On the second day of the European Blockchain Convention, Aydin Kilic and Johanna Thornblad from HIVE spoke about the evolution and agility in Bitcoin mining. This article summarizes their presentation, but also contains the audio recording and a full transcript.
HIVE Blockchain Technologies is the first publicly traded crypto miner, listing on the Toronto Venture Exchange in 2017. In 2022, HIVE mined 260 Bitcoin, with total capacity of 2.7 Exahash and 2400 Bitcoin green and clean in balance sheet. It utilizes its resources of energy, capital and technology to increase its mining margins and grow organically without taking on debt.
Difficulty goes up as Bitcoin price goes down, but HIVE has navigated the bear market efficiently and profitably. It applies environmental, social, and corporate governance (ESG), investing in communities and providing waste heat from its data centers to greenhouses and stadiums. The company donated to a local hockey stadium, providing free tickets and sponsoring the team, of which two players have gone on to play in the Stanley Cup.
HIVE is aware of Bitcoin’s overbought status and investors may be interested in HIVE stock’s parabolic following of Bitcoin. With the increasing competition for resources in the crypto-mining industry, HIVE is adapting successfully and rising to the top.
The company uses 100% green energy to mine Bitcoin with a committed environmental, social, and governance strategy since day one. HIVE strives to create long-term shareholder value with its unique HODL (from holding on to crypto instead of selling) strategy, bridging the blockchain and cryptocurrencies to traditional capital markets.
Audio
Transcript
Aydin Kilic: [00:00:01] Hi. My name is Aydin Kilic. I’m the president, Chief executive officer of HIVE Blockchain. Where is the presentation? Oh, there we go. Okay, good. So today we’re going to talk about our approach to evolving in the crypto mining ecosystem. We’re listed on Nasdaq under the ticker HIVE. As I mentioned, I’m the president CEO of Hive. I actually got involved in crypto in 2017. I was inspired by HIVE and I founded a company, raised 30 million bucks and took it public as CEO, and I joined HIVE in summer of 2021 as president and COO and got promoted to CEO a couple of months ago. It’s been an amazing journey. HIVE’s a much bigger company, it has raised hundreds of millions of dollars and has gone on to achieve a lot of firsts in the industry, which we’re going to go over. Now. One thing about crypto mining stocks is that they’ve got a lot of volatility, which, if you are a savvy investor, can earn you parabolic returns. It’s even more volatile than Bitcoin, as you could see here. Looking at a standard deviation on December 30th, 2022, you could see the plus minus is 19%, whereas Bitcoin’s 10%. So a couple of big milestones. In this last year, we realigned our long term strategy with our strategic partners. Blockbase and Barrage were an instrumental to our success. We hit two Exahash of Bitcoin mining capacity and six Terahash for Ethereum mining.
Aydin Kilic: [00:01:30] So we were one of the largest Etherium miners in the world, over 1% of the entire network. And in addition to that, over 1% of the Bitcoin network. We were one of the four companies globally that had a strategic partnership with Intel to develop a Bitcoin mining rig. And we were the first and only company to successfully deliver, manufacture and deploy a Bitcoin mining rig with Intel and my appointment. So a little bit high by the numbers. In January we mined over 260 Bitcoin. We have ended the month with almost 2.7 Exahash which again is over 1% of the entire network and we have over 2400 Bitcoin green and clean in our balance sheet. And we did a massive upgrade one of our biggest upgrades in history over 6700 new generation ASICs of that 3500 were S19j Pros if you guys are familiar with that. And our BuzzMiners which are powered by the Intel Blockscale chip, so 3200 of those. And so instead of expanding during the bear market, what we did is we actually upgraded a lot of the older equipment we have being a legacy miner since 2017. HIVE has had to evolve through the various bear markets. And so when you upgrade the efficiency of your machines, you improve your gross mining margin.
Aydin Kilic: [00:02:46] So you have a lower Bitcoin breakeven price. A lot of companies in the sector have just try to aggressively scale, take on debt and you see a lot of big names going bankrupt. I’m not going to name them, but they’re all over Coindesk, you can look it up. And we’ve navigated the bear market very intelligently. I’m incredibly proud of my team, the unsung heroes of HIVE, our coders, our network technicians, our data center technicians. We’ve got (?) general counsel (Gabriel Ibghy) who was on a panel yesterday. And of course, lovely Johanna, who’s going to chat a little bit.
Aydin Kilic: [00:03:17] So here’s one thing that’s really cool that we did in December. So we have three resources that we manage at HIVE. One is energy, the other is capital, and the third is technology. So when I say manage energy, we can either use that energy to hash and mine Bitcoin or in some cases we could sell it back to the grid. In December alone, we made 3.1 million in profit selling back to the grid. That’s equivalent of mining over 800 bitcoin, right? Far more lucrative to sell the energy back to the grid. Now, in January we made 180,000 selling back to the grid, right? So you could see how we adjust our deployment of energy. And of course the public company, we have to adjust our deployment of capital and our third resources, our technology stack, as evidenced by the HIVE BuzzMiner.
Aydin Kilic: [00:04:09] So again, we were the first company globally and so far the only company that has successfully taken an easy chip and built an entire Bitcoin mining rig system around it, which is the HIVE BuzzMiner, and we have them running in Sweden and New Brunswick. By the way, we’ve got two data centers in Iceland, two in Sweden and two in Canada. We’re all green in clean power, decentralized globally, which is a strategy. And here are some of the firsts that HIVE is known for. So again, the very first public crypto miner ever, the first to mine Bitcoin and Ethereum, were listed on Nasdaq, were listed in Frankfurt and we’re listed in Canada. That’s a first. We’re the first data centers on our balance sheet. We own the land, we build New Brunswick and we’re the first to be green energy focused. And as mentioned, we’re the first to do our own Bitcoin mining rig. And that’s a that’s a key distinction because a lot of companies have tried but a lot of fail. It’s very challenging. So we’re going to get into the financials a little bit. Oh, there’s a picture with me and our prototype. So just analytically, Bitcoin is looking a little overbought right now. We always put these sort of disclosures in our financial presentations, and it’s the same way you could see sort of how HIVE stock parabolically follows Bitcoin.
Aydin Kilic: [00:05:30] And so what you could see here is again, these are some more financial slides for the keen investors out there. As you see difficulty go up and bitcoin price go down. What that does is your mining margins go down. So on the right gross mining margin, if you look at the dark blue bars, you could see that our gross mining margin has reduced over time. But nevertheless we managed to increase the amount of Bitcoin on our balance sheet. And how we do that is we actually focus on mining for profit, not for scale. So we have 140 megawatts of infrastructure globally, but in the last quarter we only utilized 100 megawatts of it. And why? Because in some cases we were actually selling power back to the grid and in other cases we will refrain from mining and using electrons if our variable power price is high and only mine in our fixed power contracts. Right. So there’s a lot of math. We do a lot of Excel. Which one of my favorite things about my job and super proud of my team have got some of the brightest guys in the industry in the huddle daily. And you can see by the numbers, you know, the last four quarters, 70 million a year ago, most recent quarter is about 30 million.
Aydin Kilic: [00:06:44] And nevertheless, we’ve been mining more and more Bitcoin because we’ve been growing with time and it’s key. We don’t have any debt on our balance sheet where a lot of miners have taken debt or they can convert their bitcoin balance by borrowing things that we haven’t done any of that. As I mentioned, our bitcoin hodl has grown significantly and a big part of the HIVE story is our focus on ESG. And this is really important because I think as Bitcoin mining evolves, companies need to be more mindful of the communities that they participate in. And you can’t just go in and buy the cheap power. You have to invest in the community. You have to be mindful. And Johanna is going to talk a little bit about some of the initiatives that we have. And so, by the way, you know, the kind of pillars of mining Bitcoin are: you want cheap electricity, cool dry climate and of course good, good connectivity, which is exemplified in countries like Iceland, Sweden, Canada. And so ESG is sort of a new mandate that a lot of institutions have for investing. So it’s environment, social and governance. And so Johanna is going to talk about how we tick those boxes.
Johanna Thornblad: [00:07:52] Yeah. Thank you. So what we’re seeing here is the Boden Vattenkraftverk, the Boden hydro plant at the very northern part of Sweden. And this is the power plant that is providing our facility a 32 megawatt facility with all its power. We mostly across the company line with hydropower, but also a bit of wind and some geothermal power in Iceland. And what is really interesting in the areas that we’re working, especially in Sweden, is that this is stranded power. So for the communities, for the grid, it’s really important that we are there. We take advantage of the stranded power and provide a revenue stream for the community, for the grid provider. And talking about the grid HIVE has become one of the biggest participants in the grid balancing system where we in today’s society where we get more and more dependent on energy and at the same time want to shift into renewable energy to be able to participate in such a balancing program where literally our unique data center allows us to, within 5 seconds, power down half of the power that the system is required to meet these peak demand moments. That can happen when people come home from their work and want to plug in, charge their car and turn on the dishwasher. And within 30 seconds, we have to commit to power down the entire amount, and that could be up to 20 megawatts that we can turn off on a moment’s notice and share with the grid to balance that system.
Johanna Thornblad: [00:09:54] Another thing is that you have seen that we work in cold areas because our computer fleet, our mining fleet is generating a lot of warm air. And so if you harvest that heat in the right way in these cold climates, it’s actually a very nice resource. As can be seen in Sweden, where this year we have partnered together with a company called (?) and we are going to provide our waste heat to a 9000 square meter large greenhouse that will produce about 700 tons of cucumbers and over 300 tons of tomatoes each year. And we’re talking a very northern part of Sweden. We’re already harvesting the waste heat in Canada, just basically pushing that heat from our data center into the neighboring large facility, a 4000 square meter facility, so that we provide that base heat for them, revenue stream for us, and at the same time doing good for the environment. And lastly, time’s up, mining is unique in another way as well. We’re scalable. We’re mobile. And what we’re looking at doing in Sweden is basically put a container solution submersion cooling, which is very energy efficient, right by the local hockey stadium. That’s the HIVE hockey stadium to provide also the base heat for that facility and saving the community about two $300,000 a year.
Aydin Kilic: [00:11:41] Also Johanna, this stadium we’ve donated to, it’s called the HIVE (?), as you can see, that’s our logo, the logos on the jerseys. And we also allow all the kids in Boden to go watch the games for free after school so they have something to do, encourage them to get involved with athletics. And the Boden hockey team has had two players go on to play in the Stanley Cup. So this is a serious Swedish hockey town. So we’ve also sponsored a local sports team in New Brunswick. So this covers a social aspect of ESG as well, the environmental that Johan is talking about. All right.
Johanna Thornblad: [00:12:18] Thank you.
Aydin Kilic: [00:12:20] Any questions or come talk to us…
Credits
- Main picture from powerplants.vattenfall.com
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