Some argue cryptocurrencies like Bitcoin are the future of legal tender, but in the present, they’re creating as many problems as they solve.
The sheer amount of computational resources required to process blockchain transactions, and release new amounts of these currencies, requires large amounts of electricity. Just like any electronic device, these heavily customized computers also produce heat — lots of heat. Any person, or company, that wants to mine cryptocurrency on a large scale, will eventually have to deal with the costs associated with both the power consumed, and the heat that’s generated. Heatmine, a crypto mining start-up based in Quebec, thinks it has found a way to address them both, while benefiting other businesses at the same time.
The Heatmine concept, on its face, is brilliantly simple: If mining creates unwanted waste heat, put the miners where that heat can be used. If the electricity and location costs associated with mining are too expensive, put the miners somewhere where electricity is cheap and the location is free. Heatmine’s key insight was that you could satisfy both of these conditions with one device — a crypto mining-powered hot water system, designed to heat a building while it churns out crypto coins.
That device resembles something you’d expect to find in an industrial setting: A 1.5 square-meter metal cabinet, stuffed with a hot water tank, and a huge rack of 63 graphics cards, all of which is interconnected by a maze of PVC and copper piping. For an activity as high-tech as cryptomining, it looks decidedly low-tech. But that’s kind of the point.
The plumbing portion of the rig converts the waste heat from the GPUs into hot water, which is then stored in the tank. Once connected to a home’s water lines, it can take over as the source of hot water, whether it’s used for a nice, hot shower, or for radiant heat.
Heatmine has managed to sidestep utility rate regulation through its decentralization strategy.
Each unit is equipped with a 3G data connection for remote management, and the units themselves are installed outside of a customer’s premises. The cabinet is locked from the outside, which prevents any tampering. Heatmine claims one of its standard units can heat up to 300 square meters (3,229 square feet) of space. While the system could be used residentially, it’s currently targeted toward commercial and industrial applications.
More power, more problems
So, that’s the waste heat portion of the puzzle solved. But what about the electricity? In Quebec, much of the local power grid is fed by carbon-friendly, 100 percent renewable hydroelectricity, thanks to the province’s abundance of fresh water bodies and the hydro dam opportunities these create. It’s also cheap: The top residential electricity rate is 9.12 cents per kilowatt-hour. By comparison, in the New York-New Jersey area, the average residential rate is more than double, at 20.8 cents per kilowatt-hour. That means the top rate is significantly higher.
As low as Quebec’s rates are — they’re actually the lowest in North America — there’s a catch. The province’s sole electricity provider, HydroQuebec, saw an alarming trend toward massive cryptomining operations, likely attracted by the low rates. These firms, like Israeli-owned Bitfarms, were originally encouraged by HydroQuebec, because of their ability to quickly sop-up overages in electricity supply. But soon these operations grew in size, and started to place a heavy load on the grid.
The utility responded by temporarily hiking the rates for new crypto-farm businesses, up to 15 cents per kilowatt-hour. Still cheaper than some North American markets, but no longer a competitive advantage, and massively more expensive than the 3 cents per kilowatt-hour available in some locations in China. Earlier this year, Plattsburg, NY voted in an 18–month ban on all new crypto mining businesses for similar reasons.
Le Caveau’s annual electric heating costs for greenhouse is normally $25,000. With Heatmine, that cost has dropped to zero.
Heatmine has managed to sidestep this regulation through its decentralization strategy. By co-locating its rigs at agricultural sites, such as greenhouses, the power they consume is metered at the much lower farm rate, which happens to be the same as the residential rate.
Show me the money
The remaining question is, how do you get commercial properties to agree to the somewhat invasive presence of a Heatmine rig? What’s in it for them? Plenty, as it turns out. The benefits to Heatmine in terms of cost-savings on electricity, and waste heat management, are so significant, the company is willing to cover 100 percent of the cost of the co-location. This includes the rig itself, the installation costs, and the electricity consumed by the rig. The commercial property gets no interest in the revenue associated with the crypto mining operation, but it does get all of the resulting waste heat for free.
For some businesses, the savings could have a material impact on financial performance. Le Caveau à Légumes, a Quebec-based greenhouse grower of strawberries, is amongst the first of Heatmine’s customers. Its president, Guy Béland, tells Digital Trends having a Heatmine system, “enables us to be competitive against produce coming from Mexico and the U.S., as it greatly reduces our overhead.”
Béland isn’t exaggerating. Le Caveau’s annual electric heating costs for its 2,100 square foot greenhouse is normally $25,000. With Heatmine, that cost has dropped to zero.
“The installation took a total of three days,” Béland said. “The system connects to our existing solution: A heated floor and radiators. As a result, we did not have to make any compromises.”
“Our goal is to decentralize one million GPUs over the next five years”
Admittedly, it’s early days still. Le Caveau’s system was only installed in September and has yet to face a truly harsh Canadian winter.
“The unknown is a little scary,” Béland admits, “as I am unsure of what to expect in the long run.”
Gambling on the future
Béland’s unease could be justified. Heatmine’s current business model of paying all of the associated costs could come under fire if the current slump in cryptocurrency values continues. As of the writing of this article, Bitcoin’s value stands at below $4,000, a decline of nearly $15,000 in value since late 2017. Indeed, 2018 now stands as a stark reminder of just how speculative and volatile cryptocurrencies can be. A lengthy downturn could force Heatmine to underwrite a smaller portion of the electrical bill associated with the operation of its miners. Though this would still offer customers a discount on their heating bills (and a more environmentally responsible way of dealing with waste heat), but it could also introduce a level of unpredictability in customers’ monthly operating expenses.
Nonetheless, Heatmine expects a strong interest in its offering. “Our goal is to decentralize one million GPUs over the next five years,” Heatmine COO, Jeremy Dahan tells Digital Trends.
To get there, the company will have to target more than just the province’s greenhouses. “In Quebec, there are a lot of factories,” Dahan said, “with big doors that open 20 or more times per day for truck access. They lose a lot of heat.” Once Heatmine has a foothold with these commercial and industrial clients, residential installations are on the company’s roadmap. Dahan claims homeowners could save $6,000 per year in home heating costs with a Heatmine rig.
The benefits are clear, but there are a few drawbacks. Heating water using waste GPU heat — while very environmentally friendly compared to not using the waste heat — isn’t as efficient as heating water using a dedicated electric hot water tank. Based on numbers provided by Heatmine and Le Caveau à Légumes, we estimate that using Heatmine’s rigs is 17 percent more expensive than using a conventional heating system.
But perhaps the bigger issue is the environmental cost of crypto mining as a whole. Electricity consumption is just one part of the equation. Mining, even when done using Heatmine’s decentralized method, is still a voracious consumer of the natural resources needed to produce the graphics cards and related equipment. That feels even more unnecessary when you consider cryptocurrencies’ sinking profit margins.
When it comes down to it, mining remains a questionable and unreliable activity. Heatmine may have found a way to avoid much of the excess electrical demand, but it’ll take wide adoption to save the poor reputation cryptocurrency has earned itself over the past year.