The Bitcoin Mining Business Model Beauty Contest:
My daughter joined the public school system in Texas this fall, where I am a new resident. Nor sure if this is a Texas thing (if so, count me as a fan) but for some reason, Miss Texas 2022 visited her school. This prompted many questions from my daughter, she is a first grader and was bringing zero exposure to the concept of a Beauty Contest. Also got me thinking about what’s beautiful to me, Bitcoin Mining (aside from the lovely and talented Mrs. Cosgrove, of course).
I’ve been researching Bitcoin Mining full time and have focused on the 13 largest public Bitcoin Miners. (Below, in alphabetical order) I’ve gone as deep as I can so far, reading their public filing, press releases, and news articles. I will be sharing lots of analysis and observations in my writing going forward. I touched upon some of the differences here, but in the spirit of kindergarten talent contests (or a Wall Street Analyst who rates everything a buy), I want to give an award to all of the 13 that I will cover. With that preamble, I give you the Bitcoin Mining Business Model Beauty Contest, trademark applied for).
· Applied Blockchain: The least exposure to Bitcoin Price Business Model. Ever wonder who reads 10-Ks of small-cap Bitcoin Mining Companies, well, me for one. From their 8-29-22 annual report, page 4 & 6: “We have a collocation business Model”, “On March 9, 2022, we ceased all crypto mining operations and completed the sale of all crypto mining equipment. We have no plans to return to crypto mining operations in the future.” Applied principally builds mining farms for a handful of large customers and as they said above, aren’t mining Bitcoin for themselves at all.
· Argo Blockchain: Chance to leapfrog competition Business Model: My knowledge of ASIC chip design is like my French Horn Skills, but Argo has teamed up with Intel (who presumably does know something about Chip design) to receive early access to its forthcoming Blockscale ASIC chip.
· Bit Digital: Most References to Sustainable in a Pitch Deck. Bit Digital (in their September ’22 pitch deck) assures us that they are “Sustainability Focused” on first page and then follows it up “setting standard for sustainability”, “carbon-free” and “sustainable growth”. Not sure how you can precisely define sustainable, but they do seem to have the courage of their convictions.
· Bitfarms: Need a Gulfstream Business Model. While Riot has one big mining farm in Texas, Bitfarms has 9 production sites in four countries: Canada, USA, Paraguay & Argentina.
· Cipher Mining: Most likely to survive long periods of low prices business Model: Cipher appears to have a serious, experienced management team and it shows up in their numbers. They have some of the lowest cost of power (2.73/kWh), low purchase price for rigs $34.96 / Th/s) and comparatively cheap infrastructure costs per MW of capex at $450k.
· CleanSpark: Zigging while others Zagged Business Model. Texas, at least according to the Media and other Bitcoin Miners was the place to set up your mining shop. Almost all the public Miners have set up in Texas, CleanSpark, on the other hand, set up in Georgia.
· Core Scientific: The Bitcoinest Bitcoin Company: Calls to mind the old joke: “How do you know someone went to Harvard? Because they tell you so 5 minutes after meeting them”. You know which company mined the most Bitcoin because they tell you about it. However, unlike going to Harvard mining Bitcoin is valuable in the real world (I kid, mostly). From the Core Scientific August Deck:
· Hive Blockchain: Best use of Superman imagery in Investor Deck: Well check that, perhaps only use of Superman imagery in Corporate Deck. Hive does have other superlatives, was the first miner to go public (2017), and claims to have the best BTC by EH/s. The second stat will be something I will likely dive into in the future.
· HUT8: Most Use of Buzzwords in Business Model: In my opinion, they lay it on a bit thick. Their most recent investor decks hits lots of in-vogue phrases. “Web 3, High-Performance Computing, Infrastructure Transformation, Hodl, Vertically Integrated, Powering the Future, DRaaS (Disaster Recovery as a Service), Metaverse, ESG, Sustainable, Diversity Equity & Inclusion, Carbon-neutral”.
· Iris Energy: Dragnet Business Model: Iris Energy has a Just the facts ma’am feel to them, they don’t seem to embellish their deck, rather they come across as simple Australian (country of origin of Company) Bitcoin Miner trying to make a buck.
· Marathon Digital Holdings: Best Asset Lite Business Model: Marathon owns almost no infrastructure. They lease space and buy electricity in other firms (like Northern Data) mining farms. They are akin to buying Bitcoin with leverage.
· Northern Data: The Second Wife Business Model. Oscar Wilde said, “Second marriage is the triumph of hope over experience.” Northern Data has already done it once, building and selling the successful Whinstone (now owned by Riot) mining farm in Texas and is now building a massive facility in Pryor, Oklahoma.
· Riot Blockchain: Get there firstest with the mostest. Riot purchased their facility in 2021 and was able to enjoy huge power and mining rigs during the 2021 all-time high of $69,045 on November 10th, 2021.