The State of Montana funds company working on a ‘bitcoin processing center.’

In the first-ever reported case of a US State funding what looks to be a Bitcoin mining operation, Montana’s Governor recently announced that $416,000 was awarded to a “data center that provides blockchain security services for the bitcoin network.”

Governor Steve Bullock recently announced $1,124,030 in economic development grants to assist Main Street businesses across Montana with creating 116 jobs, providing workforce training and developing plans for growth and expansion.

The funds are being awarded through the Big Sky Economic Development Trust Fund (BSTF) and the Primary Sector Workforce Training Grant (WTG) programs at the Department of Commerce, Office of Tourism and Business Development.

“Missoula County received $416,000 of BSTF Job Creation funds to assist Project Spokane, LLC to expand, which will allow the company to create 65 new jobs in Bonner. The BSTF funds will be used for purchase of equipment, machinery, furniture and software and for wage reimbursement.” - The office of Montana Governor Steve Bullock

Very little information is available online about Project Spokane LLC, there is no website or contact information available online. However, third-party commercial business reports that list the company generally agree that Project Spokane LLC is a privately held company listed in Greenwood Village, Colorado.

Some listings states that the company has “an annual revenue of $750,000 and employs a staff of approximately 6,” with business launch dates all listed in early 2016. The company is often categorized under “IT & Managed Service Providers,” while at least one directory has Project Spokane featured under “Service Management and Malware Remediation.”

However, in July of 2016 Project Spokane LLC applied for a 7.2kV overhead power distribution line for a site in Montana, referred to as “the old Bonner Mill Site.” The application clarifies that the powerline is to serve “a new bit coin processing center,” which is to be located on a portion of the old mill site. “The project’s electrical requirements exceed the current electrical service onsite,” states the application.

“All agreements are in place with Northwestern Energy for the purchase and operation of the power poles and lines from the substation located west of the Blackfoot River to the Project. In order to fulfill the agreement, a new medium voltage distribution line is required to be constructed across the Blackfoot River.” - Rights of Way Applications 17412

Bitcoin mining operations are power hungry businesses, and often run where power is cheap. According to the US federal Energy Information Administration, Montana has middle-of-the-road commercial electricity rates, averaging $10.04 per kilowatt-hour (kWh). That price puts it very close to the national median for the US.

However, in the county where Project Spokane is setting up shop, there is a local energy cooperative that charges large commercial installations as little as $0.0436 per kWh, which would make bitcoin mining extremely profitable.

For comparison, in Washington State, where John McAfee has set up the Bitcoin mine for MGT Capital, the industrial average is the lowest in the nation, $4.54 per kWh. McAfee has stated, however, that he’s using a nearby hydroelectric dam to inexpensively generate the electricity and cool his mining equipment. His effective energy rate is still unknown.

"The cash flow opportunity in the Bitcoin market provides tremendous financial benefit to our operations and balance sheet. At our current output, we believe MGT is one of the top five Bitcoin miners in the U.S., and we believe our first quarter 2017 goal of 10 PetaHash for this facility would place MGT in a leadership position in the global Bitcoin network.” - John McAfee

Although Montana is the first state to fund a Bitcoin company, a few other States have tried or run initiatives and programs to boost blockchain technology use. The first attempt was in 2015, when New Jersey attempted launched the ambitious “Digital Currency Jobs Creation Act,” which was proposed to give Bitcoin and other digital currency businesses a tax break and attract them to the state. The program was formed in the wake of the infamous BitLicense across the river in New York. However, the bill has been introduced to the NJ Senate several times and failed to gain any traction.

Delaware also drafted a bill in 2015, which has passed the Senate but is being held up by the state’s legal review process. The state a popular destination for business incorporation, and wants to use a blockchain as the primary means to create and manage corporate records. The bill is expected to be enacted sometime this year.

In the meantime, the Illinois Department of Financial and Professional Regulation announced the Illinois Blockchain Initiative in November. The initiative was created to investigate the benefits of Blockchains used at the state level. Secretary Bryan Schneider states that his department “would like to educate ourselves on the technology as well as its societal, economic and legal implications.” Learning about the technology before regulating it the stated goal.

On the federal level, spending towards blockchain research has been an order of magnitude larger. In July 2015, the US National Science Foundation (NSF) awarded US$3 million to the “Initiative for Cryptocurrency and Contracts” (IC3). The three-University initiative consists of a team from Cornell, the University of Maryland, and UC Berkeley. Focusing on smart contracts and developing “new cryptocurrency systems that address pain points attributed to Bitcoin,” the program is also helping to “establish cryptocurrency as a prominent research area, and make a big impact in shaping the future of financial transactions and e-commerce,” according to the principal investigator, Elane Shi.

In January of this year, the NSF started looking for teams to fund with as much as US$8.5 million. “Solutions such as the introduction of blockchain technology are needed to ensure the integrity and confidentiality of data as it traverses multiple environments such as mobile, cloud, campus, and Internet networks,” states the NSF.

The Department of Homeland Security (DHS) has also been funding blockchain technology projects, to the tune of US$2.25 million so far. Through its Small Business Innovation Research program, the DHS has been learning about Blockchain Forensics, the method of tracking transactions and identifying relationships across the blockchain. BlockCypher is a forensics company, and the largest recipient of funds from the DHS to date. Ram laboratories has also received funding, as has a custom blockchain solutions provider called DigitalBazaar, and the identity solution Evernym.