Texas Bitcoin Miner Due Diligence

From CoinShares Research Blog by James Butterfill

The CoinShares research team visited several Bitcoin mining facilities in Texas as part of a due diligence trip to evaluate Core Scientific, IREN, Riot Platforms, and Galaxy Digital, companies in which we have previously invested or that are currently included in our BLOCK Index and WGMI. We felt it was important to share some photos from the trip to help investors understand the immense scale of Bitcoin mining in 2024. Bitcoin mining is no longer a small-scale operation but has grown into a major industry, often becoming a significant regional employer and acting as a load balancer for electricity grids.

Texas, traditionally known for its farming and oil industries, is rapidly gaining a reputation in the data centre industry due to its low-cost land, easy access to affordable power, and supportive political climate. Each of the mining companies we visited had a unique approach to cooling solutions, with extensive research and development in this area. We found that some cooling solutions, while impressive, are excessively costly, whereas others are cost-effective even in the hot Texas climate.

IREN, in particular, has implemented large-scale, low-cost air-cooled solutions, focusing on advanced filtration and ventilation systems. At their Childress site, we were able to witness the speed with which IREN could power up or down their machines according to grid requirements and power pricing.

IRENs Childress site, Texas.

This video also demonstrates the extremely high flow rate to cool the hardware.

https://www.youtube.com/shorts/dxj0Q4YyRWI

Galaxy purchased the Helios site from the distressed Argo Blockchain for US$65m. We think acquiring assets at the low point in the cycle could be a good strategy and an efficient use of capital — in a similar approach to Cormint. Interestingly, they seem to be stepping away from immersion cooling (seen in the photos) due to the high cost and going for more less complex evaporative air cooling.

As you can see, this is a massive site that can scale to potentially over 800mw of power, from 200MW currently. They also curtail mining based on power prices, selling unused power back to the grid when prices are high, helping the grid load balance (politically popular), this can be done on a minute by minute basis.

Galaxy’s Helios site (Dickens County) showing immersion cooling systems, Texas.

One of the bottlenecks for bitcoin mining has been the cost and availability of step-down transformers, they have recently acquired four additional ones ready as they continue to increase hashpower at the site.

The 4 step-down transformers at Galaxy’s Helios site (Dickens County), Texas.

Core Scientific has some massive sites, they focus on old but proven aircooled technology and have a low budget approach. Due to their known financial difficulties they haven’t been able to spend much on RD for cooling and their approach now is to expand massively into AI, having recently secured significant AI hosting contracts with Coreweave.

Core Scientific’s Denton site, Texas

Riot was definitely the most technically advanced, but likely the most capital intensive, their Corsicana site will scale to 1gW and they are spending significant RD on immersion cooling. Theoretically when prices rise they can overclock to boost income, so far though they have no desire to diversify into the lucrative AI market.

This photo shows the huge scale of their Rockdale site, with their mining hardware sitting in baths of dielectric fluid, which is then cooled using heat exchangers and external fans.

RIOT’s Rockdale site, Texas.

RIOT is also rapidly expanding its impressive 1GW site at Corsicana.

RIOT’s Corsicana site highlighting one of 4 completed buildings, Texas.

As we expected post halving, we have had a ~14% fall in hashrate, pushing out those inefficient miners. The decline in hashpower is likely to be short lived as all the miners we visited have massive expansion plans that are likely to help push the overall network hashrate to over 700 exahash by the end of this year, listed miners in aggregate have planned to raise hashrate from 118 exahash at end 2023 to 234 exahash by year-end 2024 (98%), thus the recent anticipated dip will likely not last.

It is clear that the bitcoin mining industry is rapidly maturing and becoming much more environmentally conscious, with all of the miners curtailing power at times of high demand, helping improve overall power grid efficiency and subsidising investments into renewables and expansion of the overall grid infrastructure in Texas. The state’s political support for the industry is improving as a result, according to the miners.

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