The shift that we're seeing from Bitcoin mining to AI reminds you a lot of the Chinese hash rate ban and the great hash rate migration.
The China exodus was essentially the government saying, "Hey, we're, we're done with this," e-essentially excommunicating eighty percent of the global hash rate during twenty twenty, and a, a good percentage of it ended up migrating to the United States and really put US mining on the map.
And so like, what I'm seeing now is like the shift of all the mega miners getting out and, and going into HPC AI, it's gonna have downstream effects.
There's like, right now you would think ASIC brokers are boring, they don't have anything going on, and like, they're the busiest they've ever been. And it's like, wait a minute, how is that the case?
Everyone thought when this whole emergence came that the traditional data center companies would just chew up all that demand, and that's not happening. The Bitcoin guys kinda understood the power game a lot better.
In five or ten years when this market really matures, they're going to be the industry leaders.
Right now, it kinda, you know, it's like, oh, they've abandoned Bitcoin, but in reality, all of these companies all have Bitcoin in their DNA, and now are gonna be part of this crazy emergence of where things are going with, um, compute.
Welcome back to the Blockspace Pod, brought to you by CleanSpark. Is Bitcoin mining dead or dying?
Well, as I record this, Bitcoin has plummeted to sixty-five thousand dollars, a level we haven't seen since twenty twenty-four, and as a result, hash price has also fallen to an all-time low of twenty-nine dollars per peta hash per day, and hash rate is cratering below a zeta hash as a result of the margin squeeze on miners.
So where do we go from here?
Well, for today's show, which I recorded two weeks ago live at the National Energy and Mining Summit, we have Tom Masero, the head of strategy at Cathedra, to discuss the structural shifts we're seeing in Bitcoin mining today.
Tom shares his thesis about why what we're seeing with the AI pivots really mirrors the China mining ban of twenty twenty-one, and not just how it will change the industry, but how it will structurally change where Bitcoin's hash rate is flowing.
And we also talk about dynamics in the ASIC market and where the opportunities still lie for Bitcoin miners and for the little guys who might be looking into getting into other forms of compute.
You're listening to the Blockspace Pod. We'll be right back.
Hey, this is Charlie and Colin from Blockspace Media, and you're listening to the Blockspace Podcast, a show about emerging tech in Bitcoin, AI, energy, and markets.
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And if you have any feedback or comments to give us or shows that you would like to see and topics you would like us to cover, hit us up at hello@blockspace.media. Tom, welcome back to the Mining Pod, man.
What's up, Colin? Man, it's been a long time. Yeah. It's, uh, I mean, it's been, uh, about a year, I think, which is like ten years in this industry. Yeah, absolutely.
Um, so I think a good place to start off with this conversation is
you just gave the closing talk on one of the clo-- You, you were a panelist on one of the closing panels for today at Bitcoin Park at the NIM Summit, and you mentioned this idea that the shift that we're seeing from Bitcoin mining to AI reminds you a lot of the Chinese hash rate ban and the great hash rate migration that resulted from that.
Can you unpack that to give our listeners an idea of what you think is going on currently with this shift? Yeah. I mean, obviously, like, the, the reason or the rationale for this shift is obviously much different.
You know, in, in the-- the China exodus was essentially the government saying, "Hey, we're, we're done with this," and e-essentially excommunicating eighty percent of the global hash rate during twenty twenty, and a, a good percentage of it ended up migrating to the United States and really put US mining on the map in twenty twenty-one.
All of us here wouldn't even be doing what we're doing right now if that, if that didn't happen. We were essentially two big players in the market, uh, in the global mo-mining market then.
And so like, what I'm seeing now is like the shift of all the mega miners getting out and, and going into HPC AI, and then now you're-- it's gonna have downstream effects.
And like, you know, I didn't really start putting the pieces together till I got here yesterday and started talking to a lot of folks and hearing about like, you know, uh, talking to brokers, ASIC brokers.
Like, right now you would think ASIC brokers are boring, they don't have anything going on, and like, they're the busiest they've ever been.
And it's like, wait a minute, how is that the case of like mining, you know, difficulties, you know, like...
Well, we've had some negative difficulty adjustments, but overall market is not great for mining, yet the brokers are as busy as they've ever been.
And that's because you have a lot of these companies who have been sitting on millions of ASICs who are now dumping them to make room for their new clients and their new build-outs, and where are those machines going?
And who are they going to? What use cases they're going to? They're getting spread out through the whole world.
So there was this whole talk after twenty-one into like, you know, let's say from twenty-one to like twenty-three, twenty-four, we went from, "Oh, there's too much centralization in China" to "There's too much centralization in the United States or North America."
Now, you're gonna see like almost a lot of that hash rate evaporate out of the United States, and where is it gonna go? So I, I don't think we actually know the ramifications of it.
The one thing I think of on the top of the funnel is if you think about-- I was just-- That was what I kinda closed out with was, you know, it was like, w-w-what, like what is like an underrated thing that has happened this past year?
And a lot of Bitcoiners say, "Oh, it's not g-" The traditional conventional thought is it's not good that all these b- traditional Bitcoin mining companies have now just pivoted into HPC AI.
And on the surface, that makes sense. But-There's something that happened with HPC AI that's, I think, kind of revolutionary because it's an entirely new segment of an industry. It's not traditional data centers. Mm.
Everyone thought when this whole emergence came that the traditional data center companies would just chew up all that demand, and that's not happened.
The, the, the, the Bitcoin guys kinda understood the power game a lot better, especially, like, the density side of things on a computing side and have really jumped in and have, like...
They're, like, in five or 10 years when this market really matures, they're going to be the industry leaders.
So right now it kinda, you know, it's like, oh, they've abandoned Bitcoin, but in reality, all of these companies all have Bitcoin in their DNA, and now are gonna be part of this crazy emergence of where things are going with, um, compute.
And I think long-term it's gonna be very good for Bitcoin, you know, for, for that from, like, a macro perspective. It just doesn't seem like it right now because everything's sort of- Right... unfolding.
So yeah, that was, like, sort of the rift I had, and I hadn't really, like, put that together till I got here. Um, a f- there are a lot of things to latch onto there.
And, and going back to that last point, it may not seem good right now, but if you're a miner plugged in right now, you're probably...
I mean, you're not doing great 'cause hash price is still pretty compressed, but you're feeling a lot better about seeing, what was it, five out of the last six difficulty adjustments- Negative... being negative. Yep.
I... That, that is... The last time we had a stretch like that was the China mining ban. Mm-hmm, mm-hmm. Just going back to what you were saying about the, uh, verisimilitude of these two things, right?
The other thing about the brokerage landscape, I had the same thought. I talked to a broker here, and I asked them, "You must be kinda chilling right now, right?" Mm-hmm.
And they said, "No, January has been one of the busiest months that I've ever had." Crazy.
And what's incredible is that they are basically processing more used volume right now because all the public miners are liquidating their machines. Yep.
And they told me, you know, some of those are going to places you might expect, like South America. Some of them are going to Northern Europe, which was something that I wasn't really anticipating, right?
And I kinda nudged them and said, "Are those intermediaries for Russia?" Yeah. But I think it actually is legitimately going to just the Iceland... or going to Iceland, going to Sweden, going to Norway- Sure...
going to those Scandinavian countries.
Going back to what you were saying about Bitcoin miners being more primed to tackle this new computing industry than maybe the traditional data centers, you mentioned they understand power density better.
Could you unpack why you think they're positioned to actually dominate this compared to the hyperscalers and the Mag 7 companies of the world?
Is that a complacency with the en- entrenched tech companies to where they haven't really had to struggle the way Bitcoin miners had to? Mm. Or what do you think is the reasoning behind that thesis?
I, I, I think there is, like, a complacency aspect to it. I think the biggest thing is just the market dynamics are...
Like, when, when this whole kind of, like, push started, you know, we started getting RFPs, you know, to, "Hey, what would a... what...
you know, what could you do to get, you know, a 50 megawatt setup or something like that?" And we're like... They're like, "Oh, we, we need this w- you know, tier three, all of these criterias done in a year."
It's just like that's not, not gonna happen. You could do X, Y, Z in a year. And they're like, "No, no, no, we couldn't do that."
And, and now 18 months later, they're all doing what I think Bitcoin miners originally thought, which was this, like, very light version of, like, a HPC, um, AI compute.
And, you know, really I think the, the biggest thing is, like, they have chips that are essentially sitting in warehouses that they have to...
So it's very similar to, like, when the machines came over here from China, they just started putting up sites like crazy because they had to get them plugged in. Mm.
And you've got so many orders of these GPUs that are out, and they don't have, like, the option or the luxury of saying, "Oh, we'll just wait for our tier three data center to be ready and all these other things," 'cause it's just not gonna happen.
So now they're like, "Okay, well, we gotta figure it out, and maybe we don't get the uptime that we have. Maybe we don't get as much redundancy. Maybe we'll do 20% backup battery to kinda keep the core systems going.
Maybe we have to adapt and do some type of curtailment, and we're okay with it." Whereas, like, a year ago or even longer, that was n- no, no, no, non-negotiable.
Has to be 100% redundancy, this, this, this and that, and now it's all coming. And then it... Same thing on the size. Size was massive mega scale, gigawatts. Half a gigawatt was, like, considered small.
And now we're seeing things in the market where they're gonna come down to, like, the 10 and 20 megawatt sites because the chips are getting more efficient.
So the same cy- kind of cycle that happened with ASICs from, like, 2016, 2017 to, like, you know, kinda where we are now, that's happening on the GPU side. The one...
I think the one thing that there's inherent risk for for any traditional miner kinda getting into this is that the infrastructure side is still not fully developed. So there's, like, these two kind of divergent plays.
You got, like, your shell provider, soft shell provider versus, like, someone who's fully building stuff out, which you and I talked about with, like, Iron and stuff. Right.
You know, like, the fact that there's not even racks avail- commercially available for some of these GPUs that are y- gonna be coming out, like, next year, like, what do you do with that? Mm.
I wouldn't wanna be exposed to those things, but I think that there are...
That's where, like, the collaboration's kind of coming in with some of the traditional data center hardware partners who are finding good partners with Bitcoiners because, like, we understand the power game, and then we partner with them on what they have their expertise in.
And so I think you'll see more of a convergence, um, you know, with, with that side of things.
When you're talking about the racks, basically you're saying that miners and some of these companies are gonna have to build, like, bespoke, b- bespoke infrastructure because we actually haven't standardized anything for the bones of these operations.
Yeah. Is that the idea? In some cases, yes. And then in, in some cases it's like, okay, well, what's the lifespan on this? Because if you have these new generations that are just...
I mean, you see Nvidia's, like, launches, they're like... I mean, every single launch every, whatever, eight or 12 months-These huge jumps. Mm-hmm. And now the specs don't fit.
So like you've got a company who's two years out with chips that are a couple generations old. They build out all of these infrastructures at like ten and fifteen million dollars a megawatt, and then, then what?
What do you do when those are outdated? You can't-- like now the, the bones of it can't even handle the newer generation stuff. Mm-hmm. So as a miner, I think you have to be very careful with what's going on.
And that's why if you look at like the public segment, the focus is on who's the end customer, who's the counterparty, because if it is like a, a Google, a Microsoft, like they can handle that. Right.
Like, and so I think like as the market matures and there's some other kind of like opportunities there, and maybe there's more standardization around specific infrastructure or maybe just being solely inference, then you'll see, I think more build outs in like that sub fifty megawatt range.
In going back to your point about the sub fifty megawatt range and some of the concessions that these companies are making, and then I want to get into some of the details of the opportunities that are available for the smaller guys- Mm-hmm.
'cause I think that's an important point to double tap on that we see all of the dazzling and sparkling headlines of the like five hundred megawatt build that is being contracted out for, you know, a billion dollars a year over ten years, right?
Mm-hmm.
But to your point, there are real resource constraints here, and there are real energy constraints here, and this is part of the reason I would imagine why we're seeing, you know, I think a lot of, I think a lot of folks maybe in-- I, I shouldn't sp- say a lot of folks, but some commentators will look at a company like Microsoft partnering with Iren, or a company like Amazon partnering with Cipher, or a company like AMD partnering with Riot, and they might think to themselves, "Why are they partnering with these Bitcoin miners who some investors consider, you know, like pink sheet companies?"
Mm-hmm. Like, I'm not saying they are. Obviously, I respect- Right. a lot of like friends with a lot of management teams. I know they're really high quality people working at these companies.
But there is-- there's this perception that you're playing with the JV squad, right? And that the varsity is having to go to JV for, for not just practice, but for, for playing the game, right? Yeah.
How much of that is just in, in to your knowledge, like how much are all of those concessions just the fact that kind of the capital got way ahead of its skis here, and then everyone had to take a step back and say, "Hang on, guys,
we don't actually have enough power. We don't have enough raw materials to go around." Yeah. I mean, that's definitely, that's definitely the formula that happened.
Like when these guys all started putting these RFPs out, they went to their traditional data center partners, and then they realized- When you say, sorry, RFP, can you just unpack that for me?
Like, um, like, so like Nvidia and some of their cloud partners would come out and say they'd, they'd go to power developers and say, "Hey, look, here's what we're looking for."
And they would initially tap the, you know, their traditional data center builders or co-location companies to say, "Hey, here's what we're tasked with. Go build it."
And then they realized the timelines didn't match up, and they knew the Bitcoiners were there. We had been raising our hands saying like, "We'll do this."
And then it took like, you know, CoreSci to kind of break the, the mold- Mm-hmm. with the CoreWeave deal, and then it slowly started to happen.
But like there was like a six or s- probably longer than that, almost a year span of companies you knew were sort of getting into it but didn't have a deal put in place.
And there was a lot of-- those deals are very complex, first off, so there's a lot of due diligence, a lot of making sure like on risk analysis to make sure both sides are covered.
And it was sort of like them vetting us out and then them realizing like, wait a minute, these guys have been doing this for a while at very large scale. And it's not like we just are plugging like popcorn machines in.
[chuckles] Like there's a lot of capital at play and like, you know, we're, we're capable of doing things very quickly, and especially if the incentives are tied, y- you know, together that they can accomplish that.
And that's, that's why they're doing it.
It's just, it's just like a new market, and there's a completely new segment, and, you know, they don't-- I don't think they see the risk in it, especially like with the, a lot of the collaboration that's, uh, that's taking place.
Now, there is going-- there is like a hype cycle obviously that is like part of this whole thing, but it's pretty clear like, you know, we have, you know, we got all our chat VMs and stuff like that.
Like how many people in your chat or in your sphere are using like Claude Code or any of these tools? I have like five pro accounts with all of them. Right.
And I'll use them interchangeably for different jobs all the time. And I know I'm like kind of like an early adopter. Right. But like I don't actually even have like a necessary need for a lot of these things.
They just make my life more efficient in some ways, and we're like at the very nascent edge of it and like what's go- what's that gonna be in like five years? The GPUs are still gonna be needed.
Now, like you could say some of these projects are like, are gonna get blown up. A lot of them are gonna get blown up.
But like the actual reality of like this new paradigm that we're entering is very real, and it's not going away.
I think that's an important point to zoom in on because I think one of the strongest arguments against comparing this to the dot-com boom is that the tools are already here.
Now, the market saturation for those tools and potentially obviously the upper bound for the potential for those tools, we're not anywhere near that. Mm-hmm. The revenue models are still getting fleshed out. Yeah.
Um, the revenue to actually cover all of the CapEx for these things and all of the spend for, uh, renting out this compute, you know, there might be a shortfall there.
But the fact of the matter is, at the height of the dot-com boom, I could go to, you know, the fa- famous example. I could go to pets.com, and it was just HTML text on a page. Mm-hmm.
But I can go to ChatGPT, I can go to Claude, I can Vibe code something. I can go to ChatGPT and have it do research that would've taken me an hour combing through Google.
And the, the efficiencies and the use case are already there.
So I, I, I think that that's what I-- whenever I talk to anyone in my, uh, personal life who is real skeptic about this stuff, I, I just say like, "Have you actually used these things?" Mm-hmm. Mm-hmm.
So many are just like they're, they're not-- they don't want to, or, you know, like they'll go to the fact that like, look, a lot of this stuff isn't accurate.
If I put something in, I've, you know, it like hallucinates or whatever, and it's like-Well, of course. Sure. Yeah, exactly.
But, but then when you've actually, like, experienced some of the magic around it, you're like, oh man- Yeah... this is gonna be. I mean, exactly.
And I mean, I- that's j- that's a good point not to say that it's perfect. I mean, I've had plenty of times where I was like, "This is wrong," and been frustrated because I'm just not getting the prompt right. Right.
But then there are other times where I will have it spit something out, and I look at the... It'll give me the citations and everything, and I'm just like...
'Cause that's what as a, as a journalist and a researcher, that's the thing that I find it most useful for is curating information. I don't need it to think for me. Right. I need it to find things for me. Yeah. And it is
s- it is, it is like a freaking search engine on, on steroids. Yeah. It's incredible. Yep, and it hones you to... It, it can do two things.
Like, I've seen this, like, thread of, like, oh, it's, it's, it, it basically gives you psychosis. Or it, like, gives you superpower 'cause, like, it helps you critical- critically think a little bit more too.
It's like, like you said, how am I prompting? What's a better way of saying what I want to say? And so then you go back to, like, the basics.
Like, the people who are the best prompters are people who have really good grasp of, like, English and literature, especially with Cod- Claude Code, you're, you're, you know, they've had the CEO of Anthropic on, you know, whatever, in Davos, and basically he was like, "Software engineers are gonna be completely extinct within 12 months."
Like, what? [laughs] And I know, you know, like we're, we're, you know, this is probably to the, to the bane of, uh, um, some of our, our shareholders at Cathedra, but, like, I, I vibe coded a website.
Now, it's not live yet because I've been, we've been dealing with a lot of, like, stuff here with some of our sites and trying to get them up and running and ready for these storms, but I vibe coded, like, a, a brand-new website and branding for Cathedra that we would've paid $50,000 to $100,000 for- Yeah...
through a traditional agency, and we were actually, like, engaged with an agency, and I sent them this 'cause I was like, "Hey, I kinda did this. Like, what, like, what's wrong with it?"
And they were like, "This is, like, incredible. You did this with?" Like, I, I think I used, like, Gemini, and it was unbelievable.
There's so much, like, tax for businesses that if you get smart people and making things more efficient and better, like, now it's like it has my touch, like, the things I would want are there. Whereas, like,
not to say that it completely replaces a person, but there's a lot of people who are very creative but don't have the ability to actually, like, write out or whatever. Right. Now you actually...
It's al- almost as good as saying, like, you know, I would go and task, like, a freelancer website before and say, "This is what I'm thinking. This is what I want."
And the turnaround, like you said, would be, like, a week or two, and now it's like, "Okay, look at this." I did this in a weekend. Yeah. It's crazy. [gentle music] We are CleanSpark,
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Going back to the opportunities for smaller AI and HPC developments, I've had conversations with some miners here that, uh, you know, guys that I've never met before who are like, "Oh, I have, like, this site in this part of the US.
I am, you know, outfitting it and trying to get fiber optic put in," or, "I'm trying to get generators put in so that I can market it to a, a data center company- Mm... to buy for AI and HPC." Mm.
So and y- there, there's a part of me that wants to be a little bit critical and think, like, can this really work? And so I'll just kick that to you. I mean, is it...
Obviously, there are a number of factors you need to make sure that you have, uh, a number of variables checked off the box.
But how feasible is it for smaller competitors, for smaller miners to retrofit or expand into AI, and in what ways would their business maybe be marketing that compute a little bit differently?
Because I feel like we're marketing what it can deliver differently because we've kind of, we lump AI and HPC. It's like blockchain. Mm-hmm.
You kind of create this huge umbrella, but it's like you could be do- y- you know, you could be an HPC company that's basically just doing graphics rendering- Right...
which is something that we've had for decade, you know, decades, and, like... Or you could be actually doing inference or, or training models for an OpenAI, for an xAI, things like that. Yep.
So, like, what opportunities do exist for some of the smaller miners or smaller operators in the space for this, for this boom? I think it's emerging. I think the mo- like if...
I always try to take, like, the caveman approach because, like, everything's happening so fast that there is really, no one knows. Uh, it is the Wild West, so it's the power. At the end of the day, it's the power.
If you have power, and you have it reserved, that market is gonna come to you. It might not be at one megawatt. It's not at 10 megawatts right now, but it's gonna come. It's already coming down market.
So if you can, you know, if you're somewhat, like, initially it was like you've gotta be within, you know, a 20-mile radius of a major metropolitan hub, then that's gone a little wider.
Now, it's like, okay, are you along an interstate? Um, you know, are you in between, like, some big cities? And then that, that, that little egg is or that onion's growing out further from there.
So I just think it's, like, having power, and then I think we're Bitcoin miners, and this is sort of like, like, my thesis on it, maybe not necessarily like the companies or whatever, but I, I think, like, if, if we think, like, what our advantage is, is it's go and get that power reserved.
Mm-hmm. Now, what the utilities don't want is somebody just sitting, like, basically an, a domain squatter for power. Right. They don't want that. It doesn't help.
So they actually would rather do business with somebody who's already doing the mining because they know they're a good customer. Interesting.
And you go there, you set your stuff up, and then you just play the waiting game of, hey, that real estate is gonna become extremely valuable in the future.
And you don't have to worry about, oh, well, do I have all the prerequisites that, that I need? Because eventually, like, if they want it bad enough, they'll make sure the fiber gets there.
They'll make sure gensets get there or battery packs or... The battery packs thing is sort of like a cheat code that I think is gonna become like a, like a really big piece moving in the future.
Are we, are we starting to...
I, I've heard a few operators here talk about-I was talking to a guy who works, uh, for a supply chain firm here in Nashville, actually, and he was saying he was doing a deal where this company was asking for generators, and they were asking for battery packs, and he didn't-- he couldn't really piece it together.
It's like, what are you, what are you doing? Mm. Like, wait, so wait, you're getting the battery pack, but you're also getting the thing to produce more power. Like, what's going on here? Mm.
So could you unpack the battery pack play? I mean, 'cause I mean it seems, like, very intuitive, but does that reach in the early a- stages of that meadow where people are actually deploying batteries on site?
I think, I think you're starting to see that, where the battery packs essentially act as not an entire redundant backup, but a medic- a critical mission backup.
So, like, let's say they've got a fifty-megawatt load, and then maybe they do have to... Part of their deal with the utility is they do have to curtail a certain percentage of their load.
Instead of getting gens- gensets, and maybe they don't have access to natural gas or diesel readily available, they're getting these battery packs, and they're, let's say, ten megawatts of battery power, where they know they have to commit to X amount of curtailment.
They know that that ten megawatts can be mission-critical stuff that needs to stay on in order for, like, everything to function, so when the power comes back on,
you know, maybe they have a cluster a hundred miles away or fifty miles away or ten miles away that can still, like, do its thing.
And that's the type of, like, uh-- You're starting to see deployments that are taking more of that approach. Honestly, I think Grok or xAI is a company to watch when it comes to innovating.
Uh, they, they're blowing the doors off of everybody when it comes to building right now. They have the, the biggest cluster right now there is.
They were extremely fast in putting it together, way faster than everybody else. They put that site in Memphis together in four months. They were extremely-- They thought like a Bitcoin miner.
More greenfield in six month-- In four months. They basically took over an abandoned warehouse.
They have, like, twelve hundred megawatts live, and only a hundred and fifty to two hundred of those out of the twelve hundred are fed by the grid.
The rest is all n-natural gas and gensets, and they're just-- they basically retrofitted a warehouse, and they got it working. That's wild. 'Cause it's very, like, first principles.
They were like, "Oh, you know, you need this, X, Y, and this," and they were like, "No, we're, we're gonna do it this way." And they have Bitcoiners. I think Asher's been pretty vocal about it.
He lost two of his engineers to them. Mm. And, like, these guys are running fast with that stuff, a-and they're not playing by the traditional data center rules when it comes to this.
It, it, it reminds me of the, the fact that they stood up, or I shouldn't say they, but Tesla, so, like, you know, it's all in the Musk umbrella. Mm.
Tesla stood up that lithium refinery w- and, and, and, and breakneck time. I mean, people were saying that his timeline was impossible. Yep.
I don't know how long it took them, but I remember seeing some marketing materials about it, and you look at the facility, and you're just like, "Wait, hang on. This took, like, a year or two." Mm.
And it, and it just looks absurdly complex. For, for xAI specifically, do you think that they're... Like, what do, what do you attribute that to?
Th-there's kind of a- Their, like, their business, their business model is they already have a built-in business that will benefit from that compute being on, whether it's Tesla, whether it's Starlink, whether it's obviously their consumer products with xAI, I mean, with, with Grok and with Twitter.
They already are-- like, they're able to get something out of it, where, like, a lot of these other companies that are doing it are sort of like, you know, it's like they're, they're acting like, you know, the, that the market's gonna come to them.
They already have a market that's already paying for these products. Mm.
It's already being subsidized by multiple aspects of their business, so, like, they can just continue to burn through it, where everyone else is like, you know...
You see the stories about A- OpenAI and where they're just burning billions and billions of dollars because they're spending way more than what's actually coming in the door. Mm.
And their moat is not that big considering, considering... I mean, they've grown. I mean, the fastest growing company in, in history.
So I'm not, like, crapping on them, but their moat is a lot smaller because they're competing against Google and Microsoft and some of these other guys who have similar competing products, whereas, like, it's sort of, like,
em-em-embedded into all of these aspects of, like, the X kind of, like, architecture. Yeah, and it's, these are synergies maybe between all of these different- Mm...
companies in Elon's orbit, you know- Yeah, like that compute can get- Particularly for this Tesla... that compute can get used for Teslas. It can get used for the robots. Yeah. It can g-get used for Twitter.
I mean, there's probably four or five different use cases for it and then, you know, at the same time, they have the ability to maybe put things in sites or put sites in areas that would not traditionally be viable for a lot of other companies because of their Starlink stuff.
Ah, yeah. It's their Starlink bases you could probab-- You know. So, like, they're just, they're thinking about things. They're playing chess while everyone else is playing checkers.
Yeah, that's interesting, and it kind of proves out what you were saying about companies are going to have to start writing new rule books and making concessions where it-it-- you're kind of in this weird space where it's like the traditional data center world is saying, "Well, this is the way we usually do it," and then all of these companies breaking into this new form of computer saying, "Hold my beer.
We don't have time for that." You know? Mm-hmm.
It's like, it's almost like, uh, the rush to, to find El Dorado or something, and, like, everyone knows where it is, and so as long as you get there first before everyone else, you're gonna have a, a, a larger share of the hoard of gold there, right?
And it's really just access to power. Like- Yeah...
there's a lot of push for these off-grid, or I call them off-grid, more behind-the-meter projects that are taking place, so you're seeing a lot of natural gas-type projects where, you know, they're targeting areas that meet their criteria.
There's, like, fiber, there's a big natural gas pipeline, and then they're ordering, you know, generators, and they'll just make their own power and do their own thing.
Now, with the EPA ruling that came out, like, a couple weeks ago, it was kind of...
It basically ruled against what xAI is doing as far as, like, there are certain standards that you have to meet for some of these generators for on the EPA side that are, I think are gonna slow that stuff down, and that's where all these big guys were running 'cause they're like, "Oh, there isn't five hundred megawatts available on grid."
So they're like, "Well, we're just gonna do these behind-the-meter things, and we're just gonna make it happen."
But now, because that's gonna slow down, I think, like, the real on-grid opportunities are gonna be clusters. They're not gonna be these mega sites.
Now-That removes Texas from this conversation because Texas can have probably dozens and dozens of these mega sites because of their power profile.
But throughout the rest of the country, there's gonna be-- I think what's gonna happen is there's just gonna be clusters of, you know, maybe they'll still have five hundred megawatts worth of stuff, but there's gonna be fifty here, fifty here, fifty there, and they're all gonna be kind of, you know, within the same area.
And that's just y- and w- you-- Why the clusters specifically? Because if like, uh, 'cause when I- Because A, they can get them up and running very quickly.
More, more quickly than the current scenario, the current options. Just because it's easier to get the infrastructure in place for like five twenty-five megawatt sites versus one one hundred megawatt site.
Or just the power availability. You can't go anywhere and get power. Like, if you went to-- There's just no way you're gonna be able to go in and plug in five hundred megawatts anywhere on grid right now.
And, and, and I guess what my question for that is, is 'cause like just thinking about this like power for dummies, if we look at power as a reservoir, if it's five hundred megawatts split between, you know, twenty sites versus one site with five hundred megawatts, is that because of the transmission lines?
Is it because of the infrastructure to actually deliver that power to the end, to, to the end user? It's not necessarily constraints for the production of that power, it's everything else that goes into it.
Yeah, I mean, it, it, it's a network at the end of the day, so like you've got areas that have pockets of available power. It's just not as much as the five hundred.
So it's sort of like the Bitcoin min-- that's where Bitcoin mining flourished, 'cause like we went to where- Right... no one wanted to go for that power.
'Cause there's power available in those areas, um, that would be not available in one centrally located place. I, I was talking to, uh, uh, Braden Stover.
He works at the Tennessee Department of, of Economic and Community Development. Mm-hmm. And he was talking about this specifically.
It was like when they work with Bitcoin miners, they would tell them, you know, "Well, we have this rural area in Eastern Tennessee that is really sparsely populated, but maybe there used to be a factory there or a mill there, and it's no longer there."
So there's kind of this excess block of potential power for that area that no one's using, and they would try to like, you know, nudge people in that direction and say, "You know, if you wanna set up, this is the place to go."
Yep. Our profile mix is, are those sites. And, uh, those are the sites that nobody wanted in like maybe the last epoch because they were considered too small.
But as machines became more efficient, you know, a ten or a twenty megawatt site now can produce a large amount of hash.
And then same thing on the AI side, like eventually that would be desirable for someone who's building an AI cloud- Mm.... um, because the machines are getting more powerful and becoming more efficient.
So it's just, it's just really it's a power availability play and a relationship game with where those, where that power is.
Because, you know, it's different than just going directly to, you know, one, you know, going to TVA's boss and saying, "Oh, I need five hundred megawatts." That's not how the power gets distributed. Right.
So if you have a relationship in a rural area where, you know, you've got your-- That's where I think there's a lot of opportunities for Bitcoin miners in those, in that, those smaller segments, because incrementally there will be more load at those places.
If you've got twenty megawatts from them, you'll get another five. Mm. Like that's actually how we've, we've grown our, our fleet down, not our fleet, but our capacity down here was we had a ten megawatt site.
The utility said, "Hey, we had a factory pass, pass and went to another area. We've got an additional fifteen. Can you take it?" I'm like, "Yeah, I'll take it." [laughs] So we did it.
Um, and then, you know, and then I get a call three, four weeks later, a site that's down the road that we operate, ten megawatts, and they say, "Hey, by the way, we finally got the approval from TVA to get an addition.
Can you take an additional five?" Yeah. I'll take it. And then if you just take like the breadcrumb approach and just start scraping these things together, before you know it, you can have these larger clusters.
And I think within like Middle America and like call it the Southern Belt, there's gonna be a pretty, you know, there's gonna be a lot of opportunities, and I would assume there'd be like that throughout the country.
Yeah, interesting.
This goes back to what you were saying about maybe the most prudent thing for the miners to do now is just get the power, get your foot in the door somewhere because you're going to keep that door open. Yeah.
It might open more doors down the road.
And, and that's what's gonna be unique with like the-- if you, if we rewind it back to the conversation around all these m-machines, because like you're just seeing like prices drop on ASICs.
So you're like, okay, do you need to have like an insanely profitable Bitcoin mining facility, or do you just need-- Like now you have like advantage because you could buy insanely cheap ASICs and essentially get them in and subsidize what that power, uh, is gonna do for you over a period of time.
Now, it's not extremely profitable, but at least you have the options to, to do that, because like you said, there's such an amount of liquidation that's taking place right now that, you know, you, you-- I mean, there's S21 selling for like five and six dollars a terahash.
Yeah. It's crazy. On that note, I'm glad that you brought up the ASIC market because I want two more questions on the mining front and then a, a few closing questions- Mm-hmm... on AI.
What are the secondary effects that you see outside of the ASIC market kind of contracting right now for this expansion?
Like, what kind of secondary effects or knock-on effects do you see the Bitcoin mining network facing as a result of this?
'Cause the ASICs are one, and there even is a question of, you know, I've heard rumors that Bitmain might be shelving the air-cooled S23. That's unsubstantiated. We have not had good reporting on that- Mm-hmm...
or good sourcing on that. Mm-hmm. So I'm not saying that's definitely happening, but does raise this question of, will they even be making as many ASICs in the future? Mm.
Uh, but open question, like what are some of the secondary and tertiary effects of this AI boom that you see for Bitcoin miners? Well, I would say one positive thing is that it's gonna decentralize the, the hash rate.
It's already happening. So that, that's overall a good thing.
I think there's this whole movement of, you know, there was this ton of, there was this-- I, I, I use this quote in the panel where like Jim Barksdale, who was like the original founder of Netscape, which was like the browser- Mm...
that was competing with Microsoft back in the day, he said, "There's two ways to make money in business."Bundling and unbundling. And initially, you know, all the mega miners shoot up all the hash rate.
Now there's a great unbundling that's happening, and I think overall that's really good.
And then at the s- at the other micro end, you've seen this rise of the desktop miner, and I didn't actually like think that that was gonna become a thing, but it, it really is.
You mean desktop miner, you mean like a Bitaxe? Yeah. Yeah.
Like all those, like even like the Brains Unit, the Canaan, like there's, there's a bunch of them that I feel like those weren't like the chip efficiencies weren't good enough in, in like the past couple years to make those things work, but now, like they're viable, they're little...
these awesome little lottery machines that you can plug in. They're quiet. Um, and so I think it will become a tool for people to-- that's how they're gonna buy their Bitcoin now.
Like, that's actually a really good thing for no KYC Bitcoin. Uh, so that, that's a good thing. I think business model-wise, I don't know about the foundry side of things, and, you know, if that will happen. I think the
manufacturers really, all of them, all made a concerted effort to push into hydro because I think there was this...
It was sort of like they were playing against the ESG native narrative of like, you know, Bitcoin's w- w- boiling the ocean.
So they're like, "Okay, we need to be better about this, and we're gonna make these more efficient machines and do water cooling, and then you can use the excess heat and all this other stuff."
And they just got too cute with it, and there really isn't a market for it because at the end of the day, the machines are not much more efficient than an air-cooled machine, and then the infrastructure you need is much more expensive.
You're like doubling your cap space [laughs]. Yeah, and, um, so there's just not demand for them.
And so unless you're building new greenfield sites with this a- with that infrastructure, they're-- this is not gonna happen.
So those-- I look at them as sort of strategic errors, um, o- on that front because I think they were banking on big mining becoming bigger and bigger, and because AI kind of stepped in-- 'Cause those were gonna be the ne- those were gonna be the natural customers of that next wave.
Mm-hmm. All the big miners were gonna go to h- water cool or hydro, and now they're like, "No, we don't- we don't need any of that stuff." And the air-cooled stuff is still what sells. So I don't, I don't know.
I mean, will they respond? Typically, they'll respond to, to the market with that stuff. Yeah, but I guess I'm just sitting here thinking about like how can they respond in a way that doesn't just like
undermine their entire business in the sense that like their, their, their main buyer is gone now.
It's the public companies in the US, like they are not buying, so much so that like the only volume that I've heard from brokers, I mean, obviously it's some new machines are being bought- Mm-hmm...
but the majority volume is used. Mm-hmm. The coupon market is totally dead. Yep. No one... They're, they can't move their inventory. You know, they had a supply glut with the S21 that came probably at the worst time.
Mm-hmm. They had to issue coupons and rebates on a lot of the, on the, on the, for the miners who bought the e- vanilla S21 because then they came out with the S21 XP and the S21 Pro. Mm-hmm.
All these miners were mad, and they ended up, you know, getting these newer machines at a discount. It just seems to me like there is a huge oversupply of hash rate with no place to go.
I-- and there are still going to be some places, obviously, and that kinda leads me to my last question about how this all impacts mining specifically.
With a lot of miners, even the smaller ones in the US, trying to think of ways that they can cash in on the AI golden calf, what mining do you foresee being done in the US going forward?
Is it just on the margins with stranded energy? Is that basically it? What, where do you think the opportunities will exist, uh- Yeah. You know, two, three, four, five years down the road? Oh, gosh.
I don't know anything that far. [laughs] I, I, I actually think-- Okay, okay, okay. So let's just, just, you know, we'll play like, you know, we- we'll, we'll... I'll tap my inner Marty Bent, and we'll get cosmic.
I think like on the-- if you look historically at what's happened prior at times with ASIC manufacturers, specifically when they were in China, when the market cooled down, they were still producing ASICs, but they had the ability to just go plug them in and self-mine till the market picked up, and then they'd clean them up and sell them.
That's what Bitmain did, a lot of companies did. Then they get kicked out of China, and that kinda went away. But then the market slowed down in like whatever, '22, something like that, and what did they do?
They were, Bitmain was sitting on hundreds and hundreds of thousands of XPs that they couldn't sell. So what'd they do? They partnered with people who had infrastructure sites like ours.
We were among dozens and dozens of like independent just hosting providers that they said, "Here, host our machines. We'll bring our ops team. You just provide power, and you're good."
So there's gonna be all the big-- I, I look at least short-term, a lot of the mining will be self-mining from a lot of these m- mining manufacturers. Mm. That will happen short-term.
Then maybe five or six years down the road, I think a lot of these HPC AI companies who are gonna say that they're pivoting towards that, I think will eventually will come back around. Because- Mm-hmm...
it's still gonna be the power and the access to that, and I think there's gonna be some probably interesting opportunities that they're gonna say, "You know what? Maybe we don't want battery backup.
Maybe we wanna use, utilize Bitcoin mining as a sort of like way to get a energy mix that makes sense for us."
And that's gonna be like natural because you're gonna have embedded inside all of these AI infrastructure companies, Bitcoiners. So they're eventually gonna figure it out.
Like, 'cause right now they're competing with each other. At some point, it'll be sort of like oil and gas, where when we used to talk, when I was at Great American Mining, we used to talk to the oil and gas producer.
They're so, like they had one pre... You know, they were like Spiegel. They had the one precious, which was- [laughs]... the oil in the ground, and that's what they cared about.
They didn't care about the Bitcoin or anything, and typically, the relationships that worked or the scenarios that worked is when it was like a supplemental or complementary component to their business, meaning like the flare mitigation.
That's a easy thing. There's other parts where it's just like, well, maybe I'll get fined if I flare at all, so I have to consume this gas in some way, and if I can mine some Bitcoin, great.
Maybe I can make liquids and the gas that comes out of the liquids, and we can do that.
So I think eventually for some of theseThese companies that are emerging, when they sort of get more, you know, like grown up, they're gonna be like, "Oh, wait a minute.
We can use this to, like, increase, like, flip a lever on efficiency for how our whole companies operate and give us an advantage." And, you know, then we'll see kind of like a shift back towards those.
But I also just think, like, there's gonna be a glut of cheap ASICs that are gonna be spread out all over the place.
And, you know, you've got all these different firmwares that are out there, and people will always find a way to find some cheap or free, you know, electricity. And that's overall good for the network. Yeah.
I keep coming back to this thought that the first time I stepped into my first, like, huge cathedral for one of the big pubcos, I won't name them.
But I walked in, and I just kinda-- It felt a little icky, and I'm not a communist or anything.
You know, I don't think that you shouldn't be able to deploy capital to do what you wanna do as long as you're not screwing anyone over. Mm-hmm.
But I just thought, you know, this is probably not long-term healthy for the Bitcoin, right? Like I, I would rather see this site disintermediated into a hundred other sites where, you know, every- Can end up.
Yeah, exactly. [chuckles] Right? That's it. It, it's interesting to see that, that pan out, you know.
I, I really do think-- I, I really liked leading with your insight about this being kind of like shadows of the China mining ban.
It's almost like not, not the US mining ban, but the great, uh, reshuffling of capital towards other forms of compute. Hey, Charlie here. Guess what? We just announced our next Bitcoin technical conference, OpNext.
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Last question for you on this, and I just-- I think we touched on this when I had you on, either at the end of twenty twenty-four or early twenty twenty-five, so I want your take on it again.
What are you more bullish on, the PowerShell model or the Neocloud model for, for Bitcoin miners specifically? Um- And, and for listeners who don't know what I mean by that- Yeah.
-PowerShell is what you see Core Scientific pioneering and a bunch of the other, basically every other miner, TeraWulf, Cipher, Hut 8 going for, where you build the infrastructure and then you have a hyperscaler or a Neocloud come and host the GPUs, versus the Neocloud model where you're actually building the site or, and running the GPUs, or running the GPU specifically.
Eiren is currently building a site and hosting the GPUs for Microsoft- Mm. -in their most recent deal. So out of those two models, which are you more bullish on? I think there's a hybrid model too where you're not...
I think they might call it like a soft shell model where, like, there's us providing the power and maybe say like the baseline, you know, foundation, and then there's an additional partner that comes in and does the actual infrastructure.
Mm. Then that gets bolted on top with the, the end user. I think that one is probably the safest. It might not have the biggest margins.
So you can see the risk tolerance that some of these groups have 'cause like, you know, maybe they have more experience in, in doing some of these other things. But I think, like, if you're focusing on,
like, I don't know, may-maybe it's just 'cause, like, you know, if you build in Bitcoin, if you're not building, like, what are you doing? You're dying.
So I think in order to, to continue to grow quick, you're gonna ha-- Like, doing those type of builds is really long. It's really sus-sustained, like, focus. You can't cut any corners.
And so I think, like, we're really good. We're energy pirates. We're really good about going and getting power and, and, and getting it quickly.
So I would fall for that third one, which is really like a, a subset of like the, you know, the shell version.
I think that's probably the safest one, but also I feel like it's the one you can-- you're best positioned to... 'Cause, like, at the end of the day, like, the power is what they actually need.
So if you can still own that power, it's like sort of like real estate of that- You have all the leverage basically. Exactly. Exactly. Yeah.
And then that, you know-- But I-- Listen, everyone thought Eiren is the CleanSpark of this cycle.
CleanSpark came out of nowhere, whatever, three, four, five years ago, and no, no one-- Everyone thought that their-- the way that they were doing things wasn't the right way. They weren't HODLing.
They were doing everything kind of like counter, like, contrarian to what everyone else was doing. And I-Eiren did the same thing in this AI, said, "Oh, what are you doing?
You can't do this, all of these, like, vertically integrated things." And then he's just like, "Yeah. Yeah, we can."
[chuckles] And, and, like, you know, there's still things need to be fleshed out a little bit, but, like, good for...
Like, I think that goes to your, your point earlier is, like, there's still this, like, innovation around business models that are completely untapped, and I think people are still trying to figure that out.
And so that's what's really interesting to, like, go and analyze some of these AI deals because even if they have the same counterparty in some case, 'cause it's sort of like-Four or five groups that are essentially sharing, you know, the same counterparty.
What do those deals look like? How are they different? How are they structured? Because, like, ultimately, you wanna be set up where you can continue to go build quickly more, and what allows you to grow faster.
And I think, like, doing these mega sites, I mean, you know, if you remember back in the last cycle, Riot was dominating. They were bigger than everybody. You had Chad in his hard hat. He's doing his videos- [laughs]...
and people are like, "This thing is incredible." And you can just see, like, when you do these mega si- it takes a long time- Mm-hmm... and you can't really focus on doing, you know, five at once.
And I think, like, that momentum thing is there's something to it. And not to say that there's a right or a wrong way, there's just... you're gonna be different avenues for people to take.
Yeah, and going back to the innovations part,
it kind of speaks to what you were saying about maybe miners being mentally more capable for this work in the sense that they have had to figure out things as they go along for a new industry. Mm-hmm.
And they've had to be swift on their feet, and they've had to be creative about how they are going to execute.
And there might be an argument to be made that the traditional, you know, fat and happy, you know, Mag 7 companies have not had the... They haven't had their feet to the fire in a way. Mm-hmm.
And so maybe they've gotten a little complacent about, "This is the way we do things," and a- as, as evidenced by XAI, we need to rewrite the script a little bit- Yeah, for sure... if we're going to shoot this movie.
I even think about, you know, we made a decision. We got a pro...
Like I was telling you, we got, we got offered an additional 15 megawatts at, in one of our areas, and one, o- one of the things that came up when that was offered was, "Okay, great.
Can we get the same rate schedule as we have at the other ones?" "Oh, yeah, yeah, you're good."
And then, oh, wait a minute, they're not allowing, you know, existing cu- customers to get grandfathered into some of the curtailment programs, which really allows it economically to work for- Mm... for what we do.
So then we're like, "Well, what do we do?" And then there, then, you know, as we looked at the rate structure, off-peak, they had an off-peak version.
So instead of us doing the curtailment and getting credits and participating, 'cause there wasn't an opportunity to do that for new load, we just said, "Hey, we'll take the load, but we'll only do off-peak."
And because we have machines that allow us to do that, it gave us the opportunity to, to take that 15 megawatts.
And at the end of the day, that power will be viable for somebody in the future at a rate that's doable for them. Mm.
But bec- Bitcoin gives you, or the mining gives you the flexibility to take, you know, kind of turn, you know, chicken something into chicken salad. [laughs] You know what I mean?
Uh, 'cause a lot of people would be like, "Oh man, I can't make that work." And it was like, "Well, could we make 83% uptime work?" Yeah, if the numbers are, are right.
And I don't think a lot of people would be willing to, to do that. Um, and in fact, it's funny because, like, Grid initially, before they were bought by CleanSpark, that was the business model.
They targeted these off-peak opportunities in TVA, and that's what they went after, and they built a really good portfolio.
And when they sold their business, it was valued on the megawatts that they were able to, uh, provide, not just the uptime. Mm.
Because eventually, you're, you do business with someone long enough, "Okay, okay, we'll get you in, into these programs now."
But yeah, so I think it's just being about being nimble, and Bitcoiners are, are naturally gonna figure out a way to plug machines in.
And then eventually, that power's gonna be viable for maybe a, a, a more, a competitive, uh, load in the future. The, the cockroach is becoming the butterfly perhaps. [laughs] Yeah. That's right.
Tom, thank you so much, man. Oh, thanks. This was great. Likewise, man. Appreciate you guys coming on here for this event.
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