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Bitcoin Mining Outside the US

November 20, 2023

In this video, the evolving landscape of Bitcoin mining outside the U.S. is discussed, highlighting the significant increase in the global hash rate from 2018 to 2023 and the complexities introduced by Bitcoin halving events. Fred Thiel delves into the pivotal shift in mining locations following China's ban on Bitcoin mining in 2021, which led to a notable migration of mining activities to Kazakhstan and the U.S., with a special focus on Texas. Furthermore, Fred addresses the industry's shift towards renewable energy sources and its decreasing reliance on fossil fuels. The broader implications of Bitcoin mining, such as its impact on energy infrastructure, grid stability, and environmental sustainability, are also covered, offering a comprehensive look at the current and future state of Bitcoin mining globally.

00:00 Evolution of Bitcoin Mining

02:49 Geographical Shifts in Mining Post-China Ban

06:01 Bitcoin Mining and Grid Stability

09:38 Global Expansion and Environmental Impact

Transcripts are autogenerated. May contain typos.


[Music] I'm the last thing between you and lunch I think so there one more okay good then uh I'm not the last thing between you and lunch so uh I'm going to talk about Bitcoin mining outside of the US um and I want to start with this chart this is a chart that shows Global hash rate and think of it as the total amount of compute power that the Bitcoin mining industry has deployed this chart is from 2018 to 2023 and it shows that the hash rate has increased Eightfold over the past five years but that only tells part of the


story because at the end of the day you also have this concept called Bitcoin to mine Bitcoin doubled at that point because you received half as many Bitcoin which meant that the difficulty in this period is actually increased 16-fold because we are miners who are mining in a zero sum game to get a finite number of Bitcoin that are paid to us as a subsidy for every block we receive today that's 900 Bitcoin a day in April of next year it goes down to 450 a day and all this power is vying for that finite number of Bitcoin unlike


oil and gas where you sit on reserves that you can decide to pump out of the ground or mine depending on the pricing in the market here if you're not mining you're not getting any Bitcoin and do Bitcoin go away other people are getting them another interesting statistic is in 2013 at the beginning kind of of the mining craze it used to take roughly 13 days if you would using a PC computer to win a block in 2021 roughly in the middle of this chart it took 10 years with a PC computer to do the same thing along the


way technology has advanced making going from PCS to gpus to now special purpose as6 that are in their third and fourth Generations this is a business that gets more and more difficult every day as more people enter the business get more and more difficult every four years because of having there is not an industry like this in the world where not only are your commodity prices controlled by the market but your input costs are not in your control other than your energy cost everything else is really in control of the market based on


how many other people are in this market this used to be back in its early days a hugely profitable business where it would take you three days to earn a payback on your investment in the equipment you'd put in now that's somewhere between 18 and 24 months generally for the industry so how does this apply to this the topic well if you go back prior to 2021 70% of all the hash rate in the world was located in China why the machines were there cheap power you had access to coal in the winter you had Hydro in the summer or


spring seasons and so it was easy to mine another a lot of Regulation plus this was a great trade for people in China you invested in Bitcoin mining with local currency and you received Bitcoin which effectively allowed you to export your Capital without having to do anything regarding export controls and this was a reason why the government of China decided in 2021 they needed to ban Bitcoin mining with Bitcoin there's a unique concept which is that technically if somebody controls 51% or greater of the


hash rate they could in theory harm the security of the network and in theory when China had over 20 over 70% roughly of the hash rate had the government been able to control and nationalize this they could have had an exploit but by effectively Banning mining something happened and that is that all these miners had to shut down in China and move elsewhere though today still there's roughly about 20% of mining happening in China you can see here on the chart the global hash rate dropped 70% almost overnight when this ban was


announced and those miners went to two places primarily they went to Kazakhstan because there was cheap power and you could put your miners in trucks and drive them there and they went to the United States why did they go to the United States well in the United States you had inexpensive power in States like Texas where you had deregulated markets you could bid for power and they had built huge amounts of renewable energy that was stranded it was either stranded because the grid connections to these renewable sites didn't provide for them


to sell enough energy but more importantly so much renewable energy had been built that you had excess energy capacity in the middle of the day when most most of this renewable generated energy which was also the lowest point of energy consumption in the day in Texas and so this energy was effectively negatively priced so with good easy regulation it was easy to get land there was plenty of power available miners flocked to Texas and today in Texas arguably over 30% of mining capacity in the US is done in Texas great low prices great


environment there is so much mining capacity in Texas today that when the grid needs energy instead of using peer plants which are gas fired plants that typically kick on to balance the load in the grid Bitcoin miners can shut off up to two GW of power and give it back to the grid which means that during winter storms when heating is needed or during summer heat waves when air conditioning is needed Bitcoin miners can respond in 10 minutes much faster than a gas fired power plant can kick on a peer plant load up and go and if you look at energy


markets this has a huge impact on pricing because it normalizes pricing the other impact it has is that the battery vendors who are trying to sell Battery Technology to large grid utilities which can cost a grid operator up to $2 million a megawatt all of a sudden you have Bitcoin miners who are willing to take on all of the CeX who can shed load at an instant and effectively provide the same service as battery vendors so interestingly enough in Texas you have this perfect example of how Bitcoin mining has become an


integral part of grid stability and this story is now starting to move from Texas to other places in the world so in the early days miners looked for lowcost energy and primarily operated in cool climates cuz miners typically used air to cool them now miners are seeking not just low cost and abundant energy but primarily renewable energy mining went from being 70% based on coal and fossil fuel to now being almost 60% on a global basis based on renewable or sustainable fuel sources they also seek friendly regulatory environments and typically


economic incentives so where else can mining go to expand and support energy infrastructure structure because nowadays there are new technologies like immersion which allow you to put miners essentially in a liquid and keep them cool regardless of the temperature and the environment and I'll talk a little bit more about this regarding our facility here in UAE in Partnership that we have with Z2 but mining is expanding globally because the energy grids need it too so for example in UAE we just inaugurated together with


our partner 02 a facility last last week in Abu Dhabi which is 200 megaw together with a prior facility that was opened in July that's 50 megaw total of 250 megaw of Bitcoin mining capacity that effectively can act as a load balancer and has acted as a load balancer for the grid this past summer these miners are all in immersion systems which keep them cool even in 55° Sea ambient temperature and 95° C 95% humidity very hostile environment for technology products but it was the perfect proof point to show that you can


take Bitcoin mining use it to stabilize a grid where you have this asymmetry in demand which allows that grid to operate in a more balanced fashion because energy demand is not constant during the day it varies and it's very hard to call a gas plant and say hey I need an extra so many megawatts of power it takes time you can call a Bitcoin miner and say hey I need an extra so many megawatts of power they just shut off and then an hour or two later when the demand is gone they can fire up again it's a great


way to maximize profitability of energy grids provide more stability to energy grids and more importantly provide a great return on investment for deploying renewable intermittent energy like solar and wind so in the UAE because of the temperature differences uh between winter and summer you have to have capacity to cover maximum demand nobody wants there to be a blackout but that's wasted capacity in the months when it's not needed and that's another place Bitcoin fills Paraguay South America why Paraguay huge amounts of


hydroelectricity they built a hydroelectric Dam together with Brazil one of the largest in the world that now has been paid for Paraguay has very low energy consumption on a per capita basis yet they have access to all this energy and they have to sell that energy at a loss to Brazil because they don't have demand for it and so the power of utility is essentially losing money on a consistent basis by now opening up that excess capacity to bitcoin miners they're at least able to break even and more importantly they get grid stability


so this is very important for the long-term energy infrastructure play what about about Africa in Africa you have very similar problems they different you have built micro grids that in and of themselves can be very unstable and by adding Bitcoin mining to micro grids you can stabilize those grids especially as you bring more and more renewable energy that's intermittent this provides greater and greater grid stability more importantly Bitcoin mining can offer other advantages other than just supporting energy infrastructure


Bitcoin mining can mitigate methane methane flare whether it's oil field whether it's landfill gas whether it is biomass is a climate problem and if you can mitigate that methane convert it to carbon dioxide by burning it and generating electricity you are essentially mitigating something 80 times more damaging to the environment over a 20-year period than carbon dioxide has a huge impact positively on on the environment you can do landfills you can do sewage you can do all sorts of things with this you can repurpose that heat


Electronics generate heat you put 1,000 watts of energy into a Bitcoin miner you're going to get 950 to 975 watts of heat out of it 60% of consumer use of energy in cooler climates is for heating the home and cooking heating water bathing if you had Bitcoin miners in every home I know it sounds like a dream you could not only subsidize your electricity but you'd have free hot water and you'd have free Heating in the home but now what about the industrial uses of that energy we have a pilot going in the


state of Washington where we are heating water to do shrimp farming on an agricultural scale you can take Bitcoin mining go into a developing country use it to stabilize the grid more importantly use it to generate electricity because you're using biomass or some other fuel source and then use the heat off take to create protein products uh heat hot houses you can even use it for water desalination Bitcoin mining becomes really just a utility between power generation and creating food and other products that can benefit communities


throughout the developing world and even in the developed world and so we believe at Marathon the part of our role is really changing Bitcoin mining from just being this thing that generates Bitcoin to being a positive factor in helping countries develop their economies providing better services to people and creating more stable energy infrastructure thank you very [Applause] much