BBW25 - Day 3 - Global Bitcoin Mining & Operations

co-ounder of Bridger Solutions and we also have Steve Smith who's the founder and CEO of Celestial Mining Management and leading this conversation will be Alana. Thank you very much.

Thank you.

Thank you.

Testing. Oh, look at that picture of us.

That's a nice picture. All right. Well, I would love to first of all, I would love for you guys to introduce yourselves and then we can we can take it from there. Okay.

Absolutely. I'm Stephen Talcut Smith. I'm the founder and CEO of Celestial Mining Management. Uh we manage a private mining fund called Celestial Mining 1. Uh with a variety of u a selection curated selection of mining sites in the US, specifically Texas and Alabama is where we're located right now.

Uh we are well into a $100 million raise uh to completely build out all of our sites. We produce income based on capital investment. So mining is often uh mysterious or confusing or people may think it's a kind of a lottery process, but what it really amounts to is deploying capital to property, plant, and equipment and we produce Bitcoin as income.

Hey, I'm Jake Langamp. Uh I co-founded a company called Bridger. We look for mining opportunities internationally, specifically in Africa. Um, we uh for the last year have been sourcing deals with various, you know, stateowned utilities, ministries of energy, talked to heads of state, we've talked to central bank governors, uh, chiefs of staff of of countries. Uh, and our conversations with these countries are primarily an energy, uh, play.

and and you know some of the incentives that uh Alana was talking about in her keynote.

Let's dive more into currently um what are the options when let's say for example Ethiopia or if you want to kind of use a different country as an example but what are their options for um how to build out their grid infrastructure without a Bitcoin miner and what is it how is it different when there's a Bitcoin miner there partnering Sure. So the we get asked all the time why Africa? Obviously it's not viewed as the best place to go and do business and sync you know millions of dollars of investment. And the reason why is because Africa by far has the most uh buildout to go for their energy uh grid. Every major region in the world has at least 95% of their populations electrified except for subsaharan Africa where it's somewhere between 50 and 60%.

So what that does is it it produces this metaphorical gun against the heads of these governments where they know they have to build out their uh electricity grids. Uh but there's not really good options for them uh to do that. So really the two main options are either concessionary or commercial loans where they're going to pay on average over a 30-year uh loan about 275% uh principal over interest. And to put that into perspective, if most of the people in this room got a mortgage for 30 years, you'd pay about 160% uh interest over principle. So that's not a very good option.

The other option is um independent power producers, which are electricity companies. They'll come in, they'll build an asset. In Africa, it's usually renewable because they have 39% of the world's renewable energy capacity. So hydro electricity or solar or something like that, these companies will sell that electricity to the stateowned utility. Uh but usually like say 95% of the time it carries a take or pay clause.

What that means is as long as that company is producing electricity uh they have to pay for it. The government has to pay for it. uh even if they have no place to put it and they have to pay in dollars even though they're selling to their customers in the local currency, the metic, the quatcha, you know, what have you. Uh so you have this huge dislocation that's creating debt either way. So what we do is we come in, we say, "Hey, we will buy that electricity that nobody else can buy at at industrial scale and we'll pay for it in dollars."

uh and so that is kind of uh music to their ear. So I guess getting back to the root of the question, we enable them uh to have a large industrial customer that overcomes their catch22 because they need to build out electricity. The best way for them to do it is to attract industrial level customers, but industrial level customers won't come until the electricity capacity is there. So we're kind of that bridging mechanism.

You know, even in the US, we're looking at uh the president has called for a doubling of uh US power generation. Is you look the chart uh of US generation capacity versus China. China has overtaken us and is not stopping. And we really haven't built any new generation for since the 1970s in a in a significant way. It's been flatline.

And uh one of our sites is uh located near an industrial property. I can see that the that whole region there could be greatly upgraded with additional um downstream uh industrial uh capacity. Uh but there's a substation there and we're going to take the excess uh energy at that substation and as soon as we've taken all that we're going to more than double the capacity of that substation. And so even at a small level, we're helping to build out that infrastructure and and execute on on those, you know, goals that we have to to grow. Energy is really abundance.

It is it like food production. It's it's it's the base of of of uh quality of life. Uh where you go around the world and see that energy is very expensive. You see people are cooking with wood stoves. uh they have all the health, you know, problems that come with that.

And so where energy is cheap, you're substituting energy for backbreaking human labor. And that means that people can go on to do higher quality work and uh more value added, their life gets better. So energy equals abundance and energy is good.

Electricity consumption is tied to GDP. So the higher the electricity consumption of a particular country, the higher the GDP. So yes, being able to enable and make more electricity available is ultimately something that can help the GDP which there are additional positives on that. Um does the public have any particular questions because I want to Anybody have a particular question that you would like to ask the miners? Yeah.

you you and I'll repeat your question. Yeah, I can hear you. What percent of the new energy production is clean energy and is it pushing us globally in the direction of producing more clean energy?

I'm going to go ahead and and answer that and then I'll let you guys answer that as well. Um, more than half of the Bitcoin network runs on a renewable electricity. So you're what you refer to as clean. Now one thing I discovered um working on this and at this point I've been 5 years in um how do I say this? Clean energy is not clean.

You know cobalt mining, lithium mining, um all the carbon that it takes to create a solar panel or a wind turbine, it's a it's a lot of carbon. And even the the the carbon in for what's that? There's a there's an acronym. It's like carbon in for for for roing out. Um if somebody remembers it, let me know.

But there's a particular measurement

carbon or something like that.

It's like carbon in there's a calculation of like basically how much carbon it takes to to produce something. and even solar panels um they're looking at they're starting that calculation once all of the ingredients that they need to make the panels have arrived to the factory in China and so um so there's really and not to mention they are produced in coal powered facilities in China so really that the idea that one particular power source is clean and the other one is dirty is is already kind of like an an assumption that is already an incorrect assumption. Um, but that being said, the Bitcoin mining industry consumes more renewable power than any other industry and actually at source, not just buying renewable energy credits and, you know, using coal, but actually using the electrons that were created by the the facilities. So and Bitcoin miners by doing that are actually enabling these renewable companies to now build out more generation because now they're not all of that electricity is not going to waste anymore. They have a customer.

So in a way Bitcoin mining is phenomenal for the renewable industry. And had there be a different person sitting here today, they would have told you like it's the best thing ever. But in my case, what I discovered was that um ultimately being able to consume vented methane, which is considered dirty, is a way better um boon for the econ for the for greenhouse gases than creating more solar panels, for example. And you would consider methane to be dirty, yet removing that methane from the atmosphere is actually of higher benefit. So again, it's not a up or down, yes or no.

It's a it's a really really complicated um with science that's really compromised from all from a lot of different angles. And so, yeah, so that would be my answer. There's really I would say there's no such thing as like a clean thing. But, you know, but it's it is good for the renewable industry by far. And if you guys want to add anything to that,

you some of the projects that you were talking about with me are new energy deployments in Africa that are renewable.

Yeah, so Africa uh is interesting. Like I mentioned, it's got a ton of renewable energy potential, some of the best solar in the world, a ton of hydroelectric uh energy capacity and potential. And what I've found both domestically here in the United States uh and then overseas is that renewable energy creates the most variability. So therefore it creates the most inefficiency and therefore the most use for Bitcoin miners. Which is why it's not that Bitcoin miners have a heart of gold and they're like, I only want to use renewable energy.

It creates the best incentive structure. Uh, and usually when I'm talking to uh, African governments, I use actually the example of West Texas, which you probably know, you know, uh, more than I do as the ultimate success story. So for you, for those of you that don't know, West Texas is basically, you know, here in the United States, the Saudi Arabia of renewable energy because it's the best uh, overlay of both wind and solar. The problem is is that we don't have nearly enough transmission to get that to the eastern part of the state. basically everything east of I35 where most of the consumption is.

So that's why there's so much Bitcoin mining in Texas. And I use that as an example for these utilities that are really struggling with the fact that they can build solar cheaper than any other energy source, but they're super worried about the variability. So I use Texas as the example and the success that they had there of overbuilding a responsive demand on top so that when they have uh an event like the winter storms that they had those miners can curtail. So it's better uh overbuilding the demand that can come off. Uh and so that is the incentive structure that it's not anybody who is is giving corporate platitudes of like we care about renewable energy.

That's the real show me the incentives I'll show you the outcome.

Yeah. Yeah. It it really take an an understanding of the incentives and and a belief that the incentives are really what drive behavior. the marriage of the um the intermittency of renewables with um with Bitcoin's abil Bitcoin mining's ability to turn off. That really changes the game for the grids.

We're really the only kind of customer that can operate at scale and be turned off with 10 minutes notice. You can't turn off a hospital. You cannot turn off a factory or an aluminum smelting plant or you know something like that or an AI data center. Yeah, that's another one that, you know, uh, a lot of Bitcoin miners have have taken those assets that are applicable to the data center, you know, and and they're focusing on AI data centers, but AI data centers really can't participate in the demand response like Bitcoin mining can. And for for many miners, it's a source of additional revenue actually.

Yeah. I think to that point, the first thing that we normally do when we're making a pitch to one of these governments is is breaking down the difference between our data centers and a traditional data center, which quite simply is uh those data centers need 99.99% uptime. So that means they need an incredibly firm source of power, meaning like natural gas, coal, something that is dispatchable all the time and they need a very firm backup for when that primary source of power goes out. Additionally, they need super robust internet, both download, which is what you concentrate on in your house because you want to stream videos, but also upload because data is going back and forth.

Uh Alana mentioned this in her keynote. We can do what we do with a s Starlink connection, sometimes even cell towers in the the most extreme of circumstances, and we can be interruptible like I believe some of your power uh is. Uh so that means that anywhere that there is power and you can get a rudimentary internet connection to there, we can build a data center. And there's some really incredible examples of where that makes sense. So like in Tanzania for instance, they just built a 2 gawatt hydro station which for context these grids are so small compared to uh the United States.

2 gawatts basically represented 33% of their energy capacity. Uh but they only had 400 megawws of transmission. So that means that only 20% of that energy can make it on the grid. We could build a data center help them monetize that energy which they could use to build out that transmission. Absolutely.

The revenue that you would get from that will fund the build out of the transmission

easily.

We have a question. So, you know, this is an interesting area and I think it's all about education, but you know, with with mining and being, you know, in this industry and and being so wellversed in this topic as you guys are, do you feel that it's just um a lack of education? Um and and how are you combating the narrative? because as you mentioned before, right, no one's talking about the incredible amounts of energy that AI is using um and how it's really disrupting communities in horrific ways that it seems that it's just not on anyone's radar, but you know, it always comes back to you know how bad Bitcoin mining is and no one's really talking about the positive um aspects of that. So, how do you one not take it personal and two, how are you going to continue to educate people that have heavy opposition to this or are just trying to follow the main narrative that's on mainstream media?

Well, I can say Alana's film has done a lot to help inform people and make a better judgment about these things. She's examined uh mining in many different contexts and different continents and and shown what's actually happening. Um I think there is a big contrast between the AI data centers which generally need to be located close to population centers and Bitcoin mining which is kind of remote and out of sight. Many people go to far away places and uh to where the energy is to help that. And so we are not visible in that way.

Those jobs generally are in places where there are very few jobs, you know, and so um we're out there helping in rural communities in in those places. It's a 16 to20 billion industry. We're grossing as a the overall something like uh north of $50 million a day. Uh it's it's a very significant industry, but it's it's it's almost completely off the radar for for for people. Um, and so I think education is a big part of what we do.

Um, for our investors, uh, Bitcoin mining is is a a way to to gain exposure to the asset through something that they understand, which is a cash flowing business that is, you know, has a normal balance sheet and assets that they could see and touch. I think for us, uh, there's only really two groups that we try to educate. And so because all the utilities in Africa are stateowned, we try to educate the government. So make sure that uh they understand the positive impacts. Uh and some of those positive impacts.

I talked about the need to build out uh electricity generation. The other major thing that all these governments are grappling with is youth unemployment. So every country that we start a project in, we'll start a technical skills academy to train the workers that we need. but then also uh technical skills that we don't need. Things like use of AI, coding, web design.

Uh those things wouldn't be such a big deal here. Uh and quite honestly, they're not a huge capital lift for us, but that's seen as like monumental uh for these countries. And we'll run those, you know, skillsmies the entire time that we have uh a contract in that uh country. And then just doing things in the local uh environment. They may not even understand what Bitcoin mining is.

Uh kind of like you were mentioning in your keynote. They just know that there's a company, you know, saddled up next to this uh hydroelectric dam. But we helped electrify a school. We put, you know, solar panels on a school, what have you, because quite frankly, any uh company that goes and does business in these countries, they should do that because the local community comes into they basically turn into your neighborhood watch. They're like, "Hey, nobody's going to bite the hand that feeds us."

Uh but those are really the only two demographics that we're worried about and you know we believe that the kind of work that we're doing will eventually as a community as a Bitcoin mining community will eventually show through and that all the things that Steve was mentioning about energy abundance is good consumption of energy isn't necessarily bad. It depends on you know all the factors that go into it. So that's that's where we focus.

But yeah, education it's and it's a it's an uphill battle because it is a constant onslaught of uh bad press constant and from the big publications as well. And what it what I found what I find disingenuous from the mainstream media is to only focus on negative stories rather than also talk about how it's electrifying places, how it's increasing generation capacity here in the United States outside. And I don't know, I feel like if it's if we're going to look at something fairly, we really need to look at the pros and the cons. And you know when you look at the electricity consumption of a small clinic versus a large hospital, a large hospital consumes way more electricity. And so being able to have that the capacity available literally saves lives.

And so so I do think that this is a conversation that um you know like countries that have bent the knee because of social pressure because there are there are countries that have completely buckled and succumbed to um popular pressure that mining is bad and that crypto bros suck and that you know it's a terrible industry and it's just for terrorists and moneyaunderers. And the problem is that ultimately now those comp those those countries are going to fall behind and the countries that do see the benefit um we're we're definitely going to see them get ahead. So ultimately like with everything it it falls to us to educate ourselves and you know I worked on Dirtycoin. I have been taking it outside of the bubble. It has done really well in film festivals.

A lot of people are really interested in this. So I do believe that there is an appetite for learning. Um I just think that there's also this shiny object syndrome where there's all every day there's a new shiny object and a bloody object and a blowup object and there's just so many things that are competing for our attention that ultimately um being persistent and the reality is that you guys don't even really need to educate people. That's what the you do it because you are, you know, good people and you want to educate. But a minor, their client is is the Bitcoin network, you know, so they can really just be quiet in a corner and not talk to anybody and just make their money and and get out.

So, yes, you do have certain companies.

We do have to educate investors.

Okay. Investors. Yes, I bet. I bet. Um, but yeah, ultimately it's it's it's interesting.

I wanted to ask you guys in terms of in terms of regulation, what is the kind of regulation that you feel is is helpful for the industry and when does it kind of start getting in the way of progress?

Well, regulation in the United States is different. There are many countries where it's nominally illegal to privately mine Bitcoin, but that just means that you need to be in business with the government. And that's fine if that's the way they want to do it. There's a lot of places that have abundant energy resources. Those resources are owned by the government and so you need to be in business with them to do it, right?

uh but where privately operated mining can exist um and in particular in the United States we have a culture of uh liberty and uh that which is not prohibited is allowed. So we have seen states pass right to mining bill right to mine bills that say yes you can use electricity for this purpose and yes you can hold you know bitcoin in a wallet just just just in case anybody is doubts you know there are a number of states that have passed this type of legislation and I think that's great what we have seen is complaints I think from kind of the cowboy early days there were a lot of there were some irresponsible minors there were people who would set up noisy operations next to a neighborhood and cause noise complaints and stuff like that. And I I think that those operators kind of gave the industry a bad name early on, but we've moved to such a scale uh that you do have professionals involved now. Um and most everyone I meet is is is is decent character. So from my perspective, I think the most useful regulation is is what's been done in the last year or so.

I think most people in the crypto community, not just Bitcoin community, were hoping for just clarity from the government. Uh, and what that has done, you know, we're still, believe it or not, with all the negativity. Um, we're still by far the the shining city on the hill for most of the developing world and most people look to us for an example. So when we actually started creating those regulations and recognizing it as an asset class, even if it had nothing to do with mining, that's really facilitated the conversations with foreign governments where it's like, well, this is how we do it. And that's their default starting point is like, okay, however the US is doing it, that's where we're going to start.

And that was really useful because a lot of those countries that you talked about that basically self- selected out of Bitcoin mining were Europeans. uh and that's the other default uh position that they look for. So when we weren't setting an example, but they were a lot of the countries were was saying, well, that's the only show in town. We'll kind of follow their lead. And then since then, there's been a reversal, not only and how they're viewing it from a regulatory standpoint.

But I I can tell you that our pitch initially was all about the energy. We weren't really focused on Bitcoin. We weren't trying to orange pill all these governments. And then since uh the US has gone so heavily into like the strategic bitcoin reserve and some of those things uh central bank governors, heads of state, different, you know, ministries, ministers of finance have come to us and said, "Okay, great energy. Talk to us about this Bitcoin thing.

You're the only Bitcoin guy that we know. Talk to us about it." So that's been a really interesting phenomenon.

I bet. All right. Well, we're at time. So I'd like to thank you guys. Do you have any any last words either of you?

I would I would just say that Bitcoin mining uh many miners are in it not just to make money but because they believe Bitcoin is important and uh the mining is where Bitcoin connects to the physical world the laws of our that govern our universe and that is essential to the security and scarcity of this asset that so many are placing their uh uh trust in. So um that's why we do what we do uh because we believe it is important and beneficial.

No, that's really well said. I would second that.

Thank you. Thank you both and thank you for participating. [Applause]