Giving tax breaks for Bitcoin in Kentucky is like setting money on fire
READ MORE
Kentucky’s digital gold rush
Expand All
Kentucky’s digital gold rush. What’s behind the crypto mining boom in coal country?
Don’t know much about cryptocurrencies like Bitcoin? Here’s a primer.
What is an NFT, and how are some people making big money from them?
Bitcoin has the potential to be a force for good in Kentucky
Giving tax breaks for Bitcoin in Kentucky is like setting money on fire
Having spent almost 30 years dedicated to teaching and research in electrical engineering, I have learned one thing. In Kentucky, solar panels are a complete waste of money when the state is undermining the benefits of solar with their policies toward Bitcoin. For those unfamiliar, Kentucky residents can replace all or a portion of their electricity by either purchasing and installing their own panels or subscribing to KU’s Solar Share program. I chose installing my own panels with a total cost just under $15,000 after a 25% federal tax rebate. In my first full year, I’ve saved $600 in electricity bills. At this rate, it will take 25 years to equal my $15,000 investment.
Was it worth it? In Kentucky, the answer is a flat-out no. Looking at the economics, I’ll at best break-even but that doesn’t consider what I may have made by investing. The value of my home may have increased, but perhaps only marginally given that some home buyers may balk at the added expense associated with replacing the roof. So why did I do it? Well, I thought I was taking a meaningful step as an individual. I wasn’t preaching to the non-believers. I wasn’t forcing my political will on my neighbors. I was making a personal sacrifice. But here’s the rub. Thanks to our Governor, the CO2 that I’m saving is just being flushed down the toilet through tax incentives to bring Bitcoin miners to produce CO2 in exchange for nothing.
For those unfamiliar, Bitcoin miners are a shoebox-sized computer that hosts an ASIC (application specific integrated circuit) that does nothing except mine Bitcoin. It can’t be reprogrammed to look for a cure for cancer or even for alien life. It’s just consuming electricity and, thereby, producing CO2. If you dug a hole, filled it with coal, doused it with gasoline, and lit it on fire, you would be benefiting humanity every bit as much as Bitcoin. The only job (singular) you would be creating is to plug the boxes in and replace a HEPA filter once a week.
If you do the research, you’ll find that encrypted currencies account for such a large portion of IC chip sales that banning them entirely would solve the world’s chip shortage. In 2021, 20% of all GPUs went to Ethereum mining, and graphics cards use a lot of chips for power management, communication with the CPU, fan controllers, etc. In 2018, TSMC (world’s largest chip manufacturer) devoted 4-5% of all its best, 7 and 5 nm, chip production toward Bitcoin mining. And 0.5% of global energy production went to cryptocurrencies, of which Bitcoin accounted for 95%. These numbers are growing exponentially, not linearly. They are and will continue to drive inflation. There is absolutely no scenario under which humanity reduces CO2 production while allowing bitcoin mining. Any coal or gas burning plant that is replaced with renewables on the grid will simply be repurposed for mining bitcoin, even switching to high sulfur dioxide producing coal to reduce costs while sidestepping environmental regulations.
So why would Andy Beshear, a Democrat, take such glee at his Bitcoin tax break? He will say that he’s supporting our coal miners by creating demand for CO2 emissions. He’s full of it. If he really wants to support coal miners, then why doesn’t the state give a tax break for purchasing electric vehicles (EVs)? For every kWh that I’ve saved with my solar panel array, I’ve replaced it and more with EVs. At least with EVs, you replace the CO2 from gasoline with CO2 from electricity production, which in Kentucky is the equivalent of 65 miles per gallon. Even Tennessee handed out $2,500 checks for purchasing an EV when Nissan assigned Leaf production to their plant in Smerna while Ford is investing $5,000,000,000 to build a new electric vehicle battery plant here in Kentucky.
Put simply in the state of Kentucky, there is no financial or moral benefit to reducing our CO2 production as this state is happy to take the CO2 savings and give it to Bitcoin, even using our tax dollars to pay to produce that CO2 on our behalf.
Dr. Daniel Lau is a Professor and the Director of Graduate Studies for the Department of Electrical and Computer Engineering at the University of Kentucky.
This story was originally published April 21, 2022 at 11:23 AM.