Axios Crypto

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Howdy. Again on the AI and energy topic, because we haven't said everything we have to say on it yet.

  • Are you opening an AI data center and way ahead of us emulating bitcoin miners? [email protected].

Today's newsletter is 1,081 words, a 4-minute read.

1 big thing: ⚡️ What AI operators can learn from Bitcoin

Illustration: Tiffany Herring/Axios

AI's demand for computing power is expected to consume ever-growing amounts of electricity, with new servers coming online over the next three years alone set to eat up more power than a small country.

The big picture: Bitcoin miners have already had to get creative about finding sources of energy and using it efficiently. We already told you about demand response.

  • But we spoke to three different bitcoin miners, Riot, Terawulf and Iren, whose staff illuminated some other lessons Bitcoiners have learned that could serve AI.

Geographical flexibility

The big companies of tech are accustomed to acting like 800-lb. gorillas (they sit down wherever they want to). Terawulf's Nazar Khan, chief operating officer and a co-founder, told Axios that that is increasingly not going to be an option.

  • Favorite places for data centers, such as Northern Virginia, he said, are hitting capacity. On the other hand, many parts of the country have data-center-ready infrastructure now, areas that haven't previously, he said.

Advanced facilities

Chasing abundant (therefore, cheap) power often means operating in out-of-the-way places, Iren Energy's (formerly: Iris) Lincoln Tan tells Axios.

  • "Beyond the hardware, the most important thing is actually having really good facilities that can withstand the heat, the cold and the dust of operating in remote environments," he said.
  • Unplanned downtime comes from broken machines, usually due to environmental conditions. Data centers that manage the environment lower downtime.

Operators can take that a step further and consider fundamentally changing the architecture of computing, as miners already have, by cooling computers with liquid rather than air.

  • Riot Platforms' Pierre Rochard, its head of research, explained to Axios that traditional data centers are far less energy intensive than bitcoin miners, commanding less than 20% of the power demand per square foot of facility.
  • AI facilities, however, will probably be somewhere in the middle of traditional and bitcoin mining, density-wise. That could be dense enough to try liquid cooling, as more and more miners do.

Zoom in: "There is great cooling technology out there, and they should not limit their ambitions based on the energy consumption of the system," Rochard said.

Reality check: For all the criticism Bitcoin has gotten for energy use, it's clear that AI is going to soon blow it away in terms of global demand.

What's next: AI is developing much more quickly than the facilities to serve it can possibly get built. New data facilities take years.

  • Miners are working on deals for new power capacity long before the public hears about new sites.
  • "Good things take time. You've got to always have a look at the timeline," Tan said.

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2. Charted: 😌 Bitcoin difficulty

The line chart shows the daily Bitcoin difficulty level from April 1 to May 9, 2024, with a noticeable increase from 83 trillion to 88 trillion in mid-April, and a drop to 85 trillion on May 9.
Data: CoinWarz; Chart: Axios Visuals

Speaking of energy, it looks like the power demanded by the Bitcoin network has dropped a bit.

The big picture: The Bitcoin halving on April 20 dropped the revenue for miners in half all at once.

  • This typically leads to an immediate wind down in operations for some of the oldest bitcoin mining machines, because they are no longer worth running.

Bitcoin difficulty is a measure of how hard Bitcoin makes it to win a block. It is indirectly a measure of how much machine power is securing the network.

  • Bitcoin difficulty increased after the halving (which hasn't happened before), suggesting that more machines were coming online and none were leaving.
  • This was because there was a transaction fee bonanza that took place as the Runes protocol for Bitcoin tokens debuted — then flamed out fast.

The latest: Bitcoin difficulty only adjusts every 10 days. Here at the second adjustment since the halving, it looks like some machines have been switched off. It's back to pre-halving levels.

  • Things are starting to make sense again.

3. Charted: 🛒 FTX claims

The line chart shows the fluctuating percentage of a dollar paid for FTX bankruptcy claims from March 10, 2023, to May 8, 2024. The percentage started at 14% and experienced several ups and downs, reaching a peak of 107% by the end of the period.
Data: Xclaim; Chart: Axios Visuals

When you think of how FTX was described as a fetid and rotting corpse, it's wild to see what creditor claims are trading for now that the bankruptcy recovery looks quite good (to some).

Why it matters: The world thought that more than $10 billion in wealth had been lost forever. Now, it has reappeared.

  • That said, about 40% or so of the recovered money isn't going to the victims, but to investors who took a bet on a solid recovery. This chart shows the price they paid for those bets over time.

Caveat: The dollar value here is the value of claims on the filing date, which, as we've noted, is very much not the present value of the underlying assets for these claims.

  • Now, with new details laid out before the bankruptcy court on anticipated recoveries, pricing claims just got a lot easier for those waiting for a recovery.

By the numbers: Thomas Braziel, a distressed asset investor, said in a video that bigger investors are ultimately likely to receive between 120 to 140 cents on the dollar.

  • That's slightly higher than the 118 cents that will go to small FTX customers owed less than $50,000.

Yes, but: "One big question is still the timeline until recoveries are actually made. The plan is less clear on this issue but makes reference to distributions occurring into 2026," Matthew Sedigh, CEO of Xclaim, told Axios, via a spokesperson.

  • (Braziel said that some folks could be paid before Christmas.)

Flashback: Sedigh noted some events that had a big impact on claims prices:

  • Bitcoin (BTC) and SOL (an asset closely associated with FTX) rising fast.
  • The AI boom and the value of FTX investment Anthropic, for which it was able to raise $884 million through the sale of part of its stake.
  • The IRS agreeing to decrease what it was owed.

What we're watching: FTX's amended plan of reorganization is just a draft. "It will probably change a few times around the edges," Braziel said.

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4. 📢 Catch up quick

🦊 Former President Trump has adjusted his viewpoint on bitcoin, but he still likes dollars best. (Decrypt)

⛏ An Arkansas bitcoin miner is allowed to keep operating despite noise complaints. (KUAR)

🏴‍☠️ Jack Dorsey has decided he likes the Bitcoin-linked social network Nostr now — and that bitcoin price will for sure hit $1 million. (Pirate Wires)

🗽 The U.S. lags in real-time payments. (Axios)

💵 BONUS: A great essay explaining and critiquing five perspectives on stablecoins (three anti, two pro) from the academic world. (Nic Carter)

5. 🗣️ Quoted: Dollars are money

"Tether is not just one of the greatest businesses in crypto. It is one of the best businesses of all time, in any context, ever."
— Guy Young, from the team at Ethena, which makes the synthetic dollar USDe, in a blog post about its roadmap through year's end.

This newsletter was edited by Pete Gannon and copy edited by Carolyn DiPaolo.