California Is the 3rd Worst State To Mine Crypto

Cryptocurrency (or “crypto”) refers to digital currencies that can be used to buy regular goods and services. But instead of relying on paper money or banks to complete transactions, cryptocurrencies make use of a decentralized online ledger to verify transactions. Cryptocurrencies can be bought through exchanges using traditional currencies or they can be earned through a process called “mining,” which requires specialized software to solve complex mathematical problems. Successful crypto mining depends on good computing power and is extremely energy-intensive. For example, a single bitcoin transaction is estimated to use nearly 2,000 kWh of electricity—enough to power the average U.S. household for over two months.

Since the first cryptocurrency, Bitcoin, was created in 2009, crypto has exploded in popularity. Google searches for “cryptocurrency” reached an all-time high in May of this year. While crypto prices are extremely volatile, recent increases in some coins’ values have piqued investor interest. Google searches for “cryptocurrency” tend to track the value of Bitcoin, which experienced a price bubble in 2017 before falling and then recently rising again. The crypto market has boomed during the COVID-19 pandemic—for example, Bitcoin could be purchased for less than $6,000 in the early days of the pandemic and rose to over $63,000 in April of 2021, a nearly 10-fold increase in price.

As interest in buying and trading cryptocurrency increases, so does interest in mining. While Bitcoin mining has become extremely difficult, mining other crypto coins is much easier. Because crypto mining is so energy-intensive, living in an area with low electricity rates makes mining more profitable. Residents of states with no state income taxes or low state income tax burdens will pay less taxes on gains realized on the sale or exchange of currencies, which are treated as capital assets.

To find the best states to mine cryptocurrency, researchers at Commodity.com analyzed data from the U.S. Census Bureau, the U.S. Energy Information Administration, the Bureau of Economic Analysis, and HighSpeedInternet.com, creating a composite score based on the following factors:

  • State income tax burden
  • Electricity rates
  • Cost of living
  • Percentage of households with broadband internet
  • Average internet speed

Taking these factors into account, the best states for cryptocurrency mining are North Dakota, Tennessee, and Oklahoma. All three of these states have low or no state income taxes, below-average electricity rates, and low overall living costs. Conversely, northern and coastal states like Hawaii, New York, California, Connecticut, Maine, and Massachusetts score lowest on the composite index. Despite having strong broadband coverage and high internet speeds, these states have some of the highest taxes, electricity rates, and total living costs in the country.

Here is a summary of the data for California:

  • Composite score: 26.75
  • State income tax burden: 3.0%
  • Electricity rates (cents per kWh): 20.5
  • Cost of living (compared to average): +16.4%
  • Percentage of households with broadband internet: 75.8%
  • Average internet speed (Mbps): 110.0

For reference, here are the statistics for the entire United States:

  • Composite score: N/A
  • State income tax burden: 2.0%
  • Electricity rates (cents per kWh): 13.2
  • Cost of living (compared to average): N/A
  • Percentage of households with broadband internet: 70.8%
  • Average internet speed (Mbps): 99.3

For more information, a detailed methodology, and complete results, you can find the original report on Commodity.com’s website: https://commodity.com/blog/states-crypto-mining/

Mike LaFirenza writes for Lattice News Wire


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