Yesterday’s Senate hearing saw Republican Senator John Montgomery unveil a new bill aiming to make cryptocurrency mining an attractive business opportunity for Oklahoma.
This bill, called the “Commercial Digital Asset Mining Act of 2022”, will allow crypto mining to flourish further in the state. Although the bill covered a lot of rules and regulations regarding how the process would be conducted, at the heart of the bill was a simple strategy: incentives, including an easing of tax burdens, capped at $5 million.
It also sets out the intent to regulate commercial mining and non-fungible tokens and creates a statutory framework for decentralized autonomous organizations (DAOs).
One of the benefits of a crypto mining operation in Oklahoma is the cost of electricity. Oklahoma is well-positioned for providing clean and cheap electricity to cryptocurrency miners since it is home to a large number of natural gas reserves.
Tax incentives and clean energy drive mining activity
Oklahoma isn’t the only state that wants to be the most mining-friendly. Georgia is also in the mix, with a proposal to exempt local crypto miners from paying sales and use tax.
Last month, Matt Schultz, executive chairman of mining company CleanSpark, said, “At the end of the day, Georgia wants this business here. They’ve done everything in their power to grow Bitcoin in the state.”
The world’s largest mining pool, Foundry, claims that miners in Georgia accounted for more than 34 percent of their pool’s computing power, almost twice its share since the third quarter of last year.
Kentucky recently introduced a bill that provides tax incentives to encourage crypto mining companies. The bill highlights the abundant and cheap energy available from the TVA (an agency that manages recreational, natural, and cultural resources) and former state industrial plants that can be used to create crypto mining facilities. Wyoming exempts from taxes any natural gas used to power mobile mining rigs.
Implications of more miners for the bitcoin network
Bitcoin miners are thousands of computers that perform complex calculations to maintain the security of a cryptocurrency’s network. Successful miners receive rewards of virtual currency after successfully completing the calculations. No underground mining is actually done and there are no metals “mined” in traditional terms.
The total hash rate (mining computing power) of Bitcoin reached its peak in Jan but then plummeted quickly after that.
A rise of miners stemming from the Oklahoma bill could lead to slippage in miners’ balances, which have declined since May 2020, following the last bitcoin halving.
The halving process imposes synthetic price inflation on the bitcoin network, cutting the number of new bitcoins released into the system in half every 210,000 blocks.
Bitcoin halving has implications for every stakeholder in the Bitcoin ecosystem, affecting the price and the number of new bitcoins entering the system.
Since the May crash and the start of the pandemic miners’ total holdings have fallen from more than three million BTC down to 2.5 million.
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