Since the dawn of the Industrial Revolution, North America has been the center of innovation and advancement worldwide. That is not to say that the rest of the world has not made giant leaps forward for mankind, but during the past 100 years, the “American Century,” most new ideas and inventions have come out of North America. But this has not been the story in the digital mining universe, as much of the adoption to date has come out of Asia. Be it cheap electricity during the wet season or the latest mining drive or chip, large Asian mining consortiums dominate the landscape. North America has had a few wins during these early days, but there can be no doubt that Asia has dominated the playing field. This is about to change.
Digital asset mining is essentially a manufacturing business in which miners use state of the art equipment (computer mining rigs) to convert a feedstock (electricity) into a finished good (the digital asset). Several factors need to be present for a nascent manufacturing business to be successful. The operator must have the ability to procure state-of-the-art machinery. He or she must also have affordable access to the raw materials or commodities for the finished goods. Additionally, regulation must provide a framework to avoid headwinds for new investment and expansion. Lastly, the business climate must be warming to the new ways of doing business. All these factors are lining up for the digital asset miner in North America.
Even with global supply lines strained, digital asset miners continue to have access to the latest innovations in computing hardware. While much of this innovation continues to be driven out of Asia, we are starting to see some domestic innovation and increased production. More importantly, North America is sitting on vast supplies of the necessary raw materials: natural gas. Be it the Eagle Ford Shale in Texas, the Bakken in North Dakota or Western Canadian Basin in Alberta, North America has vast deposits of oil and gas which are now accessible. Additionally, flaring, or burning the gas at a well site is commonplace in many of these locations as gas is viewed as a byproduct of the more valuable oil. The World Bank estimates that over 140 billion cubic feet of gas is burned annually. Whether it is for economic reasons or regulatory pressures, oil companies are now looking for ways to safely and ecologically manage the gas by-products. Innovative digital asset miners have stepped in to solve the problem and take advantage of the cheap energy. This has had the effect of lowering their cost of power to sub-2 cents per kilowatt hour. This is the cheapest in the world. Add in some of the hydro-generating projects, and the US and Canada truly have the least expensive power.
Access to the best equipment and the cheapest feedstock would make for a compelling case on its own merits. Taking those factors in conjunction with an evolving regulatory landscape both in North America as well as some Asian countries, and the case gets much stronger. Crypto is slowly gaining traction in North America with some jurisdictions even embracing it. Wyoming has been one of the most progressive states, but others are making strides. Compare that to some of the sword rattling coming out of China. China’s push for a national digital currency will certainly not be a positive development for digital assets and the correspondent mining. A state cannot control a decentralized currency; this flies in the face of some of the tenets of any state or government, let alone a communist one. Curbs and controls will continue to push Asian miners to the more stable and open west as our regulatory landscape is becoming clearer.
A stable political landscape leads to a warming business climate. This is essential to providing the welcome tailwinds for the mining community. We are already seeing long time digital asset proponents like Jamie Dimon of JP Morgan joining the ranks of financial giants like the CME and ICE (parent of the NYSE) in the digital asset fray. Add in the likes of Starbucks and Microsoft, and we have the makings of a very friendly business environment for the mining community.
Several factors influence where and who become the dominant players in any industry. Whether it is Columbian coffee or New Zealand wool, every country and jurisdiction has its own factors that make its global offerings world class. We are witnessing those stars aligning for the North American digital asset mining industry. Cheap feedstock, regulatory stability, and a receptive business community will place the North American miner at the top of the charts and ultimately best in class.
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