The few North American bitcoin miners who’ve built their businesses around fossil-fuel extraction are watching the oil markets with more excitement than fear, they say, as oil prices sink to historic lows.
Oil-extraction companies need to reduce gas emissions for environmental reasons. So, instead of flaring off excess gas on site, some bitcoin mining firms – like Upstream Data in Canada, Crusoe Energy in Colorado and DJ Bitwreck in Texas – capture the excess gas to fuel hundreds of bitcoin-mining computers.
The trouble is, if oil market collapse shuts these power sources down then bitcoin miners can’t capture their waste.
When the price of bitcoin drops dramatically, as it did in March, bitcoin mining can quickly become unprofitable. Some mining operations shut down rather than lose money. Only larger, industrial farms can withstand months without profits if the bitcoin price remains low.
Entrepreneurs need to look for cheap power sources – and that’s where oil-abstraction waste products come in.
Texas crude
In Texas, a bitcoin miner who goes by the alias DJ Bitwreck said he’s building new hardware for capturing flare gas. His team, with four co-founders total, will take another five months to build these devices.
“We’ve utilized roughly 40 kilowatts annually, which has really been our testing and proof-of-concept phase,” said DJ Bitwreck, who’s seeking to add at least 1 megawatt of power from flare gas. “We are looking for sites that would let us come in and put a generator and a shipping-container-size mining hut at the flare site. Most of all, flare gas is a headache and problem for producers, but their problem is our gold mine.”
Great American Mining co-founder Marty Bent, already running one such bitcoin mining operation in North Dakota since December 2019, said if the oil companies stop operating “there isn’t any gas byproduct to consume.” On the other hand, though, Bent estimated that on his site alone there are “hundreds” of megawatts of power that could be converted into bitcoin.
Negative oil prices aside, from DJ Bitwreck’s perspective, there’s no point in miners pivoting strategies until after May’s bitcoin halving, which reduces the rewards bitcoin miners can earn.
Wait till June
All of the above-mentioned startups remain moderately profitable and lean, even if the price of bitcoin doesn’t climb in 2020.
Still, it remains to be seen what would happen to all but a few massive bitcoin farms if both oil and bitcoin prices stay low throughout the year.
“We expect the waters to get very choppy but we’re actually excited for it,” DJ Bitwreck said. “That’s why we aren’t buying equipment right now, we’re ideally looking to pick equipment up off other ships that capsize in the choppy waters.”