The following is a guest post by Shane Neagle, Editor-in-Chief of The Tokenist.
When the Federal Reserve manipulated the money supply in 2020, Gives about a 40% boostEveryone has paid the cost of that injustice through inflation, which sucks the energy out of people's lives as their savings dwindle. When you have more money but can buy less, you have to expend extra energy to keep up.
The solution to this problem is obvious: make money tamper-proof through decentralization and a fixed supply – so no one can control it. This is what powers Bitcoin, but it requires a key component to function: a physical foundation.
If Bitcoin were just a digital asset, it would be easy to change the ledger on the network, known as the blockchain. A great solution to this is proof-of-work mining, which acts as an energy barrier that ties Bitcoin's digital code to real-world resources. If an attacker wanted to change a record on the ledger, they would need a huge amount of energy to harness the computing power.
733.41 EH/s (Hashrate), such an energy barrier is virtually impenetrable. But that means Bitcoin's energy requirements are the cost of having immutable money. Similarly, energy is the cost of data centers churning out text/images/video/code every time people tell their AI agents what to do.
In both cases, human productivity increases. But can we optimize energy demands in a symbiotic way?
The Energy Dynamics of Bitcoin Mining and AI
It is no exaggeration to say that being a developed country is strongly correlated with high energy usage, which is clearly seen when comparing electricity generation per capita in kilowatt-hours (kWh) with a country's Gross Domestic Product (GDP).
In other words, access to surplus energy is a requirement for any advancement in civilization to occur. After all, once multiple layers are added to a basic level of subsistence, such as agriculture, new layers must then be fed: manufacturing, transportation, public services, urbanization, computing, etc.
Beyond just data centers for internet browsing and online banking, generative AI and bitcoin mining represent the latest layer of civilization as high performance computing (HPC), which has very high energy demands.
According to the Department of Energy (DoE), data servers already consume 10 to 50 times more energy (per square foot) than commercial office buildings, and account for 2% of total electricity use in the U.S. With demand for data centers growing, the International Energy Agency (IEA) has prediction Total electricity consumption could increase by more than 1,000 terawatt-hours (TWh) by 2026.
For comparison, such a surge in demand would be equivalent to Japan's current electricity consumption. In comparison, Bitcoin mining has generated electricity demand of 130 TWh, the EIA noted.
Goldman Sachs Research Estimated value Considering that a simple Google search query requires 0.3 watt-hours of power, and a single ChatGPT query requires 2.9 watt-hours of power, AI datacenter consumption is expected to reach 200 TWh per year between 2023 and 2030.
These trends necessitate a significant optimization effort, which the Bitcoin mining industry continues to undertake by upgrading to more efficient ASIC machines, primarily manufactured by Bitmain, MicroBT, Canaan, Bitfury, Ebang, and others.
Similarly, a better cooling solution will enable the ASIC rig to maintain a lower operating temperature for a longer period of time, reducing the need for cooling power consumption during the process, significantly reducing energy consumption. Liquid Cooling and Immersion Cooling It is estimated that it could reduce Bitcoin mining operational costs by up to 33%.
In terms of AI energy, Nvidia's GPUs have the estimated advantage. 65% Market share. NVIDIA's latest Blackwell GPU microarchitecture is said to reduce energy costs by 25x compared to its predecessor, Hopper. As a major supplier to major tech companies, With Mistral, Meta and Apple pioneering locally hosted large scale language models (LLMs), this is set to become a trend. Regarding GPU server hosting and adjacent buildings.
But optimizing energy consumption requires more than updating to better chips and tweaking the cooling, and this is where Bitcoin mining in particular comes into play.
The role of Bitcoin mining in energy management
It's simplistic to think that power plants produce electricity and then the output travels to the consumer, where it is transmitted over long distances at high voltages before being converted to a lower voltage for the end user.
In other words, as the power grid needs to balance high output and low input, transmission and distribution (T&D) losses occur, accounting for an average of 5 percent. Environmental Impact Assessment.
One way to strike this balance is to rely on energy storage, which can fill the gap between sudden fluctuations in electricity demand and supply. However, battery storage not only has high upfront investment costs, but mainstream lithium-ion batteries are known to be at risk of thermal runaway and susceptible to overheating.
Ultimately, no solution beats the efficiency of being closer to the energy source, which is why bitcoin mining company TeraWulf (Nasdaq: WULF) selected Nautilus Cryptomine as its flagship facility near the 2.5 GW Susquehanna Nuclear Generating Station in Berwick, Pennsylvania.
TeraWulf has positioned itself as the most efficient bitcoin mining operation with zero-carbon energy at 2 cents per kWh by drawing 300 MW directly from the power plant.
More importantly, Bitcoin mining helps balance the power grid by acting as a dispatchable load: because HPC is energy intensive, the load can be adjusted in real time to smooth out fluctuations in energy supply and demand.
As of July 2024, the Electric Reliability Council of Texas (ERCOT) reported that 3GW of its 5.5GW of electricity was dedicated to Bitcoin mining load sharing.
Not only will load dispatch provide on/off ramps in response to local power shortages or surpluses, but Bitcoin mining companies will be incentivized to do so once they start reporting their power sales.
This injects a new element of security into Bitcoin as a tamper-proof currency. Bitcoin mining companies can offset costs by scaling back operations when they sell BTC, allowing them to be compensated for their role in balancing the power grid. As an example, Riot Platforms (Nasdaq: RIOT) $2.2 million It will be obtained in January 2024 from ERCOT's demand response credits.
More directly, Bitcoin miners could recover stranded energy by using up flared gas burned in oil and gas fields, or even collect/recycle the heat generated by BTC mining to heat water or greenhouses.
The Convergence of AI and High Performance Computing (HPC)
So far I've found the following:
AI and Bitcoin mining are both energy intensive. Power grids have friction as a function of power distribution and load balancing. Bitcoin mining can reduce that friction.
But can Bitcoin mining also be integrated with AI data centers?
Although both fall under the umbrella of High Performance Computing (HPC), AI services require a low probability of interruptions. The success of current and future AI apps depends on uptime/response times, and data centers are not well-suited to deploy the same flexible load balancing strategies as Bitcoin mining companies.
At the same time, bitcoin mining companies have a track record of innovation, such as taking advantage of continuous hydro/nuclear power to scale their operations, and as AI-dedicated data centers put strain on the power grid, the miners' flexible load following allows them to quickly respond to that power depletion.
In addition to ERCOT, more states are starting to wake up to this trend. In late May, the Oklahoma Legislature voted to Bill HB1600 This will make digital asset mining operations eligible for tax credits, with special provisions for load balancing.
“Mining must take place in certified colocation facilities that have load reduction agreements with retail electricity suppliers.”
As a result, more Bitcoin mining companies are moving to directly host their AI operations.
Hybrid Data Center Strategy
Bitcoin mining facilities, while catering for many aspects of HPC, are also perfectly suited to host AI operations. Not only do they have the skilled manpower, but Bitcoin’s Difficulty of mining And then halved.
It's no wonder that a shift from pure bitcoin mining to hybrid data center operations is already underway: Australia's Iris Energy (Nasdaq: IREN) announced a partnership with WEKA last October to provide both the storage and GPU stack for its generative AI.
Bernstein analysts recently predicted that Iris will shift 15% of its power capacity to AI data centers. In June, bankrupt Core Scientific (Nasdaq: CORZ) launched a similar co-hosting model after restructuring from bankruptcy. The company signed a 12-year deal with AI startup CoreWeave to leverage 200 MW of power capacity for AI HPC operations.
During that period, Core Scientific is expected to generate $3.5 billion in revenue in addition to its bitcoin mining operations, which rely on BTC. Spot PriceAgain, such hybrid strategies will boost Bitcoin returns.
If more bitcoin companies are less likely to go bankrupt in a bear market by leveraging AI data center businesses, the pressure to sell BTC will be reduced. As a result, a healthy currency will get healthier year by year. In the long term, it's not hard to see the trajectory. Hybrid Data Centers Supporting companies in managing their digital assets On the one hand, it is the heart of a sound currency.
Conclusion
Fueled by the promise of cognitive automation, the global economy is gaining another layer on top of digital: the high-performance computing (HPC) layer.
Just as Bitcoin relies on energy-hungry HPC infrastructure to make the money tamper-proof, AI data centers are paving the way for new jobs and a surge in productivity. As sophisticated Bitcoin mining operations scale up to GPU stacks alongside ASIC stacks, the merging of the two will be inevitable.
In doing so, an incentive feedback loop is created: Bitcoin miners’ excess energy capacity flows to load response credits and energy-hungry AI companies. Combined with AI agents capable of executing autonomous BTC microtransactions, the synergy creates the exciting beginnings of Hyperbitcoinization.
