Volcano Energy Builds Road to Geothermal Bitcoin Mining in El Salvador
In a public-private partnership, the government of El Salvador has launched new renewable energy projects to establish a mining pool. Development on geothermal energy to follow from proceeds.
In the Republic of El Salvador, the world’s first country where Bitcoin is legal tender, Volcano Energy and Luxor Technology Corporation have partnered to open a new infrastructure for bitcoin mining based on geothermal energy.
El Salvador first officially adopted Bitcoin as a new currency in September 2021 under the leadership of President Nayib Bukele, and the road to widespread adoption has been both long and bumpy. Essentially, the nation’s main currency from 1892 to 2001 was the colón, named after Cristopher Colombus, and went through several phases of having its value pegged to the US dollar before the US dollar directly became the currency of El Salvador. Obviously, for a government to rely on a currency that it cannot hope to control is one thing, but for a foreign country to actually have this power over you is quite another. To begin transitioning towards a currency free from all state control, and to gain economic independence, El Salvador chose Bitcoin.
Since then, the move has seen outright hostility from international economic institutions, but has also managed to overcome the initial wave of opposition and forge new economic ties. Just in August of this year, for example, Google Cloud moved to open a new office in El Salvador, representing substantial new international investment. Developments like this have taken place amongst many reassuring metrics in the economy, from tourism revenue and international debt agreements to infrastructure improvements. And indeed, although the path has been rocky, Bukele’s approval ratings since this project have been remarkably high.
One particularly interesting development that combines infrastructure investment with international business partnerships is the Lava Pool, a public-private partnership launched in October 2023 to mine Bitcoin with geothermal energy. The project will combine Luxor’s experience with mining-related support and software development with Volcano Energy’s commitment to building the actual hardware infrastructure. The first ground broken on this project has involved the construction of new mining facilities in El Salvador’s second-largest city, Metapán, and although this preliminary mining pool is powered by solar and wind energy, the ultimate goal is to harness El Salvador’s substantial volcanic activity.
Although this may cause a certain degree of skepticism, the journey to completing this project is straightforward and clearly telegraphed. It all began in November of 2022, when a bill was presented to the Salvadoran legislature regarding the launch of Bitcoin-backed “volcano bonds”. Promising friendly regulation alongside economic incentives and cooperation, the bill sought to attract experienced foreign firms to help provide know-how to help “El Salvador to be the financial center of Central and South America.” And, indeed, by June of the next year, these incentives had attracted some customers.
Creating a public-private partnership, these firms were set to first begin building this initial solar and wind infrastructure, as a way of gradually building up the capacity of mining operations. The Lava Pool is set to attract smaller-scale local miners to cooperate with their computational power, working off these new low-cost energy sources to create new bitcoins. The existence of this pool is not only meant to build up the state’s capacity to build infrastructure like this, but also to build up a community of active mining firms to actually work it. And, obviously, due to the government’s substantial investment in this project, 23% of the miners’ proceeds will be paid back to the government. These funds are the ones that will go towards the geothermal facilities.
The project has a very clear logic to it: the goal is not merely to open El Salvador up for business to multinational corporations, but to genuinely create a greater Bitcoin community and economic infrastructure within the country. These initial power sources, already operational and running the Lava Pool, will be a vital resource to create a real and active mining industry in the company. As they become established, build capacity and indeed earn revenue for the construction of geothermal plants, it will soon be these same small-scale local miners that have scaled up themselves. When the power underneath the earth’s crust is finally put to work, there will be no shortage of experienced businesses ready to work it.
In short, the Lava Pool project is farseeing and well thought out. Although the willingness from the government and investors is certainly there, the fact remains that many Salvadorans have not incorporated Bitcoin for daily transactions or undertaken any of the telltale signs of Bitcoin adoption. In one stroke, El Salvador has created the incentive for experienced investors to create a new infrastructure and for inexperienced entrepreneurs to take advantage of it. In other words, all the ingredients to create a Bitcoin community as diverse and energetic as the industry is known for. Even as it has already started operations, the Lava Pool is still in its relative infancy, and it has so far to go from here. With initiatives like this in the pipe, it seems clear that Bitcoin can provide opportunities for growth and economic freedom to many different walks of life.
 |
|