Bitcoin miners may not get all the credit they deserve when it comes to pushing the innovation envelope. You might even call them modern day wildcatters, or the explorers who search the ends of the earth for untapped oil deposits. Or at least that’s what Gideon Powell, the chief executive of Cholla Inc., a Texas-based petrochemical exploration and investment, would say.
This story is part of CoinDesk's 2023 Mining Week, sponsored by Foundry.
“Thinking about this from a capability standpoint, the compute cowboys are unlocking new power markets for data centers and thinking about the future of industrial manufacturing. It’s all in its infancy,” Powell said. For many in the oil and gas industry, like Powell, whose family is also in the business, the mid-century energy explorers have risen to semi-mythological status. They’re a bit like the gauchos of the South American pampas, only that the wildcatters’ business built the modern world, Powell said.
Crypto, specifically Bitcoin for Powell, might also become foundational for whatever comes next for humanity. It’s almost assured that in the coming decades, the internet and nascent tech like artificial intelligence and augmented reality will become even more intertwined with everything. And all of that takes energy.
Bitcoin mining is not just an additional source of revenue for existing and future energy producers and data mine operators, but also a site of technological process. Powell said bitcoin miners have been at the forefront of computer chip cooling and efficiency, like the liquid-immersion machines that are coming online. A lot of these advances could go from giving specially-designed bitcoin mining a slight edge in what Powell calls the “ultimate free market,” bitcoin mining, to finding applications across the data industry.
See also: Mining Bitcoin Is an Act of Freedom | Opinion
CoinDesk talked with Powell for our Mining Week series about the three components needed to build data centers, why he’s betting on West Texas as an mining infrastructure hub and how crypto mining innovations bleed out into the rest of the silicon-based economy.
You mentioned the term compute cowboys when we were talking earlier. What exactly does that mean?
The bitcoin mining industry has dozens of legends that need to be told. My dad collected old Texas oil and gas history books and I can't read those without thinking about how we're in the middle of a revolution – bitcoin miners are quite like the wildcatters. These people did stuff that no one did before and laid the foundation for modern society. There are similar stories unfolding now about bitcoin mining. Everyone's depressed about the future, and I think the future is bright. You’ve just got to have the right vision and see people that are actually doing cool stuff.
Do you think Bitcoin is the foundation for the next phase of human advancement?
I think it's a critical pillar. In a way, we don't have the words yet to describe what a decentralized digital permissionless network is. It's not just a commodity. It's not just money. But I do think moving towards a more peer-to-peer system is critical to holding fast to equitable checks and balances across society. Nothing else can really align all these really unique incentives, it’s a bedrock which allows people to collaborate across time and space with no one's permission. Bitcoin just has an ethos of entrepreneurialism – the Frontier Spirit.
What do you think of Bitcoin maximalism?
I think “bitcoin maximalist” means different things to different people. At the most basic, it means someone is committed to Bitcoin and won’t pursue other currencies. But I do think it's important to have a healthy marketplace of competition. There's been a lot of innovation on other currencies, even if Bitcoin is the most robust one and we [at Cholla] want to be involved with that. But I don't think anybody should have a monopoly on anything.
How exactly does Bitcoin fit into the energy exploration business – do you see it developing into its own venture?
Historically Cholla has been an oil and gas exploration company very focused on finding hydrocarbons and thinking about how to get them out of the ground. It’s very wildcatter on the front end. About five years ago, I started researching global power markets which led to an interest in traditional power grids. We were actually looking to build power generation that was carbon neutral. But it can be a low margin business.
We eventually pivoted, and said let’s not sell power, let's invest in what consumes power – which is where cryptocurrency mining comes in. We developed the first speculative bitcoin mining campus in West Texas and I got stories for days on that one. Over the last few years, we've really evolved to where we're not just an oil and gas exploration company: we're a diversified exploration company. So we have a few different divisions, including traditional oil and gas exploration. We've actually been building out a new division called Cholla Energy focused on where we can build new campuses for future bitcoin miners and data centers.
Apart from the family history, is there any reason you set up in Texas?
Bitcoin miners are the most fungible thing around, they can go places that traditional high performance compute data centers cannot. It's just too risky. We're all in on West Texas and we've bought a lot of land out there and we're spec developing it. The long term goal is get all the long lead items – you know, the things that are years in the works – like land power, and now connectivity fiber and bringing all that to West Texas.
You keep reading about how we're out of power. We don't have enough power or land, apparently. Actually, we have gigawatts of power and you know, West Texas has some of the highest percentages of wind and solar in the country. It’s absolutely going to dominate as a compute headquarters for both bitcoin mining and a few other classes of data centers that are emerging.
What about the metaverse and AI as opportunities?
A lot of people talk about bitcoin mining companies pivoting to AI. In reality, it’s a very different business – even if the foundations are the same. You need land, you need a lot of power and you need connectivity. When you're talking about the metaverse, and that amount of compute that's going to be needed, you need orders of magnitude more power consumption globally.
Five to 10 years out, we think West Texas is one of the only places in the world that could handle these gigawatt-plus campuses. We've been land banking and working on the high voltage infrastructures, and really taking care of front end items to ensure that high-performance compute customers, you know, have confidence they can scale. But we’re not building our own data centers.
So it's very similar to bitcoin mining, you need better connectivity – and then a workforce. Five years ago there were no bitcoin miners in West Texas. Now, it's pretty much established as one of the headquarters of large scale bitcoin mining. All this building is circular, eventually an economy will be formed around it that will bring the workforce, the electricians, the technicians and the people needed to run future data centers. Bitcoin miners again are these wildcatters building all the initial stuff. The buildings might not be able to be repurposed, but all the infrastructure and long lead items, we can take care of all that right now to de-risk future AI.
Bitcoin miners are also pioneers in a technical sense. But I’ve never been sure if that stuff could be repurposed in other industries.
You know, really, the bitcoin miners were pushing the absolute boundaries on bleeding edge cooling tech and power management strategies. So everything we're doing on bitcoin mining, from high density compute to the different types of air immersion, direct to chip phasing – all of that is really being pioneered by the bitcoin miners. So the scale of what things have gotten through in the bitcoin mining side are helping bring about a lot of economies of scale, and de-risking these other technologies. That's what bitcoin miners love. We love solving big complex challenges that the market needs.
You mentioned connectivity a few times – I feel like this is part of the story that isn't told too often. What exactly is involved here? Are you talking about laying down fiber optics?
So really, the three components of any traditional data center is land, power and connectivity. It’s why data centers cluster where there’s fiber [optic cables]. Like Google went to Midlothian, Texas, on the outskirts of Dallas Fort Worth and then you saw other data centers popping up around it because Google brought in the resources and the fiber, which then can be backboned on to other other data centers. With bitcoin mining, you don't need fiber. All you need is a decent internet connection. And with Starlink, you can get that anywhere in the world.
But some data centers are mission critical facilities, they need to be guaranteed 100%. They need to be able to transmit data back and forth in a couple of milliseconds, and not experience downtime. With the kind of emerging parallel computing and batch processing for AI rendering, these are not time sensitive. And so a new class of data center is going to emerge where latency isn't as important.
That opens up your options, and lowers your capital costs – maybe we can locate these new AI data centers in different locations. Maybe it doesn't need to be near Dallas, for instance. Would you accept 5% downtime per year? Would you be willing to turn off and turn on depending on energy demand, or only consume during the lowest hours? You can shut down your rendering and not lose the process, and then start up when the sun and winds start blowing again.
Bitcoin miners have been pioneering with demand response. The difference to some extent is it's clear for bitcoin miners what their opportunity cost is – but maybe not for AI. So really data centers are just going to be more complex.
Let’s talk a little bit about the regulatory landscape. In Texas a few legislatures put forward proposals to curtail bitcoin mining. Is that a long tail risk for you?
It's always a risk. I mean, what bitcoin miners do a really good job of is explaining the value proposition for grids and working to arrange [private-public] programs to incentivize grid reliability. That is their trump card, being able to drop gigawatts of load in real time. It’s a game changer. In ERCOT specifically bitcoin miners utilize this more effectively than anybody, and it benefits all the stakeholders and customers in Texas. But there's always gonna be people that have concerns.
Could you unpack why you say the more consumption, the better?
Energy is the input for everything. Every single thing we do, we're using energy and the price of that affects that. There’s a lot of talk of wanting to lower emissions, which is correlated with power consumption. That isn't necessarily true. What I'm focused on is how do you advance human prosperity and individual liberty? And if you look back through the history of the world, the absence of reliable, affordable energy ensures that civilizations do not prosper. Lowering emissions is one thing, but we cannot talk about just mandating less power consumption.
Likewise, more efficiency within the power sector is always a good thing. That's less resources. But straight up lowering economic growth is just not a conversation we should entertain at all. I mean, we have infinite resources – we're never going to run out of oil, we're never going to run out of gas, we're never going to run out of solar molecules. We just need to unleash more innovation in the space.
Out of curiosity, do you pay attention to what's going on with fusion?
We're generation agnostic. What's great about bitcoin mining is it's the first time in recorded history where you kind of have this democratization of innovation. Like if you wanted to innovate in fusion, you needed billions of dollars – same for any power generation technology. You really need to be independently wealthy, or a massive corporation. But bitcoin’s profit motive puts that in the hands of any individual that can plug in a computer and find a decent internet connection.
So whereas there was a small concentration of energy entrepreneurs, you now have a massive global network of anybody that can conceivably innovate to make things better, more affordable. And you're instantly rewarded by the bitcoin network.
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