Let’s begin with a couple of primary info. Reality one: Regardless of a latest rally, the worth of bitcoin remains to be far under the bullish heyday of 2021, when many bitcoin miners purchased their {hardware}.
Reality two: A lot of the hype (and capital) within the startup area has shifted from Web3 to AI.
Reality three: Each cryptocurrency mining and AI growth — such because the coaching of huge language fashions — require high-end laptop chips.
This story is a part of CoinDesk’s 2023 Mining Week, sponsored by Foundry.
Reality 4: There’s a worldwide scarcity of those chips.
All of this poses a pure query. Are crypto miners pivoting to AI?
The quick reply is that whereas most bitcoin-only miners should not, bigger outlets are exploring their choices. “I haven’t thought of that or actually heard of anybody doing this,” says an influential dwelling bitcoin miner who goes by the alias Econoalchemist.
The reason being easy. Most bitcoin miners use specialised ASICs chips, such because the Antminer S19 Professional, which are designed for SHA-256 hashing (Safe Hash Algorithm). They’re glorious at mining bitcoin however awful for doing anything. They will’t be repurposed. (Each bitcoin miner I reached out to mentioned the identical factor.)
The mathematics is totally different for bigger operations. Whereas the precise ASICs can’t be transformed from bitcoin to AI, the infrastructure that the businesses have already constructed — cooling programs, safety, entry to low cost vitality — can be utilized for an growth into AI.
In order that they’re beginning to develop. Utilized Digital, a Texas-based crypto miner, not too long ago introduced a $460 million deal to host AI cloud computing in its information heart. (Wall Avenue authorized; shares instantly jumped 17%.) Iris Vitality, one other Texas-based mining firm, introduced an growth and revitalization of its high-performance computing (HPC) information heart technique, which was usually considered to imply a push in the direction of AI. (Once more Wall Avenue authorized; shares surged by 21%.)
Skeptics would possibly see this as a ploy to capitalize on a trendy pattern – like how in 2017, Lengthy Island Iced Tea made the pure pivot to “Lengthy Blockchain Corp.” However the corporations view it as a option to scale back systemic threat. Mining income correlate with bitcoin costs. So including different providers — like internet hosting AI computing — lessens the reliance on bitcoin.
“The enterprise is in search of a diversified income stream. If bitcoin goes to $10k or $20k, we’re in a much less pressured place, and may nonetheless act strategically in comparison with our friends,” says Josh Rayner, VP of Excessive Efficiency Computing at Hut 8, which till not too long ago had been solely a cryptocurrency mining firm.
Hut 8 started its pivot early. In January of 2022, effectively earlier than the hype of ChatGPT, Hut8 invested in 5 information facilities and two cloud areas that might be dedicated to HPC. Not like the laser focus of bitcoin-mining ASICs, these information facilities are full of Nvidia GPUs that might carry out a wider vary of workloads — gaming, digital actuality, AI, machine studying. And so they nonetheless proceed to function bitcoin rigs. “Our core thesis is that we image a world the place mining and information facilities and HPC workloads [used for AI] come collectively,” says Rayner, “and we’re beginning to see that an increasing number of.”
Again in early 2022, it occurred to Hut 8 that they’ve already accomplished among the heavy-lifting to service AI clients. “We have now the workers. We have now the compliance. We have now the experience to function conventional information facilities,” says Rayner. “Mining actually goes hand in hand with that. You’ve gotten plenty of the identical synergies.”
Then there’s the pivot from Ethereum mining to AI.
When Ethereum switched from Proof of Work (which requires mining) to Proof of Stake (which doesn’t), all of the sudden the ETH-mining tools had nothing to do. And whereas the bitcoin mining ASICs can do nothing however mine bitcoin, the chips they used to mine Ethereum — Nvidia A40s — are extra versatile. “They’re very able to VFX rendering, of gaming, they usually can do AI/ML [machine learning] workloads,” says Rayner. So the chips that after mined Ethereum have now been redeployed.
(Rayner clarifies that the outdated ETH chips are “restricted in scope in what they will do,” and that they “include low reminiscence and low storage capability.” However higher to place them to make use of than to allow them to sit idle.)
So how precisely do the chips of Hut 8 energy the event of AI? Right here’s a real-world instance. XYZ AI, a startup, needs to let folks convert plain textual content to 3D imagery. They should prepare their fashions utilizing a large information set, and that requires chips for in depth processing. In case you’re a startup like XYZ, you may both buy the chips your self — and chips are exhausting to come back by — or outsource the computing to a cloud supplier like Hut 8. (It’s an analogous mannequin to parking information on the cloud with Amazon Net Providers.) So XYZ is actually renting out computing from Hut8.
Sooner or later, this may permit XYZ’s customers to kind in one thing like “present me a sword that’s dripping with melted strawberry ice cream,” after which magically see the picture. Generative AI is simply one of many AI classes that require processing horsepower. “There are a zillion of those particular forms of purposes that these chips are getting used for,” says Rayner. “That’s why demand is totally exploding.” He cites medical know-how, gaming, biology, and CAD drawing as different potential clients for Hut 8. Every of them “begin with a big-data set, and that’s the place mannequin coaching comes into play.”
Mintgreen, a Canadian firm that recovers warmth from bitcoin mining after which makes use of it to harness energy, is within the early “conceptual” levels of exploring an growth into AI. “We’ve had questions from our buyers about the opportunity of a pivot,” says Colin Sullivan, Mintgreen’s CEO. Sullivan clarifies that that is nonetheless simply theoretical and says “I would like to analyze the economics deeper,” however he acknowledges that “down the highway, it’d be sensible to diversify into different computer-intensive electronics.”
That’s the important thing phrase right here: diversify. For mining-focused corporations like Hut 8, Utilized Digital, Iris Vitality, and doubtlessly Mintgreen, the concept isn’t an entire pivot from bitcoin to AI, however somewhat making a broader portfolio that’s extra sturdy in a bear market. “We have to have a number of income streams,” says Rayner, “in order that we’re probably the most environment friendly miner and may keep nimble and strategic if margins compress.” And “margins compress,” after all, is a euphemism for an additional crash in bitcoin costs. That would wipe out some bitcoin-only miners; for others, AI may imply survival.
