In this episode, Compass Live welcomes CEOs of two of the world's largest Bitcoin mining companies – Riot Blockchain and Marathon Digital Holdings – to chat about growing pains in the mining industry and what the future of cryptocurrency mining in North America will look like after China's crackdown:

This discussion offers insights into the public sector of cryptocurrency mining and key developments to expect in mining before the next miner subsidy halving.

Video Recording

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Audio Version

Show Notes

Congress is embroiled in a battle over anti-mining and anti-crypto language in the Infrastructure Bill. (timestamp)

  • The amount of legislative attention paid to cryptocurrency right now is pretty incredible.
  • Governments like to collect taxes, but the original language was totally disconnected from reality.
  • Miners aren't brokers and the projected tax revenue from mining makes no arithmetical sense.

Are you worried about the US political climate regarding mining and cryptocurrency? (timestamp)

  • The industry is maturing very quickly, from infrastructure to applications and services to advocacy and lobbying efforts.
  • Some of this legislative news just becomes noise.
  • We're in 1995 for the Internet with Bitcoin and cryptocurrency; a massive inflection point, especially for mining in North America.
  • We're optimistic despite short-term legislative challenges.

Recent growth from Marathon and Riot. (timestamp)

  • Both companies have bought lots of miners and now focusing on deployment.
  • Scale is key.
  • Marathon has deployed 2 of 13 exahash that it is in process of deploying over the next year.
  • Focus is on BTC-denominated revenue, which is a zero-sum game. Only 900 BTC mined per day right now.
  • Riot is rapidly expanding Whinestone facility in Texas.
  • "If you build it, they will come" is Riot's philosophy for entering the hosting market.

What opportunities have you capitalized on as hashrate leaves China for the US? (timestamp)

  • Miners have been richly rewarded for "just being the same." If you aren't in China, you made a lot of money mining over the past 60 days.
  • Growth in North American mining wasn't surprising, but China caused it to rapidly accelerate – a massive tailwind.
  • Riot sees a major opportunity in its new hosting business.
  • Lots of hardware supply was freed up, which Marathon and others took advantage of as miners left China.
  • Marathon has multiple calls per day with people with miners still looking to relocate ASICs.
  • Being agile is key because the market changes quickly.

Random companies are getting into bitcoin mining. (timestamp)

  • New corporate entrants into mining should plan carefully and seek out good advice
  • Mining is not a business for the faint of heart. Be positioned to survive all sorts of market cycles.
  • Typical corporate America isn't prepared for the routine volatility in mining and Bitcoin.
  • New miners are only looking at the economics of mining today.

What happens if power gets more expensive for miners? (timestamp)

  • Marathon's blended power cost is about $0.045.
  • Long-term power agreements prevent unpredictable power cost fluctuations.
  • Canadian hydroelectric power can be tricky for power cost management.
  • Miners want to write agreements to ensure certainty and not be merchant buying power.

Will the US ever claim more than 50% of Bitcoin hashrate? (timestamp)

  • 50% of hashrate is a big number.
  • US regulators don't carry as much risk as Chinese regime, but a good goal would be to see 30-40% in the US.
  • High 30% to low 40% of hashrate is most probable for US-based miners.
  • There's an initial rush to the US, but other countries will wake up and attract more hashrate as miners move to the point of lowest cost and least risk.

Is investing in public mining companies still a proxy for owning bitcoin? Or do people actually want to invest in mining? (timestamp)

  • Institutional investors still invest in mining companies because many times they can't own actual bitcoin. Mining companies are a "perfect proxy."
  • There's also an advantage to investing in efficient operators instead of the actual asset (e.g., gold versus gold miners).
  • Mining is dollar-cost-averaging into bitcoin over a long period of time.
  • It's less a function of investing in miners to get exposure to Bitcoin and more of a desire to invest in the industry's efficient operators and have exposure to Bitcoin.

What changes in mining between now and the next Bitcoin halving? (timestamp)

  • Probably looking at a global hashrate around 400 exahash.
  • Miners are starting to get squeezed out and consolidation happens.
  • Mining economics now are very different than they will be in a few years.
  • The industrial age of bitcoin mining creates new demand for a more efficient ASIC miner.

Hosted by Zack Voell