Texas paid Bitcoin miner Riot $31.7M to shut down in August | Hacker News Reader

Texas paid Bitcoin miner Riot $31.7M to shut down in August

cnbc.com

87 pointsjanandonly55 comments

“Fun fact”, Texas grid came really close to (another) controlled shutdowns last night. We had about 1,200MW in operating reserves. https://www.ercot.com/news/release/2023-09-06-ercot-has-init...

Same is expected for tonight.

Related thread & discussion from earlier today:

Texas just got closer to blackouts than it has since 2021. What happened?

https://news.ycombinator.com/item?id=37419220

Thanks. Based on Supply and Demand forecast, we’re going to be looking at as low as 600MW operating reserves between 7:45-8-15. That may trigger Level 3

Might happen tonight. Forecasts aren't looking good - https://www.ercot.com/gridmktinfo/dashboards

> The agency also counts on bitcoin miners to soak up excess power when there’s too much supply, keeping prices in check.

And how does the Texas public benefit from this? Is "to soak up excess power" really that valuable?

AIUI, turning on a dormant power plant is an expensive process, but utilities need to be careful to balance the amount of power they put into the network is close to the amount of power being consumed or "bad things will happen™"

If the power draw is fluctuating around a level where one more power plant needs to be on during the high demand, but is is low enough during low demand for it to be dangerous to keep the plant running, it can be cheaper to just "soak up the extra" than to cycle the whole plant on and off.

> it can be cheaper to just "soak up the extra" than to cycle the whole plant on and off.

hence why nat gas peakers are so valuable.

Frankly? Yes soaking up power is difficult, you need loads of hardware. Put too much power into something and it blows up.

Unless you want to invest vast sums in energy storage then this is quite an efficient option.

It's a pretty standard option in contracts for industrial sized consumers of electricity anywhere in the world.

Power generation comes in two classes, baseline and peaker. Baseline units are on 24/7. They are typically very efficient, but can take days or weeks to start. Peakers can turn on in minutes of notice and are usually better at following demand.

Power demand follows daily sinusoidal cycles. By having an economical consumer of electricity that can choose operation times, you can have them use power at night in order to flatten your sinusoidal demand, thus allowing a higher percentage of efficient baseline units to run instead of peakers.

Why don't they just pump water up hill at night? That would be a much better use of the electricity.

Texas is like Germany. No hills (unless you count the waste disposal hills, where you cannot pump up water)

I live in the hill country in Texas, so I would disagree there.

I’m from the hill country… but that’s just a small area near Austin. Houston, SA, DFW, etc. are all very flat.

There are already many energy storage systems in place and many more being installed even now. The problem is that energy storage and recovery is a hard problem. Anyone who solves it will be rich overnight.

Yes, very

The soaker being a shitcoin farm however does leave a sour taste in peoples mouths

This is how energy contracts work. If a utility opts to break a contract made prior to ensure grid stability and to mitigate risk to more residential customers terms sometimes dictate that the settlement will be made in dollars or energy credits...

I'm not a fan of bitcoin mining but this is just business. No reason to trounce maniacally on Texas...

Yes, it is a reason to trounce on Texas. Texas wouldn't have to go around paying bitcoin miners not to mine if it was integrated into the rest of the power grid(s). But Texas is gonna Texas. Lifelong Texan here.

> If a utility opts to break a contract made prior to ensure grid stability

I think what you meant to say is: the utility should not be allowed to EVER sign a contract that allows something as silly as bitcoin to preempt providing power to citizens and vital businesses. Energy isn't a commodity, it's a necessity in 2023 and should be treated as such.

I'll predict the west Texas wind turbines will be blamed, just like the winter freeze that caused the gas plants to fail.

Bitcoin advocates talk about the cash flows sponsoring new generation capacity, but everyone ignores the fact that bitcoin plants are being built in areas with low power prices, so they are necessarily less valuable to the grid than next-to-regular-load. Almost all Bitcoin plants in Texas (except Riot) are in West Texas, next to solar farms that are transmission line limited.

Fun fact: power prices can and frequently do go negative, since electricity can't be stored (cheaply and at scale) and the plants cost more to shut down and restart.

I know you'll all call me crazy, but this is the system working at its finest

Riot, by simply existing and pursuing their mission to mine bitcoin, provides a valuable service by discovering the real price a kWh should cost. Since Riot will never overpay for electricity, (they'll simply scale back their use) and they'll happily gobble up as much as they can when electricity is "too cheap" they ensure that the amount of generation is constantly matched to the demand, adjusting for every conceivable variable in an economy in real-time. ERCOT and the consumers of the Texas grid also benefit from this hyper-efficient cost discovery system, every single second of every single day.

It's not just better than the stock market, it's capitalistic principles working exactly they way they've always dreamt of.

" the consumers of the Texas grid also benefit from this hyper-efficient cost discovery system"

I can't understand how someone that only serves to drive up the price benefits anyone except the power companies

by setting a floor on the price, and minimum for demand, they guarantee predictable revenues to those seeking to invest in or expand their power generating capabilities

it seems to me that "those seeking to invest in or expand their power generating capabilities" falls into the category of "power companies".

Perhaps you mean to include also individuals with solar panels on their roof or whatever but thats a vanishingly small portion of both companies and individuals.

yes, that's right, i should have added the conclusion: by increasing supply, price goes down, that's how consumers benefit.

But they are increasing demand, not supply. You are theorizing that somewhere someone will build more supply because the increased demand is increasing the price to consumers, which is not what I would call a consumer benefit while they wait for that someone to get their giant power plant built to offset the completely useless bitcoin mining.

I have a different definition of healthy capitalism, a system that enables people to fulfill their needs/wants while maximizing collective happiness. Wantonly consuming electricity for the purpose of price discovery amidst the back drop of global warming may not be (completely) insane, but it does appear to be a textbook externality, and it’s hardly a slam dunk for capitalism.

How is this a “hyper-efficient” system if the electricity is just wasted? Note that there is a massive negative externality (climate change!) to generating electricity, depending on the generation method of course.

You may as well just have the government set a price floor.

I feel like I could make a pretty good analogy about an arsonist burning down houses and how that would be a great way to create a hyper-efficient market that would tell us the true cost of housing, insurance, construction supplies and labor, etc. ie, your opinion sounds a lot like the the broken window fallacy.

But I don't worship the market above all, and I'm of the opinion that any type of system (capitalism, socialism, whatever) exists to serve the needs of a society, not to be a system in it's own right to serve it's own "needs" (whatever those may be.) But I also think there's a strong argument to be made that mining bitcoin is not a net benefit for society.

Could I create an energy sink (huge space heater?), that only turns on right when the grid is about to fail, and then get paid not to run it?

And you can smelt metal with it as well!

It is likely that it would be cost prohibitive to hookup that much load with that expected profile.

I'd guess "huge space heater" would certainly have to exceed 250 MW (that's at least 100,000 kettles).

IIRC that'd equal vaporizing water at 125 kg/s, doable but that's 10,800 m³ water per day.

Aaaand, in order to get the kind of contract from a power utility where they pay you to turn off, you'd probably need to operate a decent fraction of the day, say 25 %.

So you'd first need to build this thing and then you'd need to draw 1.5 GWh of electricity per day.

At 50 USD/MWh, you'd pay USD 27 million a year for the electricity to operate.

Not sure this'll work out financially.

Have many Texans started generating/storing their own power since the last big outage?

No.

Ethereum accomplishes the same thing without using the power of a small country.

It doesn't, proof of work is what makes Bitcoin unique. (1) Having to spend physical resources better aligns incentives (2) Proof of work is decentralized and fair

It's a worthwhile tradeoff.

Proof of work explicitly gives those with more resources more power. How is that "fair"? Bitcoiners complain that staking systems are somehow worse, but it's the exact same dynamic, just one uses less electricity.

BTC doesn't purport to fix "dog-eat-dog" or "might is right" in human society, but does "fix" governments being able to manipulate the value, supply etc of money.

What makes it unique is the name recognition. It wasn't the first project to use proof of work, and it wasn't the last either.

What was the first?

Gold etc You have to apply physical work to dig it out etc

Hashcash

It's not as you can't control the dezentralizatiin.

50% attack is real.

The best is our grown PoS system we currently call us dollar, euros etc.

Bitcoin not even solved the account recovery feature or any fraud protection.

Definitely not.. for one Bitcoin has a fixed supply and Ethereum does not

If you think that is a laudable feature you should probably take an actual economics course or two

You don't need an economics course when this book exists for free

https://mises.org/library/economics-one-lesson

Any amount of money, as long as it is sufficiently divisible, is capable of facilitating trade within an economy. The idea that somehow money has to increase over time is one of the most non-sensical idea.

"Thus inflation becomes the most important psychological resource of any economic policy whose consequences have to be concealed; and so in this sense it can be called an instrument of unpopular, i.e. of anti-democratic, policy, since by misleading public opinion it makes possible the continued existence of a system of government that would have no hope of the consent of the people if the circumstances were clearly laid before them."

Being shutdown by a state?

Reply on news.ycombinator.com