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The Halving and the Future of Bitcoin Mining with Charlie Schumacher

January 14, 2024

Explore the future of Bitcoin mining with Charlie Schumacher in this conversation. Learn about Marathon's unique strategy of vertical integration and how they aim to add value beyond mining. Dive into the discussion about utilizing excess energy for various purposes. Gain insights into Bitcoin's energy consumption and its market-driven nature.

00:19 - Introduction and Discussion about Marathon's Plans

5:30 - Current Block Height and Hash Rate

10:26 - Marathon's Shift in Strategy and Diversification

19:01 - Energy Harvesting and ShrimpCoin

24:23 - Potential of Bitcoin Mining in Africa

28:14 - Acquisition of New Mining Sites

30:47 - Challenges of Operating Own Facilities

34:38 - Constraints in Bitcoin Mining: Capital, Machines, and Infrastructure

40:36 - Balancing Long-Term Sustainability and Shareholder Value

44:57 - Advantages and Disadvantages of Being a Public Miner

48:09 - Dealing with Backlash and Difficult Messaging Situations

Transcripts are autogenerated. May contain Typos.


[Music] hello everybody this is Hash up once more I'm today joined by Charlie schuma is that pronounced correctly Charlie you can say it better than I can it's the German pronunciation like the race driver right um today we're going to get into what Marathon does um or has been doing and is still planning to do before the Haring I think going to be very interesting episode so thank you very much for coming on during the holidays while we're recording it's the 28th of of December so I really


appreciate you uh being here between Christmas and the new year I know that's always a a tough time to make appointments so so thank you very much um before we get into it Charlie what's the current block height can you give us that please oh uh off hand uh I don't know you read it to me a second 8 23300 8233 0 um the current hash rate uh 30-day hash rate is at 500 xra hes per second steadily climbing we already reached that that yearend Target of 500 uh that I know some people have had and the hash price currently sits at


10379 um and the hash price for May according to the Lexa Lexa Futures forward hash price it's just at around 50 where do you think it's going to be at it's 50 reasonable would you we buying here or not uh 50 sorry 50 by what time by May yeah $50 per P yeah uh for hash price uh that seems aggressive but it all depends on like what happens to bitcoin right um the that's really like the driving function and hash price over the short time frame uh right because it's There's real world constraints in mining it takes time to


buy miners buy facilities build them out like add miners online so it really just completely depends on what happens to the price of Bitcoin over the next few months um for me that maybe feels a little aggressive uh by May um but by end of year uh who knows I wouldn't I certainly wouldn't hate to see that it'd be great for uh the mining industry and for marathon and in the last you know the last time after having event and we tend to see these like very very profitable times in mining where you get


these short intervals of you know 80 90% margins in the businesses so I think everyone would like to see that uh I think there's a lot of people hoping that happens uh we certainly would love to see it but also you have to plan for things not going in that direction right how that how's that feeling how's that feeling comparison Now with uh with the hash price going up so much because of the the full blocks that we're seeing everybody spending their their Christmas money to do transactions on the Bitcoin


blockchain right now yeah yeah everyone's everyone's trying to Mint nfts or something for uh for Holiday I mean as as you don't really care you know everybody that Minds Bitcoin is like yeah okay I'll take the extra money it's just uh maybe a suppos to come no it helps substantially and I think it's uh it's well so in the near term it obviously helps because like for the same amount of like hash power input cost you're receiving more Bitcoin and marathon's actually in a particularly


unique position in this instance because we own our own mining pool so uh because we have so much hash rate uh and because we own our own we tend to capture like a large percentage of blocks right in proportion typically with the amount of hash R we have relative to the rest of the network but what's unique about like our situation that we're seeing right now is we don't have to share the transaction fees with other people because we're the only ones in our pool so we're earning like a much higher


amount of Bitcoin this month at least it looks like that so far from the data like the number aren't final yet right but um uh relative to if we had been in a pool with lots of other people in it um so it's like a uniquely like good month uh not just for the industry but for Marathon as well and then you know if I think a little bit longer term or more strategically one of the things that's very encouraging about it is there's this theory that at some point transaction fees have to outpace block


rewards for mining to remain profitable and for people to continue Mining and uh obviously no one knows exact if that's actually going to play out but it has been nice you know at least twice this year we've had these periods where transaction fees have gone up quite substantially and so you are it's there's maybe some indications that like that might be feasible right or it's starting to crystallize that a little bit in people's minds that that's something that could potentially happen


down the road so it is it is encouraging I would say like near-term for the business but also potentially long term for like viability of Bitcoin mining um as a as an industry why did you guys decide to do do that to go with your own pool Why did no other publicly listed company go that route yet there are a it's changed a lot there were a lot of reasons for it if you go back to very early days part of it I would if I actually if I I can actually draw a consistent through line part of it is that like we're really big


on trying to own our own technology and having a lot of uh input over what we think we can do with the company from a technological perspective so today that's like that's like very clear across the business uh we're the only minor who has this vertically integrated Tech stack so we're investing or developing pieces of Technology all the way from the pool down to the Asic um so owning our own mining pool uh working on our own emerging equipment firmware and then also obviously we have an investment in a uh Bitcoin mining uh


Hardware developer which is orine so we're like very integrated from that perspective if I go back though to the early days earlyish days of marathon they feel forever ago they were two years ago right something like that um part of the reason we developed our own pool was uh we there was this idea actually I don't know how many people know the story but uh it's it's funny because it's kind of come back up in conversation but there was this notion at the time as institutional investors were getting introduced to bitcoin that


Bitcoin was for Bad actors and for money laundering and terrorist financing and it was this you know sketchy dirty thing and so uh to try to provide transparency into that process we wanted our own pool and we particularly had people asking us if it's possible to filter wallets that were on the ofac list like can you filter transactions is that feasible um we didn't know at the time we thought like we're like sure let's try it if there's institutional demand and interest and uh let's let's see if


that's possible uh it turns out so that was like the original Genesis actually of us having our own pool uh which caused uh quite a bit of like uproar uh within the Bitcoin community and for really good reasons right uh you're questioning like bitcoin's fungibility you're questioning like the you know the principle that everyone should have the right to just like trade in Bitcoin and so it it really violates some of the core principles that a lot of people in the industry have and so it turned out


to be this like hugely unpopular thing of like trying to uh filter transactions with a pool it also turned out just not to work technically and it turned out that there was no market for it like people actually weren't interested in it they were just talking about it but they they wouldn't pay a premium for it or there was you know there was no monetary value in it so we like shut that down really quickly and then we were left with operating our own pool didn't quite know what to do with it um for a time we


had other people join it and so we were trying to uh I don't think anyone really quite understood the economic value in pools yet and so there was just a lot of ideas floating around uh so there was a period of time where other people were in the pool uh honestly for like accounting reasons that became like quite a nightmare for us um and so we ended up uh just going back to Marathon being the only member in the pool uh which with the amount that we were intending to grow and that we have grown we thought that it was advantageous for


us to have our own pool we weren't entirely sure of what all the benefits were going to be and to be honest still don't know 100% of them but so far it's actually ended up being like quite advantageous for us in in in instances like this month where transaction fees are extremely high yeah I mean you do save over time that two or 1% or even less I don't know what you what you guys would regularly pay um of of of paying somebody else right and I think the the room to pay somebody else's margin with


your Revenue um becomes smaller and smaller uh as we as we go into more and more hars right so but it would be interesting that would have been my follow-up question now to to say okay if you're going to exclude C transactions right what would be next like first it's ofac transactions okay what what other transactions would have to be filtered out over time potentially and then how much of a um disadvantage would you have financially over other pools where where people would mine those transactions and


then earn more money mining than you guys would but it's an interesting game theory and I think yeah um I think it's a very positive thing that at the end of the day um miners that that act according to the game theory and the the free market principles have an advantage over those that do not I mean we currently see this playing out in the space I'm sure you follow it a little bit we don't have to get into that now around the whole ordinal debate like who who includes them who doesn't what


miners build their own blocks and all of that I think it's it's it's it keeps the keeps people on the on their toes right from from this perspective that I have from the African side where you where you work with a lot of people that do not have the financial means to pay $30 for Bitcoin transactions or even 10 or five right you you start to wonder um how much education really has been done and I personally believe in the in the in the thought that it drives second layers but um all of that aside maybe we


can get into that another time um I just wanted to talk about the general strategy that you guys um are following a bit more because as you already said you you have your own mining um gear that you're developing you develop your own firm where you have your own pool typically Marathon has always done a a hosting um style business right where you pay other people to run the infrastructure to run the machines for you um as I just said I think the the margin to do that gets gets Slimmer and Slimmer or or the room to do that gets


Slimmer and Slimmer and so now you see a bunch of other things right you guys just went into into Paraguay um you guys just bought a 390 megawatt mining s i I saw that piece of news let's let's talk about Paraguay first why why Paraguay after the Middle East what's the strategy they long to you know a big piece of it we're not the first people down there I'd love to say that we were um it's funny when we first uh found out about Paraguay uh and we started vetting it it was kind of early in the process and then within a


couple months it was like several other miners were already down there and and uh and Mining there so Paraguay is very unique because it has a huge amount of stranded renewable energy uh specifically there's uh the it I'm G to pronounce this incorrectly but I think it's the iapu dam um it's the second largest dam in the world it produces 14 gws of power per year half of that goes to Paraguay half of it goes to Brazil so I think it's interesting is the entire country of Paraguay only consumes about three


and a half gigawatts of power per year so and not and because of lack of transmission lines not all of that power comes from the the dam itself so over 50% of the power that the dam can produce for the country of Paraguay has no off-take for it it's wasted so as an asset that's a highly unproductive asset um it's very and therefore it's essentially it's you know an economic drain right so the idea was if you can take Bitcoin Miners and establish them there and they can soak up that extra


capacity and serve as a base load customer for that power asset they can help keep that asset it can make that asset more profitable and help keep it running uh for the people who would actually be drawing power off of it and that idea has now been around for a little while I would say maybe like two years year and a half or so in the Bitcoin mining space it started a lot in Texas because Texas has a lot of uh stranded power there's a lot of wind in Texas uh Texas is also very open to Bitcoin mining and interested in the


grid balancing piece of the equation uh which was also what led to our project in Abu Dhabi was they were they had a lot of Excess power they were interested in using Bitcoin mining for grid stability and balancing load um but it turns out you know as people started to look outside of Texas or capacity started to get soaked up there the question became like well where else in the world is there Excess power uh it turns out that there's quite a bit in certain regions you just have to weigh uh one you have to find it you have to


be looking for it right and aware of it uh and then two you have to also then weigh uh the different costs associated with it or the different risks of operating in different countries or internationally uh Paraguay kind of fit the bill for us uh it was stranded Renewable Power so it was low cost for us uh it allows us to provide a service to the power provider there uh that they needed which is great and I think how people should start to think about Bitcoin mining um and then it's also a fairly stable regime now um and so the


the low cost for us with the regime stability was like highly attractive like situation and and I should say it's a it's a smaller project as far as our deployments goes uh but it's something that we're interested in scaling up if it does you know work the way we expect it to is this a um model where you where you own the infrastructure again yourself or is this a hosted mining model so this is a joint venture it's similar to what we did in Abu Dhabi so we have a local partner down there uh


they're called penguin digital and they do a lot of work in Paraguay um uh not just with the Bitcoin mining space but also with uh providing like educational courses for people and trying to like develop uh the intellectual expertise of the of the country which is like great we really like their the way they're very Mission oriented in that uh in that way and Bitcoin mining is just a component of their sort of mission if you would um so it's a joint venture we contributed a certain percentage of


capital they contribute a certain percentage of capital and that can be in um that could be like dollars or that could be in equipment right that could be an infrastructure and minors things along those lines okay interesting um and how do you see pricing in in Latin America and Paraguay especially compared with with the Middle East and the us because from my standpoint the US is actually super competitive still when it comes to to pricing uh and especially adjusted for risk when it comes to Bitcoin mining at least that's my my my


feeling on the situation you might have a different one if you if you could get get into that a bit no I think that I think that's true that and that was that's a surprising thing and still this you know this misunderstanding of from people who aren't in the industry they just think Bitcoin miners are taking electricity from consumers and stuff right that's still a bit of the knock you see in the in the mainstream but there's just like that's obviously untrue because it would be far too


expensive for us to do it you know uh Bitcoin miners can't pay 17 cents a kilowatt hour like it doesn't work so they have to go to where there's the cheapest energy possible and that has basically proven to be stranded power um it happens that there's a lot of stranded Renewable Power because if you think about there's sort of this power stack you can think about um you have base load power which is like coal and nuclear things that are very difficult to turn on and off and are highly very


very reliable then you have natural gas which sits on top of that a little bit easier to turn on and off also very reliable and then on top of that you have things like wind and solar which are intermittent and easy to turn on and off so those end up being uh curtailed or turned off if there's no off take for that because of that if there's no off take for that uh the power providers who run like wind and solar plants are willing and if you go to the right places to offer it for extremely cheap power uh you know a low I mean there's


there's places in the United States where you can get you know 4 Cent power pricing or lower uh what's also interesting though is like if you consider the question though is always like where can you find cheaper power right um it's having tapen margins get tighter in this industry the easiest thing you can do is reduce your costs you're always trying to reduce your your input costs and energy is by far the biggest component of input costs in running a Bitcoin mining operation so something that we've been


looking at is uh using methane from landfills to Bitcoin miners and we have a small pilot project that we announced uh I think at the start of November um that's in Utah and it's running on a landfill there and actually of all of our sites I don't think we've disclosed the exact power pricing there but of all the sites we have that's the cheapest energy that we have um and it's kind of and it's and the reason for it is it's it was a wasted byproduct and a headache for the landfill which is methane that is now


being used as a resource for Bitcoin mining so you know resources are things that can be used productively otherwise they're not resources and so we basically took this thing that was a waste in a headache which was methane and then turn it into a resource uh which is pretty amazing and because of that and because it was a headache it's it's something that we can use as very efficient and cheap power uh it also has the added benefit of reducing methane emissions which is a huge environmental concern I think all of this leads back


to to the Haring not just this one but obviously also the Haring down the line right as you just said again we the margins get Slimmer to pay somebody else and so you guys doing the methane mining you guys having the pool you guys diversifying to other to other areas means you thinking long term um shrimp coin is also one of those um projects I think can you tell people a bit about that because I mean we we've covered methane on on the podcast before um but I mean there's there's a bunch of people


that are looking at that as well um but yeah essentially the idea is what added benefit can I have with my as6 that ideally somebody pays me for right in flar gas and methane mining you might look at CO2 certificates whatever you may think of them uh and shrimp coin is another one of those what's what's the idea around that yeah it kind of you know to be honest I think it starts with a bit of a shift in how you just think about Bitcoin mining or think about the industry as a whole in the past it's been uh this very


sort of capitalistic uh approach to just like maximizing profits which I'm all for and fully support but what you end up doing in that instance is going into conversations or thinking about problems is just I want to maximize my Bitcoin production make as much money as I can where can I find cheap energy someone give me cheap energy uh what we're starting to realize though and I think you'll see the whole industry kind of like shift around this over the next couple years is that actually Bitcoin


mining is a technology that can solve all sorts of different problems and there are all these positive externalities that come off of Bitcoin mining but if you think about those as services and who could be potential clients of those Services it completely changes your perspective and allows you to get like significantly more creative about how you utilize Bitcoin mining and where you can deploy it so one of those is this idea of shrimp farming uh which you obviously like mentioned and have like read a little bit about um we're


kind of putting this under this broader category as a company that we're calling energy harvesting so uh basically using uh the heat from our operations or something else to create a new service or benefit um so there's a lot of services there's a lot of things out there like uh I think it's aquaculture like shrimp farming that require heat as like part of their in as part of their operations and it's a cost for them it's an input cost well it happens to be a byproduct of Bitcoin miners Bitcoin


miners are extremely efficient at converting electricity into heat they're more efficient than some space heaters which are designed to do nothing but convert electricity into heat um and so the idea came well if if we can sell that as a service to people and we can add value there uh then they could pay us for that heat and that can help us reduce our costs it also could help us like get access to power or places that we hadn't thought about before so shrimp farming is one that's super interesting


um basically what you're doing is uh you have to use immersion technology to do this um but you would be uh using the uh the the immersion liquid that's like warmed from Bitcoin miners to like uh run through the farm and you're using that to like heat tanks to keep them at a certain temperature to like grow protein um people also do this with green houses which is another thing that we've been looking into we haven't done that yet but that's like that's not super uncommon in the space um very


interestingly the big problem with some of these projects is that we create too much heat uh Bitcoin miners are like too good at creating heat so you need like really large scale uh green houses or shrimp farms uh if you want to do this which is actually a great problem to have right um your hyper doing that another one that's interesting is like heating buildings um so there are places in the world where uh Scandinavia for example where they use hot water pipes throughout cities uh or to heat buildings and heat infrastructure and


right now that's that's an input cost for them right um but we have this as a free service that we could provide so there's a world in which you you basically start to look at these things and you say well where else can I add value as a as a company um and if you can do that that person will pay you for that value and as a Bitcoin miner really what that's doing is subsidizing your energy costs and so that helps you as a business uh get much closer to zeroc cost energy which is like the Holy Grail


in Bitcoin mining um because if you have that then you can stay mining essentially forever right so by I think by reframing things and thinking about Bitcoin miners as technologies that can provide all these different benefits to lots of different Industries it allows you to get much more creative about how you think about your input costs and your energy uh as a business yeah you can to rephrase it you can stay mining as long as nobody else or not the majority of the network gets paid more than you do per kilowatt hour consumed


right um that's why I that's why I like the the the nordics in Europe so much because you've got um great load response programs um you've got great District heating networks you've got cheap power uh perspectively in Northern parts of the Nordic in EU so that's why I I like to look at that region and follow it quite closely to see what kind of projects develop there because at the end of the day that that's that's where I think it's going to go another reason that I'm very focused on is Africa um


and I know you guys have have have looked at that as well because nowhere in the world do you have the situation of a completely underdeveloped grid infrastructure coupled with enormous amounts of renewable energy um and that makes it an IDE breathing ground for for Bitcoin really um what sort of steps what can you say about Marathon going into into Africa and and moving into that part of the world if you guys explored at all yeah we have our team was in um Kenya earlier this year and has had some like very productive conversations uh


with some folks in country uh we try not to talk too much about projects that are like in the works or may come to fruss till they till they have so I don't want to go into like a specifics but it is a really really interesting place um because there is a surprising for two reasons one there's a surprising amount of energy that's already there that's being underutilized uh there are Hydro dams it's a similar situation in Paraguay though different scale there are Hydro dams for example that people


that they don't have enough off take for and so those projects aren't profitable and if they're not profitable they're not going to run and anyone who is buying off of them is suddenly going to be out of power so that's not a situation you want you want to increase you want to increase the profitability of those projects and the easiest way to do that is Bitcoin mining right it's a it's a base load consumer that would love cheap power and if you're a power provider you'd rather have some revenues


than no revenues um that's also where it becomes really interesting with uh funding new renewable energy projects or just new power projects in general and the industry likes to talk about this like you know within the echo chamber there the Bitcoin mining industry and uh I don't know that that many people in the energy space get yet but we're certainly working on that as a company is trying to help educate them that if you are looking to build a new energy project um it's super expensive you


don't necessarily know if you're going to have consumers for it um transmission lines is a huge complication too in the US it takes an average of five years to get transmission connection for energy projects and so if you've built your site and you don't have you know transmission connection that's years of wasted uh revenues right huge huge opportunity cost and so if you partner with a Bitcoin miner as you're building out your new project basically what you do is you have a guaranteed customer


from day one when the site is up and running that you can start utilizing um and then you can worry about transmission or then you could worry about you know building out uh uh other infrastructure that would utilize the power so it's I think the I think that's a huge opportunity in Africa both those which is stuff that we're super excited about either Inc increasing profitability of current projects which is going to allow energy to stay online or incentivize the growth of new energy so that more people have access to power


in country I think both those are really exciting yeah absolutely it's something that that only Bitcoin mining can do right and something um the possibility that we didn't have at this scale as as Humanity basically eight years ago right the the the first mover the first consumer last consumer uh energy model where you even have projects in Kenya right that that are only that that investors typically don't touch or foreign aid funds or whatever don't touch because there's no there's no Financial feasibility


there right and now come Bitcoin miners come along say hey I'll take actually I'll take those five megawatts of stred power gladly at three four cents um let's go you know and it changes everything um yeah but that's that's all still a smaller scale I don't know how many megawatts do you guys have under operation currently do you have that up top uh let's see I'm GNA yeah we just doubled our capacity basically uh like a week ago or so with this acquis with these Acquisitions that we made so we were um


around a little under 500 megawatts or so uh maybe 400 of capacity and then we're you know we're closer to about uh just under a gwatt we're about 900 Mews after these Acquisitions that we made insane you the site you bought I read was 390 megaw in total yeah we purchased two one is in Kerney Nebraska it's a smaller site and then the other is in granberry Texas both of them are former compute North sites uh which was our first big hosting provider so we're actually super familiar with both those sites we've had


miners running in Cy Nebraska since I think 2018 like some of our first deployments were there and then uh we've had miners running in Granbury Texas for well over a year at this point um but you know with compute Nords bankruptcy those were taken over by a different company called generate Capital um which you know they just didn't really want to be in the industry it's not like their expertise or their space that they wanted to be in so we had an opportunity to to purchase those uh which came up


which was great and fits super well with our strategy of uh speaking of the like really important to reduce costs right um to protect you from downside by owning the sites we have a big opportunity to do that and also the timing works well for us because we've spent a lot of the last year and a half developing our own technology whether that's the pool or it's emerging infrastructure like what we've deployed in Abu Dhabi and if we own and operate our own sites we have the ability to really kind of like utilize our


technical expert pie and like put it to work because we have full control over it as opposed to you know having all this knowledge or having this proprietary technology and going to someone else and say hey please use this uh for us because we think it's helpful um so it's it was a we're super super excited about those deals it gives us a lot of room to grow it really helps uh I think in terms of reducing costs at those sites um and uh gives us a lot of room to kind of play with our own Tech which is like really exciting what


challenges come along with that Charlie going from purely having hosted miners as a company to then operating your own 390 megawatts facility is it a bunch of hiring you guys have to do what does that look like for you internally like how do you how do you manage a complete shift in in the operations of your own machines yeah it definitely we're we're definitely going to be adding to the team for sure you need far more people uh part of the you know the uh advantage interesting component of like the old


asset light model which was just buy machines and Outsource everything was you could stay super super lean as a team um it turned out though like as we found that that wasn't that like was great in theory but in practicality you actually needed the technical buying expertise in house no matter what because you can't in super mature Industries uh you can trust Outsourcing 100% but in newer stuff with everyone's figuring this out as they go and you know this is an industry built on duct tape still basically um you want to have


like that information inh house and that uh that knowledge in house so you understand how to design sites how to vet sites like uh and so we were kind of scaling the team anyways I mean we went we doubled the team in size this year we're up to about 55 employees I think now um but with owning the sites we'll definitely have more people you need more operators right like boots on the ground right um so that's definitely a shift um though I think otherwise it's not other than kind of more uh people I


don't know that it's going to change drastically we we've already been like pretty Hands-On with a lot of our sites the joint ventures we've done were kind of a stepping stone um the side obuby we were instrumental in the development and the design of that site so it's something you know we started pure assd light where we just out we machines and outsourced everything and by the way the reason for that is because of the constraint there's kind of three constraints in mining and we can talk


about that if you want um and those have shifted I think this having versus last having so we've shifted our strategy too um but we've you know we have some of the the people who' built some of the best sites in the world like on our team and so it's just a matter of like scaling that expertise at this point as opposed to going and finding it yeah absolutely I mean what I would what I would have asked next is if if you have a large operation in Texas especially right where where where the OT grid I don't know if it's OT or


not can can be fickle um do you guys still Outsource stuff in the operations or is it 100% in-house like for instance the energy trading part right is that something you then Outsource to to vendors or the insurance or whatever like what parts of your own operations do you do you still keep um outside of your own control and pay somebody else for basically so we're still actually working through like the specifics of that like how much of that is going to be fully inhouse versus how much of that we're going to


be uh you know using outside uh folks for the energy uh trading though I think is something that uh will if we're not fully doing it inhouse we're we have people internally who are experts in doing that who will be managing that process and that actually helps a lot that's not something that we had the ability to participate in um previously uh just by being a tenant at that site but by owning it we can participate in energy harvesting which is usually helpful and can really you know the it can really really help reduce costs uh


at those sites so we're we're pretty excited about that okay nice the three constraints Charlie let's get into it what's the first one yeah so there's so there's basically three there's access to Capital there's access to uh machines and Mining hardware and then there's access to we'll say infrastructure which would be power data centers Transformers switch gear stuff like that if you go back to the last um the last having so let's go back to like 2020 and if you Marathon


was able to scale as a company much faster than its competition and the reason for that was basically because we bought all of the machines before anyone else could so our prior CEO before Fred meric okamoto had this idea something that he had observed in Prior having events is when uh Bitcoin goes up in price after having which has historically happened uh it becomes very profitable to M Bitcoin and this is what you were referencing at the beginning with you know hash price predictions right so in that scenario suddenly


everyone sees Bitcoin mining is this hugely profitable business so they want to get into it so they go out and try to buy all these all the machines and order to start plugging them in what that does though is uh it then means that machines become very scarce so they go up in value they become very expensive so in 2020 the theory was well that's going to happen again so let's go out and buy all the machines before anyone else can and uh that played out essentially is kind of what happened um but also bear in mind that at the time


the industry was significantly smaller and so you could you know just plug machines into a warehouse it wasn't that hard to find infrastructure and power uh today that's very different right we have these like Enterprise scale miners or several publicly traded ones uh it's a much different and bigger game and if you look at those three constraints uh capital is one for many people in the industry fortunately not for us we've got a pretty robust balance sheet bitcoin's price increasing a lot has


helped uh you've seen you know the stocks across the board perform pretty well especially in the last better than Bitcoin kind of crazy so better than Bitcoin which they they tend to do right they uh but in both directions right they have higher beta than the underlying asset um so access to Capital doesn't really feel like the primary constraint though it is always something you're monitoring and you know any publicly traded company you always want to raise money when you can not when you have to um but Access Capital


doesn't exactly feel like it uh machines also does not feel like it today you have far more Hardware vendors in the market today than you did four years ago uh bitmain still has the dominant position but there are other people who are making machines and if you look at the pricing of machines you can buy new equipment today like the best stuff on the market for like 14 15 bucks a terahash so it's machines don't seem like the constraint so what does that mean that means that power and infrastructure is probably the


constraint with how much capacity people have built uh there's not that many places left where you can get 200 megawatt of capacity at 4 cents a kilowatt so part of the logic was well if that's the constraint then you want to kind of go after that now uh you want to make sure that you have homes to put miners so that you can go buy them because that's going to be the more challenging piece of the puzzle it also can be the longer lead time um so it takes time to develop sites if you have a if it's


Green Field right so if there's nothing there maybe you have power uh it can take six nine 12 months to build out a Data Center and you want to do that all when hash price is low not when it's high because when it's high you want miners plugged in and running so a lot of this had to do with very long-term vision of how do you reduce costs how do you build sort of this Diversified portfolio so that you have some uh some deployments that will work very very well in uh bare markets some deployments


that will work better in bu markets and kind of you know build a resilient business that's like the big long-term strategy here but in the near- term it also had to do with what are the current constraints in the industry and what do we think is going to be the the biggest constraint in six months from now yeah I I concur with you on the on the machines part I think this time might be different um around the machines because I I anticipate that both micro BT and bitmain would um anticipate a run on machines as as the


as the Bitcoin price increases and that's why I also tend to say to people look I think cash price is going to incrementally go steadily upwards right the difficulty adjustment is going to keep knocking the the price down but over time I think it's going to increase because the next 500 exes let me we're at 500 xah hases right now right on the 30-day um and and hasher has increased so much as you've alluded to but what people often forget is that the next 500 exes are much harder to do than the


first right because as you said power is scarce infrastructure is scarce you need Transformers you need the power availability you need you don't you don't just need a lot of power but you need power at a cheap price um and access to Capital I'm a bit yeah yeah go go ahead I was just GNA push on that a little uh I actually think it's yes you're correct in terms of power it's harder to add 500 xcess hash but remember that the machines are becoming more efficient okay so you can add hash


rate without having to add power actually fair enough so there is that fair enough yeah if you if you translate it into into gigawatts um that that would make more sense right if you if you look at how many gigawatts the the the network um currently uses at any given moment um yeah just it it just goes into into what you said about the infrastructure being uh being scarce right so what I would like to do is is talk about Capital more um and I would like to ask you what what part that place the the price that you have to


achieve for shareholders the the because you have two motivations right you have the motivation of staying in the game long long term but then you also have uh a responsibility to your shareholders to say hey like we need to do everything to keep the share price High um to to speak very very very easily and plainly um how does that at all does that at all um do those goals fight against each other sometimes of saying hey we have to make long-term decisions maybe take a hit on share price as as a result um and


also how much control do the shareholders actually have over the decisions that that Marathon makes whether it be going into Paraguay or whether it's going into Abu Dhabi or whatever else I think it's um I mean the you know in response to the lad it's the same as any other publicly traded companies right like they're not shareholders don't vote on like day-to-day strategic decisions but if there's very large material things that require like shareholder votes for you do those obviously um but in terms


of like yeah it's an interesting idea like do those does that idea Bute heads of like increase shareholder value but like build long-term sustainable business I think in some people's minds they do and mind they don't those are the those those are the same thing but it just like depends on what your time preference is um and we do live in a world where people have increasingly shorter time preferences um but if your goal is to build a long-term sustainable business and as a shareholder that should be the well not should like that


depends on what your preferences are in your investment time Horizon but um if that's the objective then all the things you're doing should like be through that lens and sometimes that can involve doing stuff that looks dilutive but like that's not really the right term if the capital is being put to work effectively right it's like when startups use the term cash Burn Right like that's a I think that's kind of not to get like too into semantics but like you're not burning cash when you're building a


business you're investing in the business and that requires Capital to do the idea is that you know that that those returns are going to be higher in the long run than today that's why you're doing it you're your goal is not to put money into a furnace um and I think that's the same when it comes to raising in public markets too right like you're using you're leveraging you have different options available to you you have debt and equity and the only reason really any company is public is access


to Capital otherwise you should basically be private there's a lot of complications with being public and debt is not a great option for Bitcoin miners uh we've seen a lot of people get in trouble with that in the past um and if you consider where rates are at today it looks even less attractive than it did you know two years ago right so uh then you're talking about well if we if you want to grow the business and build something that's long-term and sustainable then you leverage your equity and then the question is like how


can you do that in the most efficient way possible that's beneficial to shareholders um so obviously you know you want to be raising at higher valuations and lower valuations um but I think I mentioned this earlier like this is also why as a I think as a public company you always want to raise Capital when you can not when you have to uh because you need to be able to be opportunistic and have dry powder that you can deploy and not find yourself in a position where oh we'd love to be able to you know raise money but you know


bitcoin's at $15,000 and stocks are depressed and it's not a good time you'd rather have done that in a uh in the summer so that in the winter you have stores to make it through basically right yeah it makes sense absolutely I mean what what what negative effects do you see though um or maybe what disadvantages that does marathon have over a large private minor when it comes to um to Bitcoin mining and and the industry and growing do you see any heavy heavy negative side effects that that come with with being


public uh as a minor with being public not really I think it's kind of the it's kind of the opposite and I think that's why you saw so many miners go public over the last two three years because the you know the US capital markets are so robust and they are like extremely helpful if you're trying to run a capital intensive business which mining is um to to raise Capital part of the you know their there are costs associated with being just in general now like there are costs associated with being public like listing's expensive


staying on Exchange is expensive there's you know there's more uh there's more lawyers involved right um there's also um I think one of the challenging things though is if you're a young business or a or a startup it's uh or like growing it can be hard to be public because public shareholders don't always have the same tolerance for risk uh that private shareholders do um so if you're trying to like do stuff that's you know you have to you have to open the kimono every quarter right in public markets


and miners do that every month with production reports actually um and even more so because you can see the revenues of the business in real time right especially with Marathon since we own our own pool so it's I don't really think we're disadvantaged in terms of like transparency the business uh if anything it's actually an advantage to us the difference is so I actually think it's now that I'm thinking out loud and coming to this conclusion I I I feel more strongly that it's beneficial


actually if you're a Bitcoin minor in many ways to be public uh than private but that's if you're at scale because if you're not then you're competing against all the people who are at scale yeah absolutely no it's it's very interesting that you say that I guess um it also puts you uh on the pedestal you you're putting yourself on the pedestal like people can look at what you're doing and you can grow right people can critique you yeah every month and look at your numbers and say this is [ __ ] this is


good whatever um and you can grow on that maybe as well um and get get more feedback than you otherwise would um from from people outside the industry maybe uh um or people that are in the industry that that might not understand what you're doing but still have a lot of expertise um and yeah I just said like did you ever have any backl about any decisions that you guys have taken um publicly when it comes to to to to to project like doing you know what we talked about earlier like you go into Paraguay right that that might be a


risky move to some um doing the doing the the the shrimp coin project where you where you sell heat um or even the Abu Dhabi move like obviously the critique would probably um be immediately visible in the share price right when people when people do not like holding the stock anymore but has there ever been any situation in which you as a spokesperson had to like really uh um work through the nights and make sure everything is is all good yeah tons I laughed because it's like feels like in this industry every


week it's a crisis you know um there's uh so there's a long list uh I've got a you know I've probably got a few fun emails in my in my inbox from from vocal folks uh it does unfortunately tend to be this thing but I totally understand where it comes from where you know when the stock price is down people are mad and they say mean things when the stock price is up silence right like everyone's happy so um unfortunately that is the way like people tend to be motivated um in terms of like difficult things so yeah I mean


the list is like endless if I think about what was probably the most challenging time messaging wise for us though it would have been in the summer of [Music] 2022 um where we were supposed to be growing hatch rate we were trying to bring this uh the King Mountain facility online this was our first big deployment in Texas it was went F behind the meter and that kept getting delayed for like regulatory reasons um and since we weren't the owner of the site we didn't have direct insight into it we didn't


have as much leverage in that situation um and also just you know utilities don't move at the same Pace that the Bitcoin mining industry moves at so you know we're trying to do our best to message when we think the site's going to come online and get as much info as we can but we don't have 100% transparency into that so we're doing our best to communicate that but all the Market's seeing is like the site getting delayed and delayed and delayed right and the company unable to make good


predictions as to when it's going to come online and at the same time the facility that we had that we did running which is about 3x a hash in Montana came offline because of the storm so this like period That was supposed to be this like huge growth year and Marathon the company was Suddenly at a point where it was supposed to be a Bitcoin miner but it wasn't mining Bitcoin and we couldn't tell people exactly when we were going to mine Bitcoin and that I thought was like a really really challenging time uh


messaging wise uh as well as just like operational it's super stressful right uh we the team did work through that really quickly if you just like go back and you think about things more in terms of quarters as opposed to like days uh it's amazing how fast that turned around um you know it went from zero X aash in that summer to seven X aash by the end of the year so we still more than doubled capacity over the course of the year with moving out of a facility um in the process but that was a uh that was a


fun time in the Bitcoin Mar yeah I don't know why and it's probably um a a mediocre comparison at best but what you just described reminds me of of being a holster for other people's retail machines right and you're in the middle and now your your side operation doesn't really work out and you promis these guys to bring the machines online um in your case is just shareholders that want the revenue to increase um how much how much does public perception matter for your stock price Charlie how much does


doing good or having um having having projects in place that do good for for environment or for for grid stability or for I don't know any any any other reason um how how much does that matter because at the end of the day mining methane mining from from wasted methane is way more complex than mining Off the Grid but it has an added benefit right so how do you guys weigh that internally how much how much does that does that play into your into your strategy the the public perception piece of of the marathon


brand yeah it's it's hugely important um but that's because value of anything is driven by people's perception of it and how much you know they think it's going to add value to their life like the price of anything is driven by how much people value it right and so the price of public companies is also driven by how much those companies align with people's values and those values include profitability right they include growth they also can include um a lot of ESG metrics right um or being more Mission


driven um and having you know trying to make a positive impact on the world as opposed to just maximize profits it's like that's not enough necessarily um but I will say that there tends to be an order to those things so uh you have to be profitable first um if you can't keep the lights on you can't accomplish your mission right so you may have this grander Mission and this big thing that you want to try to do which we certainly have as a business but profits are what enable you to do that um and that's like


Steve Jobs was really big on that I think that's where I learned this from was like he viewed uh the purpose of profit like Apple's purpose was to build great products the reason that you need to be profitable as a business is to is because it allows you to continue building great products and the more profitable you are the more Capital you have to play with to build better products so the profits aren't necessarily the reason the profits are a mechanism for your broader Mission uh but that does not mean that they're not


important um and in public markets are obviously hugely important why would you invest in a business that is like guaranteed to lose money right uh or to fail that's not that's not a very attractive investment thesis um so perception matters like because it's tied to people's values but the the reason to do things is like we certainly don't believe in chasing the shiny object uh and trying to you know just get a bump in perception because it's what is trendy you know um we do look at


this long term so you're correct that like the mething component like looks great people really like it we really like it it's part of our it ties to a lot of our values part of that being that we think Bitcoin mining can make the world a better place and this is an example of that um but it also is a very practical decision that is the cheapest energy that we have in our entire portfolio and if we can figure out how to do that and then scale that that has tons of benefits for our broader Mission and for our profitability which can help


us achieve our broader Mission so perception matters a ton in public markets um but I also think that it is tied to fundamentals and like the reason that you exist as a business yeah I mean it's almost like you have to have the money first before you can spend it right right which is um which is becoming a ever more Uncommon phenomenon I guess in the world that we live in around Ubi cbdcs and all of that stuff like people people often lose sight of that um yeah anyway so what I wanted to to ask you still um Charlie before we


close out here because we're running up on the hour um is just to go into your into your job a little bit more um as a spokesperson for for the company what what is sort of the what does your day look like what do you do as um as Communications manager or what's the official title you have sorry uh it's VP corporate Communications what does that entail like you wake up in the morning you you work from home you work in an office what do you do yeah usually when people ask me what I do uh I answer that differently


depending on who they are but I usually open with a bit of a joke which is that I'm a professional Bitcoin propaganda that's my job um and then as soon as I explain what they what I mean by that they're like oh yeah that is kind of what you are so you know my uh my job I really view it as sort of like a teacher or educator but it's to teach people about all the great and help vocalize all the great things that we as a company are doing and then that we as an industry are doing um because this is a you're


not just you know you're not just trying to educate people on Marathon that is the primary goal but you also there's a lot people that don't understand yeah Bitcoin and fewer that understand Mining and then fewer that understand Marathon so you do have to kind of like go up that ladder um I was a I was fortunate I was a pretty early employee I got started working with the company as a consultant in 2020 when it was a three person team so I was like really fortunate to be involved in kind of most of the the the


growth as a Bitcoin minor if you would um I was I think the sixth employee to get hired I came on full-time in July of 2021 and at the time my job was like all of the words was like how I described it to people um today fortunately as we've grown and scaled out stuff and we've added some super awesome and confident people to the team my team and I sort of run uh corporate Communications and marketing for lack of better terms so uh the general strategy around messaging um press releases uh social media pres conferences events


how do we think about like educating the world on what we do and then how do we actually do that all the video work stuff like that the design the design and branding uh is not me it comes from uh a great great member on my team um so kind of the look and feel and sort of like I guess the voice and the Heart of the company if I had to like use that analogy um and then we've got some other people who also do some Communications work uh who are phenomenal we have a public policy guy who's great we've got


a separate investor relations team now so that is starting to get like a little bit uh specified but my my job mostly revolves around I like to think about it as revolving around storytelling and just doing that lots of different ways sounds extremely fun um Charlie before we close it's not boring no no no no I didn't mean that in a in a ironic sense I know I was I was going back to the comment of yeah I was going back to that idea of like there is a crisis every single week There's no dull moments


especially in this industry where where two years feel like 10 um absolutely I mean that that's kind of what I try to do right I try to tell people stories this is now on YouTube as I said in the beginning to you this is the the first episode that's going to be out so we're going to see see how people like it and how how how they find it um as a Communications person at this company Charlie I'm sure you have interesting thoughts around the question that I always like to to pose last before I ask


people to um tell tell um listeners where to find them is do you think that Bitcoin consumes enough energy and why yeah uh I do for where it's at in its current time and place that's uh I don't think I think it would be arrogant for me to say yes or no and try to decide that Bitcoin should consume more or less it's that's a market driven decision right the what you see with hash price the amount of energy that goes to securing Bitcoin with proof of work uh is all driven by people's value


of Bitcoin and you know millions of people deciding like what bitcoin's value is to them and therefore incentivizing miners to to decide how much energy to utilize uh to try to secure the network or produce Bitcoin whatever their incentive is so I would say it's like you know one of the most beautiful things about Bitcoin is that all of this works through economic incentives like basically nothing else and so if and I do believe in sort of the long-term efficiency of free markets and so you know you can have you can


have inefficiencies or irrational irrational irrational like decisions or things that occur like in the short term or the the medium term but like over the long run it's quite efficient um and it's just a reflection of people's value so I would say at its current moment yeah that's what the market has decided do I think it will uh use more energy in the future uh probably especially if bitcoin's price goes up right um or just as machines become more efficient um and at that moment in time that'll probably be


the right amount for it but it's one wonderfully balanced with the way that the economic incentives and this entire Bitcoin ecosystem work that's probably the most diplomatic answer I've gotten so far so so far over the all the episodes I've done everybody said ah no it doesn't use enough yet one person said yes it uses absolutely enough you're the first person to say n neither all it's the market that decides so so that's that's really great thank you very much um Charlie this has been great


thank you very much we we got a very good overview I think um over what what the situation at at Marathon looks like currently what projects you guys are working on where you guys are going globally uh going into the Haring I said to you in the in the in the pre talk um that I think your your nights will not be um blessed with with a lot more sleep before the Haring there's still a bunch of of mining to be done I think um before we um have the block reward for for everybody involved um last but not least charie tell people where they


where they can find you where where you want to send them um where can they learn more about your your company if they want to yeah um company's website is mar.com m.com it's our ticker so try to keep everything pretty simple to remember um we're on Twitter as uh Marathon DH uh I'm not super exciting to follow on Twitter uh but I'm Charlie Shu on twitteru um those are probably the two best resources from the time being and then if you're curious find anything else like IR contact or General


corporate company contact all that's on you can find all that through those channels so that's where I point people all right brilliant guys if you enjoyed this if you have questions if you have comments anything positive or negative I kind of like negative comments more because it gives me an ability to change things up and weigh up uh what I can improve and we are now as I said uh before on YouTube as well so make sure to to hit a follow h a subscribe on the channel um leave some comments um under


the under the video that would help a lot and yeah if I mean you guys all know what to do really here so I don't have to educate anybody on that um with that being said thank you Charlie again for for coming on um and until next time guys thank you very much [Music] bye-bye