On The Brink with Castle Island - Daniel Roberts (Iris Energy) on Sustainable Bitcoin Mining (EP.278)

Episode Date: January 20, 2022

In this latest installment of the mining miniseries, Iris Energy cofounder and co-CEO Daniel Roberts joins us to talk through their approach to mining. In this episode:  How Dan came to work in mining Backgrounds of the Iris executive team Which thinkers influenced Dan in his Bitcoin journey Why Iris focuses on sustainable energy and on only entering energy markets where they will not drive prices up for households How Iris chooses geographies to operate How Iris found abundant underutilized power in British Columbia Why Iris' entry to British Columbia actually drives down energy prices for regular households Why Bitcoin mining has better location agnosticism than aluminum smelting or hydrogen production How Bitcoin miners are more flexible loads than other datacenters How Iris is geographically diversified in Canada, Texas, and Australia, and why geographic diversification is so important How flexibility from Bitcoin mining replaces peaker plants burning fossil fuels Why the oversupply of power is an issue for many power markets Are Western miners being sufficiently responsible in finding low carbon energy sources How Dan thinks about political risk at the state level Can the world accommodate Bitcoin's power consumption growth if the price goes up tenfold? What plateauing efficiency gains for ASICs means for Iris Why Iris doesn't see itself as a pseudo Bitcoin ETF and does not seek to hold Bitcoin on its balance sheet Sponsor notes: Compass Mining is the world's first and largest online marketplace for bitcoin mining hardware, hosting, and ASIC reselling. Start mining your own bitcoin by visiting compassmining.io

Good morning. Welcome back to On the Brink. I'm Nick Carter. This is the mining mini-series. This episode is brought to you by Compass Mining. More on them later in the episode. Today is a big day. The House Energy and Commerce Committee is hosting a hearing on proof of work mining. I think we all know it's going to be pretty tough listening for anyone with a passing familiarity of proof of work, which you all should have at this point, given the extended mining miniseries. Today, maybe instead of the House hearing, you can tune into this episode, we host Daniel Roberts, the co-founder and CEO of Iris Energy, a publicly traded Bitcoin miner with a strong focus on sustainable energy. I found this to be a very interesting conversation. Iris has a pretty different approach from a lot of other Bitcoin miners, and in particular,

I found their case study around mining with energy resources they were left stranded after the pulp and paper industry left British Columbia to be just fascinating. If you're at all interested in what truly sustainable Bitcoin mining can look like, I think this conversation is a great place to start. Let's dive right into it. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep.

The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, The two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars and all of a sudden people started to worry. So out of this worry, we have something called the Bitcoin. Bitcoin. I have the privilege of sitting down with Daniel Roberts,

the co-founder and CEO of Iris Energy, which is a fully renewable Bitcoin miner. They've recently gone public. They've been on my radar for a little while. Kyle, very excited. Thank you for joining us today. Thanks, Nick. Pleasure to join. Awesome. So I guess you've a pretty interesting background. So tell us a little bit about yourself and then how you came to sort of find the opportunity in Bitcoin mining.

Yeah. So I think the journey with Bitcoin probably dates back to late 2013. I was one of those people that bought in as the price was rocket in towards $1,000. And it came off and halved in the year or two later. and I sold it all and thought this is nonsense and kind of disappeared for a little while. I then went into the Ethereum ICO and did well out of that. But it was around 2017 that it really hit Will and I around what Bitcoin was, you know, the monetary asset that it is. And I guess the benefit today is the quality of literature is fantastic relative to what has been the case

over the last, you know, 10, 13 years. And at that point, we kind of just reached this point where we said, you know, what, Bitcoin's here to stay, with its increase in scarcity characteristics every four years to the ultimate cap of 21 million, how does this not create a positive flywheel around the store of value, the network effect, the longer it survives, the lower the perceived risk, etc, etc. And as you know, no supply response, unlike other commodities. So I think that was the Bitcoin lens. And from that drops out, I guess, the view online. in which we can come to, but a little bit about Will and I and our more professional backgrounds. So X-Price Waterhouse Cooper's, Macquarie, developing infrastructure, renewable energy projects across Europe and Australia. And then was involved in setting up an infrastructure funds management business in Sydney, about a decade ago. Right place, right time, we grew to around $8 billion in assets under management.

So this was on behalf of pension funds, insurance funds. So ports, airports, wind farms, solar farms, etc. I set back from my executive role there about three and a half years ago. And at that point, joined up with Will to form Iris. And Will's background was also in banking and commodity finance. And I think the opportunity we saw in Bitcoin was linked to that view of Bitcoin hanging around and likely escalating in value and the need to direct all this real world energy and data center infrastructure towards securing it.

Gotcha. And you mentioned high-quality literature supporting Bitcoin, which I find interesting. I also perceive that. Are there particular resources that you read that really, you know, change your mind or made you take another look at it? I think early on the literature that resonated with me was a combination of messages from Safe Dean's book, the Bitcoin Standard, obviously. very well known now.

Nick Zabo, a lot of his writings resonated. The sovereign individual, extremely prophetic, as we know. And then I think it kicks off a bit of a cascade down the rabbit hole of just learning a little bit more around what money is. And we've grown up in a world where US dollars, Australian dollars for us, we just accept as money. And when you start challenging some of those assumptions, it leads you down a path, which is fascinating as we know.

So you position yourself as a sustainable Bitcoin miner. What does that sort of mean to you? Yeah, so I think maybe in terms of stepping back a second and why sustainability is really important. And I think this is one thing that's really starting to hit the industry head on, which is this dislocation between the real world and the digital world. And as a minor, your revenue line is fundamentally the problem. price of Bitcoin, right? Every 10 minutes, there's an amount of Bitcoin available to the miners.

But the only way to get a piece of that digital pie is to build out this real world energy infrastructure, get access to capital, access to chips, etc. And what we've hit over the last 12 months or so is this inflection point where the real world is really struggling and can no longer keep pace with the digital world. Back when Bitcoin was small, it could. When they'll say 50 megawatts of power capacity securing the network, Bitcoin goes on one of its five, 10x runs. The world can find a few hundred megawatts worth of power chips, capital, plug those computers in, the hash rate can catch up to the price. But we saw firsthand, even in 2017, you know, the price peaked in December. It wasn't until the following August, so nine months later,

that the hash rate caught up to the price. And that was after the price fell 70%. You then fast forward to today, or go to late last year, right? There's eight gigawatts, give or take, securing the Bitcoin network. Bitcoin goes on another 5x run from, you know, 10 grand to 50 grand. All of a sudden, we're in this completely different paradigm. To try and bring online enough mining capacity to normalize those historic returns on capital, you now need 30 gigawatts of power. The entire global data center industry is something like 23. You need $70 billion of capital. And yes, institutions are here, institutions are coming, et cetera, but it's still early.

I think the listed market might have raised three or four billion in the last 12, 18 months. And then finally, even if you get that power, you get the capital, you're still waiting. Four, five, six years of full manufacturing production of these specialized chips out of Asia in the middle of a semiconductor shortage where people literally can't build cars. So what this has created is this enormous dislocation. between the real world's ability to build out energy and data center infrastructure to keep pace with this digital exponential asset. And off the back of that, you can start seeing those numbers start driving. Well, hang on, there's going to be a lot of power potentially consumed to support this network

by virtue of those economic incentives. And then the sustainability argument starts popping up around, well, how do you sustainably procure that power? And I think for us, very early on, we've sought to build out, and you would have seen from our CVs and the management team, we've got about 45 people across North American Australia, all traditional energy infrastructure data centers renewables. And for us, building out an institutional quality platform at its heart has been about managing risk. And sustainability of operations is the key to that. and we never want to be accused of pushing up power prices to mums and dads, never want to be accused of taking power away from other industries.

So for us, coming back to your question directly, our energy strategy from day one has been really clear. Not only will we target renewable energy, we will only enter a market where we're solving a problem, actually doing a social good. And yes, we know we've got to tick the ESG boxes for institutions, but this is fundamentally so much deeper. It's around winning the hearts and minds of the lives,

local communities and areas in which you operate. So we can go to a little bit more of how we do that specifically in markets like British Columbia and Texas, but it's really those parameters, not just renewables, but also making sure that we're integrating into energy markets and delivering positive externalities with our business. Yeah, it's interesting because I think you're probably one of the first mining companies I've encountered where sustainability is sort of impregnated into the DNA of the company as opposed to an afterthought or, oh, we have this exposure, we have this regulatory or political exposure. We have to tackle it in some way. But, I mean, certainly I directly perceive the risks that miners face from national policymakers,

but also local communities, people that are grieved by the presence of Bitcoin miners. There's abundant examples, I mean, wherever you care to look. So I think that's very sensible. Now, in terms of how you go about, you know, determining where to locate your operations, you know, I guess you start with the whole globe, right, because there's a whole world's worth of opportunity there. How do you then narrow it down to the jurisdictions where you choose to operate? Yeah, it's a good question. And obviously it took a lot of time flying around the world early.

on and desktop research, etc. We only wanted to focus on institutionally bankable jurisdictions, so markets like North America, some markets in Asia, Europe, etc. And very quickly settled on North America as a good place to do business for a few reasons. Fundamentally, we're looking for low-cost excess renewables. So where are markets that had an overbuild of renewables? Where was the climate manageable for our operations, such that, you know, that the need to power cooling, etc. wasn't prohibitive to the economics. And we stumbled across an opportunity in British Columbia. And at that point, merged or acquired another business called PodTech that was founded by two bryans there. And it's probably worth mentioning them briefly. Brian Fair Canadian industrialists,

build a large construction business, has the order of British Columbia. for his work in regional communities. And Brian Frye co-founded a company called Rackforce in the early 2000s, which actually grew to be one of Canada's largest cloud computing data center platforms before he sold out about five years ago as well. So two very high-quality individuals that joined up with IRS. And the opportunity in British Columbia from a power market perspective was and is, they have a massive oversupply of hydro.

There's still commissioning large-scale hydro in the north of the province, site C, in the face of decline in manufacturing and industrial load. So over the last decade, the pulp and paper industry has been decimated there. And what this does in a regulated market where you've got an oversupply of power, somewhat counterintuitively, power prices have upwards pressure. It's not like a free market, like a deregulated market like Texas, which will come to. Basically, under the regulated model, someone needs to pay the utility such that that utility can earn a return on all the investments made in infrastructure and generation.

So if you've got a lower number of users, then the cost of that generation infrastructure needs to be spread across them. So we're coming into these local communities, often leveraging sunk CAPEX in electrical infrastructure, etc. partnering with local towns and communities that have seen, you know, the decimation of economic industry in those towns and providing BC Hydro, the local utility, with an alternative revenue line such that they don't need to go and charge mums and dads and other industries that money to recover their CAPEX instead.

So it's a really good service that we're providing there and there's a substantial amount of sites and opportunities. We've got three under construction or operation and a number of other sites that we're actively working on as well. So just so I understand, the grid in British Columbia was constructed with the assumption that there would be this industrial consumer of power, in part stemming from the pulp and paper industry, which is an electrically intensive business. And as that ebbed away, the power companies were faced with the prospect of having to raise prices for consumers. and now having Bitcoin mining as a stopgap there actually inhibits their requirement that they might have to actually raise residential power prices.

That's exactly right. And it's a bit of a perfect storm, right, because they've been hit on both the supply side and the demand side. So on the supply side, they've got new generation coming online from facilities that are now becoming operational after the investment decision was made many, many years ago, combined with the decimation of demand from the closure of the local pulp and paper industry creating this oversupply of power.

And give me an idea of kind of the scale of sort of the access energy here. How material is that? Look, I haven't got the exact numbers, but our understanding, at least anecdotally, is well over a gigawatt of excess power in the province. And it's one of those things we need to be very careful of as well. like we need to leave room for other energy intensive industry electric vehicles are coming hydrogen green hydrogen certainly a large push in many countries around the world so it's not like we want to go in and steal every available megawatt hour of excess power to the detriment of future industry

but there's certainly a role that we feel that we're playing that's valuable today and we'll continue to do so right and this is something i think about a lot is you know bitcoin isn't the only sort quote unquote location agnostic industry in the world that draws a lot of power like you know historically had aluminum smelting playing kind of a similar role um and hydrogen production desalination you know to you know to a certain extent these are you know partially location agnostic so do you see do you see a model where um you know you'd move beyond just mining bitcoin to other sort of location agnostic energy intensive industries, or do you see yourself as primarily a Bitcoin miner for the long term? We certainly have that optionality, and that goes to the heart

of, I guess, our business model, which is building out a real asset platform. So we don't do short-term contracts. We don't do hosting arrangements. We don't give our computers to other people to manage on our behalf, and I can get into why that's the case. So we own our land. We own our infrastructure. We own the substations, the power contracts, our own proprietary data centers that seem to be driving some considerable operation efficiency versus the shipping containers and other warehouse models that you see out there. And I guess that ownership of all the real assets certainly gives you that optionality to push into other industries. And remember, like the team's built out gigawatts of renewable energy data centers and other infrastructure assets. So the pivot from a management

perspective wouldn't be difficult, but today it's very clear. And in fact, we signed an MOU with Dell Computing almost two years ago to start bringing out some of their customers and hardware to our first side in Canal Flats because high performance computing, it's real, right? Artificial intelligence, data analytics, machine learning, oil and gas reservoir analysis, all these applications that don't need the bells and whistles of Capital City data centers. but ultimately the opportunity cost of time, capital resources meant that Bitcoin mining was the focus. I think in terms of the geographic flexibility, your analogy to aluminium smelting is a really

good one, and Bitcoin has been described over time as modern-day aluminium smelting. I think the key difference is, even with hydrogen, is when you're monetising it into a real-world asset, you've got a lot of logistics considerations. So hydrogen, you either need to truck the hydrogen from the site or you need to be close to a pipeline and then commingle it with natural gas and deal with that. And look, it's all possible, right, but it's additional considerations. Aluminium smelt in obviously significantly more challenges around logistics. But that was, you know, an industry that anecdotally was born from leverage in excess power in different markets. But when you're monetizing the power into this digital action,

asset that can be broadcast off, you know, a 4G signal that gives you incredibly, um, more significant, um, geographic flexibility because of that. And then on the power consumption side, you've also got enhanced flexibility versus some of these other use cases because ultimately while these computers are on, they're generating Bitcoin while they're off. They're not. There's no customer contracts, no uptime guarantees, no consequential loss. You know, when the power market.

changes, you know, particularly in these intermittent renewables markets where you see those power prices peak, you can remotely throttle down the frequency of these chips, dynamically reduce your energy consumption, and then a few hours later, just ramp it back up. And we haven't come across any other end loads that have that same flexibility. And that seems to be a lot of the value proposition that markets, governments and utilities are seen in Bitcoin miners. In fact, Australia down under locally late last year actually proposed a tax subsidy. It hasn't been passed yet, to my knowledge, but a tax subsidy for Bitcoin miners that use renewable energy, recognizing the benefits that it can give to these networks. Right. And so I think these are incredibly

important points you're making here. And so I'll just try to summarize. So on the one hand, if you compare Bitcoin to other somewhat location agnostic physical industries, Bitcoin is truly location agnostic because you can bring it to market from anywhere on earth. So once you have the commodity, you can digitally transport it, which is not the case with your other semi-location agnostic physical industries. And then comparing Bitcoin to digital industry, other computational industrial loads like regular old data centers, they're less interruptible. Bitcoin is much more interruptible because a data center will have an SLA and will have an uptime requirement. And so it compares favorably with other kind of digital computational industries.

So I mean, I share your intuition. I've never come across an industry which is so gentle, I guess, in terms of fitting into the grid and accommodating energy, which is, might be intermittent and is also stranded. So you mentioned British Columbia. What are other jurisdictions where you are sort of operational or plan to operationalize? So we've got a number of projects under development in Texas and one down in Australia. And in Texas, you know, the market there, particularly West Texas, up into the panhandle. I know you've written a lot about it as well, but an enormous amount of constrained renewable

generation, the opportunity to provide those to van response and ancillary market services. But essentially, from day one, we've been looking to build out this global platform, like any good portfolio, spread your risk across projects, grid connections, jurisdictions, etc. Like one of the greatest opportunities is to monetise into this digital exponential asset where there's, you know, the real world constraints around bringing online that additional mining capacity. But that brings with it, you know, social licenses to operate, social risk, political risk, et cetera. And we've just sought to manage those risks from day one and geographic diversification is a really big part of that. So do you have communication with policymakers?

Do you try and communicate what it is that you're doing and explain, you know, some of the positive externalities potentially Bitcoin mining? But we haven't gone into kind of the policy. and the political level. We've chosen more to deal with it at a local energy market level, so dealing with the energy retailers, the utilities, the network owners of the infrastructure, so the transmission and distribution line, and really explain to them commercially what the opportunity is

for us to help them. And I think by bringing them on board and delivering those positive externalities and integrating into those energy markets, if and when it does become a political, issue and you know today we haven't seen it in the markets that that we've operated perhaps because we've chosen those markets sensibly then if that question is ever raised then I would like to think that we've got a number of stakeholders that are going to be very favorable and positive towards

Bitcoin miners in that jurisdiction by virtue of what we're doing. This episode is brought to you by Compass Mining. Compass Mining is the world's first and largest online marketplace for Bitcoin mining hardware hosting and ASIC reselling. Bitcoin mining is only getting bigger and so is Compass mining. Compass is adding 280 megawatts worth of hosting capacity next year with more to come. That's over six times Compass's current hosting capacity, meaning more people can mine Bitcoin. With Compass anyone can mine Bitcoin. Start mining your own Bitcoin by visiting compass mining.io today. So regarding Texas, We've certainly covered it on a few episodes of the mining miniseries. It does seem to be the epicenter, at least in the U.S. of mining.

If you just look at the wind and solar resources out in West Texas, they're abundant. The interconnection queue has tens and tens of gigawatts of additional wind and solar, which is kind of astonishing, also given the fact that there's transmission bottlenecks today. Can you tell us a bit more about the models? I know, you know, certain miners are looking at co-locating, you know, behind the meter, so to speak. Others are operational on the grid and they're active in these ancillary services, markets. What are the models that you're contemplating down in Texas? Yeah, and look, Texas isn't an isolated example.

There's a number of other examples of markets around the world where you've seen, you know, the build out of intermittent wind and solar, largely driven through governing incentives and subsidies. and sometimes, particularly in these Western markets, combined with the decline in manufacturing demand and industry, creating again this perfect storm. And then you overlay the build out of residential rooftop PV, reducing net retail demand. There's a need in many of these markets

to bring back energy-intensive industry and also solve the system flexibility issues, the time-of-day productions, the lower resilience in the network. And yes, people are installing low. large lithium iron batteries, you know, building out gas-fired peaking power stations. But Bitcoin mining can solve those issues on the demand side. And this isn't the narrative around co-locating next to a wind farm and a solar farm and just taking power from that asset.

You know, firstly, you know, locating behind the meter is risky. You know, if you're putting your destiny in other people's hands, you know, all of a sudden you're taking, as an investor, you're taking a team, you're taking risk on Bitcoin mining. in and then you're taking risk on a wind farm. And, you know, their downtime, their maintenance, their access to the grid, contractual disputes, etc. So we've always preferred to have direct access to the grid and avoid those risks. But from an energy perspective, it's all about being grid connected.

And it's understanding that these deregulated markets like Texas and Australia are a melting pot of different generation sources, wind, solar, some legacy fossil fuels and different demand sources. And with the intermittent nature of wind and solar, it creates more variability in the power market where it's only a very small number of time intervals each year where the power market is not in equilibrium and supply is well below demand. And Texas, the big freeze is well publicised early this year. That's an example. So this is not a narrative of just taking wind from a specific solar farm. It's about being connected into that grid and say that 1% that 2% a year when the power market can't cope, instead of building a battery,

instead of building a large scale gas-fired power station, just have some Bitcoin mining in your demand mix that can throttle their chips down, give that power back to the market, back to moms and dads, back to other industry. And then a couple hours later, when the market normalizes, just turn them back up again. Right. And, you know, the pushback I hear is, you know, oh, well, you know, having a source of demand that turns itself off. Strategically doesn't solve the problem of under supply. But I guess the idea is that the Bitcoin miner is monetizing these renewable assets by virtue of its presence on the grid.

So it's making those assets more viable. So that is an economic pressure, which improves their economics. and maybe it's an incentive for additional buildout. And it just so happens to have this additional positive effect where it can throttle itself down during a time of crisis. That's exactly right. But remember, a lot of these markets don't have an undersupply issue. They've got an oversupply issue.

And I think your presentation a little while ago actually highlighted some numbers. You know, circa 32 gigawatts of wind and solar in West Texas up into the panhandle. and only like 12 gigawatts of transmission line capacity. We're seeing in other markets as well. Some of this power, not only is it receiving negative power pricing, so they're having to pay to export their power. Often they're just spilling that power into the ground. Like they're not even exporting into the network.

So we're coming in there underwriting these renewables, taking that power, giving them a revenue line, and avoiding them having to pay to offload that power, and then overlaying the additional benefits, of that flexibility in load to when power prices do peak and when there's excess demand, be able to switch down that load. And if you take it to the next level, if we as a globe want to further decarbonise, we're in this kind of conundrum at the moment where there's been a lot of tax incentives, government handouts, subsidies, etc., to encourage the build out

of renewables. But the lack of market pricing for renewables in a lot of these markets is now inhibiting construction. So you talk about those tens of gigawatts in plan in Texas. Are they going to build where there's negative power pricings and no demand signal? And then you can't retire a lot of the legacy gas and coal because you don't have enough renewables to replace it. So you've got this chicken and the egg problem. So if Bitcoin mining can come in, provide that market-based price signal, then overlay the system flexibility issue to migrate the market back towards a market that more resembled. during the baseload era, then all of a sudden you can build more renewables and you can start

looking to retire more of this legacy gas and coal. So to the extent that, you know, you have legacy thermal generation of energy in your energy mix, do you then try and procure credits or offsets in order to target your fully sustainable mandate, so to speak? Yeah, look, we absolutely will. It's been one of those things, Nick, where we've been focused more on just solving problems and delivering those positive externalities rather than dressing it up and describing us as level one, level two greenhouse gas and carbon neutral, et cetera, et cetera.

Like we will do it and we'll go and advertise it and tell the world how green and sustainable we are. But to date, you know, over the last few years, it's really been about just fundamentally building out a business that's solving problems. And we're solving one problem, you know, decarbonizing the Bitcoin. mining network, generating returns to our shareholders securing the network further. And then the other problem is solving the energy market issues in these renewable energy markets that need more load to come into them.

So correct me if I'm wrong. Iris is a part of the Bitcoin Mining Council. Am I right there? We haven't joined to date in Texas. No. What do you make of similar such initiatives to share data regarding the, you know, energy mix of Bitcoin miners and, uh, and promote that data to an audience that, that might not really understand the nature of mining in the US.

I think anything that seeks to, um, provide transparency education in this space is fantastic. And as we know, you know, crypto and more broadly is the master of narratives and misinformation. So the more quality literature and information we can be providing to the market, the better. So any organizations that are seeking to do that, we'd be very happy to talk with. So we've seen really dramatic changes in the last year. I think it was in May that the crackdown began, May of 2021 in China, if I'm not misremembering. And that, you know, eviscerated the Chinese hash, it's probably not zero. certainly dramatically reduced.

And we've seen all these capitalization events for, you know, Western miners effectively. You know, we've seen this exodus or this growth in hash rate in North American energy markets. So I think if I had to make a guess, I would say Bitcoin's hash rate has been decarbonized, probably not fully, but to a significant extent, because you no longer have that coal. in Inner Mongolia or Xinjiang. Kazakhstan has cracked down. Also, this isn't been discussed as much,

but they've cracked down on mining. They're primarily coal. Of course, you have some residual markets that are higher carbon intensity like Iran where some Bitcoin mining occurs. But it seems to me that this reshuffling of hash rate towards the West has reduced the carbon intensity of, you know, a unit of Bitcoin hash rate.

What do you make of your peers in sort of the North American Bitcoin mining market? Do you feel that they have done a good job of finding low carbon energy sources? Yeah, and look, anecdotally, I'll agree with everything. You've just said, and you mentioned Iran. I can't recall if you mentioned Kazakhstan. I think they're, you know, potentially a large player these days and got a lot of, a little bit of coal there. In terms of North America, you know, I think it's a market that's still fine in its feet,

if I'm honest, including from an investor perspective, I mean, without naming names, like two of the largest or well-valued on a metric basis, public miners, use gas and coal. So is the market really focused that much on sustainability? Yes, everyone dresses it up. Everyone's got their own narrative, and that's kind of human nature in life. but I think going forward, certainly the push seems to be very much green and sustainable. But what I would caution is like even if you go and use renewables, it's not enough. If you're using renewable energy but still taking that power away from mums and dads and other industry,

if you're still using renewable energy and pushing market prices up by virtue of your energy consumption, look, it's a business model and you'll probably make money in the short term. And look, you know, a lot of the other mining models are more focused on accumulating as much Bitcoin as they can in the short term and not thinking as much about the longer term, just dealing with that when it comes. But I think for us, it's really, we come from a world where we're used to looking at 20, 30 year financial models. And yes, modeling out Bitcoin over a 2030 year timeframe is probably impossible at best. It does influence the way we think about our asset base and how we set up our business and our operations, et cetera, to build that long-term, you know, multi-decade platform.

And I think the market is now starting to accept that, you know, Bitcoin's here to stay. And if Bitcoin's here to stay, the need for mining capacity to secure it and the economic incentive is here to stay. And that's influenced a lot of the decisions we've made around how we've approached the sector. So it's interesting because you, as far as I can tell, are being an excellent sort of corporate steward and, you know, taking very proactive steps to identify not only low carbon energy sources, but also I call them non-rival energy. So energy that's not competing with, you know, in particular residential. but you know finding these these somewhat stranded or you know a special situation sources of energy that maybe you know aren't fully exploited and and yet that's not necessarily the case for all bitcoin miners and then as a consequence it sort of brings an exposure on you even though you know you did nothing wrong i'm seeing this at the federal level in this country now

is questions around the Bitcoin mining industry. How do you think about political risks, not just locally, but at the federal level too? Yeah, look, and I think the mining industry is evolving rapidly, right? Like, you know, gone to the days of the manufacturers, you know, front running the general public by mining on their own balance sheets, developing a more efficient chip six months later, selling the old stuff to the general public, rinse and repeat,

etc. It's really turned into a capital market. It's an infrastructure game, so players that can, you know, raise capital, deploy it into the infrastructure and deploy those computers. And with time horizons now starting to push out by virtue of people accepting the Bitcoin's here to stay. As a consequence, Bitcoin mining is here to stay, you know, jamming these computers into shipping containers that only work half the time and have shutdowns and overheating and breaking

the computers. Like everyone's starting to really challenge how they think about these. business models and you'll see more and more quality businesses come to market that have got experience in building out large scale infrastructure data center and energy platforms to build upon that and move away from this kind of cottage industry that it, you know, it was great and it was fit for purpose, time and place. Everyone will do it their own way and ultimately, you know, different business models will win out over time, how that then manifests in terms of political

risk and interaction with governments and regulators, et cetera. I mean, I do find a little bit amusing that Bitcoin gets so much attention. You know, there's been a few good anecdotes out. They're like, if people have an issue with negative externalities associated with power generation, then go and solve that. Don't penalize emerging technologies. And I think the issue is that if you don't see value in Bitcoin, then, you know, any energy. directed towards securing it is going to come from a bias that it's a waste. Even if the energy wasn't used otherwise. Exactly.

So it's a bit of an argument that you can't win in a way. Look, I think all we've got to continue to do is to not just focus on renewables, but also not pushing up power prices to moms and dads, not taking that power away. And one of the things that we'll look at, as soon as we can't find that excess power, we can't solve those problems in energy markets, we'll start considering building this stuff on balance sheet. You know, the team cumulative has built our billions of dollars of renewable energy generation assets, wind, solar, etc. And moving towards even a net positive construct where we start self-generating more power than what we consume behind the meter for our own data center activities. Sell that excess power back into the grid directly contribute to the decarbonization of these networks.

fortunate that we've got that capability in-house and that experience and that skill set. We don't need it today because there's a lot of other renewables that other people have built out that we can go and help today. But there's a lot of optionality in the business model longer term. And I think just being able to articulate that and educate the public, governments, etc. There are a lot of benefits associated with this business if people spend the time and understand it. So one thing you mentioned, at the start of the interview was what happens if the price of Bitcoin goes up a lot? And, you know, historically it's done that.

This is also something I hear all the time from, from, you know, I would say energy critics. It's like, well, you know, what happens if the price of Bitcoin goes up tenfold? And, you know, now we have this ravenous demand for new energy as mine is trying to close. the gap. They close the arbitrage. The ecology of mining is such that margins want to go to zero, but of course, there's impediments of doing that. So do you feel that the world has sufficient sort of stranded or non-rival energy such that Bitcoin can actually, you know, achieve its potential as a monetary good and not be too disruptive to sort of the global energy resources.

Yeah, no, it's a good question. And ultimately it comes down to economic incentives more than Bitcoin needs to use more and more energy to succeed as a store of value monetary asset. Like Bitcoin's security today is enormous, right? Right. to try and start tampering with transactions and, as you know, 51% attacks and censoring transactions, they're so overblown in terms of the risk of actually practically happening. And even if you wanted to try to overcome 8 gigawatts of power today is a phenomenal effort.

So potentially we're well past that point today. So really it comes down to economic incentives. And every 10 minutes, there's an amount of Bitcoin available to the miners. multiply that by the current fee at price of Bitcoin, and you've got this global bounty. And if that's big enough, it will incentivize more miners to try and come online. They will try to buy the chips. They will try to find power that's sustainable. They will try to raise the capital to build out the infrastructure.

And if less people are able to do that because Bitcoin is running too fast, too hard, and the real world can't keep pace, which is what we've been seen, then the miners just make more money. It doesn't impact the network and whether or not Bitcoin succeeds as a model. And to be honest, that's the heart of the opportunity that we saw three and a half years ago. This asymmetry in the business model, the inability of the real world to keep pace with this digital exponential asset. It was possible when Bitcoin was small. Now Bitcoin is big, much harder. But I guess to sort of simplify the question, I mean, so we're at maybe 8 to 10 gigawatts, could we find an additional 20 gigawatts under your model, the philosophy that you laid out here. Do you think that exists?

Look, there's a lot in Texas to start with. There's a lot in other markets. There's some in British Columbia. There's others in other markets. I haven't sought to quantify exactly how much there is. I mean, we've got to keep in mind right that there are other constraints on using that power, namely the chips. You know, how many chips are produced each year? Maybe a couple of of gigawatts, three gigawatts worth of chips. Yes, that can change over a three to five year time period, but that puts a kind of a bound on the ability to use that power even if, even if you find it. And I think for us, rather than speculating on, you know, whether there's 10 gigawatts or 50 gigawatts of excess capacity today, there's an enormous opportunity for us to deploy the 15x

the hash that we've got contracted. It requires around 500 megawatts. And then look, to continue growing beyond that. The numbers are so small for the profits they're generating relative to the market size that sometimes you can get a bit overwhelmed in the macro and just say, well, let's focus here and now. What are the problems that we can solve? And we know that we've got a roadmap.

If that excess power starts drying up, then just start going and building our own renewable energy generation and selling the excess power back into the grids and delivering services to the market that way. Right. So regarding the ASIC market, a lot of people talk about this plateau and efficiency of A6. First of all, do you believe that's happening?

Then secondly, does that change the business of mining at all? Look, undoubtedly, it's happening. You know, for several years there, Bitcoin mining, manufacturers were chasing the efficiency of traditional computing, right? And chasing down that efficiency curve. Today, they've now caught traditional computing. They're competing with the likes of Google and Amazon to procure a file. and seven nanometer wafers from TSM and Samsung.

So a lot of that low hanging fruit and early gains, undoubtedly, you know, you look at the transition from CPUs to GPUs to the early ASICs, those efficiency gains, are they likely to be replicated now that the Bitcoin mining manufacturers have caught traditional computing? It seems pretty difficult. Are they going to continue to find efficiency gains? Of course, like the world doesn't stand still. It's not human nature.

The economic incentives are high. They'll continue to work out how to iterate the current chips they've got, drive additional efficiencies, et cetera. But I think the biggest takeaway from the chip side is these chips are now lasting a lot longer. You know, even the S-9s, the 16 nanometer chips that were released, you know, what, five, five and a half years ago, first industrial era ASEX. They're still making money above 10 cents a kilowatt hour. Right. So this narrative around chips only lasting two or three years. Like, I think it's now well and truly being debunked and people are seen firsthand.

If you put them in shipping containers, in old abandoned warehouses, you let them get dusty overheat. Yeah, sure, they won't last more than two to three years. But the chips themselves, they last for decades if you do look after them. And the stuff that you're buying today is, you know, more than three times more efficient than those S-9s. So again, you can see that industry starting to transition and move from a short-term, Bitcoin grab out of every machine you can plug in anywhere towards, you know, thinking about the long term. How do you manage your assets? How do you extract the most operating efficiency out of them? How do you look after them for the longer term?

So just to sum up here, I guess one of the remarkable things you told me in our prior conversation was that Iris doesn't really see itself as a vehicle to acquire as much Bitcoin as possible. And to get long Bitcoin, you see yourself as in the business of mining Bitcoin. coin, but you're not strictly seeking to hold on to it at the corporate level. Is that right? Look, never say never, but like our job in life is to generate as much value to shareholders as possible. And sitting here today, we have an enormous opportunity to become one of the leading and largest platforms in the industry. We've got binding contracts for over 15x hash of mining capacity, you know, at a price that was signed, probably less than half the current market

price. We've got sites and land secured for well over a gigawatt of power. We need about 500 megawatts to install that 15 X-a-hash. We've raised a bit over half a billion dollars to date and through funding a little bit more through debt and reinvest in that profit, we can have 15x hash online. So it seems like a very obvious capital allocation choice today. And if you step back, like what value are we adding directly by holding bitcoin like our expertise is generating a real return from real assets that's our background that's the game and when we can reinvest the profits in building out additional mining capacity you know looking to expand beyond that 15 x-a-hash when miners traded a multiple of cost you kind of immediate value creation for your shareholders

if you have the team and the platform to support doing that I mean for you like when you look at it and if you've got a choice to distribute cash out to shareholders who can then buy Bitcoin and self-custody or have the corporates hold that with a custodian like Coinbase or Gemini, I mean, what are your thoughts? Yeah, I mean, I see the merit in certainly historically trying to accumulate as much Bitcoin as possible, whether it's by buying it on the open market or mining. it below market price. But yeah, I think we share the same view. I see the industry maturing and mining becoming much more a game of managing your costs and maintaining a healthy margin

as opposed to just being a pseudo, you know, Bitcoin ETF like a lot of the miners were. And he just seemed to be conflating business models slightly. And there's also a risk overlay as well, like life's good when Bitcoin's going up, you're making money on your P&L, you're making money on your balance sheet, but Bitcoin has a drawdown. You're now getting hit on your P&L. You're getting hit on your balance sheet. And then furthermore, if you've got a business model that's reliant on raising money to finance OPEX, let alone CAPX, and you can't because we're in a bear market, then all of a sudden you're faced with the prospect of having to liquidate Bitcoin at the bottom, at the worst possible time.

We've seen it. We've seen it happen historically. So you get to, if you become very pro-cyclical as business. It certainly gives me a pause. I'm encouraged to see, you know, talk these more sort of mature business models. So I guess to sum up any, any last word that you wanted to share and also how would you recommend that people sort of follow you personally and then at the corporate level? No, I appreciate the opportunity. Come on, come on and have a, discussion, Nick, and appreciate all the work you've done around the space as well. People can follow us. We're on Twitter.

We're on LinkedIn. We're publishing our monthly reports to the market, providing updates on our operating capacity as well as our development outlook and construction for delivery of the 15X hash. But look, we're very positive on where the sector's going, the focus on sustainability and green and I think it's just a matter of getting that message out there in a concise, well-educated forum for people to understand. Well, this has been fantastic, Dan. Thanks so much for coming on today.