The year is 2020, Bitcoin is more than eleven years old, it is pretty well established in the minds of the masses, it is gaining legitimacy within the financial world, and it is high time North American entrepreneurs start building out physical infrastructure that supports the network. If not, the continent risks falling behind even more in regards to Bitcoin mining.
Luckily, there is ample opportunity and incentive to make this happen. Particularly on oil fields across the continent that a.) waste a lot of byproduct that could otherwise be consumed and turned into value and b.) have a need to bolster their revenue streams in a world in which OPEC+ has an incentive to try to squash the shale industry in North America. This scenario provides a perfect storm for O&G producers and the Bitcoin network. Bitcoin miners, especially those who have visions of attaining some scale, are on a quest to find cheap and abundant energy sources. O&G companies, particularly those in jurisdictions that force producers to halt production when they reach certain emissions levels, are looking to be as efficient and profitable as possible.
Most of you freaks are unaware of this, but outside of this newsletter and the podcast I host, I have been working for a company that is attempting to bring this idea to fruition; Great American Mining. In December of last year, we deployed our first small container in a field owned by a publicly traded oil company here in the States and things have been going very well in terms of uptime and pushing the ball forward education-wise with the oil company. At GAM we believe that O&G companies will become some of the biggest miners within the Bitcoin network as they become more familiar with Bitcoin and realize that the incentives described above are simply too powerful to deny.
Currently, the best alternative that may bring additional revenue for these particular energy producers is to attempt to turn the wasted gas into a natural gas liquid that can be transported via truck and sold to the market. However, this alternative is proving to be a headache due to the fact that uptime of the machines that convert the gas into liquid is intermittent and unreliable, the prices fetched for the NGLs that are eventually produced have been on a steady decline for over a decade, and it is relatively expensive to get these systems set up onsite. Bitcoin fixes all of this by providing a digital pipeline.
If designed correctly, containers filled with bitcoin miners have far superior uptime and are 5x more profitable (on average) than sending the gas to a pipeline to sell. The container that we currently have up and running has experienced +95% uptime. Once mined, bitcoin can be immediately liquidated and prices have been trending up since the protocol was launched in 2009. And lastly, deploying a bitcoin mining operation is a much larger net benefit when compared to other flare mitigation options like NGLs and selling the gas via a pipeline, which are becoming unprofitable.
Most people don't realize it yet, but we believe this provides a massive opportunity for Bitcoin and the O&G industry to create an incredible symbiotic relationship that persists into perpetuity. Bitcoin needs to be further distributed geographically from a mining perspective and O&G companies need to be less wasteful and more profitable. Both industries are pure, ruthless ruthless capitalism. They pair really well together.
If executed correctly, this will be a huge benefit for everyone involved. Think about it. Many bitcoiners worry about the State crushing bitcoin. That becomes much harder when Bitcoin becomes a very important facet of one of the largest, most important and most influential industries in the world. Many are scrambling to put together PACs and lobbying groups to go to bat for bitcoin on Capitol Hill (stating this fact isn't an endorsement of the actions). That may not be necessary if O&G producers also become miners. They will naturally begin to defend bitcoin because it helps their business.
Taking this further, if bitcoin mining does become an integral part of O&G operations, it is not hard to imagine that these producers will want to help secure the supply chain that produces their new revenue stream. This means potentially helping to invest in or campaign for the creation of a chip fabrication foundry on North American soil. Further aiding in the geographical distribution of Bitcoin and reducing overall risk.
These may seem like lofty goals at the moment, but if you zoom out and lower your time preference, they seem very attainable. At least to your Uncle Marty. Like other aspects of Bitcoin, I see an order of operations to all of this:
help O&G producers realize Bitcoin helps solve problems they have ---> help O&G companies retrofit their fields with mining containers ---> O&G companies fight to protect their investments in mining ---> O&G companies + others invest to have more control over the supply chain ---> Bitcoin is much better distributed and O&G companies are better capitalized and much more efficient/clean
We are still very early in this game and on our personal journey at GAM, but we are confident that we will see this vision come to fruition over the course of the next five years. We could definitely fail (unless the government starts bailing out bitcoin miners), but we're sure as hell going to try.
To learn more, check out the podcast I posted today that takes a deeper dive into all of these topics.
Oh how I miss going to a bar and enjoying some beverages with good friends.