The Crypto Thread

Crypto capitalists lead electricity rush in Tenn.
Cheap power, other factors lead to presence

Vincent Gabrielle
Knoxville News Sentinel
It’s 9 p.m. on a March night. Fastfood signs and high-halogen headlamps shine in the dark along a rural Union County road.

Just past what looks like an abandoned restaurant onto Luttrell Road, the noise is unavoidable: the droning of hundreds of industrial fans.

The noise, heat and energy consumption is in the service of cryptocurrency mining. Cryptocurrency is supposed to be a digital medium of exchange that is not reliant on any central authority like a government or bank. Instead, crypto depends on a massive, distributed computer network that runs on cryptographic algorithms.

Cryptocurrency mines have spread across the Southern Appalachians like mushrooms after a rain. They’re drawn here by cheap, reliable power, few zoning regulations, depressed local economies and the opportunity to greenwash their huge electrical footprints. Some were driven out of China after the country banned cryptocurrency transactions and mining. Others are homegrown.

The USA TODAY NETWORK - Tennessee found mines everywhere. They’re tucked into industrial parks and popping up on farms. One occupies an abandoned hotel in Jellico that is reportedly haunted. They appeared during the pandemic without much fanfare or notice, and in some cases without oversight.

Meanwhile, someone cloaked by the identity protections of a limited liability corporation, is making money.

Mines capitalize on cheap power. Residents pay the price

The mines aren’t really mines in the traditional sense. They’re banks of computers running 24 hours a day, housed in prefab buildings.

The mine in Union County sits atop a small suburban cul-de-sac in the Appalachian town of Maynardville.

The mine is operated by Union Data LLC, a wholly-owned subsidiary of a vertically-integrated cryptocurrency mining company based in Cincinnati called GRIID. The company has been snapping up local power players, such


“The farthest thing from my mind was a super computer. And that’s basically what the facility is. They’ve made quite an investment. I don’t see them going anywhere.”

Dwight Osborne

Mayor of Jellico



Cryptocurrency mines can pop up virtually anywhere in counties with lax zoning laws, and the companies that operate them know that many rural parts of southern Appalachia have few restrictions that prevent mining. The mines run loud – noisier at night than a kitchen blender – and are often located right next to residential neighborhoods, like this one in Maynardville. BRIANNA PACIORKA/NEWS SENTINEL

CRYPTO from page A1 to page A16
as former Knoxville Utilities Board government affairs head Ed Medford and former Knox County Development Corporation CEO Todd Napier.

Cryptocurrency mines can pop up virtually anywhere in counties with lax zoning laws, and the companies that operate them know that many rural parts of southern Appalachia have few restrictions that prevent mining. The mines run loud – noisier at night than a kitchen blender – and are often located right next to residential neighborhoods.

The business model for miners is pretty simple. Capitalize on cheap, offpeak power from the Tennessee Valley Authority. A mine in Maynardville has a 10-megawatt capacity. This means that every hour this server farm consumes enough electricity to power 11 homes for a month.

A company called GRIID intends to build more of these facilities, according to Securities and Exchange Commission filings. It will prioritize states with “carbon free” power. They intend to build 734 megawatts of capacity by the end of 2022. That’s enough electrical power drawn every hour to support 822 average American homes.

Another cryptocurrency mining company, PrimeBlockchain inc (aka PrimeBlock), uses 112 megawatts of capacity and plans to roughly triple that to 310 megawatts by the end of 2022. Prime-Block is planning to expand its power use by 25 megawatts every month. It has facilities planned or built in about a dozen cities and towns in Tennessee, including Athens, Decatur, Lenoir City and Oneida.

Noise pollution from mines can reach nearly unsafe levels

The noise from the mine ramps up from off-peak power. Those computers run hot. Too hot to touch. The noise comes from the industrial fans venting heat.

“It’s not like your normal desktop computer,” said John Cannon, President of Symply Data Centers, a bitcoin mining company based in Washington County. “You’d burn your finger if you touched one.”

Residents of Limestone Tennessee living near another GRIID-owned mine (registered under a different LLC, Red Dog Technologies), say they get louder late at night. Craig Ponder, a retired U.S. Navy veteran and local pastor of Salem Baptist Church, said that late at night the Limestone mine sounds like a jet engine revving on the tarmac.

During peak power, the mine runs at about 75 decibels, roughly the same noise as a busy highway interchange. After 10 p.m., the mine noise jumped up 10 decibels, to an average of 85. That’s loud enough to flirt with OSHA’s unsafe occupational noise levels.

Decibels are measured on a logarithmic scale. That 10 decibel jump means the mine got 10 times louder after 10 p.m.

Locals left to fend for themselves

It was constant noise that drew attention to a small cryptocurrency mine in Washington County. There, in Limestone, Tennessee, the birthplace of Davy Crockett, the constant drone of the mines drew community ire.

Once you’re off a main road, Washington County is fairly quiet. Cattle and crops dominate rolling hills. In the distance, forested ridges touch the clouds. Like many places in the Appalachians and Cumberland plateau, Washington County attracts retirees and vacationers looking to escape the city.

“We came here and we said, ‘Wow, look at this view,’” said Roger Drake, gesturing to the country home he and his wife, Kathy Breen, built to retire to. “To sit here in the peace and the quiet at night, to sit in the day to have friends over, oh what a joy to share this.”’ When Breen and Drake heard there was a cryptocurrency mine going in behind their house they went door-todoor collecting signatures from their neighbors to stop the construction and put pressure on local politicians. They succeeded.

“If you had half a million dollars tied up in a piece of property, would you let someone kill your property values that you’d worked your life for?” said Drake, a former union carpenter. “For me that’s time to go to war.”

Drake’s worry for his home values are well-founded. Hancen Sale, government affairs and policy director for the Knoxville Area Association of Realtors, told us that the sudden appearance of a noisy cryptocurrency mine would have a “substantially negative impact on housing values.”

Breen said that lack of regulations and cheap power were to blame for the spread of the mines. It left locals to fend for themselves. “Realistically? A lot of people don’t want to get involved. People just hope it’s not going to happen.”

How cryptocurrency works

But there are an awful lot of people online who are pushing it to happen.

Cryptocurrency enthusiasts exist somewhere between the futurist, the technomystic and the evangelist. They insist that cryptocurrency is the future of money.

“The claim that this is going to replace the U.S. dollar… it’s like the Underpants Gnomes from South Park,” said David Golumbia, a digital studies professor at Virginia Commonwealth University. “First we have bitcoin. Then some steps nobody can name. Then we replace the U.S. dollar. There’s just no path between here and there.”

Golumbia said that while individual cryptocurrency enthusiasts differ on the specifics, the end goal is replacing money with cryptocurrency. They want a future in which all financial transactions will be conducted through a decentralized network of computer systems without the oversight of governments, banks or law. Each piece of digital currency is a unique digital object assigned to individual owners. Records of currency ownership are stored on a blockchain, a public, append-only ledger that documents when each unique coin is moved to a new wallet or added to a wallet by mining. Owners of computers can opt to run blockchain software, which means that they store and validate transaction records.

Each computer on the network holds the entire record of transactions conducted in the cryptocurrency. These records are immutable, meaning nobody can alter them without altering the entire, distributed ledger.

Still, the internet is rife with examples of people losing their bitcoins or other blockchain assets like NFTs by clicking on the wrong links, misplacing passwords or through hacks.

But because these records are distributed and immutable, there’s no recourse for theft or fraud. Transactions of all kinds are not reversible.

To send money, you generate a transaction that is farmed out to the network running the blockchain software. This is where mining comes in.

The miners compete in a scheme called “proof of work.” To validate transactions between accounts the network generates a random sequence of numbers roughly once every ten minutes. The entire network then feverishly guesses numbers until the correct cryptographic key is stumbled upon.

“You do that a couple trillion times,” said Cannon, a cryptominer. “One mining rig will finally say, hey I got it, and then all the others will immediately validate it.”

The owner of the computer, or server, that guesses the correct number is awarded cryptocurrency as payment for validating the transaction. For miners of Bitcoin, the original cryptocurrency, the reward is about six Bitcoin, or between $200,000 to $250,000.

In order to continue to reap equivalent rewards, miners must invest ever more infrastructure into mining servers Scott Fielder, a TVA spokesperson, told me the authority receives calls “on a weekly basis” from cryptocurrency miners seeking to set up shop. But he declined to provide any specifics about how the TVA coordinates these requests with local power companies that might have the capacity to take on a server farm with megawatts of draw.

This lack of interest didn’t stop the TVA from awarding Bitdeer a Performance Grant in 2019 for economic development and job creation. Fielder declined to answer questions about the quality and type of jobs Bitdeer had created, citing “competitive sensitivity.”

He went on to say that data processing, hosting and related businesses had been excluded from consideration from the grant program as of 2021. This would exclude cryptocurrency businesses from consideration. During the year Bitdeer received a Performance Grant it was eligible to enter.

The promise and pitfalls of cryptomining

Jellico, Tennessee, has a beautiful historic railroad downtown from the glory days of coal. Turn-of-the-century brick buildings line a walkable street.

But most of the storefronts are empty. Jellico has a 34% poverty rate.

Nobody expected cryptocurrency to move in.

“The farthest thing from my mind was a super computer,” said Dwight Osborne, mayor of Jellico. “And that’s basically what the facility is. They’ve made quite an investment. I don’t see them going anywhere.”

Overlooking the interstate is an abandoned hotel and restaurant that once served locals and tourists coming down Interstate 75. Now a cryptocurrency mine owned by “US Farms and Mines” but emblazoned with ANKR logos sits on the site of the hotel’s parking lot. The fan noise blends with the highway sound. Maintenance workers in white pickup trucks service the prefab buildings.

“They were providing lord knows how much power serving the coal mines,” said Dwight Osborne, mayor of Jellico. “Then they’ve lost those customers. We’ve not been able to replace that with manufacturing.”

Osborne told us overall the facility was helpful for stabilizing the electrical rates, un-stranding assets and improving the strapped local taxbase.

He said the city entered into a rental agreement at $3,500 a month to use a city-owned industrial building with ANKR last year. About 12 people work assembling prefabricated cryptocurrency mining pods.

Prefab buildings and server racks await assembly on a slice of countyowned land nearby. “Looking at it from my perspective, it was just sitting there empty,” Osborne said. “And if they’re in it at least my copper wiring and stuff like that is not being stolen out of it.”

Cryptocurrency moved in with the promise of financial stability. The towns are still poor.

TVA does not seem to think that cryptocurrency mining is a good, durable, long-term investment for the economy. That’s because cryptocurrency mines don’t actually provide good, highpaying jobs in a significant quantity to local workers.

Allison Hamilton, director of markets and rates for the National Rural Electric Cooperative Association, told me cryptocurrency miners didn’t really benefit the local economy. The only potential benefit was to the utility itself.

Jellico seems emblematic of this pattern. An economically distressed town. An electric utility that lost industrial customers (paired with a water district with struggling finances). Cryptocurrency moves in with the promise of jobs and financial stability.

But the downtown is still mostly abandoned. A burnt-out home sits just a couple blocks down from the main traffic light. The people are still poor, but some are minding someone else’s mine.