A tech firm is on a mission to simplify bitcoin mining. This organization has launched an array of products, including mining pools, hashrate derivatives, data analytics, and ASIC brokerage aimed at assisting bitcoin miners—regardless of their scale—in enhancing their operations.
Aaron Forster, the director of business development, joined the team in October 2021 and has witnessed the growth of the workforce from about 15 to 85 people over the past three and a half years.
With a decade’s experience in the Canadian energy sector before venturing into bitcoin mining, Forster will be discussing the future of mining in Canada and the U.S. at the upcoming BTC & Mining Summit at Consensus on May 14-15.
In anticipation of the summit, Forster shared his insights on the integration of artificial intelligence into bitcoin mining, the increasing sophistication of the industry, and how his company’s products help miners manage various risks.
This interview has been summarized and edited for clarity.
Mining pools enable miners to pool their computational power for a better chance of earning bitcoin block rewards. Can you detail how your mining pools function?
Aaron Forster: Mining pools act as aggregators that minimize the variance typically associated with solo mining. Solo mining resembles a lottery; you might connect your machines today and win a block reward tomorrow—or it might take a century. During that time, you’re consistently incurring energy costs. At a small scale, this isn’t a huge issue, but as you expand and build a business around it, it becomes more significant.
The prevalent type of mining pool is PPLNS (Pay-Per-Last-N-Shares). This means miners receive payouts only when the pool successfully mines a block, which can still lead to revenue fluctuations similar to solo mining. This creates revenue volatility for larger industrial miners.
In response, we’re introducing what we refer to as Full-Pay-Per-Share (FPPS) for our bitcoin pool. With this model, miners are paid based on the number of shares they contribute to the pool, irrespective of whether a block is found. This approach offers revenue certainty to miners, provided that hashprice remains constant. Essentially, we’ve stepped into a role akin to an insurance provider.
However, to sustain this model, a robust balance sheet is essential, as we’ve shifted the variance risk to ourselves. This requires careful planning, but it’s manageable over the long run. We’ve partnered with various entities to mitigate the complete risk exposure to our balance sheet.
Can you share more about your ASIC brokerage business?
We’ve emerged as a prominent hardware supplier in the secondary market, mainly in North America, but we’ve also shipped to over 35 countries. Our clients range from public and private companies to institutions and individual buyers.
As brokers, we primarily connect buyers and sellers in the secondary market. While we sometimes engage directly with ASIC manufacturers and occasionally take principal positions (using our funds to acquire ASICs for resale), the vast majority of our transactions involve matching buyers with sellers.
You’ve also launched the first hashrate futures contracts.
Our goal is to advance the Bitcoin mining sector. We view ourselves as a hashrate marketplace, and we aimed to integrate hashrate into the traditional finance sector.
This tool enables investors to speculate on hashprice without the need to own mining equipment. Hashprice represents the revenue generated by miners per hour or day, and it can fluctuate significantly. For some, this is a hedging tool; for others, it’s a means of speculation. We’re offering miners a way to sell their hashrate in advance, using it as collateral to fund their growth.
We allow miners to sell future hashrate, receive bitcoin upfront, and then allocate those funds for various needs, such as purchasing ASICs or expanding mining operations. This is essentially the collateralization of hashrate. Miners agree to deliver a specified amount of hashrate monthly for the duration of the contract in exchange for an upfront bitcoin payment.
There’s a discrepancy in the market between buyers and sellers; we have many buyers—individuals and institutions seeking yield on their bitcoin. The rate at which bitcoin is lent is essentially your interest rate. However, it can also be perceived as purchasing that hashrate at a reduced rate. This is significant for institutions or individuals who wish to avoid direct exposure to bitcoin mining but want to engage with hash price or hashrate indirectly by lending their bitcoin through our platform.
What excites you the most about the current state of bitcoin mining?
The growing acceptance and integration of our industry into various other markets is thrilling. The transition to AI-driven High-Performance Computing (HPC) cannot be overlooked. Instead of merely constructing enormous mining facilities, we’re witnessing a transformation where major miners are becoming power infrastructure providers for artificial intelligence.
Utilizing bitcoin mining as a gateway to a more capital-intensive field like AI is fascinating, as it promotes greater acceptance from a different standpoint. A notable example is the merging of Core Scientific and CoreWeave, where the two businesses complement each other seamlessly. This is truly exciting.
As we progress with our product roadmap, we recognize that we must align with the evolving needs of bitcoin miners. Many of our offerings for the mining sector are analogous to what is needed at a more advanced level for AI. While our industry is relatively simpler, we are taking our first steps into the HPC arena, which is still in its infancy.