Yahoo Finance Bitcoin mining in Navajo land yields jobs, revenues while revealing economic disparity
Tiffany Nelson knew little about cryptocurrency when she first happened upon a temporary labor job in 2019. A Canada-based company called Westblock was recruiting “labor hands,” in Nelson’s words, to help unload boxes in a data center facility on land belonging to the Navajo Nation.
A Navajo living on tribe land, Nelson considered the job rare for its proximity to her home. With a total tribe population of 400,000 people, only about 170,000 live on the reservation. That’s most often attributed to poor economic conditions and scarce employment opportunities, especially for women.
While grateful for the opportunity, Nelson’s employer didn’t initially tell her what the company’s business on the New Mexico reservation was.
Another Navajo woman, Kennette Phillips, who was hired around the same time, recalled similar misgivings surrounding the mysterious business of her employer.
As security guards kept watch over the site, Phillips, Nelson and another employee unloaded boxes and then began setting up the machines inside.
“When we opened the boxes, we found these machines that looked like toasters,” Phillips recalled. “We weren’t told what they were for. It seemed a little sketchy… we didn’t know if what we were doing was legal.”
Part of their growing concern was spurred by the crisis-level rates indigenous women have been kidnapped or murdered across Canada and the U.S.
When the two women, both single mothers, finally asked their employer what the site would be used for, they discovered with much relief, the company intended to use the toaster-like machines to mine bitcoin.
Bitcoin mining is the computationally-heavy process of computers validating bitcoin’s network of transactions. While the cryptocurrency’s supply is limited at 21 million coins, it distributes a small sliver of that supply to miners for contributing computer power, thereby securing the network.
The work can be lucrative, especially as the price has more than tripled over the last year. Mining bitcoin requires specialized computers, the infrastructure to house them, plus a robust and stable power supply.
“Oh, wow. Okay,” Nelson remembered thinking with relief. She didn’t claim to understand the full extent of how bitcoin worked back then, but she knew it was a cryptocurrency, “like internet money.”
Three years later, Nelson and Phillips manage operations for the site full-time. In addition to two other full-time managers who together keep the operation running day and night, the facility also employs four to six security guards to protect their expensive mining equipment, which is valued in the tens of millions of dollars, according to WestBlock’s CEO Ken MacLean.
Tapping into unused power sources
Like many other bitcoin mining operations, this project benefits from tapping into energy that otherwise went unused. After the shutdown of a nearby coal-fired power plant, the Navajo Tribal Utility Authority (NTUA), a tribe-owned nonprofit, possessed an extra 15-megawatt load of electricity for which they were eating the cost.
According to WestBlock’s MacLean, the power the operation draws from NTUA comes from a mix of solar, hydroelectric, nuclear power and natural gas, with 60% of it attributed to renewable energy. The situation reflects the Navajo Nation’s broader and economically difficult energy transition from fossil fuel to renewable energy sources over the last decade.
Historically, the bulk of the tribe’s revenues have come from leasing land to extractive energy companies, with leases for oil and gas mining operations accounting for 51% of the tribe’s total income as far back as 2003.
Critics of bitcoin mining’s high energy consumption are quick to point out that bitcoin now accounts for 1% of the planet’s energy consumption. While direct comparison can be tricky, the computational power directed toward securing bitcoin consumes more power than all the refrigerators in the U.S. but less than the total energy used to produce paper and pulp worldwide, according to the University of Cambridge’s Center for Alternative Finance.
Additionally, WestBlock’s bitcoin mining project currently uses 7 megawatts of the NTUA’s power with plans to eventually use all 15 megawatts in the near future. Relative to other regions within the Navajo Nation, the project’s energy consumption suggests some economic disparity.
A three-hour drive west from the site, in the Nation’s Black Mesa region, many residents live without electricity and running water.
Navajo Nation's need to diversify its economy
But the effort of transferring power from one part of the nation to another is not so simple, according to Carl Slater, a delegate with the Navajo Nation’s Tribal Council. Roughly the size of West Virginia, the Navajo Nation is the largest independent authority of land within the U.S. and its power grid isn't connected evenly dispersed or connected throughout its 17 million square acres.
Surprised, to say the least, when he first heard a developer was mining bitcoin on Navajo land, Slater told Yahoo Finance the opportunity could be an economic boon for the nation, if the revenues paid to its utility can end up serving the nation's residents.
“The utility that the nation owns would have just had to eat the cost of that power. To make use of it in a way that generates revenue back to the nation is good, but I think there’s a shared responsibility between the nation, utility and developer to figure out a process whereby more of the revenue can be directed to our local communities,” said Slater.
Andrew Curley, an assistant professor of geography at the University of Arizona, said the Nation’s move to bitcoin mining is just the latest iteration of their long-standing need to diversify its economy.
“The tribal leaders are trying to make the reservation a place where companies, outside of those in extractive industries, can do business and hire people,” said Curley, a Navajo Nation member himself, who lives off the reservation.
A sociologist by training whose research focuses on the Navajo Nation's energy transition, Curley called the bitcoin mining project an “interesting prospect” but also acknowledged that the Nation's energy disparity is relative to different local communities. While some communities remain without power, he said the utility companies bare the brunt of the responsibility, explaining that overall, the Navajo Nation “by far under-consumes the amount of energy it produces.”
When thinking of other economically struggling nations that have or are considering adopting cryptocurrency more broadly, such as El Salvador, Curley is quick to point out the obvious problem with making cryptocurrency play a larger rule in the Nation's economy.
“There is an innate problem and challenge when asking poorer people to take riskier transfers of technology,” said Curly.
Though WestBlock’s mining operation opened in 2020, this year marks the first time the project has gained a material profit. On the other hand, the tribal utility NTUA has yet to disclose its total revenue from the effort, but should in early 2022. In addition to monthly revenues for internet and electricity paid to the NTUA, WestBlock also pays taxes, rent for its land lease in addition to scholarships set aside for the local community.
A person familiar with the Navajo-based operation said the revenue generated from the project this year is “in the millions," and that WestBlock is working with NTUA along with other tribal chapters to find other sites on the land, which might be used for bitcoin mining.
“I’m just happy to have a job close to home, especially since so many people lost their jobs during the pandemic,” Tiffany Nelson added. “It's been a good ride and something that I’m proud to be a part of.”
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.
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