Some of you on Twitter/X were interested in a long form post about what high quality infrastructure actually is. Everything you read here is our opinion and how WE like to do things. We are first going talk about infrastructure and then tie that in to how the small to medium sized miners can win over the mega pubcos. Lets drive in.
First let's start with the question: What is high quality infrastructure? Our definition is "The ability to procure low cost power to your ASICs with a relatively high uptime. Preferably in a environment with a cool climate for maximum efficiency"
Contrary to popular belief, in the mining industry finding and building infrastructure is the hardest part of the business. Getting ASICs has always been the easiest.
Some examples of what we consider to be high quality infrastructure are:
- Having your own dedicated power lines from the substation to your facility.
- Having a power provider who understands the mining business and actually wants you as a customer.
- Owning the land/real estate that your facility sits on.
- Cost efficient cooling methods with minimal downtime due to ASICs overheating.
- Power Purchase Agreements(PPAs)/Electrical Service Agreements(ESA).
Making it in this industry is all about having an advantage over other miners. If you can produce Bitcoin with a lower cost than the market, you win. Building an advantage is now about having the best infrastructure. Everyone has access to all the same hardware. There is very little advantage there.
The mega miners have gobbled up a lot of the high quality infrastructure because they were able to sign PPAs and land grab a lot of the best areas with low cost power like West Texas. They scaled as fast as possible to grab as much low cost power as they could.
But this isn't the end my fellow plebs... not even close.
If we look back on the history of Bitcoin mining it started with people mining on their computers, then gpus, then ASICs. It started with people building mini farms in their basements. Those mini farms outgrew what a residential home could power so they moved to commercial location with commercial electric rates. Then into the area of mega miners with large multi hundred megawatt PPAs. This is where we are at now.
These mega miners are massive, as you all know, and at this point are basically stuck where they are at with the power infrastructure that they have. The problem for the mega miners is that PPAs aren't the last step in the 'energy stack'.
We touched earlier the history of Bitcoin mining and what that really is explaining is how mining has continued to move down the 'energy stack' with the last step being GENERATION.
That low cost power is being generated by energy companies for a profit to them. If you can figure out how to generate that low cost power yourself... well then you are probably one of the best positioned miners in the world. This doesn't mean partnering with a solar or wind company since that is still buying the power. This is about becoming the energy company.
We are already starting to see this with the off grid flare gas miners. But leasing or paying a couple cents per kwh for the gas doesn't really change much. YOU NEED TO OWN THE GENERATION ASSET.
Ok now back to how the plebs can win. The mega miners have gotten so big that generating that amount of power is a big hurdle. If not down right impossible for them to pull off. Generating small amounts of power is much more feasible via solar/wind/flare gas. We are leaving out natural gas, coal, nuclear unfortunately because building them to power a bitcoin mine is completely unrealistic given the current political climate in the US.
Many of you know that the Wilson family owns a little bit of farmland in Iowa. This land where our facility is located is prime real estate for wind developers. How do we know this? There is 200MW wind farm ~5 miles away with another 200MW project set to be finished in 2025. Totaling 400MW in just our little Iowa county alone.
So let's think one step ahead now. Mining is headed to the last step in the energy stack which is generation. Where are the parts of the country with high amounts of solar, wind, flare gas potential that are underdeveloped?
That is the million dollar question and it's up to you to figure out how to make it work for your unique situation.
This is the endgame for mining in our opinion. Owning your own generation with the miners located right next to generation, with very little transmission. It's a difficult plan to execute in practice but for those who can pull it off will enjoy mining with high margins and great profits for decades to come. This is how we beat the bloated fiat mega miners.