July 2022
Company Spotlight
Digital Power Optimization
For this Company Spotlight, we interviewed Digital Power Optimization’s (DPO) Chief Operating Officer (Alex Stoewer) about the company’s unique and proprietary Cryptocurrency Mining as a Service (CMaaS) strategy and structure. DPO utilizes cryptocurrency mining as a tool to help power producers maximize the value of their energy. For more information on DPO, please visit digitalpoweroptimization.com.
Bitcoin Mining Fundamentals:
What is Bitcoin Mining?: Bitcoin (most actively traded cryptocurrecy) is “mined” by computers performing a series of calculations to unlock a portion (or block) of the underlying blockchain. Every 10 minutes, a pre-defined amount of Bitcoin is distributed by the Bitcoin software as a reward for those computers that are actively “mining“ during that 10-minute period.
Mining Pools: Not all computers receive the reward, only one does. Miners get around this dynamic by joining “pools,” which are large collections of miners operating in concert to share computing power and split rewards. Rewards given to any miner in the pool are shared by all participants pro rata with their computing power contribution. Through this mechanism, miners can circumvent the unpredictability of receiving rewards and have essentially created a more stable and regular revenue stream for a small cost to the pool organizer (typically under 1.5% of proceeds).
Steadily Decreasing Rewards: When Bitcoin was first introduced in 2009, the reward given every 10-minute period was 50 Bitcoin. The rewards have been programmed to fall by 50% at regular predefined increments (every 210,000 blocks of the blockchain unlocked or roughly every four years). This will occur repeatedly until the last Bitcoin is mined, which is expected to occur around the year 2140.
Variable Mining “Difficulty”: The rate at which new “blocks” are created is adjusted every 2,016 blocks (or approximating a two-week adjustment period). This adjustment means that, over time, the “difficulty” of mining a new block will increase as more computers begin mining (i.e., more computers are competing over the same 10-minute rewards), and will decrease as fewer computers mine, most of which is driven by the relative cost of power and the relative price of Bitcoin.
Value Proposition: DPO’s “white glove” Cryptocurrency Mining as a Service offers its customers turnkey design, engineering, implementation, operations, and maintenance services while also providing 100% alignment of interest, which enables its customer to realize the following benefits:
Low-Cost Advantage: By adding cryptocurrency mining capability to companies in the power and utility space with the lowest cost energy, DPO virtually guarantees that its customers will be among the most economically competitive miners and will thus be able to operate profitably even when many others cannot. Adding cryptomining to a power generation asset can capture over $100/MWh of net profit over the life of the equipment.
Operational Flexibility: DPO’s customers can easily turn on or off its cryptomining equipment based on the market price of power they are generating. When energy prices are high, the power they generate gets sent to the grid and there are no costs when not mining, but when the price of power is low (or even negative), they can quickly turn on their cryptomining assets and almost immediately start generating profits. Further, Bitcoin’s liquid market enables it to be converted into dollars and/or euros daily.
Customizable Load: Cryptomining equipment is linearly scalable and can therefore be sized to any demand load requirements rather than in predefined increments, enabling DPO’s solution to be applied to any type of power generation operation. Further, cryptomining can be paired with batteries to manage daily volatility associated with intermittent power generation sources.
Closing Thoughts: As the power grid continues to decentralize and include more intermittent power generation sources, it is imperative that those projects can generate returns that incentivize continued investment by leveraging technologies like DPO’s. We look forward to following DPO, as it continues to help power companies become more profitable (e.g., currently developing software to automate when to turn on/off mining operations based on power prices).