Do bitcoin and other cryptocurrency miners have a place in economic development strategies?
Locations with inexpensive power have been attracting cryptocurrency miners. A recent online article from Site Selection magazine runs through the process for choosing where to place these operations. Speed to market and political support are also considered critical factors, so community leaders and economic developers in areas with available and affordable electricity may be called upon for quick decisions in an uncertain field.
As we explain in the Site Selection piece, some key questions to consider are:
- Will this type of operation contribute to your community’s economic development objectives in terms of jobs, taxes, and other benefits?
- What are the fiscal implications of the project, including any incentives that may be offered?
- Are there opportunity costs – or real costs – associated with the project’s immense energy demands?
- What happens if the value of bitcoin or the other cryptocurrencies being mined falls? If it becomes unprofitable to continue operations, what will become of those facilities and the associated investments? Who bears the risk?
- If there is an expectation that bitcoin mining operations will give communities a new foothold in the technology economy, exactly how is that expected to happen? What does everyone need to do to make this work, and how do you make it last?
The viability of these operations rides on the value of cryptocurrencies relative to costs, so the mining analogy, including the boom/bust cycle, seems more than apt. Asking the right questions early can help communities manage the potential risks and rewards.