Bitstream Mining, a new cryptocurrency-mining venture based in downtown San Antonio, is building a cryptocurrency “mine” in the Permian Basin, backed by $3 million in capital funding from parent company Ecoark Holdings.

A cryptocurrency mine is an array of computer servers that competes against other computers across the globe to solve complex math problems that require specialized computers and immense amounts of electricity. The more computing-power put into a mine, the more money a mine stands to make.

The venture is part of a modern-day gold rush in Texas. The newly established Texas Blockchain Council, a trade association for the blooming industry, estimates that there are roughly 20 small-scale mines and five or six large-scale ones, including the nation’s largest mine located in Rockdale outside of Austin.

Texas’ comparatively unregulated energy grid and cheap electricity are beacons for energy-hungry cryptocurrency miners, who compete in a market almost defined by its volatility.

“The only thing you can be sure about in this entire space is your cost of power,” said Bitstream president Britt Swann, from his office in Geekdom. “The lower the cost of power, the lower the risk.”

And the more energy put in, the more money is likely to come out. To understand why requires a brief explanation of cryptocurrencies.

Take Bitcoin, the largest cryptocurrency in a field of hundreds that includes others like Ethereum and Dogecoin. While it’s promoted as a digital currency, and on some occasions it is used as such, Bitcoin more often functions as an investment commodity. Computers participate in a decentralized network that spreads out the complicated algorithmic work needed to build out a public ledger of all transactions on the network. The more a computer contributes to that network, the more Bitcoins it receives.

However, the value of Bitcoins fluctuates wildly based on variables like energy costs, the amount of competition, and speculation about regulations — making it hard for miners to predict their returns. For example, in May, Bitcoin’s price plunged as much as 30%, though it has since climbed back. In September, the price of a single Bitcoin has fluctuated between $50,000 and $40,000.

Bitcoin mining has become a tougher market as more computers join the network. In the early days, roughly a decade ago, these algorithms were largely processed by personal computers. But as the network has expanded, increasing the length of time and the amount of power needed to generate a bitcoin, so too has the number of commercial ventures seeking to generate bitcoins and other cryptocurrency at scale with specialized rigs— like Bitstream Mining.

Swann, who has a background in finance with a focus on oil and gas, first became interested in cryptocurrency in 2016. He held onto the idea of a cryptocurrency mine for a few years until he became involved with Ecoark Holdings (Nasdaq: ZEST), a San Antonio-based diversified holdings company formed in 2020. There, he said, he found an audience receptive to cryptocurrency ventures.

Swann said he told a company leader at Ecoark, “If we can solve the energy piece of this, there’s a business here to be formed.”

Bitstream was created in May under Ecoark’s subsidary Trend Discoveries, a limited partnership that invests in early-stage startups. Ecoark also has two other subsidiaries: Zest Labs, an agricultural technology company focused on reducing food waste in the supply chain, and Banner Midstream, which is involved in oil and gas exploration.

Bitstream employs a team of contractors and employees, though Swann declined to provide numbers, saying the business was moving too fast.

Bitstream’s mine will be a collection of toaster-sized computers that spin day and night to generate bitcoins and other cryptocurrencies. These computers, which are singularly tuned for the purpose, will run on up to 12 megawatts of electricity, according to a press release from Ecoark. That’s enough to power on average about 2,400 Texas homes on a hot summer day. In the future, Bitstream said it plans to expand the mine’s capacity to 50 megawatts, which would allow it to mine cryptocurrencies faster.

The mine, which will involve itself in a variety of cryptocurrencies, is expected to yield a monthly revenue of $4.4 million by January 2022, according to the Ecoark press release. Swann declined to specify exactly where Bitstream was constructing its mine.

Because the Bitcoin network as a whole uses more energy than many small countries, cryptocurrency mining might seem a poor fit for a state whose energy grid nearly suffered catastrophic collapse earlier this year. But energy experts say the industry’s predictable power needs and ability to shut down during emergencies can add stability to the grid — provided the right agreements are in place.

Bitstream said it expects to participate in an ERCOT program in which it promises to yield its energy usage in times of peak energy demand — such as sweltering summer days or freezing winter nights. The agreement would give the company a discount on its energy rates.

Joshua Rhodes, a research associate at the University of Texas at Austin Energy Institute who is studying the effect of cryptocurrency mines on the grid, said agreements in which cryptocurrency miners shut off their operations at peak demand times can help grid operators at ERCOT better balance supply and demand.

“Anytime you have the ability to turn loads on and off, that can help stabilize the grid,” he said.

But if cryptocurrency mines don’t provide that flexibility through formal agreements, he said, they could actually exacerbate problems in the grid.

Peter Cramton, a former board member of ERCOT, echoed Rhodes’ assessment when he told the Washington Post over the summer that cryptocurrency mining was adding a welcome flexibility to the grid. But, he said, “the problem is it’s consuming real resources, doing a function that has no value.”

Questions over the value of Bitcoin and other cryptocurrencies have prompted dramatic responses from political leaders across the world in recent years. In September, El Salvador adopted it as legal tender. China’s recent crackdown on cryptocurrency, part of a larger attempt to rein in financial risk-taking, culminated last week in a complete ban on all cryptocurrency trading and mining.

While Bitstream may be the first commercial cryptocurrency venture based in San Antonio, Swann is just one of the growing number of individuals looking to cryptocurrencies as an attractive investment vehicle.

One measure comes from the number of bitcoin “ATMs,” which are publicly located machines that allow a user to buy Bitcoins using cash or a credit card. Some allow users to sell Bitcoins as well. In October 2019, there were around 31 Bitcoin ATMs in San Antonio, according to the San Antonio Express-News. Today, there are approximately 236.

 Andres Gonzalez, co-founder of the San Antonio Crypto Network, a consulting group for individuals and businesses founded by local investors, said that in the last few years his group has gotten more and more inquiries from small businesses in San Antonio asking if it is worth putting their capital into Bitcoin — not as an investment, but as a hedge against inflation. Gonzalez tells them it is. (Swann also called Bitcoin a “shelter against inflation”).

But that’s not to say it’s become normal. To many, the concept still carries a whiff of criminal activity due to its high-profile use in drug sales and money laundering.

Gonzalez said his bank contacted him after noticing activity with a prominent cryptocurrency service. They wanted to know if he was doing “nefarious stuff,” Gonzalez said. He was not, but he had to meet with a bank representative to explain his transactions.

Asked if the service has made him rich, Gonzalez said: “Let me put it this way. I might be able to pay off my law school debt sooner than I thought.”

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Waylon Cunningham

Waylon Cunningham writes about business and technology. Contact him at