As long as computers have been around, heat has been a bane in the side of engineers. Heat (and cold for that matter) is a deadly enemy for electrical components, most of which are designed to run optimally somewhere in the range of 104-149°F. Running excessively hot can lead to crashes, damage to drives, and substantially shorter computer life, amongst other things.
Air vents, mechanical fans, and heat sinks are the legacy methods for thermal control, but as computers get more powerful, next-generation tech is emerging that will soon be the standard. To that point, expect to hear and read more and more about %ImmersionCooling, an advanced cooling technique whereby computers are submerged in specialized fluid that is circulated to keep units operating at optimal ambient temperature.
The technology received an unexpected spike in demand as a result of the COVID-19 pandemic, which sent millions of people home to work, creating unprecedented loads on servers. This came in lockstep with %AdvancedMicroDevices ($AMD) and %Intel ($INTC) introducing their most power-hungry chips to date, which demand increased cooling capacity. Analysts at Market and Markets see the market momentum building, leading to a 24.2% compound annual growth rate to grow the immersion cooling market size from $244 million in 2021 to $1.71 billion by 2030.
Industry giants are moving with a purpose towards immersion. Expecting greater adoption owing to higher core counts and clock speeds, Intel is working with the Open Compute Project and cooling vendors to make immersion technology more accessible. Elsewhere, BP Amoco’s (NYSE: BP) lubricants company Castrol has teamed up with the Research Institutes of Sweden to collaborate on developing new immersion cooling fluids for datacenters.
Servers are just one application; immersion cooling could be highly disruptive to the cryptocurrency mining industry, an industry rallying after a sharp decline in the 14 months leading into 2023. Two companies stand out in this space: mining juggernaut %RiotBlockchain ($RIOT) and upstart miner/host %BitMineImmersionTechnologies ($BMNR). In October, Riot announced the development of 200 megawatts (MW) of immersion-cooling technology at its Whinstone facility in Rockdale, Texas, marking one of the Bitcoin mining industry’s first industrial-scale immersion-cooled deployment of %Bitcoin mining hardware.
Watch for BitMine Immersion Tech, or BitMine for short, to make its mark in the same space. BitMine is initially working on Bitcoin mining operations using immersion technology in low-cost energy regions of Trinidad and Texas with expectations for updates on progress coming soon. Initially, BitMine plans to exclusively mine Bitcoin for its own account, however the company is open to various hosting arrangements of others’ computers if the economics make sense.
Riot Not Alone
While Riot – with its $1.1 billion market cap – trumpets a very large industrial-scale immersion-cooled mining operation, BitMine – with its $41 million market cap – is also pursuing its own large scale operation, with an agreement in place with a large regional enterprise in Trinidad to enable it to locate up to 100 MW of hosting equipment at different locations owned by the provider. The agreement affords BitMine all the necessary infrastructure necessary for its containers and mining rigs, including real estate, internet access, on-site security, and electricity at its industrial rate, currently just 3.5 cents per kilowatt hour (kWh) plus various fees. In Bitcoin mining, 3.5 cents per kWh is low, meaning profitability can likely be maintained even during volatile Bitcoin price swings.
This isn’t a napkin drawing BitMine is trying to bring to fruition. BitMine’s team is steeped in experience of immersion technology for mining, being involved with the concept since it was developed in 2017. And they’re getting it done.
The pilot site of datacenters is ready to be switched on as soon as a few more details with the local partners and authorities are finalized.
In fact, this pilot run of 1.6 MW is just the beginning. The first potential buildout is slated for up to 100 MW of all immersion mining.
The second BitMine project, a joint venture with Roc Digital Mining LLC, is being constructed in Pecos, Texas. As detailed in a Form 8-K filed with the Securities and Exchange Commission, the company has contributed and sold assets to this venture and it too is moving forward, although it has been delayed while power agreements are finalized. The project has capacity of 5-6 MW over a five-year period.
To lend some color to value, consider that BitMine acquired an approximate 30% interest in both ROC Manager, which is the manager of ROC Digital Mining I LLC, as well as a similar percentage ownership of ROC Digital Mining I LLC itself. BMNR made a capital contribution to ROC Operating of $1.06 million, consisting of one immersion container unit valued at $300,000, six GE Protec 1500 KVA transformers valued at $750,000, and $6,000 cash. The company also sold ROC Operating four immersion container units for $1.2 million, payable pursuant to a promissory note (at 5% interest per annum, 42 monthly installments) secured by a lien against the containers.
Any news on either Trinidad or Pecos should be a catalyst for BMNR.
Savvy: Buying at Rock Bottom Prices
The plan is to buy ASIC miners – which, incidentally, can be bought at steep discounts now that the Bitcoin price plunge put countless over-leveraged miners out of business – for its own account. It was the dive in ASIC miner prices that pushed BitMine to re-focus its business model.
“ASIC miners are selling at a fraction of their price from a year ago,” said BMNR CEO Jonathan Bates in October. “Our original plan was to host others’ ASIC miners, and self-mine with a small percentage of our capacity. Given the sharp drop in ASIC prices, we feel that focusing on self-mining is a better use of our datacenter equipment and a better use of firm capital at this time. While we still plan to host for others, we intend to shift a greater percentage of our business mix in favor of self-mining relative to hosting, as long as the distress in ASIC miner prices continues.”
The Future is Now
At least a high-level understanding of immersion technology is required to grasp why it is going to dominate energy-intense computing going forward. Liquid-cooled technology has been around for a number of years, often looked at as the future of computing. Advantages abound with this next-gen tech related to performance, durability and ESG.
For starters, thermal control through immersion and a closed-loop system keeping chips at optimal temps means operators can say goodbye to mechanical failures from overheating. In turn, this extends the lifespan of each unit, improving ROI and lowering operating expense.
Operators enjoy higher yields with immersion too. The average mining process for a single bitcoin wastes 772kWh- combined from mechanical overhead, dissipated heat, and heat containment. BitMine units can eliminate up to 95% of that waste through superior thermal capacitance.
Furthermore, immersion is the responsible way to overclock. Removing both the variability of mechanical failures and electrical overhead, combined with the superior heat capacitance of non-conductive immersion fluid allows for 100+kW rack densities suitable for safe overclocking.
In aggregate, the numbers tell the story: 25% overclocking, -60% hardware failure rate, +30% hardware lifespan, and -95% cooling costs.
We are now at the intersection of mechanical and liquid cooling, where liquid cooling will start to be the more heavily trafficked route. Put aside the aforementioned advantages for a moment and consider one other key benefit: pollution. We are amid a green revolution and drive for net zero where environmentally unfriendly technologies will become extinct.
It is no secret that cryptocurrency mining consumes massive amounts of energy, which contribute to carbon emissions and climate change. Immersion technology reduces emissions and strain on the electric grid, making it the next logical progression in mining. Plus, there is no water waste and heat is re-used.
CEO is “All In”
Investors love to know insiders have skin in the game. BitMine CEO Jonathan Bates is the personification of commitment to the company. Serving as Chairman since July 2021, Bates was appointed Chief Executive Officer in May 2022, agreeing to work for no salary. He only receives equity as a paycheck, meaning he is highly incentivized to see the company perform and build value.
Further, Innovative Digital Investors Emerging Technology (IDI), LP, a 100% performance-fee investment fund managed by Bates, is the largest shareholder of BMNR and definitely a “friendly” investor that has put about $3.0 million into the company in exchange for preferred stock. IDI in October provided BMNR a $1.0 million line of credit for equipment purchases for operations. Out of the approximately 49 million shares issued and outstanding, seed investors and IDI hold about 41 million, most of which are restricted stock.
It is rare to find a company where the biggest challenge in order to uplist to the NYSE American just may be meeting the float (freely tradable shares) requirement. That speaks volumes to the quality of management to keep a tight cap table.
“I have been all-in on this business from day one,” said Bates, adding, “I can’t wait to see what the future holds for us.”
Safe to say, the investment community can’t wait to see also.
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