Happy Summer Solstice, freaks! As many of you are aware, Summer brings with it longer, hotter days and, in 2023, fluctuations in bitcoin network hashrate.
As the mining industry matures and becomes more embedded with grid systems across the world, and the US particularly, it is proving to be a reliable tool to ensure that electricity supply is sufficient when demand spikes when it gets too hot or too cold. It is becoming abundantly clear that bitcoin is uniquely suited to act as a demand response mechanism to ensure that grids have a sufficient amount of electricity when households and businesses are jacking up their air conditioning and consuming more electricity as they stay indoors longer to escape the elements. Bitcoin miners are perfect actors in a system that requires demand response for stability because they have the ability to wind down their operations within seconds without disrupting the bitcoin network outside of temporarily slower block production, which is expected from time to time.
The last major demand response event that affected bitcoin network hashrate was around Christmas of last year when an arctic blast swept through the Southwest section of the United States. Today, as temperatures rose well above 100 degrees Fahrenheit across Texas (where a considerable amount of hashrate operates today) the network experienced a ~17% decrease in hashrate. Miners across the state of Texas who take part in ERCOT's demand response program turned off their miners to make sure electricity could be delivered to residents and other businesses. Yet another example of bitcoin mining making energy systems more robust, resilient and efficient. And if I'm interpreting Pierre's tweet correctly it seems that, at least today, miners helped keep prices lower for Texas residents by reducing demand.
It should be noted that today's hashrate decline was likely exacerbated by miners who were forced to turn off because it was too hot to operate. When the temperature reaches a certain point it becomes impossible for air cooled units to properly cool themselves.
It will be interesting to see how much downtime miners involved with demand response programs experience this Summer. It's been well over 100 degrees here in Austin for over a week and the 7-day forecast includes three days over 105. We could be in for some volatile hashrate fluctuations as a result.
Many worry about a geographic concentration of hashrate leading to relatively easy regulatory attacks. If we experience an extended period of hashrate declines and spikes I believe many will start to see geographic concentration as a block production reliability risk as well. We may find that hashrate naturally becomes more geographically distributed because large miners deem the downtime that comes with weather events in one particular part of the world too disruptive to their operations. This doesn't mean that all hashrate will flee markets with this weather profile, but I could easily see mining businesses begin to think more strategically about geographic diversification as a means to level out uptime and operational risks.
What a time to be alive!
Based on a True Story is filled with a demonic normalization of infidelity.