Some Bitcoin miners are jumping on the Artificial Intelligence bandwagon, seeing it as a way to diversify their sources of income. Reality? Many do not keep their promises.
The industry of Bitcoin -especially its niche in the mining sector- is no stranger to trains of enthusiasm. Now a new one has arrived: that of artificial intelligence.
Chat-GPT and other large language modeling programs (often called IA, although technically not the right term) is all the rage in workplaces and online spaces this year. So, naturally, references to IA appear in cryptocurrency press releases and headlines.
For example, some miners have publicly announced that they are taking advantage of the opportunities of IA to use older hardware. But that does not mean that every company performs the same functions or the same level or scale as data centers in IA. In fact, they perform tasks that are very different from the requirements to use the services that people usually call IA but some miners may throw the term around just to cash in on the trend.
Can Bitcoin Miners Provide AI Services? It’s complicated.
In recent months, HIV, Hut 8 and other miners Bitcoin makes public new high-performance computing strategies (HPC) / IA. Most of these miners have computer hardware that has become obsolete by changing the Ethereum to a proof-of-stake network consensus mechanism, ending ether mining, and others have announced the possibility of now renting their computing power for high-performance computing (although Hut 8 doing so since 2022).
High-performance computing is a term that encompasses any number of data center tasks. However, when the miners talk about HPC they specifically refer to things like cloud computing or graphics rendering. Hut 8 earned $4.5 million from these services in the first quarter and $4.3 million in the second, while a pilot program in HIV generated $200,000 during the first quarter, but the miner did not report any revenue from HPC in the second quarter of their l files a SEC. Hut 8 has a contract with the Interior agency HEALTH from Columbia British to provide high-performance computing services until 2028.
The company purchased the 6-megawatt facility that provides these services when it acquired the data center operations of TeraGo based on Toronto in 2022. HIV did not respond to a request to specify what kind of high-performance computation they have GPU during the first quarter pilot program.
These are not the same types of calculations used to train artificial intelligence models or to feed them GPT in the chat. Miners do not have the appropriate computing equipment to do this type of work, nor the appropriate electrical and network (computer computing) infrastructure. IA requires a network bandwidth of at least 1 terabyte per second, which is a huge improvement over industrial-scale mining farms, which typically have speeds of 1 gigabyte per second).
The cost of building a real data center IA can be 10 to 20 times higher than the price per megawatt of a new bitcoin mining site (one megawatt can power about 200 homes in Texas according to the electrical authority ERCOT). Furthermore, the energy costs for such a facility would be double what miners are currently paying, perhaps as much as 15 cents per kilowatt/hour. on deer the miners of Bitcoin They usually pay between 5 and 8 cents.
Riot Platforms It is estimated that the construction of the 400-megawatt first phase of the future bitcoin mining facility is near. Corsicana (Texas) will cost $833,000 per megawatt of electricity.
Let’s compare this cost to the average data center HPC on North America calculated from the 2022 data center cost index of Turner and Townsend: 9.5 million dollars/MW.
The cost is due to the complexity of these data centers. They require higher caliber electrical infrastructure and network equipment, not to mention more space, more cooling, and more powerful backup generators in case of power outages to ensure 99.99% up time. .
Simply put, these miners don’t have the funding or market expertise to build or modernize a data center. IA or even a traditional one (an example: Microsoft invested 10 billion dollars in OpenAI).
This cost is only for a traditional high-performance data center, not necessarily one equipped with capabilities such as power machines. Chat-GPT on Open AI y Bard on Microsoft.
Miners Can Test High-Performance Computing, But Not AI
Mining companies Bitcoins They were born from a sudden pivot towards the line of business, but at this stage of their development, these companies should be careful about trying to bottle up the hype of the technology in sectors such as HPC/AI.
Two of the largest public miners in the Bitcoin currently, Riot Platforms y Marathon Digital announces mining business lines Bitcoin in 2017, but the companies were public before they were involved in cryptocurrencies. Marathon Digital HISTORY Marathon Patent Co who make their dollars from buying and selling various technology patents. riots It was a pharmaceutical company.
The two companies have grown to be one of the largest miners in the Bitcoins in the world, so the change is worth it.
But this would be extremely difficult and expensive for a large miner Bitcoin reuse their mining farms to turn them into data centers IA (the reason why Hut 8 purchased data centers for its healthcare operations). It is also worth noting that, in the traditional data center market, miners compete with the most powerful technology companies in the world.: Google, Amazon y Microsoft.
Applied Digitally a special case: it is a data center company that also hosts mining equipment Bitcoins on behalf of their clients. This is an important distinction, as it is easier for traditional data center operators to install a container of mining equipment. Bitcoins rather than a miner building a center from scratch.
the AI Hype Wave in 2023 the share price is raised to Applied Digitally to a high of $10.24, although shares have fallen sharply to $5.68 at the time of writing. Applied Digitally and mining stocks in general are on a hot streak right now, as evidenced by the chart below, so we recommend caution to investors considering this stock.
Decision points
We will wait for the hype to die down and for the market to figure out which companies are well positioned to capture and benefit from the wave of IA.
In the case of miners, those who can offer graphics rendering services do so, but none of these companies use their mining hardware to Chat-GPT. So don’t be euphoric when you see it IA in a headline or in a press release: it’s not what you think.
