How Two 23 Year-Old Texans Made $4M Last Year Mining Bitcoin in Oil Fields (cnbc.com) 64
"When Brent Whitehead and Matt Lohstroh were sophomores at Texas A&M University, they decided to get into the business of mining bitcoin on the oil fields of East Texas," reports CNBC:
Whitehead, an engineer hailing from a family with a long history in oil and gas production, and Lohstroh, a finance major with a bitcoin obsession, ignored the skeptics, and sunk all the cash they had earned from their high school side gigs in lawn care and landscaping into Giga Energy Solutions, a company that mints bitcoin from stranded natural gas.
For years, oil and gas companies have struggled with the problem of what to do when they accidentally hit a natural gas formation while drilling for oil. Whereas oil can easily be trucked out to a remote destination, gas delivery requires a pipeline. If a drilling site is right next door to a pipeline, they chuck the gas in and take whatever cash the buyer on the other end is willing to pay that day. But if it's 20 miles from a pipeline, drillers often burn it off, or flare it. That is why you will typically see flames rising from oil fields. Beyond the environmental implications of flare gas, drillers are also, in effect, burning cash. To these two 23-year-old Aggie alums, it was a big problem with an obvious solution.
Giga places a shipping container full of thousands of bitcoin miners on an oil well, then diverts the natural gas into generators, which convert the gas into electricity that is then used to power the miners. The process reduces CO2-equivalent emissions by about 63% compared to continued flaring, according to research from Denver-based Crusoe Energy Systems. "Growing up, I always saw flares, just being in the oil and gas industry. I knew how wasteful it was," Whitehead told CNBC on the sidelines of the North American Prospect Expo summit in Houston, a flagship event for the industry. "It's a new way to not only lower emissions but to monetize gas." Whitehead tells CNBC they have signed deals with more than 20 oil and gas companies, four of which are publicly traded. Giga also says they're also in talks with sovereign wealth funds, and they are expanding, fast.
Giga's 11-person team is adding another six employees this month.... Giga tells CNBC that its revenue was more than $4 million in 2021, and it's on track to earn more than $20 million by the end of 2022. Whitehead says that some of their mining sites have helped to revitalize the local economy by creating jobs, such as field technicians and bitcoin pumpers, who go out to check the sites. In the small communities where they've set up a bitcoin mine, they are sometimes the largest source of revenue. "An area that was just a ghost town has now found ways to take their stranded energy that they were wasting and monetize it, and that's what gets me excited, because like that's what is helping the community overall," said Whitehead.
For years, oil and gas companies have struggled with the problem of what to do when they accidentally hit a natural gas formation while drilling for oil. Whereas oil can easily be trucked out to a remote destination, gas delivery requires a pipeline. If a drilling site is right next door to a pipeline, they chuck the gas in and take whatever cash the buyer on the other end is willing to pay that day. But if it's 20 miles from a pipeline, drillers often burn it off, or flare it. That is why you will typically see flames rising from oil fields. Beyond the environmental implications of flare gas, drillers are also, in effect, burning cash. To these two 23-year-old Aggie alums, it was a big problem with an obvious solution.
Giga places a shipping container full of thousands of bitcoin miners on an oil well, then diverts the natural gas into generators, which convert the gas into electricity that is then used to power the miners. The process reduces CO2-equivalent emissions by about 63% compared to continued flaring, according to research from Denver-based Crusoe Energy Systems. "Growing up, I always saw flares, just being in the oil and gas industry. I knew how wasteful it was," Whitehead told CNBC on the sidelines of the North American Prospect Expo summit in Houston, a flagship event for the industry. "It's a new way to not only lower emissions but to monetize gas." Whitehead tells CNBC they have signed deals with more than 20 oil and gas companies, four of which are publicly traded. Giga also says they're also in talks with sovereign wealth funds, and they are expanding, fast.
Giga's 11-person team is adding another six employees this month.... Giga tells CNBC that its revenue was more than $4 million in 2021, and it's on track to earn more than $20 million by the end of 2022. Whitehead says that some of their mining sites have helped to revitalize the local economy by creating jobs, such as field technicians and bitcoin pumpers, who go out to check the sites. In the small communities where they've set up a bitcoin mine, they are sometimes the largest source of revenue. "An area that was just a ghost town has now found ways to take their stranded energy that they were wasting and monetize it, and that's what gets me excited, because like that's what is helping the community overall," said Whitehead.
The grand master plan of crypto (Score:3, Interesting)
The plan for all cryptocurrencies isn't what you think it is. It's more sinister than the egalitarian image the crypto boys portray for it.
After the 2008 financial meltdown, cryptocurrencies were born out of it, declared to be the means by which people could be freed from banks/governments, and promised to avoid any such future meltdowns from happening ever again.
But the crypto boys watched closely the result of that meltdown, and formulated their plan: create a new form of currency, and for it a new financial system detached from traditional ones (those burdened by "governments and regulations") - they called it "DeFi" for "Decentralized Finance", but its dirty little secret is that it's really "Deregulated Finance".
Their plan is to make this new money be adopted by the masses, so they start it off with a low price, then gradually increase it, by virtue of them just pulling numbers out of thin air for its value, until it catches the attention of the masses - then it gets more and more "valuable" from the collective faith of its given value ("network effect"), until traditional institutions and the typical "1%" billionaires start to notice and, greedy as they are, want in on the action too.
So now those that got in at the ground floor have gained all this "value" out of thin air, and once they're ready, they'll pull out all pretty much at once - that it'll create a sell-off panic, and a new meltdown is born! And because of their "De[regulated]Fi" system, the bros have already shifted all the risks away from themselves onto others, so they'll make out like bandits, leaving everyone else to "hodl" the bag.
But the bros were really observant about that last meltdown - and noticed all the "bailouts" the big banks got - so as they were shifting the risks to others, they increased their investments into what would get the next bailouts - so in the end they'll make out like bandits twice: the first time from suckering everyone else into their pump-and-dump scam, and again once they benefit from the bailouts that'll get handed out.
And there you have it folks, the real master plan of crypto.
--
Those who fail to accept it will mod the truth down to -1. -Prof. Feynman
Why not just convert it to electricity (Score:2)
Not quite sure why this is better than just putting in a gas engine or fuel cell to produce electricity and export it to the grid, although I get that the mining operation could offset the meager returns from wholesale electricity.
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Would be easier if we could beam electricity without wires like Tesla claimed we would. I'd still think putting up temporary wires would be cheaper than a pipeline.
Oh, but Texas' grid isn't connected to anything else. So they'd have to use all the energy there. And that'd drive the price down for the existing companies (and all the politicians they pay).
But that might be another good reason to interconnect everything in the US at least, beyond the "what if they need more power when it's cold" thing. If
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Just because Texas has their own grid doesn't mean it's not connected to other grids.
Re: Why not just convert it to electricity (Score:2)
I'm not sure if you are misinformed or trying to make a very minor distinction, but Texas for all intents and purposes does/can not buy/sell electricity across state lines, look it up.
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The only connections the Texas grid has to outside grids are ties to the eastern power grid and the power grid in Mexico. However, those ties only allow for transfers of small amounts of power. On a Wednesday media call, ERCOT said 800 MW (megawatts) per day can be transferred through connections to the eastern grid and 400 MW per day can be transferred through the Mexican grid. That's not nearly enough to make up for Texas's current deficit in power.
https://www.wusa9.com/article/... [wusa9.com]
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There's a massive difference between being connected, and being able to overcome a massive cascading failure. There's a reason why we have separate grids, and it's a very good reason.
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Would be easier if we could beam electricity without wires like Tesla claimed we would.
Tesla didn't claim it could be done, he proved it could be done [wikipedia.org]
But how he did it back in the 1890-1900's wouldn't be allowed today, the tech would interfere with, or fry, most of today's electronics. Even back then Tesla managed to black out an entire town due to high frequency feed back that set a generator at the local power plant on fire. During the same experiment he also set the still unbroken* record for longest artificial lightning bolt ever made, 135ft
*as far as I've heard.
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Actually, I think he proved it couldn't be done, at least not on any practical level.
Re:Why not just convert it to electricity (Score:5, Interesting)
Giga tells CNBC that its revenue was more than $4 million in 2021,
But what was their profit after paying for all that hardware and gas?
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It's not better than that, but it is better than just flaring it off with no emissions controls whatsoever. At worst the engine is trying to be efficient, so it will be trying at minimum to get a more complete burn than the flare.
Per WP, Some remote pumpjacks are run on generators so there's no grid to put the power on. Some of these run on the gas from the well, some are run on gasoline or diesel or propane depending on what's cheap. So I would tend to assume that they're siting these things in remote loca
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I bet they just piggyback. Seems hard to imagine these facilities are out there without a network. Since as you said, it's low bandwidth, you just ask to piggyback it.
I think that's what's interesting about this they are taking a waste and they are effectively transforming it to a digitalized energy/currency. I am sure someone will hope in to refute how I am full of shit.
It's funny it's one of the lessons we learn in physics, the law of conservation. Energy is never created or destroyed but transformed. So
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PS. I am drunk... that English is shit.
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Is that true? It seems like if there were really no emissions controls they'd just vent it without even bothering to combust it.
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It seems like if there were really no emissions controls they'd just vent it without even bothering to combust it.
That's just dangerous sooner rather than later. It's safer to flare it.
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It seems like if there were really no emissions controls they'd just vent it without even bothering to combust it.
I suspect they're REQUIRED to burn it off.
Natural gas is primarily methane, which is something like 84 times by weight, 30.6 times by carbon atom count, as radiation down-converting as CO2 (mainly because there's enough CO2 up there already to already absorb most of the energy in the bands it does, while methane's "windows" are mostly half-open, due to little methane and only a little overlap wi
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The methane molecules have an average lifetime of 18.2 years, after which they mostly get converted to long-lived CO2 anyhow.
Make that about 13.1 years average llifetime. (Half-life is 9.1 years but to get average life you divide by ln(2), not by 1/2)
Because marginal profit (Score:2)
Cryptocurrency here changes that because you can do the profitable thing right where the gas is being extracted. Of course that's only applicable so long as you ignore externalized costs. Specifically the effects on the broad
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Why not use it to be grid independent?
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Why not use it to be grid independent?
What's there in "Fort Stinkin'desert" to make grid independent?
Answer:
- A drilling rig and an oil pump that are already powered by natural gas from the well they already drilled,
- Sand and rocks as far as the eye can see, and
- A flatbed trailer with containers full of crypto-mining gear and generators.
So that's what they're doing: Putting something in the desert next to the gas well that can make use of the gas to be grid independent, just like
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East Texas is not desert. You're thinking of west Texas. Texas is a sizable state with green hills, subtropical beaches, mountains, plains, swamps, and yes, desert. East Texas is places like Beaumont, Lufkin, Marshall, Tyler, Texarkana, and Nacogdoches. It's forest, swamp, small towns, farms, ranches, and farm-to-market highways. Yes, oil fields can still be relatively remote, but it's not like they said this is west of Midland or north of El Paso. https://en.wikipedia.org/wiki/... [wikipedia.org]
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It's not better. This is just propaganda from the Slashdot owners trying to get rich by convincing more people to pour their money into crypto.
So these kids mined cryptocurrencies? So what? They have not made the world a better place, possibly they made it worse on average.
Electricity is not portable (Score:2)
Now go look at satellite photos of oil fields and contemplate connecting all that far flung infrastructure to the grid.
Rich getting richer (Score:5, Insightful)
Re:Rich getting richer (Score:5, Insightful)
"Whitehead, an engineer hailing from a family with a long history in oil and gas production."
This should tell you everything you need to know, really.
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I'm just surprised his last name wasn't "Ewing".
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I’ve said this before: proof-of-work is just proof-of-stake with waste
At best, if you live somewhere with incredibly cheap electrical rates, you’ll be lucky to mine enough currency to break even on your initial hardware expenses. What those profitability calculators on the internet never tell you is that the mining difficulty tends to increase over time (as the total network hashrate continues to grow, and your mining hardware represents an ever-decreasing share), so you may never achieve ROI
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Reading the article and looking at the pictures, a LOT of money has gone into just one container plus the genset etc,
Side gigs my arse someone has put in lots of coin into that.
You have a choice (Score:3)
> would cost at least $1 million, probably much more ...
> I would guess their parents gave them a "small loan"
You could guess, or you could read the article and find out, get the facts. Those two options lead to very different results. Life-changing differences in the results, actually.
Let's start with the unimportant - your guess of "at least a million dollars", then we'll get to the much more important choice you made.
Something like the L3++ has 288 mining ASICs and costs $1,600 from Newegg. So $
Burning is better (Score:2)
Just pointing out that it is much better, environmentally from a greenhouse-gas perspective, to burn off certain "waste" gasses like this than let them directly into the atmosphere. Which is of course why they burn it if they can't otherwise prevent it from escaping into the atmosphere.
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Yeah it's not clear to me yet how the CO2 is reduced. I would like to see more details about this but I am not of the opinion that my physics is so well versed in these aspects of engineering to miss something about how generators working. I am wondering if burning it produced more pure carbon than C02 but that in itself doesn't completely make sense to me. Either way, chemical engineers are the best of engineers -- simply because they understand chemistry.
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Not CO2, methane. A proper burner would burn the methane completely, a simple flare would release some unburied methane, and CO, and half burned ethane and propane, and soot.
Running it through an engine is cleaner as the combustion is better controlled.
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Exactly. the clue is "CO2 equivalent". Unburned methane has a global warming coefficient 84 times that of CO2, so turning 1 mol of methane (CH4) into CO2 gives a huge reduction in the CO2 equivalent GW.
Atmosphere. (Score:2)
When the earth has been stripped bare, we all have phat wallets.
Re: Atmosphere. (Score:2)
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I honestly wonder how much "Gaia", Mother, cares. I would love to see an argument about earth restoring it's atmosphere but it seems like a "rock" with the conditions necessary to develop and protect one, simply does. This means no matter how much we destroy the atmosphere it's not really "Earth" that suffers but us. It's the generations after us that have to bare these conditions if any such generations may be. Yet, Earth will remain for timescales unimaginable to the likes of us and life will blossom agai
Lost me at "high school side gig" (Score:2)
Interesting engineering choice (Score:5, Interesting)
Setting aside for a moment the Bitcoin hate and maybe the oil industry hate as well, it is a pretty interesting engineering decision. You have a bunch of "waste" natural gas and no cost effective way to get that gas somewhere useful. So instead of just venting it (really environmentally bad), or inefficiently "flaring" it (still environmentally bad, but better than venting), you burn it more efficiently and turn it into electricity. Since you don't have the electrical infrastructure to put it on the grid, you consume it locally - in this case to mine crypto.
For the Bitcoin and crypto haters, what other use would folks suggest for local consumption of a decent amount of electricity, without a connection to a larger electrical grid? Consider that the use would need to make economic sense. Also consider that not drilling in the first place has already been mentioned, and due to economic forces, not likely an option.
What other economically viable alternatives are there for the excess natural gas, or electrically given the constraint that it must be consumed on site?
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We were approached to do exactly this in Australia but said no because it just seems so wrong.
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I was going to point out that you'd be burning methane and creating carbon dioxide in order to take the same carbon doioxide out of the atmosphere.
But then I heard a whooshing sound somewhere over my head.
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The Real Story here (Score:5, Insightful)
Forget about alleged value of bitcoins. Forget about "making use of waste gas." The real story is why the fsck neither the USA nor any other government didn't long ago ban the release or the flaring of natural gas.
Yeah, we all know the answer is "keep the price of oil down." So what's really happening here is one more way fossil fuel companies make someone else pay for their pollution.
Because re-injection is often not viable (Score:2)
Economic factors are real.
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Economic factors are real.
Sure, but the underlying system, which allows people to push costs such as pollution onto others rather than requiring them to be born by the producer, is a societal level construct. If we enforced a price for that externality equal to or greater than the actual cost of the harm or the actual cost of cleanup then we could be more honest in the evaluation of those "real" economic factors.
Wait just a mimute (Score:4, Insightful)
That doesnt sound all that profitable. And they say this year will be 20 mil, up from 4. So projecting a 500% increase in business over a single year, with crypto bouncing all over the map. I wouldnt bank on that.
I sincerely hope they make a mint. Win or lose, it’s a hell of a business for a few fresh college kids (dropouts?). Certainly doesn’t hurt that at least one of them obviously comes from $$$.
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Simple equipment & much cleaner burn than flar (Score:3)
The hardware is easy and containerized gensets etc are old news in the oil patch.
It's easy to prefab the specialty stuff and containers are easier by far to work with than conventional structures. Basic fab shop equipment is cheap as are commodity parts. Natgas WILL be flared like it or not but when burned in a generator the output can be controlled and pollution mitigation devices installed on the piston or turbine driving the generator.
Pickup and delivery require zero custom equipment so mining rigs could deploy to any well and start work immediately.
Two privilaged white dudes.... (Score:2, Troll)
Build solar panel array on the moon and mine (Score:1)
Just wait until the interest owners find out. (Score:2)
That "excess" natural gas came out of an oil well. Which means it was previously underground. Which means it was owned by someone who has mineral rights (or a bunch of someones). What happens when those parties find out and want their cut of the crypto that was mined using the electricity that was generated from their (uncompensated) "waste natural gas"?
And they *will* start asking. Over the last several years the well operators had made a habit of "flaring" excess gas by burning it out of the top of th
Use the gas for power grid instead??? (Score:2)
It would be more likely that electric power lines are near by, than perhaps methane gas pipping. So, if you can't pipe out the natural gas, use those same natural gas generators to produce real benefit of electricity. This has the real bonus of making the power generation more distributed across the grid. (And of course, in some cases reducing power line losses.)
I perso