A Miami-based Opportunity Zone fund wants to develop a Bitcoin mining operation and technology business park, amid growing global concerns about the environmental impact and energy consumption created by cryptocurrency mining, The Real Deal has learned.
Aware of the controversial aspects of Bitcoin mining, Esperanza Opportunity Zone Fund president and CEO Jose Mallea said his group aims to use clean energy for its 5-acre Homestead project. The fund wants to tap into the electric power grid operated by the city of Homestead’s utility company, HPS Energy. The grid uses natural gas as its primary fuel to operate its 10 power-generating units in Homestead, according to HPS Energy’s website.
Natural gas is “much more environmentally conscious,” Mallea said, compared to coal.
The project, called Homestead-Miami Blockchain Technology Park, would include buildings housing an incubator and tech tenants focused on cryptocurrencies. According to a Sept. 13 letter Esperanza sent to Homestead City Manager Cate McCaffrey, the fund has struck a tentative agreement with International Speedway Corp., the owner of the Homestead-Miami Speedway, to use land near the racetrack that has access to the requisite electrical and mechanical infrastructure needed to power dozens of air-conditioned trailers outfitted with computer hardware used for Bitcoin mining.
Al Garcia, president of the speedway, said the race track would lease the 5 acres to Esperanza.
“I don’t know much about Bitcoin but we do have the infrastructure to generate the amount of electricity they are talking about,” Garcia said. “And we have a lot of land.”
The site is in an Opportunity Zone, an area designated as struggling economically, where investment is encouraged through tax breaks on capital gains. In its letter, Esperanza said it will receive $5 million in initial seed capital from Florida Investors Opportunity Fund, a private investment fund focused on real estate and technology. Mallea, a Miami-based entrepreneur who co-owns Biscayne Brewery, said Opportunity Zone investors would finance the development and own the business park.
To use HPS Energy as a power source, Esperanza is requesting that the city establish a rate structure of 5.5 cents for every kilowatt-hour consumed, according to a six-page proposal the fund submitted to the city. The fund is also offering Homestead $5 million, apprenticeship programs for residents to learn blockchain technology and other community benefits.
Once completed, the Bitcoin mining operation would draw 10 megawatts of power on a continuous basis annually, the proposal states. That’s the equivalent of 10 million LED lamps being turned on at the same time, according to the U.S. Office of Energy Efficiency and Renewable Energy.
“The actual mining component is the equivalent of $20 million in infrastructure and equipment,” Mallea said. “The development of the blockchain technology park is in the ballpark of $15 million.”
Homestead spokesperson Zackery Good said the administration will present Esperanza’s proposal to the Homestead City Council on Sept. 29. He said the city would not comment on the project at this time.
Bitcoin and other cryptocurrencies are created when a computer “mines” the digital money by solving complex sets of math equations. It takes dozens of computers using a maximum amount of energy to produce large sums of cryptocurrencies. A recent New York Times analysis found that Bitcoin mining consumes almost 91 terawatt-hours of electricity annually, which is more than all of the electricity used in Finland in one year.
David Chase, a partner in Coin Bayou, the company teaming up with Esperanza that would do the Bitcoin mining, said recent expulsions of Bitcoin miners in China as part of a cryptocurrency crackdown in the communist nation is opening the door for miners in the U.S. Coin Bayou already mines Bitcoin in Louisiana and Texas, which is experiencing an influx of Bitcoin miners fleeing China, according to the BBC.
“Miners in China were very opportunistic, which created this environment in which they were willing to do anything to make a buck,” Chase said. “This project is the complete opposite. We are opportunistic trying to find power that doesn’t come from dirty coal, oil or any harsh carbon coming from the ground. Ours comes from solar, nuclear and natural gas.”