Bitcoin mining was introduced the day Satoshi Nakamoto mined the first block of Bitcoin. Since that time, the industry went through many iterations, starting with the move from CPUs to GPUs.
A lot of companies were able to forge paths never taken before. NVIDIA found an entirely new market for its GPUs, along with the associated revenue stream.
Energy consumption also spurred controversy. This led to many protests against the industry.
Like any business, profitability is important. As halving took place, especially with Bitcoin, the ability to generate a profit was reduced. This was compounded by the fact mining blocks has gotten tougher over time.
All of this makes for an industry that is ripe for transition.
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Crypto Miners have some advantages that are in great demand these days. They have access to energy along with transmission lines.
This is exactly what data centers require.
With the explosion in attention AI is getting, we are seeing a world where the base infrastructure is becoming increasingly stressed. Crypto miners were ahead of the curve, moving their locations to areas where energy was abundant (and cheap). They also invested in a number of different technologies to generate more energy.
For example, Crusoe made the decision years ago to position itself for data center develooment.
Crusoe’s technology helps oil companies to turn wasted energy, or flare gas, into a useful resource. Many bitcoin miners, with the help of Crusoe, have set up machines adjacent to these sites in order to capitalize on this cheaper power source. Starting in 2021, for example, ExxonMobil began working with Crusoe to mine bitcoin in North Dakota.
Ultimately, it is the powering of compute. What is being processed does not really matter. The GPUs can be for mining of Bitcoin or for training LLMs.
From an infrastructure perspective, it doesn't matter.
Here is where the crypto miners positioned themselves for this boom. As profits drop from the base mining operations, turning to data center infrastructure is short transition.
“We’re reimagining AI infrastructure from the ground up – from our energy solutions, to the design, engineering and building of our specially-designed AI data centers, to our manufacturing capabilities with Crusoe industries for key electrical data center infrastructure and ultimately to our purpose-built AI computing stack,” he said.
The media, and politicians, were very vocal about crypto mining, complaining about its energy use. Some areas, like the State of New York, even banned it.
As it turns out, the miners provide a part of the solution. AI is driving an ever increasing need for energy. What was overlooked in the entire mining debate is the fact the miners needed to turn a profit. In other words, they were incentivized to find cheaper forms of energy.
This means getting greater output for the same or less money.
It is not surprising, then, to look back and see how these companies located themselves in areas where energy costs were cheap. This often meant being where renewable energy was taking off.
Innovation was another factor. There are numerous examples where waste was used for energy. The mention of the breakthrough with ExxonMobil is one such development.
In the next one to two years, Needham analysts estimate that large publicly traded bitcoin miners are expected to more than double power capacity, including both their mining and HPC business expansion plans.
The Electric Power Research Institute estimates that data centers could take up to 9% of the country’s total electricity consumption by 2030, up from around 4% in 2023. Tapping into nuclear energy is seen by many as the answer to meeting that demand.
These companies, along with the likes of Meta and Google have incentive to try to suck more energy out, for less money. This means radically expanding the amount of output. Crypto miners have developed some innovative solutions.
More are going to be required.
Of course, we see chip architecture factoring in as entities such as NVIDIA bring out new GPUs, which process at a higher rate yet consume less energy than their predecessors.
Over the last couple years, we discussed how the information economy is taking over.
Here is an example of the direct impact of that transition. Everything is tied to data. Naturally, few step back to look at all the layers involved in storing, processing, and delivering said data.
More industries are tied to this. As evidenced here, energy and data processing is integrated together. Both are going to explode in demand over the next decade.
Digitization is the order of the day. cCoud computing keeps growing. Much of what we do in our daily lives is integrated with this. Just consider these actions:
All of these involve the cloud. That means infrastructure, energy, and compute is required.
As we know, trillions of dollars are tied to what was just described. The world of bits can expand very rapidly. We are seeing billions being put into GPUs, something that will be dwarfed by the money required to provide inference for all the AI models being developed.
This then brings batteries into the equation. Electricity is a challenge in the sense that it has to be consumed when created. It cannot be stored for later use without batteries.
Once again we see how nothing operates in a vacuum. The advancement in the individual technologies (industries) means that it has an impact in other areas.
Crypto miners appear to have a bigger role than simply adding blocks to Bitcoin. They are now transitioning to AI infrastructure.
