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In Upstate New York, the Bitcoin Mining Rush Has Gone Bust

When the price of Bitcoin skyrocketed, eager "miners" came to town and gobbled up cheap electricity to fuel their activities. Now the price is down and the mining has slowed. Here's what that looks like.

(TNS) — A year ago, the North Country college town of Plattsburgh, N.Y., on the shore of Lake Champlain, found itself in the middle of an unexpected tech boom. Due to the region's abundance of low-cost hydroelectric power, Bitcoin "miners" were opening up shop as part of a race to cash in on the cryptocurrency craze.

But because such miners use electricity-hungry networks of computer servers to generate the digital lucre, longtime residents were seeing their energy costs skyrocket.

Angry and a bit worried about the influx, Plattsburgh imposed a moratorium on new mining operations.

Since then, the price of Bitcoin and other cryptocurrencies has crashed. That, combined with a newly boosted state-imposed rate on power for mining, has caused the boom to come to an abrupt halt.

“We don’t have anybody calling anymore,” said Plattsburgh Mayor Colin Read. A year ago, the phone rang all the time with Bitcoin miners inquiring about space for rent.

The situation is the same in other North Country municipalities, especially those which have their own low-cost electricity thanks to the massive hydro dams along the St. Lawrence River.

“We’ll likely lift the moratorium,” said Lake Placid Mayor Craig Randall. Fearful that their allocations of cheap power would also be gobbled up by the miners, leaders of the resort town imposed their own moratorium. Randall said there had been no visible influx of crypto miners.

As in Plattsburgh, electricity costs in Lake Placid are so low that many people use it to heat their homes, something that would be prohibitive in most New York communities, let alone the snowy environs of the North Country.

Bitcoin, the best-known brand of cryptocurrency, is a form of virtual currency or money. The “coins” or tokens carry a dollar value that fluctuates and can be used to pay for goods or services.

But rather than taking shape as paper currency, bank checks or metal coins, cryptocurrency is stored and traded in online ledgers using blockchain technology.

Cryptocurrency advocates prefer the system, noting that unlike dollars and other forms of currency, digital coins are not backed or supported a government.

And blockchain technology can track other transactions such as real estate sales. Cryptocurrency systems are designed in a way to be almost impossible to manipulate and they offer open access and online records of transactions.

While anyone can buy cryptocurrency online, a technologically savvy person can try to mine it. That involves using specially made computers to run the complex math calculations that are the basis of the online commerce.

As payment for detecting and verifying cryptocurrency commerce, miners get their own crypto coins.

The lack of government backing comes with serious downsides, such as the volatility that has recently afflicted the market.

In 2017, a single Bitcoin rose in value from $900 to almost $20,000. That’s what sparked the rush to the North Country, with its cheap power aiding the mining computers.

But then the price fell. On Friday, a Bitcoin was just below $4,000.

Global confidence in the currency technology was dinged last month after the sudden death of Canadian cryptocurrency mogul Gerald Cotten left $145 million in assets held by his company, Quadriga, locked inside so-called "cold wallets," or offline digital vaults. Cotten's widow claimed she was unable to find the necessary passwords.

Adding to the challenges, the state Public Service Commission last summer ruled that municipal power companies can charge crypto miners higher rates, with the money essentially helping to keep costs low for residents.

The North Country miners haven’t entirely vanished, and some saw their low power costs grandfathered in.

And one mining company, Coinmint, continues to operate a large mine in what was once an aluminum smelter in Massena, St. Lawrence County.

The company laid off 15 of its 70 employees in January. “I haven’t been out there in a while,” said Massena Supervisor Steve O’Shaugnessy, who helped bring the company to town in 2018.

Coinmint officials didn’t respond to emails seeking comment.

Some miners have adopted new strategies. Ryan Brienza, a Plattsburgh resident who early on helped open a firm that hosts the computer farms, is working on adapting the devices to heat buildings.

In addition to consuming large amounts of power, cryptomining computers throw off a lot of heat.

“The moratorium really affected our expansion plans,” Brienza said, adding that he’s talking with SUNY Plattsburgh officials about a system that recaptures heat from the computers.

According to some accounts, tech-savvy college students continue to run small-scale mining operations in their college dorms. They can make money even at low prices since they don’t pay for their own electricity.

Officials at the Cisco technology conglomerate recently estimated that college miners account for 22 percent of such operations worldwide, according to a recent PC Magazine story.

And college students remain interested in learning about this new fieId. SUNY Plattsburgh, for instance, has a summer course offering introduction to cryptocurrency and blockchain technology.

The course is offered online.

©2019 the Times Union (Albany, N.Y.). Distributed by Tribune Content Agency, LLC.