Alabama’s first bitcoin mining operation is set to begin on the Fourth of July, and it will take place outside a 7-year-old museum in downtown Mobile.
Distributed Ledger Inc., through an agreement with the City of Mobile and in partnership with the GulfQuest Maritime Museum’s board of directors, is planning to take a Maersk shipping container and modify it into a 24/7 bitcoin mining operation.
The arrangement of bitcoin mining inside a shipping container will also be an outdoor and educational feature for visitors to the maritime museum. It will be located on the museum’s south end and on city property adjacent to the Mobile Alabama Cruise Terminal.
“This type of unit was selected on purpose to celebrate the shipping containers and related equipment seen through the maritime industry, and the Port of Mobile,” said Jim Anderson, vice president of operations at Distributed Ledger Inc.
Mike Dow, a former mayor of Mobile and current executive director of GulfQuest, said there is no risk nor upfront public costs to the city. Distributed Ledger will be charged with paying its own electricity, which in other mining operations around the U.S. can be fairly costly.
Under the agreement, Distributed Ledger will pay the museum board a monthly rent payments of $1 plus 20% of net operating income derived from bitcoin mining.
Any revenue generated from the operation will be funneled back to the city-owned GulfQuest, and will go toward paying down the museum’s remaining debt from a costly construction project that wrapped up in 2015. According to Dow, approximately $1 million in debt is owed on a museum that initially cost around $60 million to construct.
“There is no liability, they have insurance and this is their money,” said Dow. “They will be providing revenues from the mining operation to the board. It’s a no-brainer. And if it doesn’t work, they’d take a truck and move (the container) off (the property).”
The activities at GulfQuest come at a time of volatility in cryptocurrency, but none of which is concerning Dow and others who believe in its potential. Bitcoin, the world’s largest digital token launched in 2009, has seen a 50% tumble in value since its November high. It continued its downward struggles on Thursday, falling as low as $25,402 – its lowest level since December 2020 – before rebounding.
“Recently, gas prices tripled,” Dow said. “So that’s the problem. We are in an (economic) swing right now. That won’t be there forever. Those ups and downs come.”
He added, “If the city had to invest $2 million to do this, I would take a step back. But the private sector is doing it and there is no liability.”
James Barth, Lowder Eminent Scholar Finance at Auburn University’s Harbert College of Business, said the timing of the mining operation comes as cryptocurrencies are facing wild market swings, a “spill over effect from the fact we have a lot of inflation.”
“A lot of people are seeking safer assets and are viewing cryptocurrencies as less safe,” said Barth, who is also a Senior Fellow at Milken Institute and a Fellow at the Wharton Financial Institutions Center. “There is also a lot of uncertainty regarding monetary and fiscal policy and Ukraine. When this happens, people look to safer sets of assets to acquire.”
Issues in other parts of the U.S. – namely in rural areas in Tennessee and West Virginia – have emerged with bitcoin mining. Noise, unsightliness and high energy consumption have been of the complaints associated with the operations elsewhere, and cited in national media stories.
Dow said none of those concerns are an issue with the GulfQuest operation.
The city is not paying for the energy costs. Distributed Ledger will handle the costs of the energy produced by the mining operation, and their estimated energy usage will be paid one month in advance.
“While the City has a very limited role in this operation, we’re encouraged the GulfQuest Board is looking for creative ways to generate revenue,” said Candace Cooksey, spokeswoman for Mobile Mayor Sandy Stimpson. “There has been a lot of discussion about how blockchain technology could benefit the maritime industry, so this seems like a natural fit. We look forward to seeing the operation up a running.”
The entire project consists of 100 miners and will use 310 kilowatts of power, which is already present at GulfQuest and is accounted for in the demand load of Alabama Power.
Anderson said the power being used is “only what’s there already to provide not only a revenue source for the museum, but educational opportunities as well.”
Noise will not be an issue, Dow said. The total noise output is expected to be reduced by the design of the mining container. The container, itself, is only 15 feet long, and will be located away from the museum’s day-to-day operations, Dow added.
Anderson said that a normal conversation can take place “not even 20 feet” away from the operation.
“It will not affect the Mobile Alabama Cruise Terminal in this regard, which I would wager produces far more noise itself,” he said.
Dow touts blockchain and bitcoin as the next level of Internet technology and digital contracting in the maritime industry that already tracks and receives – to include allowing digital crypto currency payments – global containerized cargo.
He said the potential exists for Mobile business and industry to be more competitive, citing the Maersk Shipping Blockchain network as the next evolution of encrypted and expanded Internet. Maersk already has 50% of all container shipping in the global maritime industry on its network, Dow said.
Mobile, Dow said, barely knows much about it. He said GulfQuest is the perfect location for the mining operation, noting it that can offer an educational opportunity.
Dow said that the GulfQuest board, and the city, have gotten a crash course already on the emerging technology.
“It took a while to get this contracted,” he said. “There was a lot of education involved and going through it with the attorneys and making sure it was not a liability or something that had any form of being a downside to GulfQuest and the city.”
