CleanSpark, a Las Vegas-based cryptocurrency mining company, is purchasing a facility in Georgia from its rival crypto miner Mawson Infrastructure Group.
CleanSpark said on Friday that it will pay up to $33 million for the facility, with additional $9.5 million for 6,468 ASIC miners owned by Mawson at the facility.
CleanSpark stated that the purchased Georgia facility will add 0.558 exahashes per second (EH/s) to its current hashrate of 3.8 EH/s. The miner further said the site can expand an extra 150 megawatts, which would enable it to power 70,000 latest generation miners, producing over 7 EH/s.
CleanSpark disclosed that it agreed to provide Mawson with up to 30 megawatts of temporary hosting capacity for up to 180 days, while it (Mawson) transfers its miners to the Pennsylvania location.
Mawson Infrastructure Group has multiple mining operations throughout the USA and Australia. Its Beaver County facility is a 100 MW cryptocurrency mining operation located in Midland, Pennsylvania, US.
CleanSpark said the deal in terms of $26.5 million of cash consideration, 3 million in seller financing in the form of promissory notes, $11 million in CleanSpark stock ($4.5 million of which is subject to reaching certain earn-out commitments), and $2 million in a seller-financed earn-out payable at least 60 days after closing upon certain conditions being met.
Zachary Bradford, CleanSpark CEO, talked about the development: “The site is nothing but impressive. We are enthusiastic about Georgia and believe that our expansion there will continue to build value for our shareholders and the communities we operate in throughout Georgia.”
James Manning, Mawson CEO, also commented: “We now intend to focus our attention on the continued development of our Pennsylvania and Texas facilities where we see the opportunity for compelling returns on capital.”
Miners Trying to Overcome Crypto Crash
This is the second acquisition made by CleanSpark in a month.
The firm has continued taking advantage of opportunities that emerge during the market downturn.
Early last month, CleanSpark spent $25.1 million for a mining facility and Bitcoin mining rigs in Georgia.
The company acquired a 36 megawatt (MW) active facility in Georgia from Bitcoin mining company Waha Technologies for $16.2 million, and 3,400 miners in operation at the site for $8.9 million.
The mining industry has been consolidating and is expected to continue doing so amid a bear market that is squeezing margins and rendering miners struggling. Some of the miners struggle to run businesses due to large debt obligations.
Consolidation enables the miners to bring their resources together and build greater capacities and efficiencies.
Hut 8, a Bitcoin mining company based in Canada, announced on Wednesday that it has bought 5,800 mining machines for its Ontario facility.
With the latest purchase, these mining rigs to its fleet at its mining facility at the North Bay site in Ontario. Hut 8 mentioned that new machines will add greater petahashes per second (PH/s) of hashrate to its Bitcoin mining capacity, once fully deployed.
The firm expects the addition of the new miners to help increase its mining production capacity, especially during this bear market that has seen a significant drop in mining output alongside a plunge in crypto prices.
Hut 8 disclosed that its machines at its North Bay site in Ontario were operating on 20 megawatts (MW) of power, as of June 30.
Currently, the Bitcoin mining firm said its total operating capacity in computing power stood at 2.78 exahash/second (EH/s).
Hut 8 revealed that it mined 328 Bitcoins during June and increased its holdings to 7,406 BTC ($148 million).
The company disclosed that it would continue to hold its mined Bitcoins. This is in contrast to other miners are selling their Bitcoins to pay operating expenses and loan obligations. On Tuesday, Core Scientific, a major mining firm in the industry, sold 7,202 Bitcoins in June to raise $167 million.
With the ongoing crypto winter, all miners are witnessing declining profits as Bitcoin prices dropped last month. Some mining firms are facing margin calls on debt issued during bull periods as the value of their collateral, normally mining machines or Bitcoin, has also dropped.
Hut 8 is one of the least leveraged publicly-traded Bitcoin mining companies relative to its equity. The firm had CAD$140 million ($107 million) in cash as of the end of last year, according to its annual earnings report.
Hut 8 has diversified its revenue streams away from cryptocurrency. Its high-performance computing business is on track to see a growth of up to 18% by the end of 2022.
Hut 8 is not the only Bitcoin mining firm to have added its mining rigs during this market crash. Mid-last month, CleanSpark, a Bitcoin mining based in California, purchased an addition of 1,800 Antminer S19 XP computers to take advantage of the bear market and the fallen prices for Bitcoin mining rigs.
CleanSpark capitalized on the current difficult market conditions, where the plunge in Bitcoin prices led to a drop in the prices of ASICs, computerized devices specifically used for mining Bitcoin or another cryptocurrency.
We’re all familiar with the “energy waste” and “carbon emissions” narratives around Bitcoin mining. “It wastes energy!” “It’s a carbon emitter!” Obviously, Bitcoin is a unique and terrible attack on the environment at a scale previously unheard of in human history.
But now the “Bitcoin is anti-environmental” narrative is now starting to shift towards “e-waste.” This, in the wider context of environmental narratives, is nothing new, and in the context of the consumer cycles related to electronic devices is actually a very legitimate pollution problem. Over 40 million tons of electronic waste is generated every year. But this is also a problem that predates Bitcoin, and just like energy consumption narratives, Bitcoin contributes to only a tiny fraction of the problem.
There are roughly 40 million tons of e-waste disposed of each year, Bitcoin contributes 30,000 tons of that, according to estimates cited by the BBC. That is 0.075% of all e-waste produced yearly.
Hopefully you can see that, just like the narratives encircling Bitcoin about its energy use, the contribution of Bitcoin to this larger societal problem is an insignificant rounding error. This, however, does not change the fact that e-waste is a real environmental problem.
Seventy percent of toxic waste produced by society is in the form of electronic devices. Think of how often you replace your smartphone, your television, your desktop monitors. Most people replace a smartphone every two years. Every Black Friday, people rush out to retail stores to scoop up that year’s newest television model on fire sale. This is a consumerism problem, not a Bitcoin problem.
The only real solution to this is for consumers to alter their consumption behavior. That is a wider societal discussion about not buying things you don’t need, reusing things that still work, and otherwise thinking with a lower time preference mentality. There are many dynamics that in my opinion have already guaranteed that consumers of Bitcoin miners will lead the forefront on that behavioral change.
How Do Integrated Circuits Work?
All integrated circuits in modern computing are simply packages of transistors laid out in a circuit to form logic gates. At a very high level, you can just think of a transistor as a black box that takes in a current and puts out another one based on the input and, strung together in logic gates, this allows binary data (ones and zeroes) represented by current to encode information to push through a series of logic gates that will perform a calculation on them and output a result.
The logic gates are structured in very specific physical ways to perform mathematical operations on the current (the data) flowing through them to arrive at a result. Literally every type of computation occurring on your computer is built on top of this foundation.
Each logic gate composed of transistors has a specific design dictating what kind of math it does and what specific inputs will lead to what specific outputs. You can see the example of an OR gate in the image above. Integrated circuits are just lots and lots of these gates strung together in ways that allow large chains of them to perform more complicated computation. That’s an integrated circuit in a nutshell.
Silicon Valley R&D Slowing Down
The reason integrated circuits have gotten faster and faster over the years is that manufacturers are packing transistors closer and closer together to fit more of them into a single integrated circuit. This is what someone means when they speak of 16 nanometer (nm) versus 7 nm chips.
The problem is that after a point when you start smashing transistors too close together, you get electrical interference across transistors, i.e., a charge flowing through one transistor could potentially interfere with the charge flowing through one next to it and cause an error in computation.
This has required completely changing the shape and physical structure of transistors to prevent this as they get packed closer together on the circuit. FinFET transistors are the current physical basis for logic gates in 14 nm, 10 nm, and 7 nm chip designs.
There’s one last thing to go through before I tie this all together and relate it to the “mining e-waste issue”: The manufacturing process used to etch these microscopic transistor designs into silicon chips is very expensive, as well as complex.
To etch transistors at the current cutting edge into silicon requires taking super tiny droplets of tin and dropping them in front of a laser, which turns the droplet of tin into a flat pancake, which is then zapped by another laser vaporizing it and creating UV light that is bounced around through multiple mirrors to pass through a mask controlling what the light will hit to etch the desired thing into the silicon (I’m totally serious). The technique is called Extreme Ultraviolet Lithograph (UEV).
With chip foundries just now beginning to deploy 5 nm production capacity with 3 nm systems in development, we’re getting to a point where the physical design of transistors is going to have to be redone in order to overcome the problem of transistors being too close together and causing errors in computation.
Some of these transistor designs will even require developing new manufacturing methods to accurately etch them at smaller scales (you can find a deep dive into the details here). That’s what it will take to reach the 3 nm or 2 nm level.
Think about how complicated current manufacturing is, the precision required to take a microscopic droplet of tin, alter its shape, and then blast it with a laser to vaporize it at the exact right time and bounce UV light around with multiple mirrors through a mask. Even that process is not good enough to yield 2 nm chips. Something even more complicated and precise is needed and that won’t be possible overnight. We might never be able to crack the 1 nm level in terms of manufacturing accuracy.
Newer, better bitcoin miners are not coming as fast as they did in the past. This is going to have demonstrable effects on the deployment viability of older mining hardware.
This is already evident with the number of Antminer S9s still operating today. The BBC article referenced above put forward a “researched” assertion that the average bitcoin miner has a lifespan of 1.29 years. S9s have been running profitably for five years at this point, having been released in 2016 (here are about 1,500 S9s waiting for deployment as of earlier this month).
Reuse And Repair Incentives
There are multiple thriving market places for used bitcoin miners at this point. You can acquire them everywhere, from Bitcoin companies like Kaboom Racks, to mainstream online shops like Amazon.
Miners aren’t just getting tossed out into a landfill when a newer, more efficient machine comes out, they are being resold to be plugged in somewhere else and continue mining. Major manufacturers are now even offering education programs to teach people how to maintain and repair older equipment.
ASICs quite literally print money as long as their hash rate and your electricity price work out to a profit in relation to the current network difficulty target. There is every incentive in the world to not just throw them in the landfill and keep them running until they “fall apart,” so to say. Then, there is every incentive to repair them if the cost to do so is not exorbitant, and get them back up and running as soon as possible. Companies like Upstream Data and many others broker used, older equipment as well as new units to construct their portable mining huts.
One of the biggest behavior changes required to actually address the issue of pollution caused by e-waste is to reuse older devices when you can or when you get new ones to somehow get your older device to someone who will use it instead of throwing it away.
This behavior “change” is essentially the default behavior for miners when it comes to their equipment. So, take that into account with the dynamics of producing lower nanometer chips getting more difficult, expensive and taking longer, and ask yourself this question: Is Bitcoin an evil machine destroying the environment with no regard for it, or is Bitcoin actually solving the environmental problems that all industries have, faster than any other industry on Earth?
This is a guest post by Shinobi. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.