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DMG Blockchain Solutions (DMGI.V) fends off bitcoin mining blues by selling power to Washington State

Power
09/23/2020

Cryptocurrency mining gobbles up a lot of expensive power every year. The stats are in and they’re staggering. A month after Bitcoin halved, the price to mine 1 BTC was roughly $8206.64 for both big mining centers and individual miners, which could range anywhere between $5,000 and $8,500. Nowadays, miners have more incentive to sell to cover operational costs rather than hodl.

Let’s factor in the present price of Bitcoin (in USD): it’s at $10,242.50 at the time of writing. That’s about two grand in profits, of which themselves get eaten into by depreciation, rent, and other various sources of overhead.

Bitcoin mining specifically has entered into the stagnation period. It’s a waiting game now. Weeks and months spent watching your competitors, seeing who will be the first to fail, to bow out and buckle under the economic pressure. The spectre of the unknown competition in China, itself rather mum about the prospects of its miners, looming over their heads while they wait for the hashrate to correct for the depleted market players. Hope springs eternal that the price rises while the hashrate falls, so the margin in the middle becomes fatter, or else.

Let’s also not forget the prospect of COVID-19 round two, which shut down China’s Bitcoin production and tanked Bitcoin’s price (and hashrate) for a spell, now hanging over their heads like the sword of Damocles. The risks are many and the rewards are distant.

So any company smart enough to come up with a secondary source of income during this trial period definitely has a leg-up on their competitors, and many of them do. Some, like Hive Blockchain Technologies (HIVE.V), mine secondary coins like Etherum. Others find cheap deals on power to supplement their prodigious production schedules like Riot Blockchain (RIOT.Q) and others, like DMG Blockchain Solutions (DMGI.V) recognize the inherent value in the power themselves and join their efforts in selling into a marketplace where there always seems to be a vacancy.

In this case, DMG received their energy export license from the U.S. Department of Energy to sell their leftover runoff energy from their clean, hydroelectric mining operations to the State of Washington. The license itself is a significant part of DMG’s operational strategy to maintain its power and infrastructural independence.

Before DMG even became a public company they operated out of Edmonton, Alberta, where they purchased power from Alberta’s deregulated market at the best prices before distribution and utility charges set in. They recognized early that if they wanted to scale their operation and find long-term sustainable savings, they were going to have to find a way to source energy independent of any governing body. This led the company to finding and buying its own power assets for industrial mining, accessing power from either utilities or wholesale markets, and diversifying their operation through either mining or hosting the projects of other companies.

“Our power strategy included building and commissioning our private substation with a goal to access wholesale power from the onset. Not only can purchasing power on the open market significantly reduce DMG’s energy costs, but it also minimizes the risk of price rises due to DMG’s operations on the local utility’s rate payers. With the export permit completed, DMG can now focus on the province of British Columbia’s regulations on open-access transmission and B.C. Hydro’s regulations for utilizing their system, which is needed to access power outside the province. Currently, DMG is working through changes in the regulations that recently occurred,” said Sheldon Bennet, DMG’s COO.

Some of these include crypto-mining, distributed computing hosting, and new areas and opportunities opened by advances in computational rendering and artificial intelligence. These are energy intensive endeavours, and profitability is directly related to power costs and operational uptime. At present, DMG can offer 85 megawatts, and is achieving the company’s energy strategy. Said strategy consists of low-cost energy sourcing, power asset ownership and excellence in uptime, but also ensuring that none of these activities take or use anything from the local power grid and community.

—Joseph Morton

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