How Can a Miner Make Money Without Mining at All?
Can a miner turn a profit without getting involved in mining activities? Surprisingly, yes! Especially in Texas, and specifically during the summer season, this unconventional approach has proven to be remarkably profitable.
Mining firms frequently aim to cut down on energy expenses by adopting flexible strategies to decrease the strain on the power grid during high-demand periods. They also actively incorporate renewable energy sources that have zero carbon emissions, thereby actively aiding in the improvement of the planet’s environment.
However, Riot Platforms, a Texas-based Bitcoin mining company, has taken it a step further. They discovered that they could make more money without engaging in any mining activities!
How is this even conceivable? Well, it all boils down to Riot Platforms' adoption of an energy strategy that leverages a demand response program offered by the Electric Reliability Council of Texas (ERCOT).
The concept is straightforward, yet incredibly effective. ERCOT rewards major energy consumers like Riot Platforms for reducing their energy consumption during peak electricity demand periods. This goes beyond just using less energy; in essence, the company "sells" its unused energy back to the grid and receives additional incentives in return.
Texas has long been established as a genuine hub for cryptocurrency, with miners having the ability to acquire electricity at wholesale rates. However, every advantage has a counterpart — now, the state government is confronted with the task of managing reduced energy consumption.
Now, let's delve into the financial aspect.
In August 2023, Riot Platforms succeeded in mining 333 bitcoins, estimated to be worth around $9 million. During the same period, under the ERCOT program, the company accrued energy credits amounting to $31.7 million, equivalent to 1136 bitcoins. Clearly, this markedly exceeds the revenue Riot would have generated from mining cryptocurrency. It’s crucial to note that these credits are not subsidies or donations — the electricity was resold to other users during high-demand periods at elevated prices. Thus, we are observing a conventional business operation here.
Jason Les, the Chief Executive Officer at Riot Platforms, stresses the significance of these energy credits for diminishing the company’s operational expenses.
“August has been a landmark month for Riot to demonstrate the benefits of our unique energy strategy. Riot set a new monthly record for Power Response Credits, surpassing the total amount of all credits received in 2022. The effect of these credits significantly reduces Riot's Bitcoin mining costs and is a key element in making Riot one of the lowest cost Bitcoin producers in the industry,” stated Les in the company’s most recent press release.
Only in August 2023, bitcoin miners experienced up to a 21% loss in market capitalization, representing the average figures. Riot Platforms saw a 39% reduction in market capitalization this month, rendering it one of the hardest-hit companies in the sector. However, Riot's stocks are demonstrating signs of revival. It’s quite possible that investors have appreciated the unconventional and creative business strategy that the company has embarked upon.