It is not a secret that crypto mining is a profitable business. However, one cryptocurrency startup found a way how to earn money even when they turn off crypto miners. The name of this startup is Layer1. Importantly, famous people such as billionaire Peter Thiel supports this startup. Interestingly, Layer1 started to install steel boxes stuffed with high-end processors submerged inside cooling baths of mineral oil. Moreover, by fall Layer1 will have dozens of such boxes installed in West Texas. As a result, these boxes will transform 100 megawatts into a stream of Bitcoin.
Moreover, the average cost of production is about $1,000 per Bitcoin. The price of the biggest cryptocurrency as of May 21, is $9,100. However, as mentioned above, Bitcoin mining is not the only way Layer1 wants to make money.
Bitcoin mining and power grid in Texas
It is hot in Texas, but the real heat and humidity don’t hit until August, which is when the Texas power grid comes under huge pressure, as air conditioning units in every part of the state are working due to the heat.
Interestingly, during the intense week in 2019, wholesale electricity prices soared from about $120 per megawatt-hour to reach a peak of $9,000 MWh. It is worth mentioning that, it was only the third time in history that the Texas power grid reached that level.
Moreover, Texas power generators make about 15% of annual revenues during the peak 1% of hours. Furthermore, it turns out that running Bitcoin miners is a great way to arbitrage those peaks. A cryptocurrency startup Layer1 acts as an insurance underwriter for the energy grid.
Furthermore, Layer1 entered into so-called demand response contracts. As a result, after a minute’s notice, this startup will shut down all its machines. Thanks to this decision, the grid will receive 100 megawatts. Additionally, Layer1 gets paid whether a grid emergency happens or not. Thus, just for their willingness to shut in Bitcoin production, Layer1 collects an annual premium of about $17 million.