Bitcoin mining on Navajo lands creates jobs and income while exposing economic disparities

Tiffany Nelson knew little about cryptocurrency when she first stumbled upon a temporary job in 2019. A Canadian company called Westblock was recruiting “labor,” in Nelson’s words, to help offload boxes in a data center on land owned by the Navajo Nation.

A Navajo living on the tribal lands, Nelson considered work rare for its proximity to his home. With a total population of the tribe of 400,000 people, only about 170,000 live on the reserve. This is most often attributed to poor economic conditions and scarce employment opportunities, especially for women.

Although grateful for the opportunity, Nelson’s employer did not initially tell him what the business was doing on the New Mexico reservation.

Another Navajo woman, Kennette Phillips, who was hired around the same time, recalled similar fears about her employer’s mysterious business.

While security guards guarded the site, Phillips, Nelson, and another employee unloaded crates and then began installing machines inside.

“When we opened the boxes, we found these machines that looked like toasters,” Phillips recalls. “We weren’t told what they were used for. It seemed a bit vague… we didn’t know if what we were doing was legal.

Tiffany Nelson (Photo courtesy of Compass Mining)

Part of their growing concern has been spurred by the crisis rate Indigenous women have been kidnapped or murdered in Canada and the United States.

When the two women, both single mothers, finally asked their employer what the site would be for, they were relieved to discover that the company intended to use the toaster-type machines to extract the bitcoin.

Bitcoin mining is the computation-intensive process of computers validating the bitcoin transaction network. While the cryptocurrency supply is capped at 21 million coins, it distributes a small portion of that supply to miners for them to contribute computing power, thus securing the network.

The work can be lucrative, especially as the price has more than tripled in the past year. Mining bitcoin requires specialized computers, the infrastructure to host them, as well as a robust and stable power supply.

“Oh wow. Okay,” Nelson recalls, thinking with relief. She didn’t claim to understand how well bitcoin was working at the time, but she did know it was a cryptocurrency. , “like money on the Internet”.

Three years later, Nelson and Phillips run the site’s operations full time. In addition to two other full-time managers who jointly operate day and night, the facility also employs four to six security guards to protect their expensive mining equipment, valued in the tens of millions of dollars, according to the CEO of Westblock. Ken Maclean.

Tap into unused power sources

Like many other bitcoin mining operations, this project benefits from harnessing energy that otherwise would not have been used. After a nearby coal-fired power plant closed, the Navajo Tribal Utility Authority (NTUA), a tribe-owned nonprofit, had an additional 15 megawatt of electrical load and was absorbing the cost.

According to Maclean of Westblock, the energy that NTUA’s operation derives from is a mixture of solar, hydroelectric, nuclear and natural gas, 60% of which is allocated to renewables. The situation reflects the wider and economically challenging energy transition of the Navajo Nation from fossil fuels to renewable energy sources over the past decade.

Historically, most of the tribe’s income came from leasing land to energy extraction companies, with leases for oil and gas extraction operations representing 51% of the tribe’s total income since 2003.

Criticisms of the high energy consumption of bitcoin mining are quick to point out that bitcoin now represents 1% of the planet’s energy consumption. While the direct comparison can be tricky, the computational power meant to secure bitcoin consumes more energy than any refrigerator in the United States, but less than the total energy used to produce paper and pulp in the world, according to the Cambridge University Center for Alternative Finance.

Additionally, Westblock’s bitcoin mining project is currently using 7 megawatts of NTUA power and plans to potentially use all 15 megawatts in the near future. Compared to other areas of the Navajo Nation, the project’s energy use suggests some economic disparity.

A three-hour drive west of the site, in the Black Mesa region, many residents live without electricity or running water.

Kennette Phillips (Photo courtesy of Compass Mining)

Kennette Phillips (Photo courtesy of Compass Mining)

The Navajo Nation’s Need to Diversify Its Economy

But the effort to transfer power from one part of the nation to another is not that simple, according to Carl Slater, a delegate from the Navajo Nation Tribal Council. About the size of West Virginia, the Navajo Nation is the largest independent land authority in the United States, and its electrical grid is not evenly dispersed or connected across its 17 million square acres.

Surprised, to say the least, when he first heard that a developer was mining bitcoin on Navajo lands, Slater told Yahoo Finance that the opportunity could be an economic boon for the nation, if the revenues paid to its public service could end up serving the residents of the nation.

“The public utility that the nation owns should simply have borne the cost of this energy. Using it in a way that generates revenue for the nation is a good thing, but I think there is a shared responsibility between the nation, the utility, and the developer to find a process whereby a larger portion of income can be directed to our local communities, ”Slater said.

Andrew Curley, an assistant professor of geography at the University of Arizona, said the nation’s shift to bitcoin mining is just the latest iteration of their long-standing need to diversify its economy.

“The tribal leaders are trying to make the reserve a place where companies, outside of the extractive industries, can do business and hire people,” said Curley, himself a member of the Navajo Nation, who lives off the land. Reserve.

A sociologist by training whose research focuses on the energy transition of the Navajo Nation, Curley called the bitcoin mining project an “interesting prospect,” but also recognized that the nation’s energy disparity is relative to different local communities. While some communities remain without power, he said utility companies bear the brunt of the blame, explaining that overall, the Navajo Nation “consumes by far the amount of energy it produces.”

Thinking of other economically struggling countries that have adopted or are considering adopting cryptocurrency more broadly, such as El Salvador, Curley is quick to point out the obvious problem of making cryptocurrency a bigger rule in the world. the national economy.

“There is an innate problem and challenge when asking the poorest people to carry out riskier technology transfers,” said Curly.

Although the Westblock mining operation opened in 2020, this year marks the first time the project has made a significant profit. On the other hand, the NTUA tribal utility has yet to disclose its total revenue from the effort, but is expected to do so in early 2022. In addition to the monthly internet and electricity revenue paid to the NTUA, Westblock is also paying taxes, rent for his land lease. in addition to scholarships reserved for the local community.

A person familiar with the Navajo-based operation said the revenue generated by the project this year is “in the millions” and that Westblock is working with NTUA and other tribal chapters to find other sites on the ground, that could be used for bitcoin mining.

“I’m just happy to have a job near my home, especially since so many people lost their jobs during the pandemic,” Tiffany Nelson added. “It was a good race and something that I’m proud to be a part of.”

David Hollerith covers cryptocurrency for Yahoo Finance. Follow it @dshollers.

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