Cheney institutes cyber ban

Uneasiness by city officials over the possibility of Cheney becoming a destination for power-hungry cryptocurrency mining businesses led the City Council to pass a moratorium on the practice at its April 24 meeting until regulations can be developed to protect the city’s electrical system from harm.

The six-month moratorium runs to Oct. 24, but can be extended another six months if needed. The city must hold a public hearing on the ordinance within 60 days of its adoption.

The council already agreed to a contract at its March 13 meeting with BitPro, a cryptocurrency mining company in the former location of AMX/Harman on Cheney-Spokane Road. Officials feel they have the power to handle increased demands, and hope elements in the five-year contract’s terms, including financial stipulations, are enough to protect the city’s grid should BitPro begin to require more power for its work.

But with other cryptocurrency mining businesses looking at the Pacific Northwest, and large data centers as well, Cheney’s council followed the advice of the Public Works Committee to adopt the moratorium to take a “time out” on allowing electrical customers requiring more than one megawatt of power to locate in the city.

“Cryptocurrency mining is sweeping the Northwest,” city attorney Stanley Schwartz told the council on April 24. “The reason is our electrical power is so much less expensive than the rest of the world.”

Cryptocurrency mining is a process requiring complex mathematical calculations utilizing megawatts of power to prove the validity of financial transactions which, if successful, will allow cryptocurrency miners to collect a fee for their efforts.

The most popular of cryptocurrencies, bitcoin, was created in 2009 as a response to the financial chaos caused by the Great Recession. Bitcoin creators sought to replace third party intermediaries such as bankers, who it was felt caused the recession through financial manipulation, with a currency that could be validated and protected through cryptography and code.

According to a 2017 article by Morgan E. Peck in Spectrum magazine, creators of the first digital currency felt money “is just an accounting tool — a method of abstracting value, assigning ownership and providing a means for transacting.” Cash is the main unit used for this, and if an electronic representation of cash can be used that provides a running tabulation of where each bill had been used, money would no longer be physically needed.

Bitcoin miners search for these financial transactions, and once found, attempt to validate them via mathematical programs, and insert the transaction into what is called a “blockchain.” The blockchain ensures the security of the currency by providing a record of each previous transaction that led to the current one.

Blockchains are made secure by what is referred to as “proof of work,” wherein all miners are working on the same blockchain and thus prevented from manipulating it through reorganizing past transactions. To do this, Peck says the “Bitcoin mining software makes it very expensive — in terms of computing power and, therefore, electricity — to add blocks and even more expensive to change blocks further back in the record.”

With its plethora of power sources providing cheap electricity, the Pacific Northwest is particularly suited for these types of businesses. Large server farms have been built in recent years in the Columbia Basin, and Light Department Director Steve Boorman said he’s talked to other utilities about the challenges posed by these types of power users.

“These limitations include more than us, it includes the larger transmission system,” he told the council.

Other utilities are in the same boat as Cheney, and some, such as Grant County Public Utility District, have already taken similar steps to protect themselves until measures can be instituted to ensure the solidity of their electrical systems. Boorman said he spoke with an individual who works as a locator for these types of cryptocurrency businesses and who began his search by Googling “cheap power.”

Boorman said the city of Chelan came up first, but after calling them, the individual found they had imposed a moratorium.

“He just started widening his search, that’s how he found Cheney,” Boorman said. “He’d never heard of us before.”

John McCallum can be reached at jmac@cheneyfreepress.com.