As the crypto mining boom in Kentucky has fizzled out, locals are turning to AI data centers as a potential solution for economic development and job creation.
Kentucky’s Bitcoin Boom Has Gone Bust: A New Frontier Emerges with AI Data Centers
In the coal country of eastern Kentucky, a new industry has risen from the ashes of the old one – crypto mining. For a brief moment in 2021, the region was ablaze with promise as specialized computers racing to solve complex math problems competed to verify bitcoin transactions and earn digital currency as a reward. But like all booms, it has gone bust.
The Rise and Fall of Crypto Mining in Kentucky
At its peak, Kentucky accounted for some 20 percent of the collective computing power dedicated to proof-of-work cryptocurrency mining in the US. However, local officials say it is hard to pin down the exact number of crypto mines still active in eastern Kentucky due to light state regulations and a lack of transparency in the industry.
Crypto mining is the process of verifying transactions on a blockchain by solving complex mathematical equations.
Miners use powerful computers to compete for blocks, validating transactions and securing the network.
In return, they receive newly minted cryptocurrency as a reward.
The process requires significant computational power and energy consumption.
According to estimates, crypto mining consumes 0.2% of global electricity production.
As the demand for cryptocurrencies grows, so does the environmental impact of mining.
A notable example was Mohawk Energy’s crypto mining project in Jenkins, Kentucky, which leased most of its 41,000-square-foot building to a Chinese crypto mining company. The project promised near-six-figure salaries and a vow to put some of the mining proceeds into training programs for locals. For about 18 months, things looked promising, with twenty-eight families seeing real gains. However, when asked where things stood now, Anna Whites, a lawyer who represented a roster of crypto mining clients, said most of them were unemployed again.
The Unraveling
The Chinese partner sued for breach of contract, and Mohawk counter-sued. The shared crypto profits never materialized, and the boom has begun to recede. Local officials say it is hard to pinpoint the exact number of crypto mines still active in eastern Kentucky due to state regulations being light.
Crypto mining, also known as cryptocurrency mining, is the process of verifying transactions on a blockchain and adding them to the ledger.
Miners use powerful computers to solve complex mathematical equations, which helps secure the network and verify transactions.
The crypto mining industry has grown rapidly since the introduction of Bitcoin in 2009.
According to a report by Cambridge University, there are over 18 million miners worldwide, with estimated annual revenues exceeding $10 billion.
A New Frontier: AI Data Centers
Locals are now looking towards AI data centers as a potential solution to bring jobs and fiber optics to the region. One East Kentucky, a nonprofit organization focused on bringing economic development to the area, is exploring this option. Colby Kirk recalls a conference where site selection consultants discussed the need for flat land, power, fiber connectivity, and a workforce that can wire and weld.
AI data centers are specialized facilities designed to support the massive computational demands of artificial intelligence and machine learning workloads.
These centers house thousands of high-performance computing servers, often custom-built for specific AI applications.
According to a report by Synergy Research Group, the number of AI data centers worldwide grew from 1,000 in 2018 to over 5,000 in 2022, driven by increasing adoption of cloud services and edge computing.
The Challenges Ahead
The old infrastructure is still present – substations, hardened ground, cooling systems, and power-hungry hardware waiting to be switched back on. Nina McCoy, a former high school biology teacher from Inez, expresses skepticism about AI data centers, citing concerns over the environmental impact of these facilities. They demand staggering amounts of energy, consume billions of gallons of water every year, and can disrupt the land.
A Glimmer of Hope
Despite the challenges ahead, some locals see potential in AI data centers. Wes Hamilton, a local entrepreneur who did his fair share of crypto mining in Kentucky’s heyday, claims that these facilities can bring in investors, engineers, and companies willing to stay. He believes this is different from the boom-and-bust cycle of the past.
A New Chapter for Kentucky
As bitcoin mining’s future hangs in the balance, the question remains: will it make a comeback in Kentucky? The parties involved are set to go into arbitration on May 12th, and Anna Whites expressed hope that they would sit down and say, ‘Mighty nice plant you have there. Let’s just go ahead and turn it on.‘ Only time will tell if Kentucky can find its next boom – or if AI data centers will become the state’s new frontier.
- wired.com | Kentucky’s Bitcoin Boom Has Gone Bust
