Sherrill, N.Y., Follows Lead of Other Towns with Cryptomining Moratorium

Cheap power in smaller towns has been a draw for virtual currency miners, but the burden they put on the utility system and ratepayers is leading some jurisdictions to ban them.

by Edward Harris, Observer-Dispatch / April 16, 2018
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(TNS) — SHERRILL, N.Y. — Citing a desire to be ahead of the curve, Sherrill is following the lead of other small communities to establish a local law imposing a moratorium on commercial cyrptocurrency mining operations in the city.

Mining requires a person to use their computer's processing power to solve a complex mathematical problem. The problems are getting harder to solve and computers often are networked together to work on the problems. That causes energy usage to increase in a municipality.

Sherrill, which operates its own Sherrill Power and Light utility, conducted a public hearing recently on the law and no one attended, so the law has gone into effect, City Manager Brandon Lovett said.

Lovett said the city was following the lead of Plattsburgh, which recently issued a moratorium. He said Plattsburgh had seen its energy usage rise due to commercial mining, forcing the city to purchase more power at a higher cost.

"We wanted to make sure that did not happen here," Lovett said.

Plattsburgh is the first city in the country to implement a moratorium. It was implemented in March, following a public hearing.

"It's going well," said Plattsburgh Mayor Colin Read.

During the city's public hearing, Read said that about 5 percent of the crowd was "industry types" that thought the moratorium would hinder progress, while the other 95 percent were just wondering why their electric bills had gone up.

Read said that during the moratorium, city officials would be looking at safety issues, including electrical, fire and noise nuisance issues.

Mehmet Sencicek, an associate professor of economics at Utica College, supported Sherrill implementing the moratorium, even though he does not believe there is any verifiable way to measure power consumption for mining operations.

"Large scale operations may pose risks to electrical systems as they require massive power density for mining and strong cooling systems for the mining hardware," he said. "These operations also compete with other businesses for commercial space; they may crowd out other businesses and later abandon operations ... if mining turns out to be not feasible, which remains a possibility. In my opinion, the city of Sherrill is correct in establishing a moratorium until the costs and benefits of the issue can be studied."

Under the new law, commercial cryptocurrency mining is defined as the process by which cryptocurrency transactions are verified and added to the public ledger, known as block chain, and also the means through which the new units of cryptocurrencies are released, through the use of server farms employing data processing equipment.

The use of these server farms can consume a lot of power, oftentimes requiring municipalities to go out and purchase more power for residential use, which costs the taxpayers, Lovett said. The power is used to run the servers and also cool them down. Lovett used clean rooms in high-tech manufacturing facilities as an example.

He further noted that the companies or people that would utilize such server farms for cryptocurrency mining would go to a place such as Sherrill over Utica due to the lower cost of power.

"There is little to no benefit," Lovett said of the mining companies. "It's not a viable offset."

Lovett said the city might make an exception for such high power use if the company was bringing in jobs to the community, but these types of operations do not. He said the largest mining operation that he has heard of employs nine people.

"They create little or no jobs," he said.

Lovett noted that the city was only placing the moratorium on mining cyrptocurrency — of which Bitcoin is the most popular — not the use of it in the community.

There are several ways a person can acquire bitcoins. There is mining, and people also can purchase bitcoins (and other cryptocurrency) from online exchanges where it is sold like other commodities. Retailers also can acquire bitcoins by accepting them as payment for their goods — much like Ocean Blue in Utica.

Lovett said the Sherrill moratorium is in effect for the foreseeable future. He said the city would be talking with other municipalities on how best to handle commercial mining. Some ideas are charging the mining company for the extra power usage or adding tariffs, or extra costs, which Plattsburgh is looking at doing.

©2018 Observer-Dispatch, Utica, N.Y. Distributed by Tribune Content Agency, LLC.