A Tale of Two Miners
The coming bifurcation of on & off-grid mining.
We are entering into a new era of institutionalized Bitcoin mining. The past decade mining was characterized by scrappy DIY datacenter startups and immature corporate feuds. This decade we’re getting serious.
Institutionalization & financialization of mining is only just beginning. This brings innovation across the full Bitcoin mining stack — in particular, the energy side of things.
The industry looks on track to bifurcate into 2 types of miners: on-grid & off-grid.
We could (again) draw an analogy to oil & gas with land & offshore drilling. Both extract oil, but are dramatically different all the way from the capital structure to the engineering challenges.
Historically, miners have been straightforward purchasers of electricity from the grid. Let’s visualize this with some graphics pulled from the handy-dandy Nakamotor pitch deck:
As miners prioritize inexpensive energy, they are beginning to move “behind the meter”. That is, either integrating with the grid, or moving entirely off of it onto self-generated power sources.
Off-grid, at the source of energy production
Off grid miners will need to operate like energy producers. Energy producers themselves will likely become “producers of hash” instead of oil/wind/nuclear/etc.
Grid-integrated, solving distribution & demand response inefficiencies.
Grid-integrated miners will think more like power plants & grids, responding to variable load and energy transfer challenges.
Because the engineering and specialization for solving these problems are so specific, these two types of energy integration may become wholly separate industries over the coming years. Similarly, the financialization of the two will evolve differently.
Nakamotor is currently focused on the former, thinking & operating like an energy producer. With over 500 billion cubic feet of gas vented or flared each year, there should be plenty of energy to capture. That’s something like 2000 Gigawatts of wasted energy.
The entire Bitcoin network uses about 15GW. You do the math.
-Charlie Spears, Strategy @ Nakamotor
Going public —
Core Scientific going public via SPAC
Green energy mining ETF $RIGZ
Iris Energy also going the SPAC route.
Relavent thoughtpieces —
Nic Carter responds to Janet Yellen on stablecoins.
Bitcoin mining’s Three Body Problem