Stacy Griggs bought his first Bitcoin when it was priced at $5,000. Today, a single Bitcoin is worth upwards of $40,000.
But he wanted to do more than simply invest in cryptocurrency on the sidelines.
"I look at blockchain, and cryptocurrency in particular, and say, 'This is the reshaping of the monetary system, like the internet reshaped access to data,'" he said, referencing the dot-com boom in the late 1990s. "I wanted to participate in it."
Griggs, chief executive at El Toro, said the Louisville-based ad-tech firm is doing well amid its rapid growth in recent years, affording him the ability to devote some of his time to a new venture, AboutBit. The new company is projecting about $40 million in revenue in 2022 after starting up last year. Rather than invest in crypto or build technologies within the decentralized finance (DeFi) space, Griggs said he recognized an arbitrage opportunity to acquire and make power — which is needed to mine cryptocurrencies — cheaper.
Bitcoin mining is the process of creating new bitcoin via computing systems equipped with specialized chips competing to solve mathematical puzzles, according to Investopedia. The first miner (as these systems are called) to solve the puzzle is rewarded with bitcoin.
AboutBit, founded by Griggs (CEO), Wade Lewis (COO), Calvin Wells and Dan Kimball, has been acquiring natural gas assets and other inexpensive, off-grid energy sources to make power cheaper and ultimately cleaner. Its founding team has spent the last six to eight months in that process and plans to do about 150 megawatts of power deployment in the next 12 to 24 months, Griggs said, at a price of 3 cents per kilowatt hour or less, versus the national average electricity rate of 12.52 cents per kilowatt hour.
To achieve that level of power deployment, the emerging Louisville-based company is buying one facility in the Western U.S. and is in the process of building another in the Midwest. It currently has miners working in rented space at existing facilities in Chicago and Western Kentucky.
AboutBit has also designed single-pod and multi-pod data centers out of shipping containers that can be rapidly deployed in the middle of nowhere. The company is focused on going to where it can acquire cheap power from a utility provider or where it can acquire cheap natural gas and then turn it into electric power via generators.
It costs about $1.6 million to build a mine with 200 miners, so AboutBit has set up a series of limited partnerships to help fund development.
The company is similar to a hedge fund in that way, Griggs said, as it intends to give 80% of what a mine produces to the limited partners and keeps 20% for itself as the facility's manager.
Between the four co-founders and a SAFE (simple agreement for future equity) investment round, AboutBit has $13 million invested and committed. By 2025, the company is projecting more than $200 million in revenue.
"It's a very rapid growth company because there's a ton of interest in crypto and we've got a way to finance this via limited partners so that we can use limited partners' capital to go out and build more mines faster," Griggs continued. "We don't have to go out and raise a bunch of dilutive capital for ourselves, and we give limited partners a very attractive return in a space that most sophisticated investors seem to be interested in at this point, which is crypto."
According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin uses 137.4 Terawatt-hours of electricity every year, which is more energy than the entire country of Norway uses in a year. It's a proof-of-work cryptocurrency, meaning it takes large amounts of power to mine new tokens.
In its 2020 industry survey, Cambridge found bitcoin miners use hydroelectric power, coal and natural gas as primary energy sources, but have also used oil, nuclear power and renewables like wind energy in the mix. Natural gas, which is mostly methane, has fewer carbon emissions than coal or other petroleum products.
"We're taking natural gas at one of our facilities and turning natural gas out in the field into electricity, which we can then turn into Bitcoin," Griggs said.
