El Salvador explores bitcoin mining powered by volcanoes

BERLIN, El Salvador — At a geothermal power plant near El Salvador’s Tecapa volcano, 300 computers whir inside a trailer as they make complex mathematical calculations day and night verifying transactions for the cryptocurrency bitcoin.

The pilot project has inspired a rash of volcano emojis from President Nayib Bukele, who made bitcoin legal tender in September, and promises of cheap, renewable energy for so-called bitcoin “mining.” Such operations, including ones industrial in scale, have been harshly criticized elsewhere in the world for the massive amounts of electricity they use and the resulting carbon footprint.

Bukele and others say El Salvador’s geothermal resources — generating electricity from high-pressure steam produced by the volcano’s subterranean heat — could be a solution. But the picture in the tiny Central American country is more complicated.

“We don’t spend resources that contaminate the environment, we don’t depend on oil, we don’t depend on natural gas, on any resource that isn’t renewable,” Daniel Álvarez, president of the Rio Lempa Hydroelectric Executive Commission, which oversees the plant, said during a tour Friday.

Cheap power and a supportive government are the two critical factors for attracting bitcoin mining operations, said Brandon Arvanaghi, a bitcoin mining consultant.

Two years ago, China provided about three-quarters of all the electricity used for crypto mining, with operations flocking to take advantage of its cheap hydroelectric power. But the government began restricting mining and in September declared all transactions involving bitcoin and other cryptocurrencies illegal.

That has led to a scramble to set up mining operations in other countries.

It would appear to be fortuitous for Bukele, who shocked the nation and many around the world with his announcement last summer that bitcoin would become legal tender beside the U.S. dollar in El Salvador. The president sold the plan in part as a way for Salvadorans living overseas — mostly in the U.S.— to send money home to their families more cheaply. It also made him a darling of the bitcoin world.

But the launch has been rocky. The digital wallet Salvadorans were expected to use to perform basic transactions had a glitchy rollout. Some users said they just wanted the $30 the government offered as an incentive. There continue to be concerns that the digital currency, which touts being controlled by no government, will invite criminal activity.

So far, the United States has been a big winner in attracting more bitcoin mining operations, especially the state of Texas, which has bountiful renewable energy and a de-regulated market.