The future of bitcoin mining is off grid.
Compass has recently completed an informal series of podcast episodes with multiple industry leaders who understand the opportunities for growth in mining by targeting stranded, excess, and otherwise unused sources of energy.
Here are quotes and links to full episodes from miners discussing the off-grid, natural gas-powered future of bitcoin mining.
Off-grid miners are super bullish.
Far from a hobbyist niche in mining, the optimism for growth in off-grid mining with natural gas is almost feverish.
“Texas has […] probably some of the most flared gas and stranded gas out of any other state. So, there’s lots of opportunity for off-grid mining. […] I think its only going to increase. I think you’re looking at least at a 10x in off-grid natural gas mining before the next halving.” - Brent Whitehead
Even most bitcoin investors who aren't deeply involved in mining likely aren't aware of the current growth seen by natural gas-powered mining companies.
“In fact, we haven’t even been cold calling [oil companies] lately. It really is taking off in a big way. […] I could name a dozen companies that are effectively competitors to [Upstream Data] in some form.
It’s really exploding, which I think is really underrated still. A lot of bitcoiners that aren’t involved in mining probably haven’t realized how much its catching fire. […] I think oil fields are going to absolutely dominate bitcoin mining in the next 10 years.” - Steve Barbour
Why go off grid?
Regardless of whether the operation draws power from off- or on-grid sources, bitcoin miners are by design incentivized to gravitate towards the cheapest power available, which tends to be unused, stranded, excess, etc. types of fuel.
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“I don’t think there very much if any meaningful energy consumed by bitcoin right now that isn’t what I could call ‘excess.’ […] To the point where energy that bitcoin is consuming is no longer excess, then it starts to price bitcoin mining out of that energy market in the first place. […]
In a lot of energy markets, you might not have the level of transparency to know what is truly excess. But the price is a pretty good indicator.” - Mike Hamilton
Consistently strong demand for new mining operations by oil and gas companies could function as a bullish catalyst for bitcoin's price.
“I think we’re going to see significant growth. Because ultimately the existing hashrate is going to have to compete with new hashrate. And if new hashrate is starting in the oil fields, existing hashrate will have to press their advantages of having newer machines. […] When everyone starts playing with the same toys, when miners become commoditized, they’re going to get shouldered out by guys that go seek energy off grid.
In order for even a significant percentage of the gas that gets wasted every day in the US to be consumed to mine bitcoin, bitcoin’s price has got to be north of $1,000,000. Because there’s that much gas, for the next person to come on and start mining, it’s going to need to be really lucrative. We’re talking about hundreds of exahashes of potential hashrate in the form of natural gas.” – Adam Ortolf
How does it work?
Oil and gas companies need to buy into the idea of allowing bitcoin miners onto their sites and to have access to their gas. Sometimes these companies will share in the mining revenue, other times they’re content to simply sell fuel to mining companies.
“We approach natural gas producers who are getting $0 for their gas. We say we can give you a little bit of something. We come in with all of our infrastructure that’s operated and owned by Giga Energy Solutions and deploy our setup.
So that would be a natural gas generator. Hook it up to their wellhead. Put that natural gas through an engine that combusts it. And that engine, instead of a flare, produces electricity. That electricity then powers our data centers, which we build. And that data center is then mining bitcoin.” – Matt Lohstroh
So how does off-grid mining operations function, specifically the farms powered by natural gas?
“It’s not super complicated, right? You’ve just got to make sure that everything fits. And not only that it fits, but that it has the correct spacing requirements to follow any authority that has jurisdiction over you is going to require them from an electrical perspective or even an HVAC design system that actually works. And then building those for off-grid mining.” – Austin Storms
But even though the mining hardware and hosting infrastructure may be straightforward, the on-site complexities of locations with available natural gas are not simple.
“It’s hard. Yes, there’s a lot of flared gas. Not all gas is equal, and not all gas is located in the same place geographically. And so some of the factors that come into play are well flow. Not all wells are going to have the flow necessary to keep things going sustainably.
Some gas has, basically, pollutants in it […] that make it impossible to work with in some instances. Not all gas is equal. Not ever well is equal. Not every location is equal.” – Marty Bent