Small Bitcoin Mining Sites Beat Massive Facilities—In the Right Context

Conventional wisdom says bigger is always better when it comes to industrial energy loads. A panel of Bitcoin mining executives at Bitcoin Park challenged that assumption, arguing that 100 one-megawatt sites can deliver more economic value than a single 100-megawatt facility, if you're targeting the right energy sources.

The debate centers on a fundamental tension in energy infrastructure: pure capex efficiency versus the ability to monetize stranded or underutilized assets. While large-scale facilities drive down per-kilowatt costs through economies of scale, distributed operations unlock revenue from energy that would otherwise have no buyer.

"If you're looking at it from a power generation perspective, absolutely a 100-megawatt site is far more economically efficient," acknowledged Taras Kulyk, a digital compute industry veteran. But he immediately added an asterisk: existing underutilized assets scattered across industrial facilities represent untapped economic opportunity that only distributed loads can capture.

Philip Walton of Gridless Compute framed the distributed approach as strategic gap-filling rather than inferior economics. "Bitcoin mining just gives us an incredible ability to fill in the gaps," he explained. "It's almost like putting paste on a wall to fill in all the little holes. And the truth is that's where you get the best economics." His company operates sites in remote Africa locations requiring two-day trips to reach, places where centralized infrastructure makes no economic sense.

Steve Barbour of Upstream Energy pointed to massive embedded capacity in existing infrastructure that large facilities can't access. He estimated 100,000 natural gas generators across oil and gas facilities currently run underutilized. "Engineers oversize microgrids because you don't want to run out of power," he said. Adding Bitcoin mining loads to these existing generators improves their heat rates and dilutes maintenance costs per kilowatt-hour, economic gains that don't appear on a clean-sheet facility comparison.

The counterargument isn't purely about capex. Large facilities offer advantages in power quality, thermal management, and operational complexity. Kulyk noted that developing 100 separate one-megawatt sites creates exponentially more logistical and management overhead compared to a single large installation. For companies optimizing around traditional metrics like return on capital, consolidation makes.

Yet, the participants argued that framework misses Bitcoin mining's unique value proposition as what Kulyk called a "buyer of first resort," a load that creates economic offtake where none existed before. Walton emphasized this point through the lens of zero-marginal-cost energy sources like hydro or geothermal. "When you have an energy asset and you've invested in the capex and you're not having to pay a direct cost for the fuel, then why would you not sell it almost no matter what the price to a buyer that's willing to pay you today, no questions asked?" he asked.

The distributed versus centralized question becomes even more complex when extended to AI and high-performance computing loads now competing for the same power infrastructure. Barbour expresses skepticism about replicating distributed Bitcoin mining approaches with HPC, citing bandwidth and uptime requirements. But Walton suggested inference workloads, as opposed to training, which could eventually work in distributed, off-grid contexts where low latency to end users matters.

Whether the industry moves toward consolidation or distribution likely depends on which energy sources dominate future growth. If new power generation comes primarily from large-scale nuclear or utility-scale renewables, centralized facilities win. If growth comes from monetizing stranded assets embedded in existing industrial infrastructure, the distributed model proves more valuable.

"Bitcoin mining is about getting the cheapest source of energy possible," Walton concluded. "And a lot of times those cheap sources of energy are not going to be 'here's 100 megawatts that nobody's using.' It's going to be 'here's 100 sites with one megawatt that's not being utilized.'" The question isn't which approach is superior in the abstract, but which energy sources each model can unlock.

Bitcoin Miners Face Hedging Paradox: Most Critical Risk Remains Hardest to Manage

The one thing Bitcoin miners theoretically need to hedge most—difficulty adjustments that mechanically reduce their revenue every two weeks—remains the industry's least-developed financial product. That paradox reveals a maturation gap between miners' operational sophistication and the financial tools available to manage their core business risks, according to executives from CleanSpark and OBM.

"It is the most fundamental primitive input to Bitcoin mining," said Rory Murray, Vice President of Digital Asset Management at CleanSpark, speaking at Bitcoin Park in Nashville. "And yet the financial products around it just have not really fit the risk profiles."

The disconnect is particularly striking given how far the industry has evolved in other areas. Energy hedging tools are well-developed, with miners now deploying sophisticated demand response strategies that would have been dismissed as heresy during the 2021 bull market. Bitcoin price hedging through CME futures and options has become standard practice for public companies managing treasury risk. But difficulty—the algorithmic adjustment that ensures blocks are mined approximately every 10 minutes regardless of total network hash rate—remains stubbornly resistant to effective hedging products.

Murray pointed to Luxor's hash rate derivatives as one of the few sustainable products in the space, crediting founder Matt Williams' background at the CME for understanding contract design and market participant needs. Yet even with that pedigree, adoption remains limited. "We get pitches all the time, and I've been getting pitches for years about these different products," Murray said. CleanSpark maintains a relationship with Luxor but hasn't been particularly active in the market.

The fundamental problem is structural. "It's really a two-way marketplace right now that's very much about matching buyers and sellers," Murray explained. Unlike standardized agricultural contracts that revolutionized risk management in the 1970s and 1980s, hash rate products lack the depth and liquidity that comes from true exchange-traded standardization. Miners who are structurally long hash rate want to hedge at precisely the moment when their counterparties—typically hedge funds—also want long exposure, creating a one-sided market.

Jeremy Ellis, Director of Power Strategies at OBM, acknowledged the challenge when moderator Colin Harper asked about hash rate derivatives evolution. "I was hoping to avoid that question," Ellis admitted, drawing laughs from the audience. His focus remains squarely on the operational side: power contracts, miner management software, and demand response optimization—areas where tools have matured significantly since the 2021 China mining ban.

That operational evolution tells its own story about industry maturation. "The first event that I actually went to," Ellis recalled, "I explained what I did and where I was coming from and it was met with, 'We're Bitcoin miners. We don't shut down. We're going to be running 24/7, ripping Bitcoin and hashing.'" That mentality has given way to sophisticated curtailment strategies as hash price compressed from $420 per petahash per day in 2021 to around $40 currently.

Murray suggested the hash rate hedging gap may persist until markets achieve critical mass. "Until you get a standardization of contracts, which is what the CME solved back in the 70s and 80s, and you get really kind of a lot more of a depth to that marketplace, I think it's gonna be hard." The chicken-and-egg problem requires sufficient liquidity to justify standardization, but standardization is required to attract sufficient liquidity.

What miners can control, meanwhile, is how they monetize the volatility they already face. Murray described CleanSpark's approach as "demand response for the market"—using the company's 13,000 Bitcoin treasury, 50-plus exahash of capacity, and structural position as a Bitcoin supplier to capitalize on basis spreads between spot and futures prices. "When you see that price continue to rise, the difference between the spot price of Bitcoin and that forward contract increases," he explained, noting current annualized spreads around 5% that can spike to 12-15% in bull markets.

The strategic question for the industry is whether the difficulty hedging gap represents a solvable market design problem or a fundamental mismatch between miner needs and counterparty availability. Murray predicted a "Cambrian explosion" of structured Bitcoin products in 2026-2027 that could help decompose risk into investable components. Whether those products finally crack the difficulty hedging puzzle remains to be seen.

"I think mispriced credit is a bad word," Murray said, pushing back on Bitcoin purist skepticism of financial engineering. "And I think the promise of what Bitcoin is, is it's a forcing function to price credit correctly." For now, that forcing function hasn't yet produced the difficulty hedge miners say they need most.

Announcing
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Zaps have been sent and the meetup page is updated. See all hashers 3/16

Bitcoin Miners Urged to Take Direct Action on Energy Policy Education

Bitcoin mining industry leaders are calling on operators nationwide to proactively engage with policymakers as the sector positions itself as a critical infrastructure solution for America's energy grid and artificial intelligence buildout, according to discussions at Bitcoin Park's recent Nashville Energy & Mining Summit.

The push comes as the industry faces mounting questions about supply chain security, grid reliability, and national competitiveness, particularly as China's total AI computing capacity has grown 30% since 2020 while U.S. capacity increased just 5% over the same period. Industry advocates say direct education efforts by mining operators themselves, rather than waiting for regulation, could determine whether the sector becomes viewed as essential infrastructure or faces restrictive oversight.

"It's really a lot of it still all comes down to education and being upfront with policymakers," said Michael Sullivan, principal at White Oak Strategies and former senior advisor to Senator Bill Hagerty. "You don't have to orange pill every policymaker. You've just got to be able to assure them that you pose no threat."

Sullivan, whose work helped arrange the notable Mar-a-Lago roundtable where President Trump declared he wanted "all of the Bitcoin to be mined in America," emphasized that operators must address varying concerns across government levels. Local officials focus on noise and infrastructure impacts, while federal policymakers examine grid resilience, supply chain origins, and cybersecurity threats.

Will Paul, who heads payments and hardware policy for Block, noted the regulatory landscape has shifted dramatically from environmental concerns in 2021-2022 toward questions about what he called "verifiability"—policymakers now want detailed information about hardware supply chains, firmware security and operational procedures for grid management.

"The complexity now is that when you say we're critical to the grids and we're critical to the build out and we co-locate AI, policymakers and regulators are talking to us and saying, okay, what's in that box? It's time for the industry to get ahead of that before you're regulated."

During the panel, moderated by Zack Cohen of the Bitcoin Policy Institute, both Sullivan and Paul emphasized that successful policy engagement doesn't require sophisticated lobbying operations. Sullivan's practical advice: "Pick up the phone and make the call. It's just really that easy to get a hold of a Senate office."

Paul recommended mining operators bring tangible hardware to meetings, noting that showing policymakers physical mining chips consistently breaks through abstract blockchain confusion. He stressed focusing on concrete benefits, jobs created, community investments made, grid support provided, rather than cryptocurrency philosophy.

The speakers also highlighted a strategic advantage for Bitcoin mining: its unique ability to power down within minutes during grid emergencies, contrasting sharply with traditional data centers that run continuously. This load flexibility, they argued, positions mining as enabling rather than competing with AI infrastructure development.

"It's way easier to convert a Bitcoin mining facility into an AI data center, than it is to build an AI data center."

Sullivan noted how mining operations establish the power infrastructure AI requires.

For operators concerned about resource constraints, Paul and Sullivan recommended joining state and national trade associations like the Texas Blockchain Council to coordinate messaging and share logistical burden. They emphasized that even small operators can make meaningful impact by focusing on their immediate congressional representatives rather than only high-profile Bitcoin advocates.

Cohen framed the discussion around the intersection of Bitcoin mining with AI development and national security concerns, noting that roughly half of U.S. GDP growth last year came from AI-related activity, making the conversation increasingly urgent for policymakers weighing America's technological competitiveness.

The fundamental message from the panel: operators should approach policymakers with transparency about their operations, evidence of community benefit, and willingness to demonstrate how their hardware and software actually work before regulations force such disclosures under less favorable terms.

One day remaining. Submissions will close 3pm CT on 2/16.

Winner Announced on 2/17

From Hyperinflation to Hash Rate—Lessons from Mining CEOs

Attendees were treated to an intimate conversation at the recent Nashville Energy & Mining Summit between CEOs Rapha Zagury and Mike Colyer.

Growing up in Brazil during the country's hyperinflation crisis of the 1980s and 90s, Rapha watched his father cry as the government confiscated their family's savings. Now, as founder of Elektron Energy, one of the world's largest Bitcoin mining operations, Zagury is applying those hard-learned lessons about sound money to secure a decentralized financial future.

"My mom would tell me, 'take this money to school for your lunch, don't bring anything back, spend everything because if you bring the money back, it's gonna be worthless by the end of the week,'" he recalled during a fireside chat with Mike Colyer, CEO of Foundry Digital the largest Bitcoin mining pool. "That really shapes you."

That childhood trauma primed Zagury to immediately understand Bitcoin's value proposition when he first encountered it years later. Unlike the Brazilian Real that lost value overnight, Bitcoin's fixed supply of 21 million coins cannot be inflated away by government decree or confiscated through economic manipulation.

The conversation between Zagury and Colyer revealed parallel journeys in building Bitcoin mining infrastructure, though from different vantage points. While Zagury operates one of the industry's largest mining operations, Colyer has spent years building the financial and technical infrastructure that enabled Bitcoin mining to flourish in North America after China's dominance of the sector.

"When we started, China dominated the Bitcoin mining scene," Colyer explained.

"They made the machines, they had most of the hash rate, they controlled the pools. Our goal was to bust up that monopoly."

Today, Elektron Energy operates close to 50 exahashes of mining capacity, positioning it among the largest Bitcoin mining operations globally, with ambitious plans for expansion. The company runs one of the industry's leanest operations, with just 33 employees managing this massive computational infrastructure. Backed by cryptocurrency giant Tether since day one, Elektron has remained laser-focused on Bitcoin mining while many competitors pivot to artificial intelligence data centers.

"The Bitcoin protocol doesn't care if I have the best marketing team and the best logo," Zagury said. "I'm gonna mine the exact same amount of Bitcoin at the end of the day."

This operational philosophy contrasts sharply with publicly traded mining companies that face quarterly earnings pressures. Colyer noted that Foundry's parent company, Digital Currency Group, gave him similar long-term latitude under founder Barry Silbert's leadership.

"Barry was very much like, I don't care what happens month to month, quarter to quarter, think in terms of decades," Colyer said. "How's this gonna play out over the next 10 years?"

Both leaders see the current market environment, with many miners pivoting to AI and machine prices depressed, as an ideal entry point for committed Bitcoin miners. Colyer recalled a similar moment in late 2019, during the depths of the bear market, when Silbert told him to buy every machine available.

"It reminds me of the end of 2019," Colyer said. "Everyone was depressed, there was nobody buying machines, and literally Barry was like, go buy all you can buy."

Zagury confirmed that Elektron is currently one of the only buyers purchasing mining equipment at volume, creating favorable conditions for expansion. He anticipates slower hash rate growth this year as capital flows toward AI infrastructure, which he believes represents a riskier bet than Bitcoin mining.

"Bitcoin is a significantly less risky business than AI HPC because not only it's less capital intensive," Zagury said. "AI HPC...are still in the nascent part of the technology ramp up. You are going to see step functions that are going to wreck a lot of people."

Elektron's strategy involves identifying remote mining sites that will never become AI data centers, acquiring them at discounts, and integrating Bitcoin mining with renewable energy projects. The company recently launched operations in Brazil, where government-subsidized solar and wind projects generate excess power with nowhere to go.

"They're buying batteries to store the energy," Zagury said. "We put containers there with older ASICs. You turn on whenever you want, and you monetize immediately."

The conversation also addressed Bitcoin mining's decentralization, a topic both leaders take seriously. Colyer emphasized Foundry's support for technologies like Stratum V2 that would allow individual miners to construct their own block templates, though he noted most miners don't currently prioritize this capability.

Zagury expressed surprise at this industry apathy.

"It's my hash rate. I want to build a block. I want to have control of the block. Maybe that's why a lot of them are shifting to AI, because they were never Bitcoiners to begin with."

Both leaders predict continued convergence between energy markets and financial markets, with Bitcoin miners serving as controllable loads that help utilities balance grids, with Colyer noting that Foundry can actually observe weather patterns in Texas simply by watching hash rate fluctuations as miners respond to grid conditions.

For Zagury, who watched his father lose everything to government monetary manipulation, securing Bitcoin's decentralized network represents more than business strategy: it's personal mission. The boy who learned to spend money immediately before it became worthless now helps secure a monetary system designed to hold value across generations.

"I grew up in hyperinflation," Zagury said. "When I saw Bitcoin for the first time, it kind of clicked to me. It really made sense."

https://blossom.primal.net/62959fd847b166992235e04a7f8b7afe42904dd22399153c07d85ba217ac17b1.pngBitcoin Mining Gets a Design Overhaul

Block's hardware engineering veteran Thomas Templeton is bringing Silicon Valley's design philosophy to Bitcoin mining, and early miners say it's overdue.
Templeton, who spent a decade in semiconductors before helping Apple design the original iPhone's camera system and later leading Square's product development, expanded his scope to also lead Block's Bitcoin initiatives, rethinking how mining hardware is built. His approach: ask miners what actually hurts, not what they think they want.
"The people who live and breathe this every day are the experts," Templeton explained at the recent Nashville Energy & Mining Summit. "Going in with preconceived notions about how it should be, you're not going to arrive at the best solution."
The result is Proto, Block's new Bitcoin mining initiative that challenges fundamental assumptions about hardware design. Rather than viewing miners as monolithic devices, Proto reconceptualizes mining equipment as modular infrastructure where individual components, power supplies, cooling systems, and other elements, can be upgraded independently as chip technology advances. This shifts the industry paradigm from disposable hardware to sustainable, repairable systems.
Templeton's methodology with Proto and Bitkey mirrors his earlier successes at Apple and Square: extensive customer interviews across diverse segments. His team consulted with large-scale operations, small miners, technicians in East Africa and West Texas, and fleet managers. Common themes emerged immediately: quality, durability, repairability, and a fundamental lack of understanding about why mining hardware was designed the way it was.
"Why does it have to be shaped like a shoebox? Why do you have to throw out perfectly good components when upgrading? Why do you have to take it off the rack to repair it?" Templeton asked, applying first-principles thinking to an industry that had accepted these constraints as inevitable.
Block's approach includes releasing open-source software, reference designs, and comprehensive documentation, tools Templeton views as essential to decentralizing Bitcoin mining. "The biggest way we help with decentralization is open source, talking to community, giving tools and access," he said.
Rather than prescribing mining's future, Templeton emphasizes Block's role as an enabler. "If we try to decide what's going to happen, we're going to be wrong. The community will find those uses," he noted.
For those interested in contributing, Templeton's advice is straightforward: identify your expertise and passion, dive in, and recognize that Bitcoin's developer community is smaller and more welcoming than most expect.
As Bitcoin adoption accelerates, the infrastructure supporting it requires the same user-centered design rigor that transformed consumer electronics.