What's fuelling the potential bitcoin mining boom in Canada

A strong winter wind whips across the frigid Alberta prairie just north of Drumheller.

Hardyentrepreneurs have long searched for the oil and gas buried under these hills and fields, but these days, this harsh landscape is attracting a different kind of treasure hunter.

The bitcoin miner.

Toronto's Hut Eight operates a mine that pops out on the horizon at the top of a hill: A gated compound filled with rows of shipping containers, 48 in all, each crammed with high-powered computers referred to as rigs designed to turn all of that computing power into digital currency.

Sites like this are also popping up in Quebec, Manitoba and B.C.as arelatively cheapand reliable supply of electricity makes digital currency mining a more cost-effective proposition. So much so, in fact, many foreign operators are looking to set up mines in the Great White North.

Bitcoin has made plenty of headlines since its price skyrocketed to nearly $20,000 US late last year.

Since then, its value has fluctuated wildly, dropping below $7,000 US and then bouncing back above $11,000 in just a two-week period earlier this month.

Despite the volatility and the concerns of some regulators aboutrisks to investors, interest in mining the act of creating bitcoin appears to be growing in Canada.

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Near Castlegar in southern B.C., Sheldon Bennett's company, DMG Blockchain Solutions, is putting the finishing touches on its new mine. The exact locationof the thousands of rigs is a secret, but what they aredoing is not.

The computers are used to confirm bitcoin transactions and the miner, DMG in this case, is paid the digital currency in returnfor its services.

"You can kind of think of it like Visa and Mastercard and how they sort of sit as an intermediary between the bank and a transaction that somebody that has a card would do," Bennett says.

Basically, miners like Bennett and his company are paid to act as the middlemen for bitcoin transactions, confirming who is transferring bitcoin to whom, and when. Inside DMG's27,000-square-foot bitcoin mine which employs about 20 people but is still ramping up it is very loud as large fans try to cool the massive racks of computers that runaround the clock.

Of course, all of those machinesconfirming all of those transactions need a lot of power. Someanalysissuggests digital currency miners around the world used more power than the entire country of Ireland last year.

Bennett says most mining operations are based in China, but he suspects that's changing. He says many operators are showing interest in other countries, including Canada.

This is particularly true inQuebec and Manitoba, home to an abundant supply of cheap, clean hydro power.

'Kicking the tires'

Bruce Owen of Manitoba Hydro says the utility has been approached by more than 100 groups interested in opening mines in the province since Christmas, However, hecouldn't disclose where those groups are based.

"We are getting a lot of inquiries of people just kicking the tires."

In addition to the tire-kickers, Owen says there are six major digital currency mines operating in the province. Together, he says, they consume as much power as 18,000 new households.

Hydro-Quebec is also fielding numerous requests from foreign digital currency miners hoping to set up shop in the province. Thepublic utility says its campaign last year to attract data centres also caught the attention of many bitcoin miners.

Similar to the case in Manitoba, a Hydro-Quebec spokesperson recently said more than 100 digital currency companies have expressed interest in mining in the province.

Alberta's energy sector is also watching the rise of bitcoin mining in Canada closely.

Inside a storage closet at the headquarters of Iron Bridge Resources in Calgary, a line of bitcoin mining rigs hums away on a table. The small oil and gas company is testing the rigs for use at its oil and gas facility near Grande Prairie.

'Natural fit'

CEO Rob Colcleugh plans to use the natural gas that his operation generates as a byproduct of oil extraction to mine for digital currency and maximize potential revenue.

"The cryptocurrency business was attractive because it uses quite a lot of electricity and that electricity can be generated off of natural gas," he says. "We do that anyway, so it was a natural fit."

Colcleugh plans to power about 170 mining rigs. But his real goal is to provide power to a much larger mining operation transplanted from China, a deal he hopes to finalize soon.

China is looking to curb the number of digital currency mines operating in the country because they use so much power, he says, which is why some of those mining firms are looking to expand orrelocate to Canada.

At least six Chinese companies have contacted Colcleugh about hosting mining operations, he says, as have a few American firms.

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He says most oil and gas executives are initially baffled when he explains the concept of hosting bitcoin mines, but he says their attitudes change pretty quickly when they learn about hisGrande Prairie project.

"I have an awful lot of coffees set up afterwards and they want to know the details and they want to know the math."