On The Brink with Castle Island - Paul Prager (TeraWulf) Building a Zero Carbon Bitcoin Miner (EP.315)

Episode Date: May 2, 2022

TeraWulf cofounder and CEO Paul Prager joins us to talk about his experience building a vertically-integrated, zero carbon Bitcoin miner. In this installment of the mining miniseries we cover:  Paul's career trajectory from coal trading to energy infrastructure to Bitcoin Beowulf's deal with Marathon and their entry into Bitcoin How TeraWulf distinguishes itself from other Bitcoin miners Why TeraWulf has an explicit ESG focus Zero carbon and how that differs from 'carbon neutral' The importance of being vertically integrated How Paul thinks about the halvings and how that affects their business TeraWulf's facility in upstate NY Paul's views on NY State's approach to Bitcoin mining How the Bitcoin mining industry struggles with proactive messaging TeraWulf's 300 MW nuclear-powered facility in Pennsylvania Why Bitcoin is synergistic with nuclear power The prospects for nuclear bitcoin mining TeraWulf's zero-carbon approach and how that manages risk TeraWulf's plans for growing their hashrate under management The characteristics that TeraWulf looks for in new sites Will Bitcoin miners develop better transparency around emissions data? Why mining is so useful for decarbonization through curtailment programs The convergence between the energy sector and Bitcoin mining Why vertical integration and zero carbon will prevail in Bitcoin mining long term Trends in consolidation Paul expects Why vertical integration allows you to manage your risk better than a hosting model What public market analysts should be doing when they evaluate miners Follow Paul on Twitter and learn more about TeraWulf. 

Hello and welcome back to On the Brink. I'm Nick Carter. This is another episode of the mining miniseries, which keeps going and going. Today we're sitting down with Paul Prager, the CEO and co-founder of Terowulf. Terowulf is a Bitcoin miner focused on zero carbon energy. Paul explains what that means in the episode, and they're also focusing on vertical integration. They have two major facilities. One is based on hydro power in New York, and the other is co-locuted with a nuclear power plant in Pennsylvania. I believe that's the first of its kind in the Bitcoin mining space, which is fascinating to me to see the synergies between Bitcoin and nuclear developing already. We talked about that in the episode.

Paul has a wealth of knowledge. He's a sion of the energy industry, having previously founded Beowulf. We talk about why miners should consider being vertically integrated and how there are risk factors that analysts that cover miners are just not. seeing so far. We talk about why Terawolf has committed to a sustainability strategy and what that entails. This is a fascinating episode. I'm really glad we were able to sit down. And by the way, before we get into the episode, a quick PSA for our listeners. The vast majority of the firms profiled on the mining miniseries are hiring for all kinds of roles. And some of them have

reached out to me for assistance with that. Now, if you're looking to get into the mining industry, In particular, if you don't work in the crypto industry, but you have an interest. There are absolutely roles available at most of these firms, in particular communications roles, are an urgent need. If you'd like to be considered, shoot me an email to Nick NIC at nickcarter.info and include your favorite episode or the favorite thing you've learned on the mining miniseries and attach your resume as well. Without further ado, let's dive right into it.

So I'm sitting here with Paul Prager, the co-founder, chairman and chief executive of Tara Wolf. Paul, thanks so much for joining us today. Thanks very much for having us. Awesome. So you have such an interesting story, and I think it's really different from a lot of the publicly traded Bitcoin miners. Given your long background and energy, I just love that your prior venture was Beowulf and now we have Terawulf. Why don't you tell us a little bit about your career in energy? and then how Terowulf came about.

Sure. So I'm an Annapolis grad, and when I left the Naval Service, ended up at Solomon Brothers. I was a trader, did proprietary arbitrage. And I left to go purchase some marine assets, ran a shipping group for a little while. And I was in the process of trading coal around the world, Pakistan and India,

when I got into the power supply. space. I thought it was a good way to be vertical. And I've owned energy infrastructure now for, you know, almost 30 years. I purchased continental energy from the old Montana power company. I then centennial energy from the old Montana Dakota utilities. So I've been in power for a real long time, by the way, with the same team. And we have designed, built, operated, purchased added distress, restructured, redeveloped, repowered, everything from coal to gas to hydro, wind, and solar. So, you know, we ended up at Bay Wolf Energy, we had an asset in Montana. Best Available Control Technology is a fantastic coal plant. But it was called.

whole and we recognize the sea change here as a result of how fast renewable and sustainable projects were coming online. We were seeking a new life for that plant. And we ended up in a deal with Marathon at the time Merica Akamoto, who was present and an early adopter of Bitcoin. and he enabled us to design and build a Bitcoin mining facility for him on that site and even operated for him for the longest time. We worked together to develop risk mitigation strategies. I think for a long period of time, Marathon was just a handful of employees, and we were the 200 other employees, in fact, through Beowulf.

And that's how we got into the crypto business. Co-founder of Terawolf, one of my best friends, our chief operating officer Nazakon, you know, kept banging the table and saying, Paul, this is the future for us. Energy's moving in this direction. And in fact, this is the way to store energy that the whole world's been trying to figure out for the last 100 years. And this is what we should be doing. And so we decided to form Terawolf. and Terrell was going to be different than any other crypto miner on the basis of three things.

The first one was our team. You know, we've been together a very long time. I have 15 members of my leadership here that have been together at least 15 years, some as many as 25. So a seasoned management team that was seasoned in energy infrastructure. right? Because Bitcoin mining at its core is really energy infrastructure. The second big difference was going to be our ESG focus. I think ESG is a word a lot of people throw around. It's not an ideal for us. It's a practice.

We were in the power space for, as I said, 25, 30 years, and we watched the evolution, both in terms of what is the definition of demand and from high-tension customers to a population and use by a population. And also how quickly sustainable renewables dominated the space and how they could be competitive from a price perspective. So we wanted Terawolf to be about zero carbon, you know, and that was going to be an important. important way that we could differentiate ourselves, both again, because it's the right thing to do, but also because we believe ultimately, as the space institutionalizes, institutional investors want to see that as well. So that was going to be a key way that we would sit ourselves apart. And the third way was vertical integration. You know, I think there are a bunch of guys out there

that, you know, try and communicate that they're vertically integrated. I mean, we're really vertically integrated and I think unique in the space. We, we like to control every element of risk in the chain from, you know, generating electricity to making Bitcoin. So vertical integration is essential for us because it reduces your operating costs. It helps you manage your CAPEX and it reduces risk, whether it's price risk or regulatory risk. So I think those were the three things that we defined is the reason to start TerraWolf and here we are. So after such a long career in energy, what was it about Bitcoin mining specifically that just got you excited? Was it just the financial opportunity or, you know,

something about Bitcoin, like something ideological about Bitcoin itself? We were first introduced to Bitcoin through the economic opportunity. I was fascinated. with it from the store of energy perspective. I mean, I've been energy my whole career. And everyone's always promising the battery, the battery, the battery that could come. But the reality is, you know, in electricity, you take a locally resource commodity and you turn it into electricity. And in Bitcoin manufacturing, you're taking a locally manufactured commodity and electricity. that has, you know, no real storage value.

I mean, hydro has some storage value, but no real long-term storage value. And no real ability to transport it because transmission, well, transmissions all know. The story needs a ton of investment, it's regulated return. And you can now take electricity and turn it into something that you can store, you know, internationally. So I was fascinated by that. And I think, listen, you know, you get a little bit older in life, you become more open to certain notions. I have taken the view.

I'm short fiat and want to be long Bitcoin. I mean, I become, I wouldn't say I'm a zealot, but I am a strong believer that it's the right thing to do. I also think Bitcoin, I mean, it sounds a little bit goofy. I think it's good. I think Bitcoin is good. And so that's where I'm at. Well, I should hope so. I'm glad I'm glad you think that way.

So in terms of the actual business of mining Bitcoin, this is something I'm really curious about because Bitcoin is such an interesting commodity in that it's so predictable. In the supply dynamics, of course, the only thing that's, I guess, unpredictable is the hash rate in the aggregate and obviously the unit price. So as you look ahead, you know, I think yesterday we're actually halfway between the two halving periods. So we're right at the midpoint now. So I believe it's two years until the next happening, if I'm not getting that wrong. How much does that kind of factor into your decision making, the fact that there is a structural sort of decay in the issuance and sort of theoretically in the, you know, revenue opportunity for minors in the aggregate? Is that something that you actually plan around and think about? I think you have to think about it.

Our strategy has always been energy infrastructure first and doing it at scale. So, you know, after the having, you know, the reward's going to be cut in half. And I think that makes it harder for smaller, less efficient mining operations to survive. So, you know, we worked to accelerate our build-out so that we could be, you know, we're going to be at 210 megawatts by your end. 400 megawatts by 23 year end. I mean, we focused on scale and the build out of the infrastructure. And an important element to that was taking into account this happening. Yeah.

And so I guess your reasoning is like, look, if you're mining more cheaply than the next marginal miner, it doesn't necessarily matter what the sort of aggregate market size is. Like, you're still going to be profitable. Absolutely. Our priority is ensuring we have the lowest production costs. We'll be profitable. Yeah. And I guess vertical integration is a big part of that.

I agree. I think vertical integration is essential to it. So do you at all rely on any projections regarding fees? Because obviously minor revenue is issuance plus fees. Right now it's about 99% issuance and 1% fees. I think it's the inherent value of Bitcoin. So the answer is yes. Yeah, because I always wondered about that because, you know, that's such an important component of long-term minor revenue.

But I never really hear miners talking about fees. I think that's just because there's been so much price volatility in the absolute value of Bitcoin. But I think it's essential. We think, you know, we think about our business. We try and think, you know, where are we today? Where are we a year out, two years out, three years out, five years out. And I think that you have to look at fees as, you know, it's part of the inherent value. So I want to talk about your two sites.

So you have Lake Mariner, which I believe is upstate New York, strongly hydro-based. Now, is that just you drawing on grid energy in the region there? Yeah. We have a facility there. It's up to 500 megawatts, and we're taking power from NYPA. and their published reports are that it's 90% hydro. We're also redeveloping on sites and solar to add on there. In that region, is it a matter of there having been a big industrial capacity historically, which then left?

That's something I've heard from other miners that are maybe in Quebec or New York. There used to be paper mills or something like that. Is that the case in U.N. York? Like what explains sort of the energy abundance there? I think it's a few things. First of all, I'm less than 25 miles away from, you know, two and a half gigawatt Niagara Hydro plant, right? So location, location, location.

It's great. And what made that site, by the way, not the best power plant, is what makes it a great Bitcoin mining facility because here was all this inexpensive power racing by to go south. And so as a power plant, you were dealing with congestion and much more competitively priced power that was green. And here now, we're the first stop on the way, if you will, for this great inexpensive resources of zero carbon power.

I think the second part is, yeah, it was a big industrial area. I mean, I had the two last coal-fired power plants in the state of New York that we closed, worked with the state for years to do that, mitigated. It was terrible. we actually lost some employees. And we had employees, by the way, that were three-generation, you know, power plant employees at the same facility. We employed over 300 people, which was, you know, more than 10% of the population of the local town. We've hired a bunch of those employees back, by the way, and many we've hired sort of indirectly because they work in the union,

and they're rebuilding our site. And it's pretty cool to sort of. sort of rehire and retrain these folks. So I would say the third element to what makes it appealing up there is the people. There's a large segment of the community that you could hire, that are excited about working in Bitcoin mining, and that are really talented. I would tell you the fourth part about it is the state. Contrary to anything you may hear, New York State's been fantastic and they have, you know, a thoughtful approach towards data centers in Bitcoin mining. And, you know, hence our partnership with the state with the contract coming from Nipa. Yeah, that was actually going to be my next question is I think of all the states,

New York has been the most strident about, well, just generally being concerned about the growth of Bitcoin mining in the state. It's certainly one of the biggest states for Bitcoin mining, I think, top three, maybe top five, certainly. Yeah. Depending on what kind of data you're using. And there's so many academic papers I see that come out. You know, those papers saying, hey, these miners, you know, came into town and then increased power bills by X amount.

I don't know if that's true. I mean, I think those models are likely to be a little bit misleading. And, you know, power prices are such a complex thing. I don't know if you can ascribe it solely to one industrial entity. But either way, we definitely see a lot of agitation. So I was going to ask what your view is in terms of sort of what is likely to actually happen there in sort of the medium and long term. So I'm really constructive on New York State and their approach to Bitcoin mining.

I had two coal-fired power plants in the state, and they worked with us when we're operating, and they worked with us when we decided to close them and mitigate them. I think they were great partners in every respect, very professional. I think we're working now with the state on figuring out how Bitcoin mining can enhance the grid by being as the kind of responsible load that we are. Listen, I think state legislatures have people on, kind of either side of the aisle and sometimes you've got to be extreme one direction or extreme another to get through the right legislation last year when the state looked at legislation my understanding

and i'm not a politician is you know um it it was quickly realized by by leadership in the committees that it's a slippery slope to decide what do we use electricity for so let's not do that right i mean are Are we going to use electricity for Bitcoin mining? Are we going to use it for factories that make baseball cards? We're going to use it for factories that, you know, make cigarettes? Who knows? But I think at the end of the day, it is a slippery slope, particularly in our country, to decide who gets electricity and who doesn't.

So they went away from that. And I think more now they're focusing on the effect of having, you know, plants that are generating electricity and what the commodity or the resources that are being used to generate electricity and what were the permits originally for those plants and how does it affect the system in the grid. We're fortunate, right? We're sitting right up there with the infrastructure from a massive plant that's been retired. So we have the ability to take on this hydro power from the state. and we could help the state, in fact, by, you know, the state doesn't want imbalances, right? The state wants a balance, great.

And so we're, you know, an intimate resource for them. And so I'm not really worried about legislation or regulation in that state that's anything other than constructive. And I would tell you, I mean, I think a few weeks ago, while we were down in Miami, the state, decided that to elect the entity or the revenue department that would tax crypto to be the same one that does insurance and banking. And in many ways, you know, you don't, you don't contemplate taxing an industry, right, without realizing this is an important industry for revenue growth. So I think we're important for revenue growth. We're important for the grid. I think the state's been very constructive with us and we'll continue to be. Yeah, I think the objection I see,

oftentimes from activists is kind of creating local externalities, maybe around noise or obviously, you know, power prices or, of course, emissions, you know, not localizing the benefits, I guess, of having a new industry coming in. You know, people complain Bitcoin miners don't produce, you know, a requisite amount of jobs given their economic scale and things like that. So oftentimes I see it's like a privatization of the benefits of electricity, but like in an extractive way. I think there are two things to that. I think early on, listen, people were early on plugging and mining into their garage. Early on, people were sort of just, I can't go build a Bitcoin mining facility in New York City, right?

You've got to be thoughtful about it. By the way, it's another reason why I like Terrell so much because we're energy infrastructure folks. So we think about sites and where it is best on a long-term basis to have that infrastructure set. But the second thing is messaging, right? As a community, we minors need to do a much better job of sort of telling the truth about what we are doing, stopping people from spreading misinformation about what we are doing and helping communities recognize we're investing in the community we're investing in the grid we're enabling I would argue the development of more sustainable resources and so I think part of its messaging

yeah and that's certainly been a challenge for the Bitcoin mining industry I mean no industry has been as reviled in the press. Maybe, you know, I feel like Bitcoin mining took the helm from, you know, to tobacco industry in terms of being the target of attacks. You know, in upstate New York, because we started there, you should know, first of all, we have well over a thousand acres. I mean, and the local community is really excited because while they lost jobs and revenue, they're now gaining jobs and revenue again. And it's, it's, it's, it's, zero carbon. The state's done, in my opinion, a great job of communicating. They want to, they want to sort of move on from old technology into new technology. So the people that are

sort of working on site, all of them feel a sort of sense of equity in the place. In terms of good stuff for the community beyond that, I would tell you, you know, we're doing a joint venture with Bitmain where we're training veterans. And we're, we're, we're, we're, we're, we're, working with Blue Star family to train veterans on how to operate in crypto mining world and repair miners. And so we're offering sort of a school and a JV with Bitmain. Another way to help the community have a better appreciation for what you're trying to do there. On our site, in fact, we have a 100-year-old museum for the county in upstate New York, which was a great agricultural County and then except it was this big massive coal plant there and so we we set them up with a museum there

to also welcome the community to look to see what's going on the evolution from agriculture to coal-fired plant to crypto mining with zero carbon I think there's a lot in messaging here that's important yeah I think there's an interesting historical symmetry if I'm not mistaken wasn't a hydro facility on Niagara, the first industrial power plant in the U.S. I believe that was the case. So it's kind of, you know, right back to where it all began. I agree. So I want to head south to the Barrett, Pennsylvania site you have, which is absolutely

fascinating. I mean, I don't know how many co-located nuclear Bitcoin mining operations there are. I think it might be the only one, actually. Yeah. I think we are too, certainly the first, excited about it. It's our Nautilus facility. It's a 300 megawatt facility that we have in partnership with Cumulus, which is a subsidiary of a company called Talent Energy Corporation. Listen, I mean, we built, you know, the largest scale facility in the States, you know, for Marathon.

And if you're a base load facility, you know, a big nuke. You know, you need help to run in a negative pricing environment, right? And one of the greatest things they ever saw was the notion of Bitcoin mining facility and a data center, by the way, I think Tumulus is also invested separately in data centers. But baseload resources, those plants are designed for steady demand. And when you have crypto mining, which can operate 24-7, you know, it makes us the perfect anchor tenant. So, you know, we knew the talent guys for a long time. You know, I think my chief strategic officer,

Carolingless was probably a Gulbin with the CEO, Alex Hernandez. I'm an Annapolis guy. I don't think there's a nuke in the country that's not run by, you know, one of my classmates or alumni. I mean, it's just a, it's a small community. I think next year, Miami, we should have a special stage that glows in the dark or, you know, the nuclear Bitcoin miners. I think that would be really a lot of fun.

But yeah, I mean, it's a great relationship, and it's an important relationship for nuclear power and for Bitcoin mining. Right. Yeah. So that was going to be what I was going to ask about. So very little time or consideration is given to the suitability of nuclear power for Bitcoin mining. People talk a lot about, uh, coal, locating Bitcoin mining installations with wind plants or solar plants. And we hear a lot about that.

We hear a lot about West Texas. We don't really hear about Bitcoin mining in sort of the rust belt or like these industrial areas in the heartland of America. Certainly don't hear about it for nuclear. So maybe just can you expand a bit on, you know, why it makes sense. And you're not accounting for all the energy that's being produced by this plant. It's just a subset of its production. Sure. I mean, this is a two and a half gigawatt plant, right?

Listen, the sun doesn't always shine, the wind doesn't always blow, you don't always have Northwest Hydro runoff, right? But nukes are a guaranteed, low-cost power source and at massive scale, right? So now you're giving them this resource that they could work around and manage around, and that can generate real, you know, significant revenue. And again, store electricity value. And so I think, and by the way, there's zero carbon, right? And I believe the world's got to go to zero carbon, 100% zero carbon.

I think that's where we're added. And I think it will happen far more quickly than anyone predicts. But it can't come soon enough. And so from my perspective, it was a natural. And by the way, it's a great partnership. They have terrific people there and we're very excited about lighting that facility up. So would you say that the existence of Bitcoin as an industrial load actually improves the prospects for nuclear?

Is that an overreach? I think it does improve the prospects for nuclear. But, you know, Biden came out last night. He talked about the commitment to nuclear. I mean, you can't have sustainable energy without nuclear energy, right? I mean, you need those massive spinning reserves to be able to bring on the smaller, you know, hydro and solar and wind units. They are the fundamental definition of basal of electricity in our country, which makes our country great, you know, the ability to walk into your office and flick on a switch and the light goes on, right? And so Bitcoin mining is enabling that.

I think it will reduce some of the tension that these nukes have when there isn't that steady demand. And, you know, I think Talon was brilliant to reach out and seek to form this partnership. And again, it's very constructive. We're learning a lot from them. and we hope we're teaching them a lot about the more entrepreneurial side of bitcoin mining. Right.

Yeah, I think it's something people don't realize about nuclear powers. You can't really, you know, regulate it down. I mean, it's pretty much linear. It's sort of either on or it's off for maintenance. And, you know, you can't curtail the generation at night when the grid doesn't need it as much. She's always running and at massive scale. So, you know, Bitcoin mining and data centers, I think, but Bitcoin mining to a greater extent because they're really storing something

that has got a liquid value. I mean, I think it's a great resource for Nuke. So in terms of sustainability, that's obviously a big part of your story. And I think, you know, very authentically so. If you look at the two sites that you have, you're 90% zero carbon energy. that you mentioned on the website. Are you incorporating rex or offsets into that figure? No, no, no.

It's nicest published reports. It's that they're giving us at least 90% green power. So no wrecks incorporated. And by the way, I'm not a big fan of, I mean, wrecks are good. But, you know, I think carbon neutrals, you know, you know, I think it's smoke and mirrors, right?

It's not what we're about. You know, when my kids were little, they'd move food around the plate and tell me they finished their meal. And I was like, no, you hit. And that's the way I think about carbon neutral, right? I mean, it's not really additive, right? And I think the approach has to be about zero carbon.

And it's the right thing. to do, but I also think it makes you the lowest cost operator. I mean, think about running, you know, off of some gas or some intermittent resources. It's price and risk to you as an investor in one of those sort of ventures, right? A, you know, gas price volatility has not been not been easy to manage in here. I think you'll see a lot of folks when their PPAs come up, you know, just go nuts when they see the new terms. But you're hedging it. You don't hedge for free. Hedging is a cost, right? You're posting collateral to the grid, right? That's another cost. We will have regulation. There's no doubt about it. We should embrace it. We should embrace it as a

community. But the low-hanging fruit on regulation is going to be, hey, you know, are you burning carbon? Yeah. So from my perspective, perspective, I'm about zero carbon neutral, not about carbon neutral. And when people say, so you guys are carbon neutral, no, no, no, no, we're zero carbon. It's a big difference. So in terms of actually growing your fleet, you know, as you progress from sort of hundreds of megawatts to gigawatts over time, how do you feel about these sort of existence of these renewable assets which you can potentially target? I mean, what's your level of optimism around the availability there of other zero carbon sources?

So I'm very optimistic. I mean, to be honest with you, Nick, I have clear visibility now on 800 megawatts. And I have to focus on building that out, executing, delivering on the promise. So that's where, you know, I'm really focused. But like I said, I mean, we're in touch with the nukes. I mean, it's, I'm wearing my Naval Academy shirt for a reason. I'm just trying to, you know, if anyone sees it, call me if you've, you know, but we're talking to the nudes. I think, listen, these nuclear plants are exceedingly. well managed by really thoughtful leaders. And they're all looking at us today and trying to figure out not whether or not they want to do something with us, but how they want to do something with us. What more percentage or what allocation did they want to have, right?

And so I'm really constructive in terms of that. And I think an advantage that we'll have is we've done it, right? They won't have to recreate the wheel. We've been there, done that. Separately, Italian, you know, that's a two and a half gig facility. You know, these guys are great partners. I'm confident that we could grow together beyond the 300, which is just the first stage. And then thirdly, I would tell you, this is a team that has developed and built power plants for the last 25 years.

So we have a bunch of folks, been and women, that are out there looking for. for just those right opportunities on the back of the lessons we've learned. And so what do you want to look for, right? We're looking for sustainable energy supply. We're looking for scale. And we're looking for a very supportive regulatory environment. You know, we have an office in D.C. that's all they do for us. It's just, you know, they focus on the regulatory regimes in states.

And then, of course, there's got to be this inherent awareness. of where the imbalance is between supply and demand. But that's how we think about, you know, the forward market. But right now I have to deliver. I got to get 210 megawatts home by your end and, you know, 400 by 2023 and build out the rest of our facilities. So when, you know, when I hear miners talk about sustainability, I mean, there's kind of a variety of claims there. Obviously with you guys, it's pretty transparent. It's not difficult to really map the hash rate to the electrons and, you know, map that to carbon intensity.

I think it's very simple in your case. In others, it's more obscure. It's more oblique. And there isn't really any sort of body that actually investigates these claims. What do you think about that? In your view, is it just going to be a self-regulatory thing where the market eventually converges upon a. better standard of transparency or do you think there's actually going to be some entity that comes in and asks for sort of proof of the claims that miners make about sustainability?

Three things. One is I agree with you. There's not a whole lot of transparency out there right now. And the second thing is regulation will come and I think this will be an area where regulation demonstrates clear interest. And the third thing is regulation will be a area where regulation demonstrates clear interest. And the third thing is I'll tell you, as we mature as an industry, right, you need institutional investors. And retail investors are brilliant, but they don't always have the same resources that institutional investors have to sort of run things down and get to the bottom of it. And I think it will be very important as the industry sees more institutional investment that we're going to need to be. to prove to these investors what we're all about. What's the mix?

And I think it will both naturally evolve as a market matures, which I like a lot. It's consistent with the notion of a free market, but also I believe there will be regulation that we should welcome in terms of how people talk about zero carbon or whatever, their practices. So one thing that I've spent a lot of time on recently, it's been such a learning experience for me. I mean, I need very little about power markets before I started getting into Bitcoin mining a couple years ago. And I think the rabbit hole in terms of energy is deeper

even than the Bitcoin rabbit hole, frankly. I mean, there's just so much complexity. I feel like I need to do like a graduate level course in this stuff. So it can even talk about intelligently is basically, you know, minors as providers of demand response capacity or just more generally selling into ancillary services markets. And this is something I'm pretty optimistic about. I've seen a lot of miners making more noise about it and even putting out press releases when they curtail their usage. Is this something that's on your radar and like participating in these markets? And if so, like why, you know, what is it about Bitcoin that makes it so suitable for these programs?

So the answer is absolutely. And, you know, mining is got to be the most valuable tool for decarbonization in the grid round. I mean, it's that simple. And we could turn off in seconds. You know, we're working with the state of New York on exactly that right now. And I think it's essentially you do it because it is the easiest way to do. demonstrate to the state and the community how enabling Bitcoin mining is to the grid, right? It will lead to reduced prices, better transmission. It's just great. So the answer is absolutely yes. And to your earlier point, you know, about power, rabbit hole, and you're welcome to come to our office anytime and sit with us. And, you know, we'll go through PPAs with you.

PPAs are not at, while miners are becoming a commodity, PPAs are customized things and there's elements of risk in every line in a PPA. And I think as more institutions come to the space, more analysts will start studying, what's the source of the electricity? Another good argument, by the way, for vertical integration. because in those PPAs there's a lot of risk. And you know, you don't realize what will trigger a draw in collateral. What will trigger an adjustment in electricity price?

What will trigger a change in your fuel pasture costs? What will trigger additional payments to the grid that are required? Because it froze last winter in Texas or something. So I think understanding power, understanding energy, infrastructure really digging in is the key to being the lowest cost most reliable miner so that story around demand response i mean i think it's very strong because basically miners are proving that they are not stressing the grid at a time of grid scarcity and um you know it's very direct it's like if if the grid operator asks us to gritill yeah we're off for a few minutes or hours maybe um but a

haven't really seen it covered much, certainly not in the conversations. You know, for instance, there is that committee, the House Committee on Agriculture. It didn't really feature much in that hearing. So is that part of your dialogue that you have with policymakers? Is they generally aware of this? Or is it still just not on their radar? No, again, in New York, they're certainly aware of it. In Pennsylvania, they're aware of it.

I think it's coming onto their radar, but they just had a lot of other stuff to get to first. And separately, there weren't, and there still aren't minors with real scale, because the more scale you have, the more enabling you could be to the grid as opposed to, you know, you have 20 megawatts or 40 megawatts. I mean, that's exciting. But when you're a grid operator, that's not where you're going to focus. So I think that's coming as a result of mining operations like ours that are achieving scale. So I want to be mindful of your time and get you out of fare by 11. But maybe just before we go, I keep seeing energy firms getting involved with Bitcoin mining.

Obviously, you're on the front lines of that too. You know, we're seeing the oil and gas majors, you know, engaging in mining with stranded gas. certain renewable energy asset operators are looking at JVs in the Bitcoin mining space. It seems to me like there's a convergence happening. Curst to get your take in terms of what it's going to look like in 10 years. How active is just the energy sector going to be in terms of Bitcoin mining directly? Listen, I think vertical integration will win the day and zero carbon will win the day. Absolutely.

I think that there are going to be winners. and there are going to be, you know, folks on the margins. And I think that there'll probably be a lot of consolidation as well. This is not any more about, you know, competing just for capital. This is competing for plugs or the energy infrastructure. You know, I think there'll be fewer larger providers, but I think that 100% will have to be about zero carbon. And if you're not about zero carbon, you won't win.

Again, the way to think about it from my perspective, Nick, is, and I know it may be simplistic, is vertical integration means you manage your risk all along down the line, as opposed to a host model. So I believe people will be vertically integrated. You know, if you're doing the host model, you know, you're going to a site. The site's hiring contractors to put in your transformers, you conduit, all that. The site host is going to a utility to get the electricity. Sometimes the utility is hiring like a third-party operator to, if you will, manage the site, right? There's a lot of price leakage because there are three, at least three, maybe four profit centers along the way that you've got taken to effect.

When you're vertically integrated, you're one, right? So it's a price issue. The second issue is it's a risk issue, right? You saw what happened to the Texas grid in the winter freeze, right? You're upstate New York. transformer goes out. It's minus 15 degrees. The wind's blowing in off the lake, right? If you're a host guy, right, who do you call? I mean, I guess you write the repair center of the site. They call the utility. They send out their team. There are a bunch of change orders, maybe a few weeks from now,

you get a phone call, right? Who do I call? I call Doug. In upstate New York, I call Doug. Montana, I call Gary, right? Pennsylvania, I'm going to call Lindsay. And so it's a whole different approach to the business from a risk perspective. So I'm a big believer that the winners are going to be vertically integrated. And then from a zero carbon approach, I think you have to be zero carbon. I believe it is the only right thing to do. But separately, it reduces your risk of regulation effect or mitigates the risks of regulation effect. And you're the lowest cost guy. You're the lowest cost guy when you're zero carbon. So from my perspective, smaller, bigger, scaled, seasoned teams that

understand vertical integration and zero carbon. Well, this has been fascinating. You have a wealth of knowledge on this. I'm really glad we get you on. I feel like we've talked to a lot of the renewable focus miners and we've talked to, I would say the other two vertically integrated miners, but we haven't talked to you, renewable and vertically integrated. So I'm glad we get that and really excited to see how you develop here. I mean, I personally think the Bitcoin nuclear nexus is so critical. I'm a big believer in nuclear as well. So appreciate the time today. Paul, appreciate you coming on the show. Thank you so much for having me. And just before we go, where would you direct people to go in terms of following your work and following Terawolf?

So we have a website, Terawolf.com. We have our chief strategic officer, gal has been with us for 15 years, Karen Langless. I'm also on Twitter. I don't know if I'm not nearly the magnetic personality Mike Saylor is, but I'm doing the best I can to keep people informed of how I feel about developments in the space. Awesome. Well, we'll certainly link to all those things. Thanks again. Really appreciate the time.

Thank you. See you.