“We encourage you to get more involved with bitcoin miners to better understand the issue in general and the consequences of your legislation.”
This letter was originally published on bitcoiner.ghost.io.
Dear Senator Kolkhorst,
As native Texans, we are writing to express our concern regarding Texas Senate Bill (SB) 1751, which you cosponsored and which recently passed. Business and Commerce Committee Vote on April 5, 2023. This open letter follows a private appeal filed through his office in March. We are writing as concerned Texans who are independent and do not represent any business or lobby.
Viewed from the outside, you appear to be a proud Texan who fights for the rights of all Texans, promoting freedom in accordance with Texan values. SB 1751 is a notable departure, at least in critical respects, from its previous record. It is misinformed, discriminatory, anti-competitive, detrimental to the interests of network stability, bad for consumers, and a strategic setback for Texas.
For context, the bill refers to “virtual currency” mining and demand response. It seeks to limit the ability of bitcoin miners to participate in compensatory ERCOT programs, which incentivize load reduction, to 10% on all bitcoin miners in total. Prior to sponsoring SB 1751, it is unclear if he participated in discussions with bitcoin miners to better understand the matter or if he expressed any views on bitcoin or bitcoin mining. It’s also unclear if special interests lobbied for this bill, since it doesn’t seem to have taken any position on bitcoin before, but on the merits alone, SB 1751 is problematic.
Misinformed
The bill refers to “demand response virtual currency mining.” Actually at issue is bitcoin, not “virtual currency” in general. There are no miners of any currency other than bitcoin who can participate in demand response programs or promote network reliability. Bitcoin is also not, by definition, comparable to any other currency, and it is not virtual. Bitcoin is not “crypto”. Bitcoin is bitcoin, and if bitcoin is at the center of your bill, it would be beneficial to understand it better before you legislate.
Bitcoin is a form of money with a fixed, global, and permissionless supply. There will only be 21 million bitcoins. That is the basis of your value to the world. As evidenced by a recent tweet, he seems to acknowledge that inflation is a problem. Inflation is not a political phenomenon. Money is created by the Federal Reserve (“Fed”). The Fed has increased the money supply for $8 billion, or 8x since the Great Financial Crisis, which causes inflation and destroys savings. Bitcoin is designed to solve the problem of printing money, but nothing of value comes without cost. The fixed supply of 21 million Bitcoin is secured by energy, specifically power. In short, energy innovation has always been strategic for Texas. Energy is strategic for bitcoin and bitcoin will become increasingly strategic for Texas as a result. However, it is not just about energy generation and demand. It’s about money printing problems, which undermine the interests of all Texans and the state of Texas.
Texas is a leader in energy and all Texans need a form of money that the government can’t print out of thin air at no cost. Texas Power is securing the bitcoin network, which not only promotes network stability and creates jobs and economic development, but also ensures the interests of all Texans, even those who don’t yet use bitcoin as a superior form of money. We would be happy to hear your concerns and discuss this further if it would be of value.
Discriminatory
SB 1751 singles out bitcoin miners from all other industries. All else aside, this is discriminatory and creates an uneven playing field. While other sources of demand have been identified as critical infrastructure, no other industries have been restricted, including battery operators. Why mine bitcoins?
anticompetitive
Bitcoin miners compete in various ancillary services that ERCOT uses to compensate for soft charges to ensure network stability. The entry of bitcoin miners has made the bidding process more competitive, lowering prices. Restricting the ability of bitcoin miners to participate is anti-competitive and will result in marginally less participation in ancillary services by bitcoin miners, which will marginally increase the cost for ERCOT to achieve its reliability mandate.
Harmful for network stability
SB 1751 discourages bitcoin miners from participating in ancillary services, which promote network stability. Greater participation in ancillary services not only reduces costs, but also allows ERCOT to have more resources at its disposal to achieve network stability. As Texas’ demand for power grows, more flexible resources will be needed to achieve grid stability. Why discourage large flexible loads, which are often more efficient and lower cost than using peak plants?
bad for consumers
Access to ancillary services creates marginal economic incentives for miners to come to Texas. Over time, more miners in Texas will lead to increased power generation, increased demand response, and increased participation in ancillary services. All three, individually and together, promote more affordable and stable energy prices for all Texas consumers.
Strategic setback for Texas
Due to the fundamentals of energy development and as socialist-leaning states like New York have restricted mining, there has been a significant shift from bitcoin mining to Texas. From a mining perspective, Texas is known as the “hub of hash.” Austin is also an emerging hub for bitcoin development. SB 1751 sends strong signals that Texas is not the free and unregulated market that everyone believes it to be and that the state of Texas is antagonistic to bitcoin in general.
Bitcoin mining incentivizes cheap energy, and its unique ability to respond at scale to all other sources of energy demand helps achieve grid stability far more effectively and efficiently than any other single resource. The willingness of miners to shut down and NOT mine bitcoins in the interest of network stability is a benefit to ERCOT and all Texans, who should not be financially discouraged or disadvantaged relative to other industries. Mining projects are also highly capital intensive. Hasty legislative action can have an immediate impact by deterring miners from undertaking large, long-term capital projects in Texas.
Even if you don’t care about its broader meaning, this legislation will hurt Texas’ strategic interests beyond ancillary services.
Appeal to reason and reasonableness
Before moving forward with harmful legislation, we encourage you to engage further with bitcoin miners to better understand the issue in general and the consequences of your legislation in particular. Halting work on SB 1751 is the only sensible and reasonable course. Please don’t shoot and aim later. Additionally, we ask that you engage with the Texas bitcoin community to understand the importance of bitcoin and why it is strategic to Texas and all Texans.
Bitcoin does not need favors or competitive advantages. It simply should not be subject to regulatory discrimination. The rights of Texas bitcoin holders, including miners, must be protected. House Concurring Resolution (HCR) 89 sponsored by Cody Harris, Texas House of Representatives, District 8 is a great example. Their goal is to protect the rights of Texas interests in bitcoin, rather than benefit bitcoin in any way. That is all we ask of you and your colleagues.
It is clear that you are a proud Texan and your values align with the spirit of bitcoin. Most importantly, we simply want you to engage with the citizenry before you legislate. But rest assured that regardless of how you proceed, everything is good for bitcoin, which is a theory formally known in Keynesian economics as the Nakamoto paradox. If you want to talk about SB 1751 or bitcoin more generally, we’re in Austin or we’d come to Brenham. Good luck.
“Rule wisely and as little as possible.”
-Sam Houston
Better,
parker lewis
Will C. Cole
This is a guest post by Parker A. Lewis and Will C. Cole. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
