Blockware Mining Inc., a technology-based company specializing in bitcoin mining from Canada to Calvert City, has bought five acres in Paducah’s Industrial Park West with plans to invest $50 million and hire 20 new employees over the next 24-36 months.
The company’s expansion, announced Wednesday by Greater Paducah Economic Development, is expected to have a $5.7 million annual economic impact once Blockware Mining’s planned new facility is completed.
GPED has been working with Blockware Mining for about a year on the expansion project, said Bruce Wilcox, the organization’s president and CEO.
A number of different organizations have been involved, including Navier, an expert in mining digital currency, Big Rivers Electric, Jackson Purchase Energy, Paducah Power, Paducah-McCracken County Industrial Development Authority, city of Paducah, McCracken County, the Kentucky Cabinet for Economic Development, and other community partners.
“It really puts us on the map,” Wilcox said. “We’re seeing an increased interest as a hotspot for cryptocurrency miners with the newly-enacted legislation Kentucky’s put in place with the sales tax incentive, coupled with very affordable and competitive power rates. We have come together as a community to make this investment happen.”
Big Rivers Electric is also investing an additional $12.7 million in additional utility infrastructure upgrades to Industrial Park West to accommodate 100 megawatts of power.
“We actually set out looking for facilities that were in the TVA or Big Rivers power grid area,” said Michael Stoltzner, Blockware Mining’s CEO. “I guess we would refer to it as the lower Midwest central states area like Kentucky, Tennessee, Georgia, North Carolina, Alabama ... in that area.
“Obviously, for bitcoin mining your power usage is a large percentage of your operating costs. So we were looking for a location that gave us favorable power rates and on top of that to acquire land that was in good proximity to a substation.”
The company hopes to break ground on the Paducah project in July.
Stoltzner praised the efforts of Wilcox and Heather Pierce, GPED project manager, for their assistance in the project.
“They were extremely helpful through the whole process. They really walked us through it and put us in communication with the Kentucky Business Investment program that allowed us to file for incentives with the state,” he said.
The CEO was also impressed with Paducah.
“We made some local connections in Paducah. In five to seven visits, we really liked Paducah as a community,” he said. “Knowing that we’re building a long-term facility, we’re (also) looking to build a long-time relationship with the community.”
Another draw, he said, “was a pool of workers to draw from. We felt Paducah offers a great mix of really qualified workers that we need, the technical-oriented type of employees that we need.”
In its simplest terms, a bitcoin mining facility is nothing more than a data center, Stoltzner said.
“If we stopped mining bitcoin tomorrow, and we were looking to convert to another business or to sell it to someone, it would be a data center that would buy it,” he said.
A bitcoin miner is a computer that’s about the size of two shoeboxes put on top of each other. The mining process consists of an incentivized network of miners competing for monetary rewards based on “hash rate,” or the measuring unit of power needed to solve complex mathematical puzzles and earn newly-minted bitcoin.
There are two sources of income from mining, transaction fees and mining rewards, the bitcoin that is earned each day, Stoltzner said.
“The way bitcoin works is the ecosystem is controlled by miners, and what miners are doing are two things: mining virgin bitcoin, which approximately every 10 minutes, 6.25 bitcoins are released into the universe. But they are released to miners.
“So, based on how much mining capacity you have, how many other servers that you have, all that server is doing is figuring out an algorithm. Your share of the 6.25 bitcoins is based upon your computing power.”
Blockware Mining has mining rigs (computer systems used for mining bitcoins) in Canada, Newfoundland, upstate New York, the state of Washington and Calvert City in Kentucky.
“We currently have up and operating about 4,200 mining rigs. But, by July 2022 the build-out in (Paducah) Kentucky will allow us to add approximately 8,000 more rigs,” Stoltzner said.