Under the big sky in Bonner, Montana, if you're close to the old mill along the Blackfoot River, you can hear a loud hum. But the sound isn't from machines cutting plywood--it's from 12,000 servers mining for bitcoin, zcash, and other digital currencies.

Founded in 2016 by cryptocurrency investor and entrepreneur Sean Walsh, Project Spokane is a 20-megawatt crypto mining facility, the first of its type and scale in Montana. (Project Spokane's parent company is Hyperblock Technologies.) The business model is simple: Use half the computing power to mine, and sell the other half to other miners. Walsh says the data center eventually will have 55,000 servers.

Montana may sound like an unlikely place for such an operation, but there's a good reason Project Spokane chose it. The state is home to cheap hydroelectricity and large, vacant former manufacturing facilities that have their own power grids.

"We looked all over the country--from an old vacuum factory in Texas to a manufacturing plant in North Carolina," Walsh says. "But Montana had the cheapest electricity and no competition."

Cryptocurrency miners around the world use more electricity per year than Ireland does, according to data from research firm Digiconomist. Given the staggering amount of power required, entrepreneurs in this field need the best price they can get for every kilowatt.

Miners use servers like the ones at Project Spokane's facility to solve complex math equations to validate digital currency transactions, and then upload them to the blockchain (the digital ledger that keeps track of them). The first miner to solve an equation receives a reward in bitcoin, ether, or whatever currency the mining rig is made for. Running the computers at high processing speeds and constantly cooling them with fans results in massive power consumption.

Montana might have only one large-scale cryptocurrency data center at the moment, but it's part of a growing group of such facilities across the Northwest. Washington and Oregon have been flooded with cryptocurrency server farms with names like Giga Watt and OregonMines for nearly two years, thanks to the cheap hydroelectric power available in the Columbia Gorge Valley.

In Chelan County, Washington, for example, more than a dozen cryptocurrency mining facilities have set up shop near the Columbia River. The server farms in the rural area were using so much electricity that Chelan's Public Utility District decided in July 2016 that it needed to raise rates.

Eager to get in on the trend further, the Montana governor's office is actively marketing the state as a location for new data centers, a category that would include cryptocurrency mining businesses, chief business development officer Ken Fichtler tells Inc. And last year, the Montana legislature passed a bill to lower property taxes for large data centers in an effort to attract companies like Project Spokane.

Clarification: The Montana governor's office said the state is interested in attracting data-center businesses in general, but not specifically cryptocurrency-mining businesses.

Published on: Jan 26, 2018