Mining in the Northwest was different in the 1890s.

Back then, miners hunted for gold in the streams and mountains of Alaska and the Yukon with picks and shovels. Seattle was a jumping-off point and supply center for gold miners.

Today, central Washington, upstream of the Tri-Cities, has become the focus of a new type of mining, the bounty being valuable formulas in cyberspace. The tools are rows and rows of computers.

There are about 50 bitcoin and cryptocurrency mining operations stretching along the Columbia River from Grand Coulee Dam to the Tri-Cities. Another 150 ventures have requested electrical power to set up their own operations in the same region. A few more mining operations likely exist in homes that Mid-Columbia public utility districts admit they don’t know about.

It’s a phenomena that has five regional public utility districts scratching their heads — not necessarily opposing the concept but wondering how best to deal with it.

Welcome to the world of bitcoins, the most famous version of cryptocurrencies. Cryptocurrencies are solutions to complicated mathematical formulas calculated and found in cyberspace. The “miner” buys software designed to solve those formulas and sets up a string of computers to solve those equations. The wrinkle is that once a cryptocurrency formula is solved, the equation for the next solution becomes harder.

Created in 2009 by Satoshi Nakamoto, bitcoin is the top cryptocurrency in existence. A single bitcoin looks like a string of numbers and letters on a computer screen.

But Satoshi Nakamoto is a pseudonym. No one knows who he or she is. It could even be a front name for a group.

That creator put a finite 21 million bitcoins in cyberspace. On July 1, blockchain.info, which tracks bitcoin numbers, said 17.1 million bitcoins have been mined. But the super-difficult formulas have industry experts speculating the final 3.9 million bitcoins could take 100 years or more to be captured.

Unlike the world’s more traditional money, bitcoins and cryptocurrencies are not backed by any government, which makes governments, banks and Mid-Columbia utilities leery.

“Trust can evaporate at any time because of the fragility of the decentralized consensus through which transactions are recorded. Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value,” according to a June report by the Switzerland-based Bank for International Settlements.

Consequently, a bitcoin is sort of like a cyberspace version of a new rare gemstone. The object has a value that rises or falls based on a type of emotional supply-side economics.

In 2009, bitcoins were merely a hobby for computer geeks, worth nothing. By March 2010, the value of a single bitcoin crept up to a third of a penny. In 2011, a bitcoin’s value went from $1 to $13 and then back down $2. Then it hit $1,242 in late 2013. Values meandered up and down for the next three years before booming in 2017. A bitcoin’s worth made it to $17,900 on Dec. 15, 2017, before dropping back to $6,311 by July 1.

“In 2013, if you told me a bitcoin would be $10,000 or $20,000, I would’ve called you crazy,” said Lauren Miehe, co-founder of Bitcoin ASIC Hosting, who has switched from being a miner to being a provider of computing power to others bitcoin miners in East Wenatchee. His warehouse operation of providing computers to miners now employs 17 people. He declined to discuss his firm’s finances in detail.

In a 4,000-square-foot East Wenatchee warehouse, Miehe has chambers full of computers connected by lots of red and yellow cables— with lots of fans and vents tackling the heat from the servers. Despite all the software, complex math and cyber stuff involved, raw computer power is the key to mining cryptocurrencies. Mining consists of doing zillions of calculations at warp speed. More electricity from the Mid-Columbia utilities equals powering more computers, which translates to better chances to solve the algorithms to “mine” a bitcoin.

“They are basically brute-forcing solutions to those algorithms,” Miehe said.

Miehe was a telecommunications and banking corporate guy in Seattle who got in a discussion about bitcoins with a friend over a beer. He scoffed at the idea of bitcoins. His friend scoffed back. They argued. That prompted Miehe to research the subject and it eventually convinced him to give the concept a try.

He started mining in Seattle when a bitcoin was worth $3. Adding computers for the increased computer calculations overwhelmed the electrical capabilities of Miehe’s house in Seattle. He moved to East Wenatchee and set up in the warehouse because this section of the Columbia River has some of the cheapest electricity in the nation coming from five dams between Grand Coulee and the Tri-Cities.

Basic residential rates range from 2.7 cents to 4 cents a kilowatt-hour in Grant, Chelan and Douglas counties. Residential rates fall short of twice that in Benton and Franklin counties. The national average is 12 cents per kilowatt-hour.

Meanwhile, the Chelan, Douglas and Grant PUDs have at one time or another issued moratoriums on processing applications by cryptocurrency ventures for their electricity. So far, no miners have applied for Franklin PUD’s power, but that utility’s commissioners are pondering what to do if and when that happens.

“It’s kind of a fear of the unknown, which is totally reasonable,” Miehe said.

The moratoriums have been prompted by the mining operations using significant amounts of electricity with the PUDs wondering if they can afford to provide it. While the extra electrical load is within the production capabilities of the five dams, questions exist on adding power lines and extra transformers and substations — and who will pay for that extra infrastructure? And how stable is the cryptocurrency industry, which might need a lot of new infrastructure now, but may or may not die away as a fad in the digital age? That could leave the PUDs with extra maintenance costs while losing a revenue stream.

Another wrinkle is that a bitcoin mining operation uses a steady amount of heavy power non-stop 24/7, instead of the day-and-night fluctuations of homes and normal businesses. That changes the dynamics of a PUD running its own power grid. Consequently, the cryptocurrency-power contracts are extremely complicated, with the miners paying more than a normal home or business would for a kilowatt-hour.

Here is a breakdown of what the five PUDs have faced in the past few years.

Benton PUD: This district is processing or has approved 11 applications for cryptocurrency operations. It has a new policy requiring such operations to contact it so the PUD can determine whether the new heavy and steady load will cause any problems. This PUD provides about 203 megawatts annually for all of its customers.

Grant PUD: Its first bitcoin operations applied for power in 2014. The PUD produces 2,000 megawatts annually from its Wanapum and Priest Rapids dams. About 200 megawatts goes to its own customers, with abut 16 megawatts going to 12 bitcoin firms. The rest goes to the Bonneville Power Administration. Grant PUD commissioners put 125 new cryptocurrency applications on hold last summer while they work on a new rate structure for bitcoin-type operations and make sure ends meet.

The deluge of applications came as the value of individual bitcoins zoomed up last year, said Grant PUD spokesman Ryan Holterhoff.

Chelan PUD: It is now on its second moratorium on cryptocurrency applications. The first took place from 2014 to January 2017, which resulted in 22 approved applications.

“Then in October 2017, the price of bitcoins really skyrocketed, and we saw big increases in applicants,” said Andy Wendell, Chelan PUD’s director of customer services. The PUD discovered 28 unauthorized cryptocurrency mining operations in the county. The clues were huge steady 24/7 appetites for electricity that were more than a house would normally use. The PUD’s commissioners installed a moratorium again in March 2018 to re-review the situation. About 25 applications are on hold.

The Chelan PUD has two dams — Rocky Reach and Rock Island — rated to provide 2,000 megawatts annually, although that translates to 1,100 to 1,400 in the real world, Wendell said. About 200 megawatts goes to the PUD’s customers, including about 16 megawatts to bitcoin mining. The rest goes to the BPA.

Douglas PUD: Right now, Douglas County has eight cryptocurrency operations, each with a load of more than 1.5 megawatts. No additional applications are pending. Its commissioners held a three-month moratorium in 2014 to review what it would need to do with bitcoin miners. The Wells Dam is rated at 851 megawatts annually with county customers using roughly 108 megawatts a year, including 15 megawatts for cryptocurrency operations. However, the bicoin miners have paperwork in place to ramp up by a total of an extra 90 megawatts. The rest goes to the BPA.

Meanwhile, Miehe is optimistic about his firm’s chances in East Wenatchee.

Bitcoin ASIC Hosting has switched from being a mining company to a firm that provides computing power for other miners — a demand that he still sees as growing more than the availability of designated computers.

All the equipment is a huge up-front investment for any bitcoin miner. Miehe said it takes a few years for such a single mining operation to become profitable.

“You don’t get rich quick,” he said.