Cryptocurrency mining has become a political issue in Plattsburgh, New York, of all places. Plattsburgh’s city council has placed an 18 month moratorium on new mining farms.
The mines were draining such much electricity from Plattsburgh’s grid that they were driving up utility bills, Motherboard reported. The very idea of cryptocurrency mining in Plattsburgh seems bizarre; because it is an old industrial town on the shores of Lake Champlain — about as far from Manhattan as one can get in the Empire State.
Small time miners are in Plattsburgh because it has some of America’s cheapest electricity. Electricity in Plattsburgh is so cheap because it is close to the St. Lawrence-Franklin Delano Roosevelt (FDR) Power Project. The Project is a giant dam that produces electricity with 32 turbines on Barnhart Island in the Saint Lawrence River. Half the power goes to New York State and half to Quebec.
Cryptocurrency Mining is a Political Issue
Plattsburgh receives 104 megawatts or 104 million watts of power from the project each month. That enables residents to pay just 2¢ a kilowatt hour for electricity, while the average American pays around 12¢ for a kilowatt hour.
Miners poured into town taking over empty store fronts and bringing in Antminers as cryptocurrency prices rose. The mines in Plattsburgh are small potatoes, compared the giant facilities run by companies like Genesis Mining. Yet they were enough to drive electricity bills up by to $100 to $200 a month for some residents, Mayor Colin Read claimed.
That led the city council which controls the local electric supply to institute the moratorium. It is to see why the council took action higher electricity costs are threatening jobs.
Electric bills went up so fast that Mold-Rite Plastics; a local company that employed 500 people would have to cut jobs, the company’s Chief Financial Officer (CFO), Tom Recny claimed at a city council meeting. Mold-Rite operates in Plattsburgh for the same reason the miners are there — the cheap power. If it cannot get it cheap electricity, Mold-Rite will leave town and take the jobs with it.
Cryptocurrency mines are completely automated operations that employ only a handful of people. They make a lot of money but they only benefit their owners and investors who can get rich.
Should Cryptocurrency Mining Be Banned?
The situation in Plattsburgh is being played out in other areas with cheap electricity from hydro projects such as Central Washington State.
Cryptocurrency mining is flourishing in the Mid-Columbia-Basin; which is home to some of the world’s largest power dams, The Seattle Times reported. Demand for power increased by 210 megawatts in the region because miners came to town. Utility crews have found apartments full of remote controlled Antminers. Situations like that in Washington State will lead to more demands to ban cryptocurrency mining.
Banning cryptocurrency mining would be both stupid and short-sighted. A better answer is what can be called the Alaska solution. The state of Alaska charges taxes on mines and oil drilling that are paid back to every citizen in the form of a basic income payment from the Alaska Permanent Fund.
Local governments might charge a tax on cryptocurrency mining, or simply go into the mining business themselves. The government or utility can use excess electricity to mine and simply redistribute the cash generated back to residents or to pay for local government services.
The City of Plattsburgh is facing a $1 million budget deficit. The city might be able to make that up and cut taxes if it were willing to go into the mining business.
Plattsburgh instituted the moratorium because it is illegal for the city to charge the miners a higher rate. A rate increase would have to be approved by the New York State Utilities Commission, Motherboard reported.
How Technology causes Income Inequality
The situation in Plattsburgh demonstrates how the new high-tech economy generates both income inequality and political controversy.
Cryptocurrency is just one of many new technologies that can generate vast amounts of revenue without creating jobs. Similar dilemmas are created by server farms, datacenters, wind farms, solar electric projects, oil and gas wells, and by next-generation manufacturing and fulfillment centers. Labor on today’s oil and rigs is done by robotic roughnecks, and the work in fulfillment centers is being done by swarms of robots.
Such projects may only generate a handful of jobs but they make a lot of money for their owners. That creates huge problems for the mostly working-class communities in which they are located.
The working people get no jobs or money, yet they live with the side effects of the new Industrial Revolution every day. The people profiting from the new technology are enjoying the nightlife in Brooklyn, playing golf at Pebble Beach, or laying on the beach in the Caribbean.
Time for a New Social Contract
Progress is ripping up the social contract written at the end of the last Industrial Revolution.
That contract read something like this: the working class agreed to live with the pollution, grime, danger, noise, and ugly architecture of industry in exchange for high-paying jobs with good benefits. The jobs no longer exist, which means the social contract is dead.
The working people that get no eggs from the golden goose of technology but have to live with its shit — will kill the bird. The only way to protect the goose is to start sharing the golden eggs with everybody.
Fortunately there is a humane solution to this situation. The solution is to invest revenue generated from the new technology in sovereign wealth funds like the Alaska Permanent Fund. Those funds should pay the revenue out to all citizens in the form of a basic income and other benefits.
Such funds are not fantasy they function well in countries as diverse as Saudi Arabia, China, and Norway. Norway’s sovereign wealth fund which supports the nation’s pension system is worth $1 trillion.
Is Basic Income the Answer?
If every citizen of Plattsburgh was receiving a few hundred or a few thousand dollars a month from the cryptocurrency mining they would welcome new cryptocurrency mines with open arms. Basic income would be an equitable solution because it would stop politicians from wasting the money on pet projects, or giving their friends and relatives high-paying “jobs.”
An obvious solution for America would be to set up a national sovereign wealth fund to shore up Social Security, finance single-payer healthcare for all Americans, and pay a basic income to every citizen. The fund can be financed by government-operated cryptocurrency mines, and taxes on cryptocurrency mining, finance, and data mining. Modern technology allows taxes to be collected directly as wealth is generated.
The fund can be overseen by the Federal Reserve Board and invest excess cash in stocks, securities, and venture capital to increase the nation’s wealth. That way every citizen will profit from the new technology — which is the best way to shut down the technophobes and the Luddites.
One thing is clear our political and business leaders’ almost pathological obsession with “jobs” is not the answer. Developments in Plattsburgh prove that the old social contract is dead and it is time to write a new one. If we do not write a new social contract our cities will burn, and many people will suffer.
Responsible investors that want to experiment with cryptocurrency mining should consider using companies like Genesis Mining. Genesis operates large commercial mining farms in sparsely populated areas that have little impact on average people.
Investors need to consider the ethical implications of some of this new technology. If they do not, everybody will suffer from the political backlash.
This story initially appeared at Market Mad House your barometer for income inequality, technological unemployment, and cryptocurrency insanity.