We recently had the chance to talk with William Szamosszegi, CEO and Founder of Sazmining Inc., to hear his thoughts on the cryptocurrency industry, it’s a relationship with the energy industry, and what we may expect to see in the future.
- How sustainable are the markets vs Crypto markets? What lessons have we learned between the 2008 recession and Covid-19?
The crypto markets began with Bitcoin, which was created with the purpose of developing a currency that was not tied to a government, and therefore unable to be manipulated by a government. Looking at the US economy, the GDP has been falling and unemployment has been increasing, yet the stock market has gone up 40% since it’s low point earlier this year. The increasing stock market in relation to these factors doesn’t make sense. The only reason why this has happened is due to government intervention as the result of the stimulus that many corporations received. In a sense, by pumping money into these companies, the government has artificially increased the value of the stock market. So you won’t actually see the true value of the markets. Since crypto markets are decentralized, they do not fall victim to being artificially inflated by government spending. Cryptocurrency tends to act more like a commodity, this actually makes cryptocurrency more predictable than centralized currencies that are subject to manipulation.
- How has the halving in May impacted the industry and the miners involved?
The halving in May cut the reward for crypto-miners in half. Miners who were not efficient or were operating in areas with higher power costs have struggled to stay profitable post-halving, and many have even shut down. That being said, miners who have continued to operate and are efficient have been looking to expand and grow their operations. With a lower number of miners, those remaining must be efficient and forward-thinking in their operations to remain players in the long term.
- What are some ways miners can stay efficient post-halving?
There are five key areas that miners should be focusing on to stay efficient: mining design, energy, custody, lending, and hedging. Optimizing each of these areas while taking advantage of the products and resources available to do so, will maximize efficiency and profitability for miners going forward.
- What are the advantages of continuing to mine when others have stopped given the lower reward?
While the halving reduced the reward for mining a new block, it didn’t remove the prospect of being profitable from crypto mining. If crypto miners are running an efficient operation, they will continue to earn rewards from mining blocks. If miners are being efficient and keeping costs low, they will continue to see profits from mining.
- What is the biggest misconception about the mining industry?
Many people don’t have a clear understanding of cryptocurrency, they believe that cryptocurrencies don’t have any actual value, which is incorrect. Cryptocurrencies have value and there are actually many financial products associated with them, some of which pay interest on the mined crypto and others to allow crypto to be used as collateral against loans. Additionally, there are futures options available based on the value of cryptocurrency which further validates the value of cryptocurrency.
- Sazmining has been working closely with energy companies with mining, why are these important relationships for Sazmining?
Relationships with energy companies are crucial for the crypto industry. It’s well known that crypto-mining requires a fairly high use of power and the cost of power is often one of the highest expenses that crypto-miners incur. Electricity rates have a direct impact on the profitability of a mining operation. Crypto-miners are best off developing relationships with energy companies and working together to determine the best way for the miners to use the energy that benefits both parties. We frequently establish PPAs and use load shedding to help with this process. Some energy companies also want to participate in the mining process and earn a share of the profits as an alternative to selling electricity to miners.
- What problems do energy companies face and how does Sazmining help them solve this problem?
A big problem that many energy companies face is having excess energy that they cannot sell to the grid, due to the grid’s capacity. Additionally, they often have energy that is too challenging or costly to transport to the grid due to location. This is commonly referred to as curtailed or stranded energy. Sazmining has worked with energy companies to take advantage of this energy onsite to mine for cryptocurrency.
- Why is it advantageous for energy companies to become directly involved with mining vs. just selling their electricity to the miners?
While both options can be beneficial to energy companies, there is typically a higher potential for profits with mining. For example, if a company was selling its power to a crypto-miner, their profits are going to be directly tied to how much electricity the miner uses, and therefore will be capped at that amount. So if they were selling electricity to a 1 MW mining facility, they’d probably earn around $25,000 per month from the sale. However, if they direct the energy into a 1 MW mining facility themselves, they’d be looking at revenue of around $66,000 with a profit of about $31,000 per month. The profitability with mining also increases with the more MW that is devoted to mining due to economies of scale whereas the profits with energy sales will likely stay about the same for each MW sold.
- What do most energy companies end up doing with their stranded or curtailed power?
Some companies are able to establish private purchase agreements with businesses to directly sell their energy, but many others simply do nothing with this stranded or curtailed energy. For example, you may drive by a wind farm on a windy day and see that the turbines aren’t turning. This is a classic example of curtailment that you can see, they have simply stopped operation for a period of time because there is no demand for energy. It’s a very common practice throughout all renewables as well as hydro, we also see gas drilling operations burning excess gas on a regular basis. There are some areas where this gas flaring is so prevalent, you can see the light from space at night.
- How is load-shedding practiced by miners, and how can it help their energy partners?
Load shedding is a practice unique to cryptocurrency miners. Miners are able to scale operations down within about 15 minutes to free up the electricity. This allows the energy company to then sell this electricity to the grid. Grid prices can fluctuate greatly based on demand, and it is extremely lucrative for energy companies to sell to the grid during peak periods. Miners can help energy companies to capitalize on the peak rates by scaling down operations during these periods. When energy companies are the one’s mining, they can direct their power between the grid and their mining operation depending on where the higher profits are at the time.
Sazmining is the leading US-based cryptocurrency mining and consulting company that offers a 360 approach to cryptocurrency through joint venture crypto mining projects, consulting services, and treasury management. Their team has built and scaled a wide range of mining operations in locations as diverse as China, Texas, and Iceland. William founded the company in 2018 and has scaled the team to handle multiple domestic and international joint venture mining projects. He has built a well-recognized brand within the industry, having been written up in Business Wire, Yahoo Finance, Marketwatch, Business Insider, and other platforms. William has strategically positioned Sazmining to capitalize on future trends in the cryptocurrency mining and energy industries, enabling innovation that will support a truly dominant global brand.