Bitcoin Miners Flock to New York’s Remote Corners, but Get Chilly Reception

By Patrick McGeehan

Computers mining cryptocurrency in a former Alcoa aluminum plant in Massena, N.Y., near the Canadian border.CreditCreditGabriela Bhaskar for The New York Times

A region that once attracted heavy industry is coping with an influx of Bitcoin speculators, lured by an abundance of cheap electricity.

Computers mining cryptocurrency in a former Alcoa aluminum plant in Massena, N.Y., near the Canadian border.CreditCreditGabriela Bhaskar for The New York Times

MASSENA, N.Y. — The hulking aluminum plant in this northern border town is starting to spew heat and noise again, four years after Alcoa shut it down. But now the hot hum comes from thousands of Chinese computer servers whirring away 24 hours a day for a very modern purpose: producing Bitcoins and other digital currencies.

The crackerbox-size machines stacked inside rusty cargo containers are powered by the same cheap source of electricity once used to extract aluminum from ore. They represent the first stage of an obscure company’s plan to convert the 60-year-old smelting works into the world’s biggest cryptocurrency mine.

“The size is overwhelming,” said Prieur Leary, as he led a tour of the 1,300-acre site formerly known as Alcoa East. “Maybe we’re a little bit crazy.”

Prieur Leary, chief technology officer of Coinmint.CreditGabriela Bhaskar for The New York Times

Mr. Leary is the chief technology officer of Coinmint, which has led an influx of entrepreneurs to this economically depressed region, all seeking to capitalize on the soaring value of digital currencies, like Bitcoin. Their arrival has been met with wariness — just what are they doing? — coupled with fears of their outsize thirst for electricity.

A backlash has spurred changes in state regulations and local building codes and some officials worry about becoming the East Coast counterpart to Wenatchee, Wash., which has been inundated by cryptocurrency speculators.

But neither local resistance nor a steep decline in the value of Bitcoin has blunted the demand for practically any space with a reliable power supply. Utility officials in this remote corner of New York — known as the North Country — continue to receive weekly inquiries from people aspiring to set up cryptocurrency mines.

[What Is Bitcoin, and How Does It Work?]

The region is an unlikely front in the global race to produce Bitcoin. Massena used to be a hub for making things — tangible things, like V-8 engines and parts for the Apollo 11 spacecraft. The factories that churned out those products are, for the most part, gone. Thousands of union jobs that paid well and offered full benefits have vanished, leaving the area with one of the state’s highest unemployment rates.

A dam on the St. Lawrence River between Canada and the United States provides hydroelectric power.CreditGabriela Bhaskar for The New York Times

But the iconic American corporations that abandoned plants in Massena left behind the precious resource that drew them here in the first place: abundant, cheap electricity flowing from a dam in the St. Lawrence River.

Some locals had never heard of cryptocurrency before their utility bills increased last winter and they learned that start up ventures rushing to cash in on the Bitcoin boom were responsible. If they knew anything about this new type of intangible money, it was that Bitcoin’s value had shot up last year to nearly $20,000 from $1,000. (It has since fallen back to about $6,300.)

Bitcoin is nearly a decade old, but that dizzying run-up and fall has put the North Country on the crypto-mining map. Before the speculators arrived in Massena, they discovered Plattsburgh, a small city about 80 miles to the east that was also awash in cheap hydropower from the St. Lawrence.

Mr. Leary showed up there two years ago, before Bitcoin had fully registered in the popular consciousness, and set up shop in an industrial park. Coinmint filled a small space with servers built for the singular task of creating cryptocurrency, running them nonstop. Each server, or miner, draws as much as 1.5 kilowatts, or about twice as much as a typical refrigerator.

A Coinmint facility in Plattsburgh.CreditGabriela Bhaskar for The New York Times

As the Bitcoin market grew, Mr. Leary expanded into much bigger space in a nearby shopping center that had been a distribution center for comic books. Soon, Coinmint installed four transformers that could draw more than 13 megawatts, or enough power to run about 10,000 homes. It was more than one-tenth of the local utility’s total allocation of low-cost hydropower.

This heavy usage was not a problem on most days, said Colin Read, the mayor of Plattsburgh. But during an extreme cold spell last winter, the people of Plattsburgh got a costly glimpse at the impact their new neighbors could have.

With electricity so cheap that most residents use it to heat their homes, the city’s consumption exceeded its allocation on several days, Mr. Read explained. As a result, the Municipal Lighting Department had to purchase additional power at much higher prices — a cost it spread across its customers.

“We had a huge rash of complaints” about the jump in utility bills, Mr. Read said.

Plattsburgh, N.Y., is the first American municipality to place a moratorium on new cryptocurrency mining operations while the city decides how to cope with the new burdens on its power grid.CreditGabriela Bhaskar for The New York Times

Among those complaining was Thomas Recny, the chief financial officer of one of city’s biggest employers, Mold-Rite Plastics. Mr. Recny said his company’s electric bills were about $60,000 higher than normal for January and February, an unforeseen increase of about 30 percent.

Mr. Recny asked why an enterprise that required only a few people to run it should be able to drive up the operating costs of a company that employed about 500.

“The only reason they’re here is this unusually inexpensive rate for power,” Mr. Recny said. “But with two guys, they can consume more electricity than a hospital.”

Mr. Recny also said he was “still somewhat puzzled” about the need for digital currency, which he knew could be used for essentially anonymous online transactions. He questioned whether it was appropriate “to have the electricity used for that purpose,” which he said might involve some illicit activities.

Colin Read, the mayor of Plattsburgh.CreditGabriela Bhaskar for The New York Times

Sitting in his office in City Hall near the shore of Lake Champlain, Mr. Read had a more positive view of cryptocurrency. He said he told his economics students at SUNY Plattsburgh that it would exist in some form, whatever the fate of Bitcoin itself, for many years. “No doubt about that,” he said.

The mining operations that ultimately survive will be those that get the most electricity at the lowest prices, he said. Whether they deserve it is a separate question that Plattsburgh, Massena and other towns in the region have been grappling with. Their municipal utilities have persuaded state regulators to allow them to charge higher rates for electricity to cryptocurrency miners.

In March, Plattsburgh became the first American municipality to impose a moratorium on new cryptocurrency mining while the city decides how to cope with the new burdens on its power grid.

Leon Christman manages Coinmint’s operations in Plattsburgh.CreditGabriela Bhaskar for The New York Times

In the meantime, Mr. Read said, city officials are adapting building codes to account for the fire hazards posed by the servers, each of which can generate as much heat as a small space heater. The concerns are part of a broader battle over the enormous carbon footprint of Bitcoin mining, which on a global scale uses as much energy as a medium-sized country.

Mr. Read estimated that Coinmint had made a profit of more than $50 million in Plattsburgh. Leon Christman, who manages the company’s operations there, said the larger installation in Plattsburgh — the one with the leftover image of Spiderman painted on the back wall — earned $600,000 on its best day last year.

Plattsburgh’s temporary ban sent Mr. Leary to Massena, in St. Lawrence County, looking for an expansion site. Massena’s municipal utility, owned by its ratepayers, was already trying to hold Bitcoin speculators at bay as it figured out how to accommodate their demands, said Andrew J. McMahon, superintendent of the Massena Electric Department.

“Back last fall when Bitcoin was at $15,000 to $20,000, we were getting eight to 10 calls a week and they were wanting to set up within two or three weeks,” Mr. McMahon recounted. “These guys were wanting to plug in 10, 20, 30 megawatts. They were asking: How much do you have?”

Ryan Brienza, 19, postponed college to try his hand at the cryptocurrency business. His company, Zafra, is developing a big box that could serve as a self-contained unit for miners, complete with electrical hookups, cooling and ventilation.CreditGabriela Bhaskar for The New York Times

The answer was nowhere near that much. Massena’s system has never distributed more than 50 megawatts at a time, and the biggest users draw just a few megawatts. In its industrial heyday, Massena was home to two aluminum plants and a General Motors factory. But they were far too big to connect to the municipal system. They tapped directly into the state’s power grid and purchased the lowest-priced wholesale power.

Mr. Leary wanted to follow that recipe. Earlier this year, the New York Power Authority agreed to provide 15 megawatts of subsidized power to Coinmint. But the authority grew skeptical of the company’s promises for job creation and local investment, scuttling that agreement and leaving Coinmint to obtain its power on the wholesale market, Mr. Leary said.

Standing outside the old Alcoa plant, Mr. Leary pointed out new bundles of black cables leading from an electric substation to smaller transformers inside. Those cables could deliver more than 40 megawatts now, he said, with the potential to increase the capacity tenfold.

“We’re just getting started,” Mr. Leary said.

Cheap electricity is abundant in the area.CreditGabriela Bhaskar for The New York Times

Coinmint told state officials it would eventually employ 150 people in Massena, but only a few clusters of workers were visible on a recent midday tour of the plant.

Still, some residents welcomed the cryptocurrency miners — even if they weren’t too sure exactly what it is they do.

Over lunch at Spanky’s, a diner on Massena’s Main Street, Brad and Nancy Fletcher said they had no idea that Coinmint was already operating at Alcoa East. Mr. Fletcher, a retired state trooper, helps his wife manage her family’s RV park in neighboring Franklin County, which Mrs. Fletcher said was “even more depressed than St. Lawrence County.”

Besides the remaining aluminum works, the biggest employers in the area are prisons and a casino on the St. Regis Mohawk tribal land, the Fletchers said. If Coinmint fulfilled its promise, “that’s 150 more people that are going to be working,” Mrs. Fletcher said. “The area needs jobs. Anything that’s going to bring some would be good.”

Coinmint promises to bring jobs to the region, but critics are skeptical.CreditGabriela Bhaskar for The New York Times
A version of this article appears in print on , on Page A1 of the New York edition with the headline: Bitcoin Miners Descend on New York’s Rust Belt, Thirsty for Power. Order Reprints | Today’s Paper | Subscribe