Startup company looking to invigorate Anaconda economy with bitcoin, officials say

A startup company is seeking to invigorate Anaconda’s economy by bringing a new global trend in currency — the bitcoin — to the Smelter City.

The bitcoin is often described as digital currency, but it’s perhaps easier to think of it as digital gold.

You can’t hold it in your hand. Like a video game, the bitcoin process has its own rules. But, in the simplest of terms, earning bitcoins could be thought of as somewhat similar to playing a video game like Super Mario Bros. You solve an online puzzle and, like collecting coins in Super Mario Bros., your reward is online gold — bitcoins — in return.

The money is digital, residing on the bitcoin network in the world of the internet.

San Francisco-based cryptocurrency researcher Howard Wu likens the current bitcoin phenomenon to what the internet was like decades ago, when few knew how to use it or what it was. As the internet began taking off, companies made it easier for ordinary people to go online, access email, and begin to use the web.

So, you can’t use bitcoins the same way you can use your regular dollar bills or your credit card. But there is a growing trend to accept bitcoins for online purchases of products and services. Microsoft, for instance, allows users to pay for games, movies, and apps in bitcoins.

Wall Street is also getting in on the bitcoin phenomenon.

The value of the cryptocurrency against the dollar has taken an enormous jump this year, from around $900 in January to $17,678 as of Friday. And this month, several companies are launching futures contracts to allow investors to go long or short on the bitcoin.

Now a startup with major financial backers behind it, New Mexico-based BitPower LLC, is considering the purchase of the W.K. Dwyer Primary School in Anaconda to convert the empty school into a training center for a bitcoin-based business.

The company says it has plans to purchase land in Anaconda’s Mill Creek TIFID district, east of downtown, to build a facility that will house computers — lots of computers. The more computers that BitPower has engaged in solving the bitcoin puzzles, the greater the chance of obtaining the reward — bitcoins.

Another way to think about bitcoins is to think in terms of something southwest Montana knows quite well: mining. By solving the puzzle, the computers “mine” for bitcoins. In fact, those in the bitcoin industry refer to it exactly like that. A bitcoin operation is called a bitcoin mine.

Every 10 minutes, 12.5 bitcoins are released worldwide. In a bitcoin mine, the currency is acquired using computers that solve what Wu calls “computational puzzles” — or moderately hard problems — on the bitcoin network.

But mining for bitcoins involves more than just playing a game or solving a problem. The bitcoin network comes with something called a blockchain, a ledger of all bitcoin transactions. Once a group of computers has solved the moderately hard problem, the computers complete an audit of the ledger. Having the computers perform the audit cuts out the “middle man” — centralized banks — and enables anyone involved in bitcoin mining to see the ledger.

Once the group of computers has audited the ledger, those computers receive their reward — bitcoins.

Like a bank, Wu said, the bitcoin network needs a ledger to make sure all transactions are accounted for fairly and accurately. But instead of a bank keeping track of transactions, it’s computers all over the world competing to earn bitcoins that are keeping track through the auditing work they perform.

“It’s the miners that keep the system honest,” Nathaniel Popper told the Standard by phone from California.

Popper is a journalist with The New York Times. He has written extensively on the bitcoin and other cryptocurrencies, and he says that the prospect of winning coins is what encourages users to join the network, solve its puzzles, do its accounting, and keep the system honest.

“It’s like a race, and whoever is the fastest is generally going to win,” said Popper. And this explains why BitPower and others are seeking to build increasingly large data centers to mine the digital currency.

Nearly a decade ago, an anonymous entity known only as Satoshi Nakamoto created the digital currency, reportedly due to the global economic collapse in 2008.

The bitcoin took time to take off, but now it’s beginning to do so in a big way.

And it appears that the craze is on its way to the Smelter City.

A New Mexico-based investment group, BitPower LLC is headed by Daniel Burrell, a 39-year-old entrepreneur who has made deals in New Mexico; Idaho; and, for a time, Bozeman.

Burrell did not respond to an email request sent Friday for an interview.

BitPower is a subsidiary of The Burrell Group LLC, which has bought a garnet mine in southern New Mexico and sought to open a for-profit osteopathic college in Bozeman in 2015. But that deal eventually fell through and the company instead located the college in Boise, Idaho. Burrell Group broke ground this year on the medical school, anticipated to open in 2018.

Burrell Group’s worth has been estimated at $3.5 billion.

Rick Tabish, who is a consultant for Premier Industries, the slag-processing venture trying to get started in Anaconda, is also a spokesperson for the bitcoin venture, though his degree of financial involvement is unknown.

Burrell reportedly worked on both the Al Gore and John Kerry presidential campaigns. Burrell relocated to Santa Fe, New Mexico, in 2010 and became head of a major real estate company, bought a ranch, and tapped into the industrial grade garnet mine in southeast New Mexico a few years ago, according to The Albuquerque Journal.

BitPower vice president Scott Mosebach said Wednesday that the company is interested in locating a bitcoin mine operation in Anaconda because of the region’s cold temperatures, because keeping massive banks of computers cool is essential to the operation.

The company has not yet brokered a deal with Anaconda’s Mill Creek TIFID district, according to the district’s board president Jim Davison. But, if the project goes through, the company expects to build a facility that will house a server farm. Those computers will be constantly working together to solve the bitcoin puzzles to earn bitcoins. The more computing power an entity can put toward solving the bitcoin puzzles, the greater the likelihood of solving the puzzles.

So the more computers, the better.

As for the Dwyer school, Mosebach said the company would use the facility as a training hub.

“We’ll be training employees to maintain the data center that we would be building in another location,” said Scott Mosebach, Burrell vice president, who confirmed that BitPower is exploring building the facility in the Mill Creek TIFID. Mosebach added that the company doesn’t know yet how large the facility will be nor how much electricity it will need. Bitcoin mines are known for their enormous power usage.

If the project goes through, BitPower LLC won’t be the first bitcoin mine in Montana. Another one exists about 100 miles west of Butte, in Bonner.

Project Spokane LLC, a company located in the Bonner Mill site near Missoula, provides security services for the bitcoin network.

The company launched in 2016 and snagged a $416,000 grant this year from the state’s Big Sky Economic Development Trust Fund, becoming a bona fide state-sponsored company built around the bitcoin.

Sean Walsh, partner at Redwood City Ventures, a company that specializes in investments in the bitcoin industry, said Project Spokane is Redwood’s largest portfolio company. The operation is a 20-megawatt facility, Walsh said, and has employed between 25 and 50 workers since its inception.

NorthWestern Energy spokesperson Butch Larcombe said Project Spokane is one of the larger customers in the Missoula area.

Walsh said he’s been in the bitcoin game since 2013, when the world of the cryptocurrency was a small community.

According to both Wu and Walsh, bitcoin mining companies tend to keep their operations under wraps not only to keep their projects safe from security threats from hackers but also to remain competitive in what Walsh described as a competitive industry that’s “cutthroat to the nth degree.”

Mining companies have to be secretive, Walsh said, because staying ahead of the competition could be the difference between winning and losing in the bitcoin game.

Incidentally, he said, Project Spokane is called Project Spokane as a diversionary tactic.

“We didn’t want people to know where we’re located,” Walsh said, adding that the cat’s been let out of the bag since then.

When asked why Burrell Group is interested in the bitcoin industry, Mosebach said the company strives to be on the cutting edge.

“The underlying technology which this is a product of is exciting from an investment standpoint,” said Mosebach. But the implication of how the bitcoin and other cryptocurrency could possibly impact the world isn’t a bad incentive either, the vice president said

“This is obviously going to be revolutionary,” said Mosebach.


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