Okay, cool. I think these are on now. Great, so I think everyone in the room knows me at this point. But we're joined by the folks at Marathon. We have Salman Khan, CFO, Chris Brendler, head of IR at Marathon. I'm super excited to have them. Obviously, one of the largest miners, and I believe the second largest holder of Bitcoin out there after-
That's right.
Yeah. So great-
The largest in mining space.
Yes, the largest in mining. Great. Well, I guess first off, we've seen a number of miners come through. Would love to just kind of take a step back, though, hear about Marathon overall, maybe the evolution of the business, and then where you guys differentiate. Because I think a lot of investors look at the space and think, "Hey, look, this is a very commoditized space," where can you gain an edge?
Yeah, Marathon, first of all, thanks, thanks for having us here. It's been a great day today. Marathon is the largest publicly traded Bitcoin miner, and we are a truly global company. We have operations in the United States, in Texas, Nebraska, North Dakota, and then overseas in Abu Dhabi and Paraguay. The company has grown exponentially over the last few years. We have followed something called asset-light strategy, where we have invested our capital in miners and saved about 30%-40% capital on the infrastructure side, and instead hosted our machines at third-party sites. That has given us that upside.
As the Bitcoin price goes up, our fixed-cost structure remains fixed, and as a result of that, we keep the prize money when the price goes up. Lately, we announced an acquisition that has resulted in, which we're very excited about. It gives us the opportunity to have a portfolio-based approach, where we own infrastructure and sites and control the power side of the business as well, and provides us opportunity to do energy arbitrage. So all in all, it's a great growth story, and we're very happy and pleased where we are. And this is just the beginning. We feel that this space is in its infancy stages, and we're proud of what we've achieved so far, and there's a lot to come from here.
On top of that, our management team is one of the best in the sector. Our CEO comes from tech background, entrepreneurship, and has taken companies public very successfully in the past. And I come from energy background, traditional energy, oil and gas, been through down cycles, up cycles over the last 20 years, and I have been exposed to technology industry and I've had the opportunity to establish a renewable energy business in solar, wind, and geothermal. And that, all of those skills combined together and our team across the board gives us a competitive edge compared to others.
That's great. Thanks for that. You mentioned that that acquisition, which has allowed you to lower power costs in Q3. I know that's been a key point for investors as they think about Bitcoin miners, is who's the lower cost operator. What's interesting now, though, is you know, if Bitcoin prices keep going up, maybe they get $50,000+, does the focus then shift back to growth mode, growing hash rate, and maybe there's kind of less scrutiny on the power cost side?
Yeah, global hash rate, as you rightly said, it's been growing, it's been surprising everybody, and continues to grow. What we as miners can control is not the global hash rate, but how efficient we are as operators. And that includes not only operating costs, but also the cost, the capital, how we deploy it and efficiently deploy it. And all those things combined together is important for our operations. When it comes to cost, operating cost having coming up in the near term, and obviously we are planning for a very long term, not just this halving. I know halving is an event that people talk about because it's coming up pretty soon.
But from a long-term perspective, operators who will have a low-cost environment will be able to sustain downturns and take the advantage of upturns or bull markets, they will be successful. In the short run, with the global hash rate where it is and the halving coming up, and older miners out there, about 30%-40% of the miners are inefficient. That may not survive less than $30,000-$35,000 Bitcoin price. And that can have a pretty serious dent on the global hash rate in the short run. In the long run, obviously, things will play around demand and supply, and things will catch up, and this is where Marathon is looking long term. We are viewing two sides of the business.
One is the large-scale, utility-scale projects, more than $100 per MW, I'm sorry, more than 100-MW-type projects, which would be similar to how other competitors of Marathon are doing. On the other hand, we also have opportunity, which is unique to us, energy harvesting opportunities. And that's where we're looking at smaller sites, 1 MW-50 MW, opportunities such as, for example, take the heat. 94.5% of the power that goes into the miners is converted into heat... and we're piloting how to capture that heat and convert that into shrimp farming, for example.
We don't intend to be in shrimp farming business, but it's a by-product that can reduce our costs and increase our revenues and solve the problem for our stockholders. So something called zero cost strategy, that's one way of doing it. The other pilot that we're running is looking at landfill methane gas. And methane, just a reminder, it's 80 times more harmful than carbon, and 80 times, so think about it for a second. So we are running a pilot with a partner and very pleased with the results. Our cost to mine per bitcoin is significantly lower, about $10,000 per coin, which is very attractive to us.
Obviously, there's capital costs that may be needed to expand it further, and finding those sites is not easy, so not saying it's a piece of cake. But we do have that bandwidth, and we do have that team that can go out and make things like those happen. So all those things combined together, cost is important. Many miners who are with older machines and high costs will not exist in the next few months.
Talk to us about where you are then with rig purchases, your latest machines, kind of which generation those are, and how you're thinking about the overall fleet.
Yeah. So we are one of the most efficient fleets in the industry. We are hovering around 24-25 joules per terahash. I mean, this is a newer industry, so most of the public companies have more efficient machines than others. But as I said, more than between 30%-40%, we believe, machines are, you know, inefficient in a $30,000 price environment post-halving. As we move forward from here, it's an interesting market out there, and we wanna be opportunistic about it and get the right machines at the right time, at the right price. And it's not just about the most efficient machines, it's the pricing as well.
Same is the case with when we think about financial investments, as I call it, investing in machines, investing in infrastructure, buying assets, organic versus inorganic growth. You have to look at what is the cost of buying that. So the M&A transaction that we announced, that was at the right price, at the right time. That's why we executed that. And that's an example of going into the right pricing.
I would just say, like-
Chris?
... you know, Marathon as a, as a company, has been sort of, more tilted towards next-generation machines. You know, I think with our cost structure and the, the extra spread we pay our hosting providers, I think it makes sense to be investing in the, the most efficient machines possible. That's why we've dumped so much of our, 2021 capital raising into the XPs, and you'll expect us to do the same with the next-generation models. We have announced that we have seven exahash on order. They're not all from Bitmain. There's some MicroBT and Canaan in there as well, but they're all like the, the next generation, you know, closer to 20 or below joules terahash. And, you know, that's kind of future-proofing, you know, so the...
You know, as you go through these halving cycles, it really is- it's not the miners that go out of business in terms of the companies, though it can be, it's really the machines that are- that are most at risk. The older machines will not be able to survive, and we've got pretty good data on this now. It's publicly available data. You can sort of go to the- I think Coin Metrics does the best job of sort of mapping out exactly what the network looks like. And yeah, over 40% today, it's actually gone up-
Yes
... because as the Bitcoin price has rallied and transaction fees have increased, most of the network hash rate increase we've seen in the fourth quarter is 'cause older machines are coming back online. So I think it follows that as the network economics change in the halving, those machines will be the first to fall offline. So I'm pretty optimistic, given the recent behavior. It seems rational that we'll see the network hash rate come down into the halving, but you never know, obviously. So there's a lot of different factors at play.
That's. It's a good segue because, we've heard from a lot of different miners today that... So everyone's growing hash rate, sometimes multiples, but also most of the folks think hash rate comes offline at the halving. So I guess, how do you reconcile the two? So, understood that there's older gen machines, but, all the public miners, which is a good chunk of the hash rate out here, we've seen in some cases even up to 5x exahash planned for not too long after the halving. So I guess, what are your plans post halving?
Do you see continuing to grow hash rate, or are you gonna be very cost sensitive, where, say, Bitcoin, you know, comes down even a bit more, it's $35K-$40K, does it make sense to take some hash power offline and kinda wait it out?
Yeah, it's a very complex question, and it's... The way to view this is that, we've got a very strong balance sheet. We've got, obviously, depending on the day of, the pricing of Bitcoin, we were, approximately $1 billion in cash and Bitcoin combined together. We reduced our debt significantly, last year, at a discount, saving $100 million for the company by doing that. And, this acquisition that we just closed, that we announced last week, that gives us ample amount of bandwidth to put miners at a very low cost, of operation.
So all of that combined together, and then the very efficient machines, that puts us at the forefront of the industry when it comes to mining efficiently in a very low price environment. We feel very comfortable and very blessed that events like halving this time around specifically, although it may result in the industry bleeding and some people going out of business, for us, we have ample amount of liquidity to go for a number of years, even if the price stays very low, static for the next couple of years, and that is a very unique position to be in. Not everyone is in that position.
The other thing that is important for us is, as the price goes down and companies start shutting down, the hash rate will start to come back up at some point in time, 'cause it's a demand and supply game. During that period of time, we may have more opportunities to consolidate the industry, and this is no way a guidance, but it's more a methodical thought process that we have a unique position compared to our competition, where we have this asset-light situation that we've addressed with this asset-heavy acquisition, but this is not where we're stopping. There's more opportunities out there.
Yeah.
Just to add something on the industry. When I was modeling this as a sell-side analyst, I always thought that as you got closer to the halving, capital flows would slow down, and the network hash rate would start to slow down, and we've seen the opposite, right? And I think it actually makes sense. What you're seeing across the industry is miners looking to upgrade their fleets-
Mm.
because they... Everyone kind of knows that the, even the J Pros will be at risk. The S19s, I think, will be the first to sort of, you know, recent model to start turning off, and then the J Pros, and eventually the XPs.
Mm.
So I think it makes sense for miners to invest heavily in next-generation machines now, so they can be ready for the halving when it comes in April. And, I think you'll just see the, you know, the upgrade cycle play out. So it's the only industries in the world that's, like, forced to get more efficient every four years.
Would you say that the efficiency gains, though, in new rigs, are we almost at the point where they're as efficient as can be? It almost seems like we're gonna get to the point where you can actually start depreciating these over 5 years versus they have a 2-year almost useful life here, because there are just limits to how efficient these rigs can get. So I guess after this halving, what moves the needle in terms of getting more, better economics? Is it just starts to become more power dynamics, 'cause the rigs maybe aren't gonna get any more efficient?
Yeah. Rigs are still continuing to get efficient, more efficient with time. We're seeing the passage of time, technology improving, and it's a difficult business to be in, being a manufacturer. So efficiencies and differentiation in the product, and technology and the software, all that stuff becomes important, and we're seeing that the technology keeps on improving with time and machines becoming more efficient. The thought that... The way I see this is that that's why we have these two-pronged approach to the business. You've got this large utility scale business, and then you've got this energy harvesting business, and that's where your older miners could be placed into the energy harvesting business to cycle the life of the asset.
And I think my perspective is that this is certainly not two years, it's more than that. You can utilize miners more than that, especially the more efficient ones. But there will come a time, your question is reasonable, there will come a time that it will plateau, and it will be interesting to see how these miners can go on for years and years and create value.
Got it. And is there any... We've heard a lot about power curtailment credits, power sales. Is there any power dynamics at play for you guys that you can employ to lower your all-in power costs?
So the acquisition that we just announced, that is, Texas and Nebraska, 290 MW in Texas and 100 MW in Nebraska. And the one in Texas, obviously, we are going through a freeze right now in our climate-related impact and or weather-related impact in the Texas region or ERCOT region. When that happens, we curtail, and we... The way this works is that we have attractive rates with the in that region because we participate in that demand management. And as we curtail our power, we get paid to do that, and by reducing our costs to buy the power in the usual times.
And then on top of that, we have hedge that protects our interest on the power cost side. So as you can see, this is a very interesting industry. We don't control global hash rate, but everyone wants to grow. If you don't grow, you're gonna be left behind, so your share of the global hash rate goes down. On the other side, cost side, you've got to solve the problem of the power, and the lower your cost, the better margins you have, and that includes not only power asset management but also hedging and reducing your costs, and demand management, certainly. The grids love that because, think about being in Texas right now. You've got extreme weather condition.
You need that power to heat the houses and keep people alive, and Bitcoin mining industry is providing that right now, and that's something to be proud of.
That's great. And just also, you know, as we are on this acquisition, you inherited some hosting contracts from this. What is the longer-term strategy with that? Is it to get those back into self-mining? Remind us also how much time is on those.
Yeah, so, 390 MW, out of that, about 64-65 MW, we are already there with that amount, 65 MW in there. The remainder of the, there's an 80-85 MW that is readily available for us right now, where we can put our miners. We already have seven S19 XP miners on order, which are being delivered starting this month. So that provides us a great opportunity to place those miners. And then on top of that, there's about 245 MW left, which is hosted, and about half of that, the contracts are expiring in the next six months. So it gives us additional 120 MW capacity.
The rest of the 120, depending on how Halving goes, and the contract goes for a year or so out from here. But there are opportunities to bring our own miners and put them in place, 'cause the rate of return for us is better, way better with our own mining operations.
Yep. And so at that site, I believe it's around $0.04-$0.045?
Yes.
So power costs pretty low there. So if you do get the full, I guess, 390 MW self-mining at that rate, that's about a 30% reduction in your, your portfolio power costs if that makes sense.
That's right.
Yeah.
That's right.
Okay, got it. I guess also talk a little bit about so the balance sheet healthy, a lot of cash, a lot of Bitcoin. This acquisition, you know, seems to certainly make sense. Lowers your power cost, which has been a key point for folks. Are you seeing other assets out there in the marketplace where you would look to do this maybe a few more times?
Yeah. So it's... As I alluded to in the, in the beginning, mergers and acquisitions sounds sexy and nice, but you've got to pick up the right opportunities. And this acquisition made sense for us. Pricing was what we felt was good, and at $248,000 or $250,000 per megawatt, roughly speaking, that becomes more attractive. Think about it. If we have to build the site, some of our competition that's building large-scale sites right now are paying $700,000-$800,000 per megawatt. We bought this, and that's four years out from here, and there's more risk in construction, as you know, with the passage of time, permits, and things like that.
Here we acquired something which is readily available and provides us access to hash very quickly at a very low cost. So cost is an important element, right?
Mm.
And that, that becomes the question mark as to opportunities are there. We get calls every day from somebody, and it's a small industry, and we are viewed as an industry consolidator. We have the bandwidth, we have the capacity, but we wanna be picky and choosy as to what, what we go for and from here. I mean, we feel very good where we are right now.
That's great. Is there any other areas you see that you could lean into to lower power costs? I know in the past, it's been mentioned that, some of the companies that you have your, your ASICs plugged in at, who are hosting you, there might be an opportunity to, to rework some of those contracts. Is there anything on those dynamics there you could talk about?
Yeah. Our focus has been to bring our costs close to zero overall, right?
Mm.
That's our CEO talks about that zero-cost strategy, and some of that can be achieved not just by the traditional model, but also through the energy harvesting business, the businesses that we talked about earlier. And the contracts are out there. They're subject to... Can they be open for negotiation? Sure. Our eyes are on the prize money. We feel that being at the top quartile rate of return type company with very efficient operations is the answer for this, and that's what our eyes on.
One thing I'd add is I've been telling people, put my sales hat back on, is that, you know, Marathon has been looked at as a higher cost operation because of our hosting contracts and our asset light strategy, but we're actually the only miner that has the opportunity to lower our costs-
Yes
... by changing it with transactions like this. You know, all the other miners that have their own operations, you can't really go much lower than the electricity costs you're already paying. So we're kind of unique in that we have this opportunity to lower costs through this transaction and then potentially others. But, you know, it's- I think we're looking for transactions that help lower costs. If it's shrimp farming that gets us there, or if it's M&A, we're considering all the things. I do think we're not that interested in buying, you know, companies. I think we're more interested in infrastructure at this point-
Mm
... because we'd rather run stuff ourselves and use the latest generation miners than take over, you know, older, unprofitable miners at this point.
Great. And talk to us how Garden City's progressed. I know there's been delays there at that site. Not on you guys. I believe those are all with Applied Digital, and they've had delays with. I don't know. What was the? Was it transformer issues or?
It's a funny business in the sense that, yeah, we had the permits, but then you have to get the utility to say: "Yes, go ahead." So that red tape process, as I would call, that takes time, some time.
Mm.
The facilities were constructed and nicely done by APLD, and our miners were there, delivered timely. It took some time to get the go-ahead from the utility, and then that's a little bit of a hard burn for us. But we're finally there, and we're happy that it's energized and it's operating.
So is it fully energized or... I believe we had them yesterday, and they still said 65 MW need to come online, or is ev-
No, it's fully energized.
Fully. Everything's fully online.
Yep.
Yeah. So on our website, you can see our locations and how much is online, and Garden City is at 4 out of 4.1. So it's-
Okay
... it's almost 100% there as of December 31st. So-
Got it
... maybe a different aspect of that site that's not online yet. But for Marathon, we're fully online-
Yeah
... at Garden City and looking for more.
Great. Would, would love to turn it a little bit broadly, on the space and, and mining in particular. But, obviously, the Bitcoin ETF has come out. There's been interesting dynamics there. It's traded for what? I guess five days now. Do you think... And this is a, a popular question, so I, I'm sure you, you've already gotten it a number of times. But with an ETF out there, especially you guys who are sitting on so much Bitcoin, do people say, "Okay, well, now there's almost a pure play Bitcoin trade out there I can do. I don't need miner exposure in maybe in particular Marathon," which could be just kind of a Bitcoin proxy?
Yeah. So I'd like to look at the data, because data is king. Historically, last year, Bitcoin, if you had invested in Bitcoin, you would've gotten about 150%-
Yep
... increase in your appreciation from January 1 through December 31, versus our stock, which went up 570% or so, roughly. So there's that delta between Bitcoin and miners that will always exist, and there's a lot of history of ETFs. Let's go back and look at gold ETF. Let's look at oil ETF. So there's a lot of history out there. There are people who would be interested in investing in ETF for sure, because they wanna allocate something. They don't know the companies. They just want a exposure to Bitcoin, and that's a great way of getting that. But if you want great rate of returns, you would pick stocks that will get you that rate of return, and that's where miners give that premium to the investor.
So that's, that's the way we view it, that's the way it has existed for other industries, and that's the way I believe it's going to play out from a long-term perspective. Now, in the short run, there will be some, pluses and minuses, as we are seeing right now, with the ETF just launched, and, the demand will be generated through investors. If even if everybody invests 0.5% or 1% of their portfolio towards ETF, those ETFs have to go and buy Bitcoin-
Mm
... 'cause those are spot ETFs, and that will drive up the price. In terms of where do we come into play, look, MicroStrategy would be a good competition to ETF probably because that's their strategy, to buy and hold Bitcoin. We are a miner. We just happen to hold Bitcoin because we view that as a valuable investment for us, and we view that as an investment, as disclosed in our financials. Our investors frankly love that, and we get that premium to our stock versus others as a result of that and the arbitrage that, and the liquidity that we have in our stock price. So-
There's certainly a lot of liquidity in the stock. I believe it's one of the most traded on the Nasdaq. I guess, so is there any plan that maybe moving forward, you would sell more Bitcoin as you operationally produce it? Or is the strategy still to hold a, you know, a considerable amount?
So we're long on Bitcoin. We believe the Bitcoin price from a long-term perspective will be great, and we view this investment as going to be one of the most profitable investments for us. When it comes to monetizing Bitcoin, last year, we monetized Bitcoin to pay for our operating costs, for example. Run the operations, pay for employees, and things like that. For growth capital and for buying miners and sites, all that stuff is paid through our ATM or our equity, and we view that mix to be very valuable. It has worked out very well for us historically. It all depends on the market conditions, how the market conditions would play out. As of now, we feel equity and Bitcoin mix is good.
There may come a time in near future where just equity may be more valuable. There may come a time where just Bitcoin may be valuable. So it's a great problem to solve and great optionality to have, frankly. I feel blessed to be in that situation, to be making those decisions where you have to pick and choose one or the other.
Understood. Thanks for that. And also as we think about the whole industry, and I've asked all the miners here, and Chris, maybe you have some insights in this: It's been hard to gauge how much nation states are mining, but you keep hearing about it.
Yeah.
Have you guys seen anything concrete where nation states are mining Bitcoin, they're actively involved, and is that gonna kinda apply pressure to some of the public miners here, which maybe can't access at low, as low as cost?
Yeah, it's a million-dollar question, literally a million-dollar question. Well, China banned Bitcoin mining. A lot of those miners moved toward the West, so most of them came to Texas and Kazakhstan and other places. Mining didn't stop. Mining continued. But we keep on hearing that China is still, there are people mining there, Russia, another country where there's mining going on. As the price of Bitcoin goes down to the point that some of those miners are not profitable, at that point in time, it will be interesting to see, because the sovereigns, they may continue to hash, and we may not see the decline in the hash rate the way you would expect in a normal market condition, where 40% of your miners are not profitable.
So, it will be interesting to see how that comes into play, but we don't know for sure how much is from China and Russia and other places. But it will be interesting to see how it plays out for the halving.
That's a great point. I hadn't thought about that. So, you know, if we're wrong about how much hash rate comes offline, it may be because they have different incentives-
Mm
... and there may be more, mining going on in, at the, at the state level that we didn't realize. But unfortunately, I haven't seen good data. I think, you know, doesn't feel like it's a majority. It, it's fairly interesting that the public miners' share has kind of fluctuated around 20%-25% and not really growing, and even though the network hash rate has grown so much. I also think, with the, the discussion earlier of the joules per terahash, the older machines that are online, there are not a lot of public miners that have older machines that I know of.
Right.
So, that also lends credence to, you know, something else mining out there that's not, doesn't have the same incentive structure. So I think the halving will be a great way of looking at that. Unfortunately, I don't think we're getting much better data.
Yeah.
This is kind of a, you know, not something you wanna broadcast if you're doing it at scale in, in Russia or China. So, you know, we'll have to be left guessing. But I think it's one of the things that, you know, is certainly a risk for the industry long term. I. You know, there's no barrier to entering this, in this business. We think we do it really well, but there's all kinds of companies that also do this, and, as long as they have the same economic incentives, we're gonna be doing just fine. If there's different incentives out there, I think it may be a little bit different and more challenging, but, we're ready for anything at this point.
There you go. As you do think about successive halvings, though, does it become a time where Bitcoin miners need to move more upstream, integrated with energy producers? You do get to the point where nation-states are maybe the only ones left that can do it profitably. I guess, how do you think about maybe not necessarily this halving, but the one more halving or maybe two out?
Yeah, from a very long-term perspective, it would be. It's speculative at this stage, but it makes sense that there could be some play with the energy industry and, and, you know, balancing the grids. You know, battery technology isn't good enough to provide that arbitrage that it was supposed to provide for solar and wind. What miners can do is that they can provide that arbitrage. We can shut down miners by a flick of a button and switch them on very quickly without losing much, and utilities and grids love that. And that is an aspect that makes it very attractive for that side of the industry, for Bitcoin mining.
Look, in the end of the day, it's the lowest-cost producer and the most innovative company that's going to survive from a very long-term perspective. And whether it's the company, whether it's a sovereign, only time will tell. But at some point in time, you can compete when there's a level playing field. But if there are countries who have very low cost of power, and it's difficult to compete with that, as in a market economics perspective.
The only thing I would add there would be the transaction fees. You know, for years, you know, folks, you know, said: "You know, how are transaction fees gonna take over for the block reward? That, you know, no one's paying transaction fees." Well, now we know that people actually do pay transaction fees.
Yeah.
They're very significant, and I'm feeling more encouraged about the longer-term outlook of Bitcoin mining as the block reward reduces because of the transaction fees we've seen recently, but also because, you know, the network is brilliantly designed.
Yeah.
It rebalances. So if their block rewards are insufficient given where Bitcoin price is, the network hash rate will just have to come down. There will always be miners. They'll always be paid based on their costs, so as long as, you know, no one solves the electricity problem, I think there will always be miners. And we may at some point see an all-time peak in the global network hash rate because, you know, the successive halvings make the hash rate continue to go down.
Yeah.
Um, so-
I come from oil and gas industry, and for 20 years, I've lived a down cycle and up cycle. The difference between that industry and this industry is that you've got ExxonMobil can go out and have a huge discovery of oil, and suddenly you have ample amount of supply. In this case, you cannot have that discovery. It's mathematically restricted, and that puts this asset in a very different class compared to other assets. Even for gold, you can have a discovery, and you can have more gold in the market.
Mm.
Bitcoin is limited by capacity, by design. Nobody can change that, and that puts it in a position that it will be very valuable at some point in time. Whether it's a few miners left or one miner left, from a long-term perspective, it will be very valuable. And just like Chris said, it's the transactions. Call this like the internet of the '90s. I'm a '90s kid. Growing up in the '90s, how the internet was, there was nothing on the internet, and how trillions of dollars of businesses have been built on top of that a few decades later. Bitcoin is that infancy stage technology. There will be a lot built over a period of time, and there will be ancillary businesses that come on top of this. So the future is bright.
That's great. And that segues me to my last question. Chris, appreciate you bringing up transaction fees. So mostly driven by Ordinals, it seems right now. At one point, you know, a few weeks ago, maybe a month ago, it was 30%-40% of block rewards were these transaction fees. When I talk to a lot of buy-side folks, they don't have the transaction fees built into their models. Do you think this is sustainable, and it's gonna stay elevated, where folks should start building in these transaction fees to their model?
I think it's a little bit early. We're still going through that process and discovering as to where does this land. Obviously, we're very pleased to see the transaction fee go up. From a longevity standpoint, a very long-term perspective, absolutely, there will be a fee. There is a fee, but it will increase with the passage of time. And as the subsidies keeps going down in the, in the, in the block that miners earn, there will come a time where the fee is gonna be higher than what you earn as a Bitcoin block. So we expect that to happen from a long-term perspective. Only time will tell whether what we've seen through the Ordinals in the last couple of months will is that sustainable or not?
The only thing I'd add that we've been thinking about recently is the halving. You know, Bitcoin transaction fees are not denominated, or not affected by the halving. So just mathematically, the day of the halving, they'll double as a percentage. And then also, just given what the halving does, it's gonna reduce network hash rate, it's gonna increase block time, so more demand for block space. So I would think there'd be natural pressure on transaction fees to go up even more, and given the math, a bigger percentage as well.
As a percentage.
Yeah. We still internally haven't really modeled that in. Like, it seems like it's, it's a lot of upside-
Yeah
'Cause transaction fees, especially in December, it was very powerful for us. It's all profit, basically. We're not planning on it, so hopefully it continues. But it'll be interesting to see what happens in April.
Yeah, that's where I was kinda thinking of it as just a potential upside surprise is that hasn't really been baked into any models.
Yeah.
Right.
That's great. With that, we can take a few questions from the audience here. Yeah?
Yeah. So, first of all, just interested in what you guys are doing on the just monetizing byproducts, waste products, and some of the landfill gas. I've got a background in that in my previous life, doing some clean tech projects. But how scalable do you think that is? I mean, obviously, the landfill gas, all sorts of issues with that. You get the dirty gas-
Yes.
You got the inconsistent gas. You've got to use engines on there rather than efficient turbines. You know that obviously, the shrimp farming and monetizing the waste heat, but how scalable do you think that is?
I'm supposed to repeat the question. I'll repeat the question.
Go ahead.
The question is about landfill gas and how difficult it is. It can be challenging, and how scalable it can be for us, and the shrimp farming, that was the other question. It's a valid question. This is a difficult problem to solve. It's not an easy one, otherwise, anyone would have solved it. But we believe we have a solution out there, and our tech team has done a great job, and ops team going out and running this in a test phase, and the results look very promising. The question is, can we repeat this and get the same results again and again? And only time will tell.
We feel very opportunistic about our, you know, optimistic about it. But it's a, there are a lot—there's a lot of stranded gas and stranded energy out there in the world, and it cannot get to the grid because it's too far away. It's in a far-flung area. And that's where Bitcoin miners like us become, because we've got those modulars, where we can put those containers and put those modules in there and quickly start hashing. So that puts us in a very unique position, and we feel that's a, it's a solvable problem in terms of the scale. It can grow very quickly.
It's a matter of spending time and energy, and finding those opportunities, and seeing if it's economical, continuously economical, with a similar amount of results that we've seen so far. So more to come on that. I hope that answers the question.
Yeah, yeah.
Yeah.
So have you guys actually done any scenarios or modeling on how much of your fully depreciated fleet that you would need to recycle and redeploy to make these other zero-cost, like, shrimp farming projects that would fully offset your cost down to zero?
So the question is about fully depreciated machines, if we've done an analysis of how much machines do we need to cycle towards our energy harvesting business.
Yeah.
There's no need for us as of now. Our machines are one of the most efficient in the industry at 25, hovering towards 24 joules per terahash, and the newer miners that we're looking at are in the high teen type situation. So we expect our fleet to remain very young in the near term. There's no push for from economics perspective and also miners perspective. All we're doing is we're planning for the future.
Yeah.
'Cause none of the miners right now are talking about this, and there will be an aha moment for the industry that there's these older miners, what do you do with that? There will be a maintenance capital going forward, but and we're at the forefront of that. We're planning ahead and trying to put these miners to use, and we feel good about that.
Great. We're actually, I think we're 45 seconds over, so if there's not any other questions, I wanna thank Salman, Chris. Appreciate you guys being here.
Great.
Thanks, John.
Thanks for having us.
Appreciate it.