How Bitcoin mining monetizes grid resilience, and more

10/10/2023 0 Comments

1. How Bitcoin mining monetizes grid resilience, a national defense matter

Winter is coming, and with that means a shifting of demands for power and a reshuffling of power generation capacity. During the coldest months of the year the northern hemisphere receives less direct sunlight and shorter daylight hours, making winter a literal cold season for solar generation. With marked difficulty on infrastructure that is not weatherized to handle what the Iowan in me would call a “normal winter.”

This means insulation for pipelines to prevent freezing and the formation of ice crystals – you’d be surprised at how much water can be found when things start freezing. Also meaning a need for hydraulic fluid of a lighter weight that is intended to handle cold weather and maintain its viscosity for lubrication & pressure distribution functions. Or o-rings/packings of a different density or polymer that prevents excess shrinkage in response to cold temperatures; preventing leaks and loss of pressure. As well as factoring in which portions of equipment are receiving direct exposure to the elements versus insulation. This was a common problem being an aircraft hydraulics specialist for the Army in Iowa and then deploying to the Middle East; entire inventories and operating equipment must be retooled to the environment one will be operating in.

This can result in increased strain on independent service operators (ISOs) like ERCOT. But this strain is placed on ERCOT only when the individual power generation and distribution operators are not properly prepared. I do not know how well prepared the ERCOT grid has gotten since Winter Storm Uri, but with the continued complications in shipping and fulfillment of late, I would say it’s safest to assume that not all will be prepared for a potentially bitter winter to come. Meaning that ISOs like ERCOT should be preparing strategies now to have power redistribution ready where and when it is needed to avoid the catastrophes that follow an abnormal winter weather event on an unprepared grid.

“The best defense is a good offense.” Pierre Rochard posted a presentation discussing how bitcoin miners can service ERCOT by providing ancillary efforts, but that is only the tip of the iceberg.

In May of 2023 I wrote up a concept for Simply Bitcoin detailing how power distribution infrastructure stands to benefit from the defensive auspices that bitcoin mining can yield. This approach utilizes an offensive strategy in expanding grid reliability by swelling power demand with perpetual & flexible load.

By utilizing bitcoin miners we can have peaker plants and broad power generation facilities essentially “warmed up” and already providing flow of electrons and molecules to the effect that when winter weather demand strikes the only course of action is redirecting flow. Bitcoin miners are positioned to shoulder this burden better than any other industry today as they can shutdown and power on in a fraction of the time compared to other operations. Allowing bitcoin miners to act as the vanguard in grid balancing rather than relying on industries such as metallurgy (which impacts far more moving parts downstream than a bitcoin miner curtailing).

Let’s not forget the added benefits of capturing and redistributing the heat produced by ASICs. There are plenty of plebs on the Twittersphere (I will not ever be calling the app “X”) that are utilizing capture strategies from home mining operations to produce heating for laundry machines, water heaters, etc. When money is on the line, and defending expensive infrastructure is necessary, no strategy should be discounted. Especially when it’s freely provided through normal operations.

This is grid infrastructure provided by bitcoin mining. This is a national defense matter.

2. Oman bets big on cryptocurrency mining despite Bitcoin’s volatility

For the last two years, the market value of Bitcoin has been on a rollercoaster ride, the volatility leading institutional investors and regulators to question the cryptocurrency’s long-term viability.

But look to the Gulf countries and a different story is taking shape: the United Arab Emirates and Oman are looking seriously at regulating digital assets while crypto firms are flocking to Dubai to set up shop. Oman, for its part, is betting big on cryptocurrency mining. Observers say a cooler climate in Salalah, in the south, compared to elsewhere in the desert nation, as well as business-friendly regulation and cheap energy could help it succeed.

In August, the oil-rich country announced close to $800 million in investments in crypto-mining operations, including $300 million with Abu Dhabi-based Phoenix Group to develop a 150-megawatt crypto-mining farm with Green Data City, Oman’s first licensed crypto-mining entity, slated to go online next year. Weeks earlier, Muscat approved a $370 million farm operated by Exahertz International.

Oman is looking to diversify beyond fossil fuel revenues under its “Vision 2040” economic agenda, which focuses on the buildout of modern energy and telecommunication infrastructure that aims to attract foreign investment and create knowledge-worker jobs.

“Crypto might be uniquely suited to Oman’s policy style to diversify its trading partners and sources of non-hydrocarbon income,” Sam Blatteis, CEO and co-founder of the MENA Catalysts, a government relations firm for tech companies, told The Circuit.

Over the last decade, crypto mining has gone from a basement-type operation distributed over individual computers to large centralized mining pools that require large capital investment and sophisticated machines to solve ever-harder-to-attain matches to cryptographic solutions.

This is energy-intensive work. Oman offers some of the cheapest electricity in the world, costing only 2 to 5 cents per kilowatt hour, compared to 23 cents in the U.S. This significantly lowers the operational costs for crypto mining. A medium-sized crypto-mining operation in Oman could save millions of dollars in electricity costs compared to operating in the U.S., which is home to over a third of all crypto mining globally.

The move will not be without controversy as crypto mining is often derided for not being environmentally friendly. Bitcoin mining generates 21 to 53 million tons of carbon per year, according to an analysis by Massachusetts Institute of Technology.

Sheikh Mansour Bin Taleb Bin Ali Al Hinai, chairman of Oman’s Authority for Public Services Regulations, commented in a press statement about his government’s support of Bitcoin mining facilities: “This initiative aligns with our goal to diversify our economy, integrating modern technologies while upholding our commitment to ethical and sustainable practices.”

The country is aiming for at least a third of energy production to be from renewable sources by 2030.

But energy isn’t the only focus. Stability matters, too, according to those who have chosen to do business in Oman.

“In previous years, the mining industry was only focused on finding the lowest prices of electricity, and this led to disasters in unstable countries like China, Kazakhstan, Russia and Paraguay,” Olivier Ohnheiser, CEO of Green Data City in Muscat, told The Circuit.

“Even the U.S. is threatening the mining industry with taxes and higher electricity prices in the next few years. So, now, with the consolidation of the industry under publicly listed mega-miners, the priority is stability. Most miners prefer to have 50% of their operations as a maximum in the U.S., and 50% diversified elsewhere. Oman is one of the best places, if not the best place, for that.

“Oman offers long-term stability and fixed prices of electricity in the long run,” Ohnheiser continued. “The country is stable and is known to respect its commitments.” Jad Kharma, CEO of Exahertz, the other crypto mining operator with an Omani license, agrees.

Bitcoin mining is a very simple way of monetizing excess electricity,” he told The Circuit. “If there is a place that has a lot of excess electricity, but has no other way of quickly putting it to use, Bitcoin mining is a very efficient way of attracting investment into that area, for example in southern Oman, with all this excess electricity.”

Plus, Kharma likes the quality of life in Salalah, the microclimate in southern Oman where the crypto mining takes place. It’s often many degrees cooler than elsewhere in the Arabian Gulf: an actual oasis.

The oasis has Jaran Mellerud’s attention. An associate at Luxor, a Seattle -based company that develops crypto-mining technologies, he traveled to the UAE and Oman over the summer to check out the mining operations underway and evaluate if either country has the potential to take up significant market share in the near future.

Oman has the advantage in the region, he told The Circuit, adding that solid government support, an excess of cheap energy and a relatively cooler climate are the main drivers.

“The only way to mine Bitcoin in a scalable and legally sustainable way in Oman is by closely cooperating with the government. Miners need licenses and are also expected to provide significant benefits to the community. In return, they get tax benefits and access to loads of competitively priced electricity.”

Mellerud predicts that Oman will become an increasingly important destination for Bitcoin over the next couple of years and could, together with the UAE, take the Middle East’s total share of the Bitcoin mining network to above 15%.

3. Bitcoin Mining Companies Preparing Prior Halving to Defy Odds

One of the highly anticipated events in the cryptocurrency industry, Bitcoin halving, is about half a year away from now. Though the wider crypto community is excited to see the next high BTC price can go, there’s an industry that is preparing for the significant change. The crypto mining industry is buckling up for what’s coming since it’s going to affect the companies in the sector the most.

Bitcoin mining is a major chunk of operations in any cryptocurrency mining company. The BTC halving— Bitcoin mining rewards reduced to half—is going to cut the existing reward of 6.25 BTC to 3.125 BTC. The major companies seem to be getting ready for the event as it will drastically change the mining sector forever.

Mining companies will have to face the same fierce competition for the halved reward. This will automatically make the inefficient ones leave the arena as it will not be sustainable to remain profitable without applying efficient means.

Prominent Bitcoin mining companies like Marathon Digital, Riot Blockchain, Iris Energy, and several others, reportedly looking to increase their hashrate.

Bitcoin Mining Giants Involved in Advance Preps

Marathon Digital Holdings (MARA) saw a rise in production by 245% year-over-year. It accumulated 1,245 BTC in September marking a 16% increase in a month. Meanwhile, the hashrate saw a massive jump of over 500% from 3.8 exahashes/second (EH/s) to 23.1 exahashes/second (EH/s) within a year.

Such an impressive growth in Bitcoin mining ability is likely to keep MARA floating despite the potential odds around and after Bitcoin halving.

Riot Blockchain is also among the companies looking to increase their computing ability in the months to come in the wake of halving. The company plans to deploy about 33,000 BTC miners by Q2 2024. This will help inflate the hash rate capacity from 12 EH/s to 20.1 EH/s by the time.

Canadian Bitcoin mining firm, Iris Energy also announced plans to expand operations by deploying a significant number of miners prior to halving.

In its announcement made on Friday, October 6, Iris Energy stated that it will be adding 7,000 new S21 miners from Bitmain to its crypto mining fleet. This will help the company attain 7.0 EH/s, a 25% jump from existing 5.6 EH/s. The company will be spending over $19 Million to get the job done.

According to Iris Energy, it will be purchasing the miners using its existing cash and not with the help of any external financial source.

Iris Energy (IREN) stock price saw a significant increase of over 9% following the optimistic news in the company.