Nov 7, 2022 - Economy

Looking at bitcoin mining under the surface

Bitmain S19j Pro bitcoin miners submerged in fluid in Norcross, Georgia.

Bitmain Antminer S19j Pros submersed in fluids that continuously remove heat. Each tank has its own arrangement of machines that best maximize cooling. Photo: Brady Dale / Axios.

The first thing you notice about CleanSpark's new 20 megawatt immersion mining facility in Norcross, Georgia: It is not loud.

Why it matters: Noise is just one of the many complaints communities have had about bitcoin miners. CleanSpark, a Las Vegas-based energy company turned bitcoin miner, invited press to its new facility last week in order to show it's operating in the open.

  • Inside, you can hear the machines, but it's not overwhelming, you can chat at normal volumes. The cooling unit outside also isn't that loud, especially for the commercial, light industrial area it's in.

Of note: Outsiders don't get to see inside bitcoin mining facilities very often. This reporter has been covering crypto full time since 2017, but this was his first time inside one, see below:

Background: Bitcoin is the world's oldest cryptocurrency. It guarantees that a single bitcoin can't be spent more than once using a system called "proof-of-work," which basically makes it too expensive to publish a phony transaction.

  • Proof-of-work basically requires a miner to encrypt a set of transactions using a well known algorithm and then guess the solution to that encryption. This requires trillions of attempts using specially designed machines.
  • The miner who completes that task first gets the transaction fees for that block plus the new bitcoins awarded for that block (currently 6.25, worth over $12,000).

What they're saying: "Bitcoin has historically had a bit of a negative connotation," Chairman S. Matthew Schultz acknowledged at the event, whose purpose was to try to show how his company was taking a community-friendly approach.

Be smart: This is not your normal bitcoin mining facility, though there's a decent chance that more and more will look like this going forward.

  • This facility uses what's called "immersion mining," which means the machines operate complete immersed in a flowing synthetic oil that absorbs the heat generated by the machines.
  • Usually, miners are air-cooled, with lots and lots of fans, which generate a lot of the noise.
  • Of note: Immersion technology has been around on some level since at least 2006, and has in recent years taken off with miners. They've been experimenting with it as far back as 2013.

CleanSpark believes that this approach will have other advantages, such as using less energy for cooling and longer life for their machines. Schultz said they hope to get seven years out of the machines seen here, though the normal life is five.

  • Meanwhile, immersion allows CleanSpark to overclock the miners, getting something like 20% more hashpower (the aforementioned guesses, basically) out of each machine than advertised.
  • CEO Zachary Bradford explained to Axios that this is what makes immersion the most profitable approach long term. They can have lower overhead with airflow, but they can't squeeze quite as much bitcoin out of those machines.

How it works: These are S19j Pro machines from Bitmain. They are built to be air cooled with built in fans. CleanSpark strips off the fans and replaces the firmware with its own.

  • The machines are then submerged in tanks of the non-conductive synthetic oils seen here. The fluids are pumped over the machines to gather up the heat they generate while running.
  • That heat is then transferred to water which is pumped to an external cooler. Once the water's heat has been transferred to the air, the water is recycled back inside to do it again.

Energy consumption is another hot topic in mining.

  • CleanSpark buys emissions-free power from Georgia Power. It's largely nuclear power, but with classic renewables in the mix. There was talk of building a solar array for the facility in Norcross as well.
  • "We're actually operating at carbon neutrality," Schultz said. "We're not going to operate somewhere we can't get access to renewable."

Driving the news: CleanSpark did a ribbon cutting with local dignitaries, in part to show that the company had met with community leaders before setting up shop. Here are some benefits to the community they touted at the ribbon cutting:

  • Employing 20 people with an average salary of $48,000 per year.
  • Five scholarships for computer science students seeking an associates degree at a local community collge.
  • $50 million in local investment to date with a planned $145 million total over five years.

By the numbers: Across all of its facilities, CleanSpark had mined 3,768 BTC over the life of the firm, though Q3 2022.

  • It holds $10.5 million in digital assets, which would be roughly 525 BTC (the company only mines bitcoin).
  • The firm mined 384 BTC in July, but Chairman S. Matthew Schultz told Axios it uses mined bitcoin to cover operational and capital expenses first in order to avoid diluting shareholders or going into significant debt.

This approach has allowed it to pick up more mining machines at a discount through the bear market.

  • The company is currently mining about 3 exahashes, but projects breaking 20 by the end of next year.

The bottom line: CleanSpark has been an energy company since 1987. It got into bitcoin as energy entrepreneurs learning about bitcoin, not bitcoin entrepreneurs learning about energy.

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