Houston Developer Invests In Cryptocurrency Mining Facility As The Process Gets A Texas Foothold
Texas is one of the hottest states in the country, and that year-round heat and humidity has largely kept crypto mining operators from opening facilities in the area.
That may soon change with the emergence of new technology created by Plano, Texas, crypto mining operator TMGcore.
Backed by a $67M capital injection from Houston-based real estate investment firm Pinchal & Co., TMGcore has developed technology that offers cost-effective mining that is not dependent on climate. Its mining technology uses a two-phase liquid cooling immersion technology that reduces cooling costs by 90%.
“Most miners are located on the hillside, the cool climates in China, the caves in Russia and somewhere in Washington state,” TMGcore CEO and co-founder JD Enright said. “[However], we can do our mining [in Texas]; it could be 105 degrees outside, and we don’t care.”
Simply put, crypto mining is the necessary computational process of approving cryptocurrency transactions to ensure the integrity of the network since there is no centralized authority overseeing the blockchain ledger network, principal of Ultimate Powerhouse LLC and data center constructor John Diamond said.
These facilities, which can be likened to data centers, require access to mining technology (i.e. miners, hashing boards and chips), low-cost, sustainable infrastructures for power and a climate conducive to removing the heat from the mining technology.
Historically, Houston miners needed 60% more power and cooling capabilities to mine compared to miners in Iceland, said Diamond, who has built two blockchain validation sites in Princeton, New Jersey.
“Efficiency always drives job growth,” Enright said. “If a company can be more efficient, and it costs less than they can do more of it and invest more into it.”
Houston CRE Firm Makes A Big Play
Seeking to diversify its portfolio after nearly 30 years in the business, Pinchal & Co. has been on the hunt for data centers in the Houston, Dallas and Austin markets for some time.
In April, the firm invested $60M to purchase a 100-megawatt, 150K SF data center in Plano with TMGcore as the sole tenant and transformed the center to handle the data mining capabilities. The facility will open in August.
In addition to funding the Plano facility, some members of the partnership individually contributed more than $7M to directly support TMGcore, which also collected $10M in additional funding from private equity investors.
Penetrating The Crypto Mining Market in Texas
With only a small portion of the world’s cryptocurrency hashing power, the new technology provides Texas, and the U.S., with an opportunity to participate and invest in the untapped market of crypto mining facilities and the emerging market of data centers, Enright said.
“Texas is a great location in terms of power price, but the facilities with power already in place are important,” Diamond said. “Places like old steel mills or industrial manufacturing plants are desirable.”
One advantage of crypto mining development in the Texas market is the high-tech-savvy workforce from engineers in the oil industry to researchers in the medical field, Enright said. He said a few of the innovators behind the mining technology also work at Rice University in Houston.
As blockchain technology continues to transform the real estate industry, the cost-effective data processing is allowing data center developers to cut down on the land and power use previously required.
Since one of the benefits of using the blockchain technology is the traceability of the products, McMackin also said it could eliminate the need and cost of commercial real estate title insurance policies. Other benefits include the reduction of fraud, the ability to manage large amounts of data and the transparency across multiple parties.
Diamond said blockchain technology is also being developed by large financial services, healthcare and government organizations to create less expensive, more effective and smaller data centers.
“Our technology is not only for cryptocurrency mining, while it is our initial focus,” Enright said. “The technology is transferable to traditional data center-type applications.”
Expanding The Global Cryptoprint
As the use of cryptocurrencies rises globally, experts agree that the U.S. must build more infrastructure to compete with the rest of the world.
“Until recently, the U.S. has done very little, if anything, in the blockchain development space,” Enright said. “The rest of the world — China, Russia and Europe — have been early adopters.”
The foreign domination of blockchain defeats one of the major concepts behind cryptocurrency — decentralization, Enright said.
The U.S. controls less than 1% of the hashing power — the computational speed to run and solve hashing algorithms that generate new coins and approves transactions — compared to China, which controls 70% of the global blockchain mining technology and 46% of the total hashing power for bitcoin.
“The United States has an amazing opportunity to step up and start taking part in creating mega nodes, which are centers with high computational power [or] mining that supports the transactions on the blockchain, thus diluting China’s position in [the] blockchain market and giving the U.S. a bigger piece,” Enright said.