This just amazes me. Is there a better example of why capitalism is broken in some fundamental ways other than the idea of "pay me to stop doing this"? On top of that, I seem to remember Texas...
This just amazes me. Is there a better example of why capitalism is broken in some fundamental ways other than the idea of "pay me to stop doing this"?
On top of that, I seem to remember Texas being in the news a few years ago because they were attracting this type of business.
Paying out subsidies to crypto miners is a policy choice, not an intrinsic feature of the capitalist system. Almost every country in the world uses some variation of capitalism, but as far as I'm...
This just amazes me. Is there a better example of why capitalism is broken in some fundamental ways other than the idea of "pay me to stop doing this"?
Paying out subsidies to crypto miners is a policy choice, not an intrinsic feature of the capitalist system. Almost every country in the world uses some variation of capitalism, but as far as I'm aware, Texas is the only state or sub-national unit in the world that offers this type of subsidy.
In my view, if you get an absurd outcome like this one, the appropriate lesson to draw is not that the entire system is broken in some fundamental way, but rather, that one specific government made a bad public policy choice, and we should recognise that and avoid making similar policy choices in other legal jurisdictions.
I think the subtext, and this is my interpretation of it, in their comment about capitalism being broken is that capitalism incentivises people to make decisions that are worse for the group...
I think the subtext, and this is my interpretation of it, in their comment about capitalism being broken is that capitalism incentivises people to make decisions that are worse for the group because they benefit the individual.
The miner could take the subsidy, keep mining, and still come out ahead, while the infrastructure suffers.
Perhaps if there was a system in place where everyone's basic human needs were covered, people as a whole would be able to forgo massive wealth to ensure everyone has what they need.
But I might be projecting my own thoughts into this.
That's pretty much it. Capitalism has done, IMO, immeasurable good to bring lots of people up - medicine, food production, housing, etc. But at some point, the unfettered capitalist system will...
I think the subtext, and this is my interpretation of it, in their comment about capitalism being broken is that capitalism incentivises people to make decisions that are worse for the group because they benefit the individual.
That's pretty much it.
Capitalism has done, IMO, immeasurable good to bring lots of people up - medicine, food production, housing, etc. But at some point, the unfettered capitalist system will eat itself. And that's just how it works.
Of course, this particular example is bad policy, but it's bad policy that is based on the premise of capitalism as we have it today in the US, which is basically growth at all cost.
What upsets me the most about the system is the fact that, at least in my case, we are brainwashed as kids into believing capitalism in the US is the premier system. Sure there are others, but...
What upsets me the most about the system is the fact that, at least in my case, we are brainwashed as kids into believing capitalism in the US is the premier system. Sure there are others, but they all failed or are corrupt.
The second you start to analyze things and realize that infinite growth is impossible and we're only destined to be crushed under the giants at the top, again, at least in my case, it makes me feel duped and foolish for believing it.
It's really more of the opposite. Market based systems work better with constrained resources. Other systems, like the command economies of the soviet union, worked best under heavy, heavy growth,...
It's really more of the opposite. Market based systems work better with constrained resources. Other systems, like the command economies of the soviet union, worked best under heavy, heavy growth, where the rising tide lifting all boats made up for allocation inefficiencies. There is nothing inherent about a market based economy with private ownership that presumes growth, and indeed there are many micro-economies in, say, games that are completely resource limited, which exist perfectly well in a market system. With limited resources, the damage of resource misallocation only magnifies.
The reality is that market economies with private ownership has been the model that has by far worked by the best, and it's not particularly close. Call that what you will, as the term "capitalism" has grown so underdefined it's practically useless.
for more background on "energy credits", Some More News has a great video: How corporations pretend to be eco-friendly
Riot said on Wednesday that the state's power grid operator paid the company $31.7 million in energy credits in August — or roughly $22 million more than the value of the bitcoin it mined that month — to cut its energy consumption during a record-breaking heatwave in the state.
The Electric Reliability Council of Texas (ERCOT), which operates the state's power grid, issues the credits to incentivize companies to reduce activities that might strain the state's already overloaded energy system.
"The effects of these credits significantly lower Riot's cost to mine bitcoin and are a key element in making Riot one of the lowest cost producers of bitcoin in the industry," CEO Jason Les said in a statement.
Riot, which is publicly traded, in 2022 reported a loss of more than $500 million on revenue of $259.2 million. In its most recent quarter, it had a loss of roughly $27 million on revenue of $76.7 million.
As someone in Texas (and working on getting the hell out) I'd like to expand on a little point in the article. This, the second to last line in the article, only tells half the story. Here's the...
As someone in Texas (and working on getting the hell out) I'd like to expand on a little point in the article.
Some Texas lawmakers have also grown wary of cryptocurrency mining. In April, the state's senate passed a bill that would limit incentives for miners participating in the state's energy grid load-reduction program.
This, the second to last line in the article, only tells half the story. Here's the rest:
Texas has made itself an ally to the bitcoin mining industry through credits, but the financial incentives hit a snag in early 2023. A bill to cut off the mining industry from those credits – SB 1751 – passed the Texas State Senate in April, but ultimately stalled out in a House committee.
Instead, state lawmakers passed two mining-friendly bills expanding incentives and cutting red tape for the industry. Those went into effect on Sept. 1.
It's also worth noting that the article mentions the notices from ERCOT to cut usage have been arriving nearly daily for the past month.
You have to be kidding. I don't understand why anyone would want to invite bitcoin miners. Are they paying boatloads of tax on profits or something? I'm starting to understand why China said no to...
You have to be kidding.
I don't understand why anyone would want to invite bitcoin miners. Are they paying boatloads of tax on profits or something?
I'm starting to understand why China said no to all of this and banned it.
Because Texas lawmakers believe so much in "free market" that they think the demand for electricity (through its use by crypto miners) would make the supply grow (by the companies being...
Because Texas lawmakers believe so much in "free market" that they think the demand for electricity (through its use by crypto miners) would make the supply grow (by the companies being competitive to supply to customers' demands). Reality says otherwise. Companies don't have incentive to grow because it doesn't matter to them as they're already saturated and earning shit tons of money. Startup companies also can't just grow out of nowhere to fill in the demand for the obvious reason that it takes too much capital to actually start an electric company.
Formally known in economics as a barrier to entry. But this is econ 101, so surely policy makers aren't expecting new entrants. Why wouldn't incumbents want to expand capacity and make more money?...
it takes too much capital to actually start an electric company
Formally known in economics as a barrier to entry. But this is econ 101, so surely policy makers aren't expecting new entrants. Why wouldn't incumbents want to expand capacity and make more money? Not fully buying "because their satiated" argument. If I were to guess, its due to long lead times, uncertainty, or other factors.
You can always assign some reason on some scale of expectancy of competency. But fact of the matter is, that was their plan. "I demand more it, so you supply more it." I don't see why they...
Why wouldn't incumbents want to expand capacity and make more money? Not fully buying "because their satiated" argument. If I were to guess, its due to long lead times, uncertainty, or other factors.
You can always assign some reason on some scale of expectancy of competency. But fact of the matter is, that was their plan. "I demand more it, so you supply more it." I don't see why they wouldn't just coast back and laugh their way to bank right now without having to lift a finger. There was already plenty of demand even from before, with risks of people freezing and dying, but nothing was done then.
I'd say, without knowing too much about econ, but a bit about power grids, that uncertainty cuts two ways here: (1) Uncertainty about where the market will be in, say, 3 years. Will you still be...
I'd say, without knowing too much about econ, but a bit about power grids, that uncertainty cuts two ways here: (1) Uncertainty about where the market will be in, say, 3 years. Will you still be able to make use of that possible new power plant in 3 years? Or will the market have moved substantially enough to make it unviable? Renewables are expanding massively these days. But maybe more specific to power grids is (2) Variability in the power grid. If there's lots of renewable generation (which I understand texas has), and on top of that ACs draw a lot of power, the grid deficit is highly volatile and dependent on weather. Which means there's these freak events where Texas loses power because their gas plants freeze up, or where they have to drop crypto miners from the grid, but they will be presumably quite rare. Frequent enough for them to be a political problem, but also rare enough to not be an economic opportunity. What, you gonna build a gas plant for a billion dollars that only really needs to run 2 weeks a year? Politically maybe not a bad idea as a reserve, economically that stinks to high heaven unless ERCOT starts handing out a pretty penny for hot spare capacity.
What an ass-backwards system... pay a company millions of dollars to not use power? Not to mention that all that crypto mining is just a huge drain on the grid for no reason. What a waste.
What an ass-backwards system... pay a company millions of dollars to not use power? Not to mention that all that crypto mining is just a huge drain on the grid for no reason. What a waste.
What's stopping these crypto mining companies to bring 5x their current setup and demand the state to pay up 100 million or they'll consume all the electricity?
What's stopping these crypto mining companies to bring 5x their current setup and demand the state to pay up 100 million or they'll consume all the electricity?
it's even dumber than that... from the sources I linked to in another comment, in the past year their bitcoin mining capacity has increased 2x, but the amount of subsidies they receive from ERCOT...
it's even dumber than that...
from the sources I linked to in another comment, in the past year their bitcoin mining capacity has increased 2x, but the amount of subsidies they receive from ERCOT has increased 10x.
they don't even need to do the ransom strategy you're describing. it's more like they've found an infinite money cheat code and the Texas state government has no interest in patching the bug.
It's a big number and I'm wondering how to put it into context. An interesting comparison might be with how much Riot pays ERCOT for electricity over a year. How much does it reduce the average...
It's a big number and I'm wondering how to put it into context. An interesting comparison might be with how much Riot pays ERCOT for electricity over a year. How much does it reduce the average rate they're paying?
It wouldn't be particularly surprising if ERCOT screwed this up, though.
this statement from Riot's CEO (also linked in the article) may help: the CEO himself is saying the amount of these payments is significant and that it's a "key competitive advantage" for them....
It's a big number and I'm wondering how to put it into context.
The effects of these credits significantly lower Riot’s cost to mine Bitcoin and are a key element in making Riot one of the lowest cost producers of Bitcoin in the industry. Riot’s power strategy is a key competitive advantage..
the CEO himself is saying the amount of these payments is significant and that it's a "key competitive advantage" for them.
which makes sense, doesn't it? Bitcoin is a global network, the reward for mining a block is the same around the world, so the cost mostly depends on the price of electricity. if you can find a local government that will subsidize you for doing Bitcoin mining, why wouldn't you use it?
also, if you look closely at their chart - in August 2022 they got $3 million in energy credits, a year later in August 2023 they got $24.2 million. likewise with "demand-response credits" (another ERCOT program) increasing from $0.2 million to $7.4 million.
(and again, this is Riot's own numbers here, we have to take their word for it. they make clear in the statement these are unaudited, so it's always possible there's something they're sweeping under the rug and not disclosing here)
their "deployed hash rate" and "deployed miners" doubled in that time. so their Bitcoin mining volume is 2x, but they increased their energy credits by 8x and their "demand-response credits" (which I'm guessing is ERCOT paying them to mine only at night rather than during the day when the sun is shining and people are running their AC) by 37x. seems like a pretty good grift if you can make it work.
"Significant" is really vague puffery and no substitute for numbers. I did look at the financial statements a bit, but I couldn't tell how much they spend on electricity and I don't really...
"Significant" is really vague puffery and no substitute for numbers. I did look at the financial statements a bit, but I couldn't tell how much they spend on electricity and I don't really understand their business.
It's interesting to me that they decided to pay miners to use less electricity, rather spending that money to improve their infrastructure. Electricity usage is going nowhere but up, as...
It's interesting to me that they decided to pay miners to use less electricity, rather spending that money to improve their infrastructure. Electricity usage is going nowhere but up, as electrification of massive categories of energy usage such as vehicles and heating continues to increase.
Is it that interesting? Unless they happen to also have a time machine, if the energy gap is coming up in a week, you can't exactly just magically "upgrade" the grid in that time frame. You can...
Is it that interesting? Unless they happen to also have a time machine, if the energy gap is coming up in a week, you can't exactly just magically "upgrade" the grid in that time frame. You can think of it as ERCOT taking an electricity loan from the miners.
You don't need a time machine to realize that Texas/ERCOT (among other states) doesn't have sufficient infrastructure for peak demand. This isn't the first time they've had an "energy gap"...
You don't need a time machine to realize that Texas/ERCOT (among other states) doesn't have sufficient infrastructure for peak demand. This isn't the first time they've had an "energy gap" recently. Their inability to adequately deliver power especially came to light during the 2021 ice storm that caused outages for 4.5 million homes and businesses.
This just amazes me. Is there a better example of why capitalism is broken in some fundamental ways other than the idea of "pay me to stop doing this"?
On top of that, I seem to remember Texas being in the news a few years ago because they were attracting this type of business.
From what I read in the other comments, they didn't even stop doing it. Which just makes your statement even truer.
Paying out subsidies to crypto miners is a policy choice, not an intrinsic feature of the capitalist system. Almost every country in the world uses some variation of capitalism, but as far as I'm aware, Texas is the only state or sub-national unit in the world that offers this type of subsidy.
In my view, if you get an absurd outcome like this one, the appropriate lesson to draw is not that the entire system is broken in some fundamental way, but rather, that one specific government made a bad public policy choice, and we should recognise that and avoid making similar policy choices in other legal jurisdictions.
I think the subtext, and this is my interpretation of it, in their comment about capitalism being broken is that capitalism incentivises people to make decisions that are worse for the group because they benefit the individual.
The miner could take the subsidy, keep mining, and still come out ahead, while the infrastructure suffers.
Perhaps if there was a system in place where everyone's basic human needs were covered, people as a whole would be able to forgo massive wealth to ensure everyone has what they need.
But I might be projecting my own thoughts into this.
That's pretty much it.
Capitalism has done, IMO, immeasurable good to bring lots of people up - medicine, food production, housing, etc. But at some point, the unfettered capitalist system will eat itself. And that's just how it works.
Of course, this particular example is bad policy, but it's bad policy that is based on the premise of capitalism as we have it today in the US, which is basically growth at all cost.
What upsets me the most about the system is the fact that, at least in my case, we are brainwashed as kids into believing capitalism in the US is the premier system. Sure there are others, but they all failed or are corrupt.
The second you start to analyze things and realize that infinite growth is impossible and we're only destined to be crushed under the giants at the top, again, at least in my case, it makes me feel duped and foolish for believing it.
It's really more of the opposite. Market based systems work better with constrained resources. Other systems, like the command economies of the soviet union, worked best under heavy, heavy growth, where the rising tide lifting all boats made up for allocation inefficiencies. There is nothing inherent about a market based economy with private ownership that presumes growth, and indeed there are many micro-economies in, say, games that are completely resource limited, which exist perfectly well in a market system. With limited resources, the damage of resource misallocation only magnifies.
The reality is that market economies with private ownership has been the model that has by far worked by the best, and it's not particularly close. Call that what you will, as the term "capitalism" has grown so underdefined it's practically useless.
What a use of Texas tax dollars. Almost seems like laundering.
for more background on "energy credits", Some More News has a great video: How corporations pretend to be eco-friendly
As someone in Texas (and working on getting the hell out) I'd like to expand on a little point in the article.
This, the second to last line in the article, only tells half the story. Here's the rest:
It's also worth noting that the article mentions the notices from ERCOT to cut usage have been arriving nearly daily for the past month.
You have to be kidding.
I don't understand why anyone would want to invite bitcoin miners. Are they paying boatloads of tax on profits or something?
I'm starting to understand why China said no to all of this and banned it.
Because Texas lawmakers believe so much in "free market" that they think the demand for electricity (through its use by crypto miners) would make the supply grow (by the companies being competitive to supply to customers' demands). Reality says otherwise. Companies don't have incentive to grow because it doesn't matter to them as they're already saturated and earning shit tons of money. Startup companies also can't just grow out of nowhere to fill in the demand for the obvious reason that it takes too much capital to actually start an electric company.
Formally known in economics as a barrier to entry. But this is econ 101, so surely policy makers aren't expecting new entrants. Why wouldn't incumbents want to expand capacity and make more money? Not fully buying "because their satiated" argument. If I were to guess, its due to long lead times, uncertainty, or other factors.
You can always assign some reason on some scale of expectancy of competency. But fact of the matter is, that was their plan. "I demand more it, so you supply more it." I don't see why they wouldn't just coast back and laugh their way to bank right now without having to lift a finger. There was already plenty of demand even from before, with risks of people freezing and dying, but nothing was done then.
I'd say, without knowing too much about econ, but a bit about power grids, that uncertainty cuts two ways here: (1) Uncertainty about where the market will be in, say, 3 years. Will you still be able to make use of that possible new power plant in 3 years? Or will the market have moved substantially enough to make it unviable? Renewables are expanding massively these days. But maybe more specific to power grids is (2) Variability in the power grid. If there's lots of renewable generation (which I understand texas has), and on top of that ACs draw a lot of power, the grid deficit is highly volatile and dependent on weather. Which means there's these freak events where Texas loses power because their gas plants freeze up, or where they have to drop crypto miners from the grid, but they will be presumably quite rare. Frequent enough for them to be a political problem, but also rare enough to not be an economic opportunity. What, you gonna build a gas plant for a billion dollars that only really needs to run 2 weeks a year? Politically maybe not a bad idea as a reserve, economically that stinks to high heaven unless ERCOT starts handing out a pretty penny for hot spare capacity.
Nice to see rich people find creative new ways to shuffle the wealth around.
What an ass-backwards system... pay a company millions of dollars to not use power? Not to mention that all that crypto mining is just a huge drain on the grid for no reason. What a waste.
What's stopping these crypto mining companies to bring 5x their current setup and demand the state to pay up 100 million or they'll consume all the electricity?
it's even dumber than that...
from the sources I linked to in another comment, in the past year their bitcoin mining capacity has increased 2x, but the amount of subsidies they receive from ERCOT has increased 10x.
they don't even need to do the ransom strategy you're describing. it's more like they've found an infinite money cheat code and the Texas state government has no interest in patching the bug.
It's a big number and I'm wondering how to put it into context. An interesting comparison might be with how much Riot pays ERCOT for electricity over a year. How much does it reduce the average rate they're paying?
It wouldn't be particularly surprising if ERCOT screwed this up, though.
this statement from Riot's CEO (also linked in the article) may help:
the CEO himself is saying the amount of these payments is significant and that it's a "key competitive advantage" for them.
which makes sense, doesn't it? Bitcoin is a global network, the reward for mining a block is the same around the world, so the cost mostly depends on the price of electricity. if you can find a local government that will subsidize you for doing Bitcoin mining, why wouldn't you use it?
also, if you look closely at their chart - in August 2022 they got $3 million in energy credits, a year later in August 2023 they got $24.2 million. likewise with "demand-response credits" (another ERCOT program) increasing from $0.2 million to $7.4 million.
(and again, this is Riot's own numbers here, we have to take their word for it. they make clear in the statement these are unaudited, so it's always possible there's something they're sweeping under the rug and not disclosing here)
their "deployed hash rate" and "deployed miners" doubled in that time. so their Bitcoin mining volume is 2x, but they increased their energy credits by 8x and their "demand-response credits" (which I'm guessing is ERCOT paying them to mine only at night rather than during the day when the sun is shining and people are running their AC) by 37x. seems like a pretty good grift if you can make it work.
if you want some additional context, from January 2022: Texas officials put the final death toll from last year's winter storm at 246. if ERCOT has $31 million dollars to spare, there are probably things they could spend it on that are higher priorities than giving kickbacks to Bitcoin miners.
"Significant" is really vague puffery and no substitute for numbers. I did look at the financial statements a bit, but I couldn't tell how much they spend on electricity and I don't really understand their business.
It's interesting to me that they decided to pay miners to use less electricity, rather spending that money to improve their infrastructure. Electricity usage is going nowhere but up, as electrification of massive categories of energy usage such as vehicles and heating continues to increase.
Is it that interesting? Unless they happen to also have a time machine, if the energy gap is coming up in a week, you can't exactly just magically "upgrade" the grid in that time frame. You can think of it as ERCOT taking an electricity loan from the miners.
You don't need a time machine to realize that Texas/ERCOT (among other states) doesn't have sufficient infrastructure for peak demand. This isn't the first time they've had an "energy gap" recently. Their inability to adequately deliver power especially came to light during the 2021 ice storm that caused outages for 4.5 million homes and businesses.