Mining Bitcoin with Hut 8

BitcoinPodcast
Written By Keegan Francis

We had Sue Ennis, the vice president of corporate development from Hut 8 Mining on our podcast. Hut8 is a bitcoin mining company that is publicly traded on the NASDAQ and the TSX. Sue brought up a number of great points worth highlighting from the episode. There are two in particular that Go Full Crypto would like to focus on. The first is that bitcoin has a much larger potential to affect financial markets than people may realize. The other is that bitcoin has a specific role to play in acting as a buffer with its use in balancing energy grids.

 
 

Bitcoin, buffering energy grids

As Sue lays out in our discussion, bitcoin mining companies are 24/7 customers of energy. They are a customer that can provide a more or less constant demand for the supply provided by energy producers. The mainstream narrative is that bitcoin increases the total demand for energy. In reality, there is a bit more nuance to this issue. Bitcoin miners are incentivized to find the cheapest and most reliable sources of energy they can find. The business model of mining bitcoin is largely a function of how consistently your miners are running, and how much you pay for electricity. Maximize uptime, and minimize electricity expense and you have a profitable mining enterprise.

These incentive structures force mining companies to seek the cheapest form of electricity. A cheap form of electricity is energy that was generated to handle pique demand, but otherwise gets discharged into the ground. If a power plant produces too much energy, only a certain amount can be shifted around the power grid. Much of the time, companies are forced to just release the energy into the ground. It doesn’t matter if that energy was harnessed from burning coal, or through a windmill; discharging electricity into the ground is a waste. Energy companies claim a total loss on this energy.

Bitcoin mining companies can provide a buffer for this. They can take some energy during times wherein there is too much energy on the grid, and be slowed down when there is more consumer demand. This is a win-win scenario. The bitcoin miners get cheap energy, making their digital coin mining endeavour lucrative and profitable, employing thousands of people worldwide. The energy companies win because they’re suddenly able to sell excess energy to a previously established customer.

What is bitcoin’s potential?

It has become common to refer to bitcoin as digital gold. The comparison allows us to speculate that bitcoin may eventually grow to achieve the market cap of gold; about $10 trillion. While Sue can see this comparison, she believes (and we agree) that bitcoin has bigger fish to fry. With bonds and debt giving a negative real yield in the face of high inflation, bitcoin presents an appealing alternative with its guaranteed scarcity of 21,000,000 coins. People historically have bought bonds in order to preserve their wealth long into the future, but bonds are no longer presenting themselves as the safest and most reliable investment. Nonetheless, the global bond market today is worth more than $100 trillion dollars.

The potential for bitcoin to capture even a tiny percentage of the market share of the fixed income, credit, and bonds market is high. Governments, cities, institutions, and a whole lot of individuals are already treating bitcoin as their preferred store of value. Its year-over-year appreciation flies in the face of any regular fixed income investment promising you less than a percentage of growth per year. We’re seeing the adoption of bitcoin take place before our eyes as it makes its way into more and more markets previously untapped. The final outcome of these events will not be seen overnight, but instead over the course of years or decades. So bitcoin’s potential is not simply contained

Sue Ennis' Social Links

Hut 8 Mining Social Links

Keegan Francis
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