Speaker 1: Most people are down the road and there's sort of
Speaker 1: maybe hundred houses, maybe a little bit less than that.
Speaker 1: This summer, I spent some time in a remote town
Speaker 1: along the coast of Canada, about three hundred miles northwest
Speaker 1: of Vancouver. It's called Ocean Falls. He used to be
Speaker 1: a paper mill town, and so these are this was
Speaker 1: part of the paper facility. The blue building that you
Speaker 1: guys are in that. Yeah, this was so this was
Speaker 1: all buildings here and most of them were torn down
Speaker 1: about ten years ago. The mills just downstream from a
Speaker 1: dam that was built in the early nineteen hundreds. Ocean
Speaker 1: Falls is surrounded by steep hills covered in thick forest,
Speaker 1: and it sits on a deep bay that empties out
Speaker 1: into the Pacific Ocean. Ocean Falls had been a town
Speaker 1: of about five thousand people until the mill shut down.
Speaker 1: Now it's less than a hundred. It's almost a ghost town.
Speaker 1: That's where the wood would come down and then it
Speaker 1: would be uh, they're the big grinders in there. They
Speaker 1: would grind the wood up into With the mill gone,
Speaker 1: Ocean Falls began looking for some new business, anything to
Speaker 1: keep the community alive. It's latest hope comes from Kevin day.
Speaker 1: Kevin's a tech guy from Vancouver, and he's the one
Speaker 1: showing me around here, and do you need to use
Speaker 1: you wear a hard hats. Borre Lex is the private
Speaker 1: utility company that operates the damn in Ocean Falls, but
Speaker 1: Kevin doesn't work there. He's actually bora Lex's new customer.
Speaker 1: Is that sound you guys, Yes, that huney you here.
Speaker 1: It's the sound of hundreds of fans blowing past hundreds
Speaker 1: of little computers. They're on twenty four hours a day
Speaker 1: cranking through complicated math problems making bitcoins. Hi, I'm Pegatari
Speaker 1: and I'm Joshua Bursting. And this week on Decrypted, we're
Speaker 1: bringing you the story of Ocean Falls, a town on
Speaker 1: a multi decade search for a savior that thought it
Speaker 1: might have found one when a bitcoin mine came to town.
Speaker 1: This is the first episode of our new season, where
Speaker 1: for the next four months will be exploring the unintended
Speaker 1: consequences of technology. The biggest problem for Ocean Falls was
Speaker 1: its isolation. It was just too much trouble to bring
Speaker 1: workers there and too expensive to ship goods out. But
Speaker 1: those things don't matter much for bitcoin miners. All they're
Speaker 1: looking for is cold weather to keep their computers cool
Speaker 1: and enough electricity to keep them running. Ocean Falls has both.
Speaker 1: But if a town is good for bitcoin mining, does
Speaker 1: that mean bitcoin mining is good for the town. And
Speaker 1: while it may have seemed promising when prices were soaring,
Speaker 1: what happens now that they've crashed? Stay with us. I
Speaker 1: first heard about Ocean Falls in January. I was talking
Speaker 1: to a businessman in Toronto who invested in cryptocurrency businesses,
Speaker 1: and he mentioned that bitcoin miners have been taken an
Speaker 1: interest in old mill sites in British Columbia. That immediately
Speaker 1: caught my attention. The bitcoin gold rush was all over
Speaker 1: the news. Bitcoin stores past thou dollars for the first time.
Speaker 1: It's up, and it's up big for this about since
Speaker 1: nine thirty this morning, New York Times, six thirty R time.
Speaker 1: I think that we're going to see fifty by the
Speaker 1: end of two thousand eighteen for bitcoin. It's easy to
Speaker 1: think of bitcoin is something that's happening just online. In fact,
Speaker 1: the price runup had set off a global race to
Speaker 1: find actual physical places that are well suited for the
Speaker 1: data centers and needed to create new bitcoins through a
Speaker 1: process known as mining. And here was a place where
Speaker 1: the crypto rush felt like an actual gold rush, so
Speaker 1: I asked for an introduction to Kevin. He agreed to
Speaker 1: talk to me, and I began checking in with him
Speaker 1: every once in a while as he traveled between Vancouver
Speaker 1: and Ocean Falls over the course of this year. Finally,
Speaker 1: in July, I headed up there myself with Jackie Dives,
Speaker 1: a photographer based in Vancouver. And it's a trek because
Speaker 1: there's no road to get there. Yeah. From Vancouver, I
Speaker 1: took two little hops and a twenty person playing to
Speaker 1: Bella Bella, which is the closest town with an airport.
Speaker 1: Then I hitched a ride from people boating into work
Speaker 1: at a local salmon hatchery that's the only other real
Speaker 1: business in town. The boat moves through narrow channels between
Speaker 1: the mountains and then opens up into this big bay
Speaker 1: and there you are. It's unbelievably beautiful. When we got
Speaker 1: to town, Kevin was walking up to pick us up
Speaker 1: at the dock. I wonder if this is Kevin here.
Speaker 1: Kevin is an athletic guys in his mid forties. Hey Kevin, good,
Speaker 1: how are you? Kevin says he's most comfortable when sitting
Speaker 1: in front of a computer, and he's run a handful
Speaker 1: of start ups in and around Vancouver. He used to
Speaker 1: run a business selling ringtones back when that was a thing,
Speaker 1: and then he had a business that had to do
Speaker 1: with insurance. Kevin had first heard about Ocean Falls in
Speaker 1: twenty ten when he saw a TV documentary about it.
Speaker 1: He actually suggested to a friend of his and the
Speaker 1: hotel business that it might be a cool place to
Speaker 1: set up a resort, but nothing ever came of that.
Speaker 1: Then Kevin started getting interested in bitcoin in about twenty
Speaker 1: twelve and twenty thirteen. Over time, Kevin became fixated on
Speaker 1: building his own bitcoin mine. That's when he remembered Ocean Falls.
Speaker 1: Ocean Falls has this nostalgic vibe of a pioneer town
Speaker 1: in decline. At least that's how it came off in
Speaker 1: a news cost you showed me from nineteen eighty one.
Speaker 1: The good old battle days in Ocean Falls. Today, they
Speaker 1: were remembered with fond regret by the last survivors of
Speaker 1: a very special kind of town. Today most of the
Speaker 1: residents are older. They have a really romantic view of
Speaker 1: the place. Like here's Tony Zignash, who runs the small
Speaker 1: boarding house where I stayed when I was there. Every
Speaker 1: time we come around the corner into some Falls, I
Speaker 1: always think this is as close to paradise as as
Speaker 1: it gets. Still, it takes a certain type of person
Speaker 1: to live there. It may be beautiful, but it's so remote.
Speaker 1: People in Ocean Falls put up with his challenges because
Speaker 1: they seem to relish the sense of removal from the
Speaker 1: outside world. But not Kevin. No, he immediately saw the
Speaker 1: town's the setting for his own kind of secret, technological retreat,
Speaker 1: like the ones he daydreamed about when watching television as
Speaker 1: a kid. I always love this idea of like sort
Speaker 1: of this high tech sort of layer, kind of in
Speaker 1: the middle of sort of nowhere. Maybe it's sot of
Speaker 1: because I was a big fan of like James Bond
Speaker 1: movies or something like that, where they had sort of
Speaker 1: these guys they were had these Kevin's not the first
Speaker 1: businessman to fall in love with Ocean Falls. There's been
Speaker 1: a steady stream of proposals. The first one happened soon
Speaker 1: after the mill closed, when a businessman bought many of
Speaker 1: the biggest buildings in town, hoping to convert them into
Speaker 1: a resort and casino for people traveling up the coast
Speaker 1: on cruise ships. There have also been plans to brew beer,
Speaker 1: grow marijuana, and bottle water. At one point, it looked
Speaker 1: like Ocean Falls would be the setting for an action
Speaker 1: movie starting Al Pacino and Hillary Swank. My personal favorite
Speaker 1: was a plan in the nineteen eighties to fill tankers
Speaker 1: up with water and ship at wholesale to California or
Speaker 1: even Saudi Arabia. Needless to say, all of those plans
Speaker 1: have fallen flat, with the one exception of the fish
Speaker 1: farming company whose employees gave you a ride. Any business
Speaker 1: plan for Ocean Falls eventually ends up in front of
Speaker 1: Brent Case. He's the operation manager for bor Alex in
Speaker 1: British Columbia. I had talked to Brent before flying up
Speaker 1: to Ocean Falls and he spotted me and Jackie when
Speaker 1: we got off the plane. He walked over to introduce
Speaker 1: himself once we landed in Bellabella Galls. Yeah, Brent's basically
Speaker 1: Kevin's opposite. Can be hard sometimes to get Kevin to
Speaker 1: talk much, but Brent would talk all day if you
Speaker 1: didn't interrupt him. Kevin likes the city. Brent describes himself
Speaker 1: as a bush person and he loves to regale people
Speaker 1: with stories about ravens or mountain lions or bears that
Speaker 1: he's interacted with over the years. Brent has spent decades
Speaker 1: up and down this coast, in the small towns and
Speaker 1: the woods in between them. He first came to Ocean
Speaker 1: Falls in the mid eighties when he was helping string
Speaker 1: a transmission line from the power plant at the dam
Speaker 1: to a few of the neighboring towns. He's now something
Speaker 1: of a local celebrity. He bought the biggest house Notion
Speaker 1: Falls and has poured a lot of time and money
Speaker 1: into fixing it up. His star rose even more after
Speaker 1: he survived a grizzly bear attack. I was just finishing
Speaker 1: up my engineering and I was heading back to the
Speaker 1: truck and he uh jumped me on my arm and
Speaker 1: ripped the elbow. He bitten the humbol's arms and then
Speaker 1: ripped this out from here right over the head. If
Speaker 1: it did you google? Did you google? And google? Yeah? Yeah,
Speaker 1: so I did a show with the Animal Planet. That
Speaker 1: incident with the bear inspired a wave of local and
Speaker 1: even international media coverage. Then around, Brent's phone suddenly started
Speaker 1: ringing off the hook in a way it never had before.
Speaker 1: The people were calling in search of places to set
Speaker 1: up bitcoin mines. Bitcoin mining was becoming increasingly lucrative as
Speaker 1: the price sword, especially if you can find a place
Speaker 1: like Ocean Falls where the cost of power is extremely cheap.
Speaker 1: A large proportion of bitcoin mining was happening in China,
Speaker 1: but for many prospective miners, the idea of doing business
Speaker 1: in Canada was much more attractive. You know, I'm getting
Speaker 1: companies from Texas, New Jersey, California, Washington, Steed. Of course,
Speaker 1: Brenton no the first thing about bitcoin. One one company
Speaker 1: from Australia, I mean, one from Argentina, I mean. And
Speaker 1: it didn't take him long to realize that most of
Speaker 1: the people calling him had no clue how to pull
Speaker 1: off what they were proposing. A lot of the blotching
Speaker 1: people and bitcoin people and you name it. They think
Speaker 1: they can come in and do a project without you know,
Speaker 1: doing their homework. A lot of speculation, but brent also
Speaker 1: saw himself as Ocean Fall's main booster. He knew that
Speaker 1: the longer the town went on in its semi dormant state,
Speaker 1: the bigger the chance was that it would never recover.
Speaker 1: And after seeing so many other business ideas full flat.
Speaker 1: Brent thought these clueless people blowing up his phone to
Speaker 1: talk about some esoteric technology trend might be worth taking
Speaker 1: a flyer. On the first night we were in Ocean Falls,
Speaker 1: Jack and I walked up to Kevin's home to meet
Speaker 1: with Kevin, Brent, and one of Brent's colleagues, a guy
Speaker 1: named Alistair Howard. This is the house you mentioned earlier,
Speaker 1: the one that Brent had fixed up. Kevin recently bought
Speaker 1: it from him. Yeah, it's a really odd place. Once
Speaker 1: you get inside the house, it feels like a suburban home.
Speaker 1: There's new floors, a nice kitchen, even a huge flat
Speaker 1: screen TV. But to get there, Jack and I walked
Speaker 1: down a street where most of the other buildings were
Speaker 1: basically just rubble, and then we bush whacked our way
Speaker 1: up a steep trail through some brush to get to
Speaker 1: the door. Is that like little deer path? Really? The
Speaker 1: way we're supposed to get here? Could be? I've never
Speaker 1: had anyone actually comes through the front door before, even
Speaker 1: with Kevin sitting there. Brennan Alistair were pretty open about
Speaker 1: how skeptical they were of him at first. Here again,
Speaker 1: he's one another one of these I thought, hair brained ideas.
Speaker 1: So when we did we need in Vancouver first, Kevin
Speaker 1: definitely didn't change Brent's mind by coming off like someone
Speaker 1: who knew what he was talking about. When he first
Speaker 1: called in late Kevin didn't know much about electricity, he
Speaker 1: knew nothing about dams, and he had no experience navigating
Speaker 1: the shipping channels that on up and down the sparsely
Speaker 1: populated parts of Canada's West coast. But Kevin was asking
Speaker 1: the right questions and Brent was looking for someone anyone
Speaker 1: really to get excited about Kevin would do with this
Speaker 1: foot Finally in the door, Kevin developed a pretty simple strategy.
Speaker 1: Who just asked Brent for help with everything. A lot
Speaker 1: of the challenges that you you face here or not
Speaker 1: things that you can just sort of solve look on
Speaker 1: your own by you know, just doing a Google search
Speaker 1: and like, well how do I get this in here
Speaker 1: or do that? It's all sort of like, oh, you know,
Speaker 1: like Brent knows a guy for everything, right, so if
Speaker 1: there's a problem, it's like I know a guy who
Speaker 1: could do that. I know someone who could get this
Speaker 1: in here. I know who you could do this. So
Speaker 1: this was really clever on Kevin's part. I think he
Speaker 1: took Brent's enthusiasm about the town and used it to
Speaker 1: turn him into a kind of spokesperson within Bora Lax
Speaker 1: for Kevin's company, which he named Ocean Falls Blockchain. It
Speaker 1: didn't hurt that Bitcoin just kept getting more and more exciting.
Speaker 1: The price rose from about four hundred dollars in late
Speaker 1: when Kevin started making his first inquiries with Ocean Falls.
Speaker 1: A year later, the price would be closing in on
Speaker 1: a thousand dollars. Kevin wasn't the only person calling Brent,
Speaker 1: but most people would call him once realize how hard
Speaker 1: this would be and disappear. Some I call a few
Speaker 1: times before fading away, But Alistair remembers how Kevin just
Speaker 1: never stopped dialing the phone. I just remember so many
Speaker 1: times you would tell me Kevin's calling again. I'm like again.
Speaker 1: In fact, Kevin became so persistent that he turned into
Speaker 1: something of a myth inside the company. At a certain point,
Speaker 1: Kevin went to Toronto and cold called Patrick Lamaire, the
Speaker 1: president of Bolax, to ask for a meeting. And Patrick
Speaker 1: already knew who he was when I sat down with them,
Speaker 1: and he said, like I said, well, I think we're
Speaker 1: really gonna move ahead on this project, and he said, okay,
Speaker 1: well that's why I want to meet with you, because
Speaker 1: I want to see if you were like a real
Speaker 1: person being here hearing about your name while this time.
Speaker 1: But that's nothing's ever happened. It's been two years, so
Speaker 1: are are you real? Is it's really going to happen.
Speaker 1: Patrick had a decision to make. Should he agree to
Speaker 1: sell cheap electricity to Kevin? The bitcoin mine might work
Speaker 1: out well as a business, but it was unlikely to
Speaker 1: make much of a difference to Bora ax Kevin's plans
Speaker 1: were to make just under six million dollars in revenue.
Speaker 1: Bora axes annual revenue is about three fifty million, but
Speaker 1: the utility didn't have a lot of other options for
Speaker 1: ocean falls. Bora lex Is only using two of the
Speaker 1: dam's four turbines because there would be nowhere else to
Speaker 1: send the electricity they'd produce. So Kevin secured his deal
Speaker 1: to buy hydro electric power from Bora Lax at a
Speaker 1: heavily discounted rate. This was basically an incentive to get
Speaker 1: him to set up his business in a place that
Speaker 1: would otherwise not make much sense. Neither Kevin nor Brent
Speaker 1: wanted to discuss the specific price. That's probably because it's
Speaker 1: so low. According to a presentation and showed investors in February,
Speaker 1: it was less than four cents per kill a lot hour.
Speaker 1: That's less than half the rate boro Lex charged to
Speaker 1: ship power to Bella Bella even back in the rates
Speaker 1: solo that the head of another bitcoin mining operation in
Speaker 1: the area described it as almost free. The power from
Speaker 1: the Ocean Falls Damn had another advantage. Bitcoin miners are
Speaker 1: coming up for increasing criticism for burning through massive amounts
Speaker 1: of energy just as the world is trying to fight
Speaker 1: climate change. But hydro electricity doesn't create carbon emissions, and
Speaker 1: this power literally had no other use. Now, all Kevin
Speaker 1: had to do was figure out how to get hundreds
Speaker 1: and eventually thousands of computers from China, along with heavy
Speaker 1: equipment to power them all the way to Ocean Falls.
Speaker 1: We brought them in Vancouver and then we trucked them
Speaker 1: up from there. There's a truck road somewhere if you
Speaker 1: need it. No, there's no road into Ocean Falls. Uh um,
Speaker 1: you can come in on the on the ferry, which
Speaker 1: is what we did. It's kind of a full day things.
Speaker 1: As I mentioned, before you know. We loaded them on
Speaker 1: the truck at the airport and then set the operation
Speaker 1: up in an old paper mill that had been falling
Speaker 1: apart for decades. But he did it. Finally, this July,
Speaker 1: Kevin flipped on the first few servers. Kevin's bitcoin mine
Speaker 1: has been reverberating through Ocean Falls ever since Kevin first
Speaker 1: came to town, and not just because you can hear
Speaker 1: the humming of the fans far away from the building.
Speaker 1: I kind of assumed the cryptocurrency boom would have passed
Speaker 1: Ocean Falls by completely, but that wasn't really true. One day,
Speaker 1: Kevin and I visited one of the only public businesses
Speaker 1: in town. It's a local bar. It's open every Monday, Wednesday,
Speaker 1: and Friday from four pm. The seven pm gets packed,
Speaker 1: and the guy sitting next to me said he had
Speaker 1: a friend who was mining cryptocurrencies in Asia. Still, a
Speaker 1: lot of people didn't really seem to know what it was. Yeah,
Speaker 1: even like my granddaughters understand it. Yeah, not me. Know.
Speaker 1: It's a new technology. Yeah, and as you get older,
Speaker 1: you don't at least I don't pick up on it
Speaker 1: very fast. Well, I mean you gotta, it's gonna be
Speaker 1: something you're interested into yeah, like right now, especially now,
Speaker 1: because it's very techy right now. It's just like the
Speaker 1: Internet was in the early nineties. It was there, but
Speaker 1: it was really techy, you know it six I took
Speaker 1: computer programming, yeah, all right on, so I was like,
Speaker 1: uh like fortran kind of stuff for right for now,
Speaker 1: many residents are hopeful that the bitcoin mine will help
Speaker 1: turn things around. Kevin's construction work did provide a handful
Speaker 1: of jobs, but those went to crews that came in
Speaker 1: on boats from the Vancouver area. That's been good for Tony,
Speaker 1: the woman who runs the boarding house, but she framed
Speaker 1: the main impact as more psychological than economic. It always
Speaker 1: puts that air of positivity in in into the mix,
Speaker 1: and that makes a big difference. We have a very
Speaker 1: aging population here, and when I say aging, I mean
Speaker 1: seventy and and up. So there's not a lot of energy,
Speaker 1: not a lot of enthusiasm for anything new, to tell
Speaker 1: you the truth, So I just would like to attract
Speaker 1: some younger people to come in. There is a post
Speaker 1: office and a government run ferry stop in town, but
Speaker 1: Ocean Falls doesn't have enough people to support any private
Speaker 1: businesses except for the bar. Really if you can believe it.
Speaker 1: There isn't even a grocery store in Ocean Falls right now.
Speaker 1: We're barging in all of our groceries from Port Hardy.
Speaker 1: It's a two week process to get from time you
Speaker 1: order your groceries to the time you get them here.
Speaker 1: Kevin's business isn't changing that for now. It's too small.
Speaker 1: He's currently using under a mega watt of power at
Speaker 1: Ocean Falls. Big bitcoin mining operations are measured in the
Speaker 1: dozens or hundreds of mega watts. But even if Kevin's
Speaker 1: business does take off and gets bigger, it's not clear
Speaker 1: that it's impact on Ocean Falls will grow. He is
Speaker 1: tony again. If Ocean Falls become in the meantime more
Speaker 1: recognizable to outsiders who see it as a place to
Speaker 1: come that's viable, it may be just that springboard that
Speaker 1: they need, you know, to come in, and and it
Speaker 1: can perpetuate after that. So do I see blockchain is
Speaker 1: being the I think once it's up and running, it's
Speaker 1: probably not going to have a lot of people that
Speaker 1: are needed. They haven't said, but I don't know how
Speaker 1: many people does it take to keep a bunch of
Speaker 1: computers running? Probably not more than just a couple, and
Speaker 1: maybe they don't even have to be here full time.
Speaker 1: This is something of a pattern. Governments and other places
Speaker 1: that have attracted attention from bitcoin mine is have been
Speaker 1: frustrated once they realize how little chance there is for
Speaker 1: anything resembling real economic development. This isn't just a bitcoin problem.
Speaker 1: A bitcoin mine is basically just a data center, and
Speaker 1: companies that run data centers for other purposes have also
Speaker 1: offered mixed benefits for the out of the way locations
Speaker 1: they've set up. In another version of the story have
Speaker 1: been the places where a defunct shopping mall, let's say,
Speaker 1: will be filled with computer service and buildings that used
Speaker 1: to house dozens or hundreds of retail jobs have become
Speaker 1: places where wealth is generated for people living elsewhere, while
Speaker 1: offering basically no employment opportunities for the locals. Now, to
Speaker 1: be fair to Kevin, he didn't promise to create lots
Speaker 1: of local jobs, but he did have plans to expand. Yeah,
Speaker 1: he said he wanted to grow the size of his
Speaker 1: existing mind and even to get into other types of businesses,
Speaker 1: like he wants to use the heat from the computers
Speaker 1: to warm up the water and the fish hatchery or
Speaker 1: to develop novel technology for cooling computer servers that he
Speaker 1: could presumably sell to other businesses. He's also talked about
Speaker 1: using the paper mill as a kind of working retreat
Speaker 1: for coders working on cryptocurrency projects, and now that might
Speaker 1: be pleasant, but it's not clear how likely it is
Speaker 1: to happen. Some of these ideas might work out and
Speaker 1: bring new life to ocean falls, but Kevin's got lots
Speaker 1: to worry about before then, throughout there was this incredible
Speaker 1: run up in the price of bitcoin. It surpassed nineteen
Speaker 1: thousand dollars at the end of last year. This year
Speaker 1: has been brutal, though. The cryptocurrency is now sinking below
Speaker 1: eight thousand and down more than six percent in the
Speaker 1: last week, and it's getting technical analysts spooked that maybe
Speaker 1: bitcoin has further to fall than we've even seen this week,
Speaker 1: or people are gonna become very fearful and you're going
Speaker 1: to see even further liquidation as people begin to understand
Speaker 1: that the bloom is off the rose. As of this taping,
Speaker 1: the price of bitcoin is around six thousand, four hundred dollars.
Speaker 1: Last year, a handful of bitcoin mining companies had raised
Speaker 1: money by going public on Canada's junior stock exchanges, Ocean
Speaker 1: Falls Blockchain had plans to do the same thing, and
Speaker 1: that presentation that Kevin showed investors in February, it based
Speaker 1: its financial projections on bitcoin being worth eleven thousand dollars
Speaker 1: back in April, when the price had fallen to about
Speaker 1: I asked Kevin whether he was worried at the time.
Speaker 1: He shrugged it off. You know, like Warren Buffet doesn't
Speaker 1: look at stock traces every day. You know, he looks
Speaker 1: at the long term sort of picture of where potential
Speaker 1: for companies. Looking at someone like that as an example,
Speaker 1: you know, he expands his business when you know people
Speaker 1: aren't interested to concerning companies that he sees the longer
Speaker 1: term potential. But it's clear that the price of bitcoin
Speaker 1: has impacted his plans. Kevin's company decided against going public
Speaker 1: because the interest in businesses like his had largely dried up.
Speaker 1: He says this shouldn't be a problem and he'll find
Speaker 1: money elsewhere as he needs it. But investors know that
Speaker 1: there's a point at which it would become unprofitable to
Speaker 1: keep mining bitcoin. Mosaic, a research firm focused on the
Speaker 1: cryptocurrency industry, puts that price at five thousand dollars on average.
Speaker 1: I asked Kevin if there was a low price at
Speaker 1: which it wouldn't be profitable for him to mind bitcoin anymore.
Speaker 1: He said he didn't have one in mind, and instead
Speaker 1: he offered an optimistic rationale for how dropping prices might
Speaker 1: actually be a good thing for him. Here's the thought process.
Speaker 1: New bitcoins are dolled out regularly. The more minors there
Speaker 1: are competing for them, the fewer bitcoins each minor gets
Speaker 1: for the same amount of work. If the price drops
Speaker 1: low enough that some people turn off their computers, the
Speaker 1: remaining miners will have an easier time their profits rise
Speaker 1: even if the price doesn't so. In theory, this helps
Speaker 1: the entire system constantly find the right equilibrium, and Kevin
Speaker 1: thinks he can power through the lean times when weaker
Speaker 1: businesses will have to drop out. It's good for everybody
Speaker 1: when the first goes up. From competition standpoint, it's actually
Speaker 1: helps separate us a little bit, because we again, efficiency
Speaker 1: is our big thing. Before leaving Ocean Falls, I discovered
Speaker 1: that Kevin's dealing with a second complication to his business plan,
Speaker 1: even though he's one Brent over bora lax is an
Speaker 1: actually selling Kevin as much power as he was hoping for.
Speaker 1: His initial plans called for them to sell him six
Speaker 1: megawats of power by the end of this year. He's
Speaker 1: not gonna get anywhere close to that, and that's because
Speaker 1: Bora Lax is facing questions about the economics of operating
Speaker 1: the damn in Ocean Falls. Situation is complicated, but it
Speaker 1: involves the rate that bore Alex charges to sell power
Speaker 1: to the town of Bellabella. We said earlier, the rate
Speaker 1: is far higher than what Kevin's business pays. Bor Alex
Speaker 1: is currently having a dispute with BC Hydro, that's the
Speaker 1: public utility in the area that buys the power headed
Speaker 1: for Bellabella, and until that is settled, bor Alex doesn't
Speaker 1: want to commit to selling Kevin the amount of power
Speaker 1: that would allow him to grow Ocean Falls blockchain. Now.
Speaker 1: As we said, Bora Lax is giving Kevin a steep
Speaker 1: subsidy for power because it needs an incentive to get
Speaker 1: him to come to Ocean Falls. But one upshot of
Speaker 1: the negotiation with BC Hydro could be that regulators require
Speaker 1: Borelax to charge Kevin much more. You know, you do
Speaker 1: your best to sort of navigate sort of those those
Speaker 1: those political type of waters. But at the end of
Speaker 1: the day, it's not something we have, you know, we
Speaker 1: don't make the final say and things like that. This
Speaker 1: speaks to a bigger question facing utility companies, especially utilities
Speaker 1: that have facilities in remote places like northwestern Canada, what
Speaker 1: is their policy on cryptocurrencies? In Quebec, regulators want to
Speaker 1: increase the rate that miners pay for power. I think
Speaker 1: right now you're seeing it all over the place. You
Speaker 1: look at what's happening in places like Washington State where
Speaker 1: there are a lot of minors on the on the
Speaker 1: Columbia River there, and you know, there's a lot of
Speaker 1: there were there. There's a lot of pushback from from
Speaker 1: the government and from other businesses and that type of thing.
Speaker 1: And so that gets us back to this original question
Speaker 1: of what the public gets out of having a bitcoin
Speaker 1: mine in town. Right in a place like Ocean Falls,
Speaker 1: the utility seems to have a clear incentive to bring
Speaker 1: a new customer in. It has this power, it can't
Speaker 1: sell it, and here's someone who's willing to buy it,
Speaker 1: so that it's just good. But what if there's other
Speaker 1: people who want to buy the power? Too, And that's
Speaker 1: a question that many utilities, many small towns in other
Speaker 1: places are facing. Right. And once you've decided we're going
Speaker 1: to sell this power to a data center because there's
Speaker 1: some sort of economic benefit, there really is a question
Speaker 1: what the benefit is. These places don't employ people, it's
Speaker 1: not clear why another business would have to set up nearby,
Speaker 1: and you may just end up having energy consumer and
Speaker 1: nothing else. Right, there's no need for dependent businesses like
Speaker 1: restaurants or hotels to spring up um And it's a
Speaker 1: pertinent question now that towns are falling over themselves to
Speaker 1: offer incentives to tech companies that are promising to bring investment.
Speaker 1: And there is one bitcoin specific question that we should
Speaker 1: deal with here too as well. Though I think most
Speaker 1: people think that Amazon's data centers or whatever are going
Speaker 1: to definitely be around in a couple of years, but
Speaker 1: there's a question about whether or not a bitcoin mine
Speaker 1: would be around in a couple of years. This is
Speaker 1: a really volatile asset. It's speculative business, and it's not
Speaker 1: clear if selling your energy to a company like Kevin's
Speaker 1: is going to be any good for you in two
Speaker 1: or three years down the road. And is that something
Speaker 1: you asked Kevin about Yeah, I did. He is an
Speaker 1: optimistic guy and said that, of course it would be
Speaker 1: bad if bitcoin went to zero, but no one thinks
Speaker 1: that's going to happen, and he's in it for the
Speaker 1: long haul. It took a long time to a lot
Speaker 1: of work to set this up. You know, I don't
Speaker 1: I don't want to build another substation somewhere else like
Speaker 1: this is. You know, I want to start running the
Speaker 1: business now. You know, obviously, if a bitcoin collapsed and
Speaker 1: when it came nothing, obviously that's not going to be
Speaker 1: good for us. It's not gonna be good for for anybody.
Speaker 1: But I think that that's uh. I think everybody agrees
Speaker 1: that that that's that's very unlikely, but it's good at
Speaker 1: the same time, you know, we believe it's it's going
Speaker 1: to do very well in the long term, but it's
Speaker 1: not going to be a straight line and it's gonna
Speaker 1: go up, and it's kind of in the way down,
Speaker 1: and he's taking Ocean Falls along for the ride. Three
Speaker 1: of a century made its place and his to read
Speaker 1: it will never be in that emold Oan Falls, but
Speaker 1: it delves into every sodden daughter that's been in the Martin.
Speaker 1: People are gone, but the sphere lives on. I was
Speaker 1: born right here in this very spot. You can see
Speaker 1: the pride in their eyes. I remember this. Do you
Speaker 1: remember that? Here? The school caught fire? And that's it
Speaker 1: for this week's Decrypted. Thanks for listening. We always want
Speaker 1: to know what you think of the show. You can
Speaker 1: get in touch by emailing Decrypted at Bloomberg dot net
Speaker 1: or I'm on Twitter at Joshua Burwstein and I'm at
Speaker 1: pagat Cary. Please subscribe to our show wherever you like
Speaker 1: to listen to podcasts, and if you haven't already, please
Speaker 1: leave us a rating and a review. It really helps
Speaker 1: us find new listeners. This episode was produced by piagod
Speaker 1: Carry and Magnus Hendrickson, with help from Austin Weinstein. Our
Speaker 1: story editor was Emily Busso. Thanks to Big Jim Lewis
Speaker 1: for letting us use his song about It, which can
Speaker 1: falls in this episode. I also wrote an article about
Speaker 1: Kevin and Brent. You can read it at Bloomberg dot
Speaker 1: com slash tech and thanks to Robin Agello, my editor
Speaker 1: on that story. Francesca Levie is head of Bloomberg Podcasts.
Speaker 1: We'll see you next week.