HUT 8 MINING’S JAIME LEVERTON ON CANADA’S BITCOIN MINING BOOM.
HUT 8 MINING CHIEF EXECUTIVE ON CANADA’S BITCOIN MINING BOOM
The recent run-up in the price of Bitcoin is fuelling a new round of interest in crypto mining, especially after a crackdown in China sent miners scrambling for more receptive pastures, including Canada. For Jaime Leverton, who has been chief executive of the Canadian Bitcoin miner Hut 8 Mining since December, that spells opportunity. Leverton spoke to The Financial Post’s Stephanie Hughes about the Canadian Bitcoin mining scene and what she has in store for Hut 8. This interview has been edited and condensed.
Q: How would you describe the Bitcoin mining boom that we’re seeing right now? How has it affected Hut 8’s results?
A: I would say the Bitcoin mining boom that we’re seeing in North America is generally a reaction to the exodus from China. But the biggest drop in the global network hash rate didn’t actually happen until the beginning of July so, with respect to our Q2 earnings results, there was a negligible amount of upside from that Chinese exodus. The majority of that of that upside in production will be seen in our third quarter results.
Q: We see headlines that declare that up to a million crypto mining machines are heading to Alberta to set up at three natural gas plants. What are your thoughts on the Canadian Bitcoin mining scene — could we become the next China?
A: I think it’s unlikely that that would be true for Canada in isolation from the U.S. We see an increase in hash rate coming in North America in general — certainly Texas is proving to be a big area of investment for Bitcoin mining activities and we’re expanding in Alberta. Bitfarms is expanding in Quebec, so there is a lot of expansion happening in North America but I wouldn’t say it’s isolated to Canada.
I really do think it follows the energy profile, with the U.S. being the second-largest energy producer, and Canada being fourth. I think it’s unlikely we’ll see a time again where the global network hash rate is concentrated in one country to the level that it was in the past in China. I think the exodus is contributing to more decentralization — Chinese miners are also looking at some places in Europe, certainly Kazakhstan, and South America is coming onto the map.
Q: How would you describe the Alberta crypto mining industry and how does it compare to the Quebec market?
A: I would say they’re wildly different. The mining that we see in Quebec tends to be smaller-scale, more broadly distributed and it is hydro connected so it’s all grid-connected. Quebec has kind of drawn a line in the sand on
how much energy can be used in these activities and it’s not currently a province that’s fostering further investment, innovation or development of new sites that aren’t already included in the 300 megawatt allocation from Hydro Quebec.
It’s quite contrary to what we’re seeing in Alberta. Alberta is obviously making tons of investments in greening up the grid, which is a really good thing and is important for most crypto miners to see that there is a plan underway to bring more renewables into any area where miners operate. Of course, Alberta has an abundance of natural gas.
Q: What steps is Hut 8 Mining taking to reduce the carbon footprint of its own mining process?
A: We’ve recently hired a head of sustainability and part of his mandate is to build out a framework to specifically address our carbon footprint in a meaningful and auditable way. We will disclose more about our carbon initiatives over the next few months, but in the meantime, we’ve taken steps, such as using LED lighting and converting 90 per cent of the vehicles at our facilities to electric. We’ve reduced the waste going to landfill by over 50 per cent, and we’re really trying to take a holistic view at the entire ESG framework.
It’s not just about carbon, it’s about the environment. It’s about our interaction with our community. Diversity and inclusion is important for us. And then governance, we’re one of the few miners that has an internal general counsel who is also a head of regulatory, we have 40 per cent female representation on our board, and 50 per cent female representation of our senior leadership team.
This is one of the things that prompted the founding of the Bitcoin Mining Council
(by myself and a handful of others), with the goal of promoting education transparency around Bitcoin and Bitcoin mining.
Q: What’s the plan for the Bitcoin you hold in your reserves? Will Hut 8 Mining sell to other entities or engage in lending practices?
A: That’s a conversation that is constantly evolving. Historically, Hut 8 would mine Bitcoin and sell what it needed to sell to pay operating expenses and then put the rest on the balance sheet. During the crypto winter, we were able to use the Bitcoin we held on our balance sheet as collateral for a loan to continue to allow us to fund operations without selling down that Bitcoin balance, so it was a critical tool for us during some of the more difficult times. In January of this year, we were able to raise capital as the new bull market started and use the capital to pay off the loan. Since that time in early January, we haven’t sold any Bitcoin and we started to put a portion of that balance to work. In January, we opened our first yield account with Genesis Mining and earn a four per cent rate of return on those thousand Bitcoins. We have another yield account with Galaxy with another thousand of our Bitcoins, and then the balance of our Bitcoins remains with our custodians. We are looking at ways to continue to explore how we can earn a fiat-based revenue stream on our Bitcoin while it continues to appreciate.
Q: What’s next for the company?
A: We’ve made significant investments in equipment expansion. I’ve only been here eight months, so I’m still just getting warmed up.
We run all of our own sites so when we build out a site, we run it 24 hours a day, seven days a week all with local staff, which is incredibly important to us. We also do onsite maintenance and repair of that equipment using local talent, so I think it could be a huge opportunity for Canada.
There’s a lot of talk about Texas in the Bitcoin mining space and all of the innovation and support from Governor Abbott. But the challenge with Texas is the heat. It is so hot. It means you have to use a lot more power and capital to put toward cooling that equipment. Whereas, when I think about our operations in Alberta, we actually are able to take advantage of free air cooling because Alberta is just a perfect climate. It’s flat, it’s dry, it’s windy. The winters are long and cold and the summers aren’t too humid or hot, so it allows you to have a better environmental footprint because you’re spending less on the infrastructure and the energy required to cool the equipment. The equipment performs incredibly well in those environmental conditions which is just a thing that comes with being in most parts of Canada.