10-megawatt facility in Skyway Plaza.
In 2019, Coinmint was evicted from one of its facilities in the Imperial Mill industrial park for unknown reasons. Doug Butdorf, the property manager of the park, declined to comment on either Coinmint’s eviction or the space’s two current mining tenants, including Zafra (the identity of the second mining operation is also unknown).
Zafra, Plattsburgh’s second-biggest operation, however, worked to comply with the city’s new rules, and when the moratorium was lifted, it expanded its presence in the city.
After Coinmint’s eviction, Zafra took over its location at Imperial Mill and has been working on a buildout of a 2-megawatt mining operation. Zafra runs a hosting business in another unit in the industrial park.
Zafra has a handful of employees, including CEO Brienza’s father, a local businessman and engineer, and Brienza’s high school friend (at 22, Brienza is a recent graduate of Beekmantown High School, just outside Plattsburgh).
The economic impact of crypto mining farms
Though both Coinmint and Zafra have employees in Plattsburgh, the mining operations have created far fewer jobs than the city’s government would like to see.
Mining operations often tout job creation as a benefit to the community before they set up shop, but both Read and Christopher Rosenquest, the current mayor of Plattsburgh, said the gains have been minimal at best.
“For better or for worse, they don’t create a lot of jobs,” Rosenquest told CoinDesk. “We track these companies, we know who they are. We know that there’s only one or three jobs created after the build-out [of the mining facility].”
And the jobs that are created are often low-skill, low-wage security jobs, said Read, which means that they produce little tax benefit to the community.
“Mostly young kids work for them, at minimum wage, so they’re not buying houses and paying property taxes, and they can’t really afford to live on the wages that bitcoin [mining operations] pay, and there’s no income tax,” Read said. “There’s really no way to tax them.”
And because miners are highly sensitive to the price of electricity, as well as to the ease of doing business, they keep their operations as mobile as possible, often in shipping containers, like Coinmint. That means they don’t buy warehouse space, they rent it, and so cities like Plattsburgh don’t reap the benefit in property taxes, either.
“We don’t get property tax from crypto miners, we get it from their landlords. We don’t get sales tax from crypto miners, because they’re not selling a product. There’s no tax benefit or tax revenue we generate from that industry. We don’t get any money from them,” Rosenquest explained.
Crypto mining vs. plastics and weed
Other industries that consume the same amount of power as Plattsburgh’s crypto miners create many more jobs. Read told CoinDesk that for each megawatt of power, economic planners typically expect to see 55 jobs created.
Mold-Rite Plastics, for example, which is the second-biggest user of Plattsburgh’s power at 5 megawatts per month, has about 450 employees. Read said Coinmint has fewer than 10.
Rosenquest told CoinDesk the biggest benefit to having the miners in town is the ability to sell the city’s excess power.
“Look, if we’re allotted a certain amount [of power], and we only use 90% of that, that’s money left on the table, right? Having some type of industry that consumes the rest of that electricity is our goal,” Rosenquest said.
The mayor, however, is also concerned that by selling the totality of the city’s power each month, Plattsburgh could be missing out on a better option in the future.
“The city of Plattsburgh is very pro-adult recreational marijuana. [Growers] use as much, maybe slightly less, electricity than a miner of the size we have,” Rosenquest said.
“But a large-scale marijuana grower and manufacturer would create a significant amount more jobs, right? They would consume the same amount of electricity but provide a lot more benefit to the city by creating jobs,” he added.
When asked whether Rider A was ultimately effective in protecting residential ratepayers, both Read and Rosenquest told CoinDesk that there were no more complaints of sky-high electricity bills.
But, when CoinDesk talked to Plattsburgh locals, the truth appeared to be more complicated.
Jeremy Frenyea, an IT specialist for the local school district and a small business owner, told CoinDesk that while the passage of Rider A kept his bills from rising astronomically, the monthly cost is still more than it used to be before the miners moved into town.
Frenyea is a co-owner of Medusa Gaming, a board game shop, and says the store’s electricity costs each month are still up considerably from what they were before. Frenyea said Medusa is open only five days a week for four to five hours a day. The only significant power draw in the shop, aside from the lights, is a fridge storing cold sodas for sale.
“Our average bill prior to the bitcoin farms was between $14 and $50 per month. Now we’re up to $200-plus a month. So that’s been wonderful,” Frenyea said sarcastically.
Despite his frustrations with the mining industry’s impact on his life, Frenyea said he isn’t against cryptocurrency.
“I don’t mind crypto. I think it’s fine,” he said. “But the impact is a little rough on the communities that are hosting it.”
UPDATE (March 21, 20:30 UTC): Corrects high school's name.
UPDATE (March 21, 21:50 UTC): An earlier version of this article incorrectly stated that Zafra employed a former Coinmint employee. Ryan Brienza says he and his company have no affiliation with Coinmint.
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