You can listen to the audio format of this article via SoundCloud by clicking here.
At MX3 CS we generate passive income from connected machines. One area we are excited about is crypto-mining. For the uninitiated, crypto-miners use specialist hardware to convert energy into crypto-currencies (cryptos) such as Bitcoin (BTC) and Ether (ETH). To be profitable, it is vital that capital expenditure, running costs, and the price of energy consumed are kept as low as possible.
Although some small-scale residential micro-mining operations have returned to profitability as a result of the recent crypto bull run, to make serious returns it must be done at scale. Industrial crypto-mining farms use the combined processing power of huge numbers of processors (ASICs and/or GPUs) that consume copious amounts of energy and need to be upgraded every few years. In short, the more processing power you deploy, the more electricity you will consume but the more crypto you are likely to mine. Once earned, cryptos can either be put into cold storage and left to appreciate over time or sold for fiat currency on crypto-exchanges such as Coinbase. Although far more energy-efficient blockchain consensus methods have been developed recently, proof-of-work (the method used by crypto-miners) is by far the most secure.
One major concern many people have about crypto-mining is the amount of energy it consumes. Last year the industry spent almost three billion dollars paying for 90 TWh worth of electricity. That’s the same as a medium-sized country like Switzerland! However, I am personally not in the least bit concerned. There is nothing wrong with energy consumption per se providing the energy being consumed is clean and sustainable. Crypto-mining is arguably good for the planet as it is facilitating the construction of green energy infrastructure that wouldn’t otherwise have been built, being used to capture carbon, and it will gradually diminish the carbon footprint of the legacy banking system.
Layer1 Technology is a new breed of crypto-miner backed by the tech billionaire Peter Thiel. It operates a growing fleet of mobile crypto-mining units (MCMUs) in West Texas where some of the cheapest clean energy on the planet can be found. MCMUs are shipping containers stuffed full of ASICS and/or GPUs. They typically generate around 1MW and cost at least $600k ($250k just for the generator) per unit. Layer1’s MCMUs are far from typical as they can generate a wapping 2.5 MW of capacity and are unique in several ways. Rather than purchase off-the-shelf hardware from China, the company’s MCMUs have been designed in-house for extra efficiency and performance. What makes them unique is that they contain batteries that can be used to sell energy back to the grid to supplement their mining profits. In addition they use liquid cooling instead of air. Another strategic advantage they have over conventional static crypto-mining farms is their ability to rapidly deploy to where the cheapest energy can be found. The importance of this will become clear when I explain how they capture carbon. As previosly mentioned, not only is the company perfectly located near to some of the cheapest and most abundant sources of wind and solar on the planet, but Texas also has huge reserves of fossil fuels and this represents a golden opportunity..
As oil-extraction companies throughout Texas have been negatively impacted by the Covid-19-induced global economic downturn they have more inventory than they can sell. Layer1 has been able to take this excess inventory off their hands and use it to power their fleet of MCMUs. In most cases, the price paid is almost free or below zero. This is because some of the most cash-strapped are willing to pay to offload their black gold to avoid having to fund construction of onsite storage or dedicated pipeline infrastructure. As if that wasn’t enough, there is one final gift that keeps on giving. Drilling for oil releases a byproduct that can also be used to mine crypto and that is natural gas. Instead of it being emitted into the atmosphere via venting or flared (burned), it too can be converted into clean energy by MCMUs as soon as it becomes available.
As the co-founder of a British company that operates crypto-mining rigs in Scotland, my team and I are in the process of leveraging a similar opportunity. Although energy in the UK is not nearly as cheap or abundant as it is in Texas, every year millions of pounds are handed over to wind farm operators to switch off their turbines. This money comes from fees added to electricity bills and government grants (taxpayer’s money). These payments are referred to as Constraint payments. They are made when the national grid is unable to cope with the amount of wind power generated during periods of high production and low demand.
The Northern Times recently covered this in their article “Multimillion-pound payments to turn off wind turbines ‘beggars belief’, says far north campaigner”. According to the publication, the UK total was put at £910,301,106, with most of this (£844,075,854) generated in Scotland.
Like the Texan drilling companies, this problem is only going to get worse as a result of increasing capacity and stagnant demand.
Boris Johnson wants to make the UK “the Saudi Arabia of wind power” by increasing capacity to 40GWs by 2030 and lead in carbon capture and storage technology.
Mobile crypto-mining falls very nicely in line with this new government narrative. Instead of gouging the general public, we would like to see underutilised wind energy being used to power fleets of MCMUs during periods of high production and low grid demand. We believe this could be a much-needed catalyst for an entirely new sector that could inject much-needed value into the UK’s Covid-ravaged economy. A major benefit of deploying MCMUs that would make it pandemic-resistant is that they require little human involvement. Once on-site, they can be left to generate passive income while human operators monitor and control them remotely.
We are developing a plug-and-play solution that connects crypto-miners with providers of cheap renewable energy. Our plug-and-play prototype (MX3 Atom) combines a digital wallet with a blockchain-connected smart meter that facilitates payment at the point of energy consumption. We want to help the UK government and the energy sector do away with Constraint payments by deploying our own fleet of MCMUs across the UK. We hope others will do the same. We have already started field testing with a wind farm operator in the Scottish Borders and plan to cover other regions and energy sources such as biomass, hydro, geothermal, solar, and natural gas. Unlike Texas, however, almost all our natural gas is extracted off-shore so capturing it will be an interesting challenge!
One final thing worth considering is the ecological impact made by the financial system as it exists today. Many of the costs associated with physical money artifacts like gold, banknotes, and credit cards and all the associated costs such as point-of-sale infrastructure, transportation, storage, and administration; workers, buildings, vaults, vehicles, rare-earth materials, trees, petrochemicals, computer equipment, etc ads up to a gargantuan carbon footprint. Thanks to blockchain technology it is now possible to replace the entire physical money system with code. Consider for a moment what impact that could have on the planet’s net carbon emissions.
