Transcripts are autogenerated. May contain typos.

00:00

Bitcoin miner Marathon digital has teamed up with Nadal power for 280 kilowatt pilot mining project in Utah that he's using methane gas generated from landfill waste to power mining operations joining us now to discuss is Marathon digital Holdings CEO Fred teal welcome back to the show Fred great to be here all right so this is uh a big move for Marathon digital talk to us about how this works so essentially what we're doing is taking methane that is emanating from a landfill think you're trash basically as it rots in a landfill

00:37

generates methane gas landfills have an obligation to collect that gas generally but only about 50% of landfills do that and do something to mitigate the methane the other 50% of landfills just vent it into the air methane is 80 times more damaging to the environment than carbon dioxide and so we believe that longterm Bitcoin miners can become um essentially energy negative meaning that we consume energy that truly is wasted and we're not using energy Off the Grid we're not using energy that is coming um and has

01:11

been generated to power anything for consumers or industry but rather we're consuming this type of bad energy so we take methane gas coming from the landfill convert it into electricity and use that electricity to power our miners so Fred uh welcome back there of course the it's a great idea um and there obviously have been other uh examples of methane being harvested throughout the United States and all over the world really but you guys are a for-profit company so what are the costs for you to actually go out and try to harvest in

01:49

this in this one case that that uh your most recent uh your most recent project what are the costs how much Bitcoin can you expect and what what kind of RI Roi are we looking at here so here's a great way to compare it imagine traditional Bitcoin mining operation you're paying 3 to Four Cents for energy and then you have hosting operations cost on top of that so let's say it's costing you 5 to 6 cents a kilow hour to mine Bitcoin all things being equal with landfill natural gas or as we call it lfg you can

02:24

essentially lower your electrical cost considerably so you could get your all-in cost down from 5 or 6 cents to maybe under 4 cents so there's a huge Roi for us because it lowers our cost to mine Bitcoin the other Advantage is that methane doesn't get curtailed like energy does for example in Texas when miners are being compliant with the electrical grid and they shut down production to provide more electricity to the grid with methane landfill gas it's coming out of the ground all the time so you can mine 247 365 very high

02:57

uptime and if the cost is you know 4 cents or less then we've just lowered our cost to mine Bitcoin by In This example 30% that's a considerable Roi now so a couple of things here first of all what you have to have some costs right you have to set up the facilities I assume it's not already in place you're you're paying to build a a a way to mine this how much is that costing how does that get factored into all this and how long is it expected to last so the duration of the gas coming out of

03:32

the landfill could be 20 30 years uh it all depends if the landfill is active or not active meaning they're continuing to refill add more trash to it but definitely longer than the life of the miners we're deploying you know the average life of a mining Center data center is from a rig perspective five years before you have to swap out the rigs because they get old and they're not as efficient as the newer rigs are and the infrastructure May last 10 15 years in this case it's pretty similar the infrastructure will last 15 to 20

04:03

years um you're generating power off of the methane using uh a special type of generator in a traditional Bitcoin data center you're having to buy substation equipment power Transformers all of the similar types of equipment from a cost perspective as you do to generate electricity off the methane so the capital expenditure is not that dissimilar the challenge is you have to have access to the methane so you have to have relationships with the landfills the other Advantage you get is when you mitigate methane in some areas you're

04:38

able to receive essentially credits for that mitigation you're generating carbon credits to keep it simple uh rins and reck as they're called those can be sold and that subsidizes your cost so in this case in the in the Utah it is Utah right uh what what's the ROI on this expect a given bitcoin's price to around let's say $34,000 uh yeah I'm not going to go into exact numbers because it you have to compare it to something else but essentially we're looking at increasing the profitability of mining at this site

05:16

by upwards of 20 to 25% compared to any one of our typical data centers now granted this is a pilot doing this at scale has yet to be done but our goal is to build out more and more of these sites one of the Specialties we've developed is the ability to do small sites uh with low Manpower requirements which gives us access to many more sources of energy like this than just traditional data centers I I I guess my question is are are you covering let's say loan costs like let's say I'll throw a hurdle rate out of 7 to 10% uh

05:50

assuming that's a borrowing cost you guys have I I I don't know I'm just throwing that out there are you able are you able to cover that and then some oh absolutely yeah are typical cost of capital that we use for evaluating any project the hurdle rate we internally use is about 22% and so you're you're more than 22 you're doing better than 22% yeah okay Fred how are you going to determine success here what's going to make this pilot of success for you and see Marathon build out more uh sites like

06:22

this so uptime obviously is the gas flow consistent uh what are the uh maintenance requirements on the equipment are they different so you have generators here compared to having substations and Transformers in a traditional data center so it it's really a pilot to see what the operating um expenses are and if they compare and if they're better and then really for us to identify how we can do this better um as an example when we did our first site in the UAE we did a 1 megawatt pilot where we really fine-tuned what we were doing before we

06:58

built out the full 200 50 megawatts there same thing here we're doing a small pilot we're experimenting over time we'll likely try different generators we'll try different ways of cleaning the methane Etc to make sure that we really have it dialed in before we expand and do this at scale but in the US there are hundreds of landfills that are viable sites for this type of mining internationally there are huge landfills and we've been in some early stage discussions with sovereigns in count where they have huge landfills

07:32

where they're not doing any mitigation where using this type of system could help them comply much more with environmental concerns and generate extra revenues for them as well as generating very lowcost Bitcoin for us so of course the the obvious question here is why haven't they used uh methane as a way to generate electricity before you guys came along if it's so if it's so beneficial uh obviously you you're a big Electric you're you're a big electric consumer but so are cities and

08:05

why haven't power companies gone into uh wa sites and said hey look you know what this is this is a way for us to uh to to make some money and and and deal with the towns what what how are you guys able to do this or why are you guys all of a sudden coming in why haven't the cities done it before so as I said earlier about 50% of the landfills are VI able for this type of operation the other 50% currently do generate electricity because they're connected to transmission lines they have enough gas

08:38

and they're doing it at an industrial level so if you look at that 50% that currently are using the gas for something productive it's either being used to generate electricity which is then being injected into the Grid or it's being refined and injected into natural gas pipelines and so we're using the 50% of landfill gas that is stranded meaning they're too far far from a transmission line they're too far from a natural gas line and it's just impractical for them to refine the gas

09:05

for natural gas um or to generate electricity at scale again one of our core competencies nowadays is that we can do very small scale Bitcoin mining sites profitably because of the technology we've deployed in our mining capabilities so we believe going forward there's going to be a huge opportunity not just in landfills but with biog gas which is another thing look at all the agricultural waste that comes out of food production dairy industry uh corn production Etc there's huge amounts of raw material that is organic that will

09:39

otherwise become methane producing material that if you can convert that into energy essentially could create energy negative Bitcoin which is something we're very focused on so so so in other words these are these are uh sites that basically they're they're long forgot they're forgotten by the energy industries that you're trying to impractical they're too small too far away um and or just produce too little are you exploring any other sources of renewable energy and why why if so why is this better so we're

10:16

exploring a wide variety of energy sources so in some cases you'll see us mining off of wind energy which we do in Texas and uh North Dakota today uh you'll start seeing us mining off of hydroelectrical dams there's a huge amount of stranded hydroelectrical capacity in the world today more so internationally than in the US uh there's a huge amount of biomass as I mentioned you know landfill is one type but um you have biog gas coming off of all sorts of agricultural food processes and um dairies Etc you know a lot of the

10:48

methane produced today comes from manure uh you know dirty word it's true and if you could take that manure capture it and essentially um use that methane to produce energy which some people do actually in the world today already um you could generate a huge amount of electricity and again making Bitcoin mining energy negative that's one of our goals uh we also if you're dealing with manure have you thought of of operating out of Washington DC well that's swamp gas as they say but uh yes that would be an

11:23

option had to get a nice Lawrence joke in there at at the end of this FR thanks so much for join it's always a pleasure having you on you're very welcome thanks that was Marathon digital holding CEO Fred Thiel