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MINING: Inside Tether’s 50 EH/s Mining Empire w/ Elektron's Rapha Zagury - Blockspace: AI & Bitcoin | Wave AI Podcast Notes

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MINING: Inside Tether’s 50 EH/s Mining Empire w/ Elektron's Rapha Zagury

Blockspace: AI & Bitcoin

Thu Feb 26 2026

Tether has quietly become the largest bitcoin miners in the world, and Elektron manages 50 EH/s of the stablecoin issuer’s fleet.

Summary

BLOCKSPACE: AI & BITCOIN
Episode: MINING: Inside Tether’s 50 EH/s Mining Empire w/ Elektron's Rapha Zagury
Date: Feb 26, 2026
Host(s): Charlie Spears & Colin Harper
Guest: Rafa Zagury, CEO of Electron

Episode Overview

This in-depth episode dives into Tether’s massive and quietly-assembled Bitcoin mining operation, with a spotlight on Electron, the company responsible for managing about 50 exahashes (EH/s) of Tether’s mining hash rate. The hosts are joined by Electron’s CEO, Rafa Zagury, for a discussion covering the evolution of this mining juggernaut, the dynamics between Tether and Electron, the shifting energy landscape, competition with AI/HPC data centers, and mining strategy in an uncertain market. Zagury also shares nuanced insights into global mining opportunities, capital efficiency, and what the future holds for large-scale miners in the post-halving era.

Key Discussion Points & Insights

1. Bitcoin Market Conditions & Mining Sentiment

[05:09–07:40]

Market Volatility and Crypto Predictions:
- Zagury refuses to give price predictions, citing Ray Dalio: “Those who live by the crystal ball eat shattered glass.”
- He notes Bitcoin remains in a price discovery phase:
  
  “I think the odds are much better on the upside than they are on the downside. But again, it’s bitcoin. I wouldn’t be surprised if it goes another 50% from here. I wouldn’t be surprised, you know, if we see an all time high in a month.” (Rafa, 05:51)
- Hosts observe typical cyclical market capitulation is underway, seeing non-believers exit as a bullish sign.

2. Rafa’s Background and the Birth of Electron

[08:09–11:16], [11:24–14:46]

Rafa’s Unique Perspective:
- Grew up in Brazil during hyperinflation, had a tech/financial background, and worked on Wall Street.
- Left a successful fintech exit to “go all in” on Bitcoin in 2022-23, initially as a portfolio theorist (“Nakamoto Portfolio”) and later into mining.
Company Origins:
- Electron, spun out of Swan Bitcoin’s mining team, is now one of the largest miners globally, with about 50 EH/s under management.
- Initially adopted an “asset-light” model (managing sites without ownership), now shifting into selective site ownership.
- Tether provided the strategic capital and partnership for rapid scaling.

3. Unpacking the Swan-Tether-Electron Legal Saga

[14:46–16:53]

Brief Context:
- The legal drama between Swan, Electron (formerly Proton Management), and Tether is acknowledged but not deeply discussed.
- Rafa reiterates that the team has focused on “building and scaling.”
  
  “We’ve been very quiet about that… Unfortunately we can’t talk too much about litigation, but I think it did a good job covering it… It shouldn’t be litigated on public opinion or on Twitter or anything like that.” (Rafa, 15:59)

4. Tether’s Mining Strategy & Partnership Structure

[18:16–25:52]

Tether’s Holistic Asset Strategy:
- Diversification is central; Tether owns hard assets (real estate, gold, mining ops) alongside highly liquid US Treasuries.
- Within mining, Tether has many ventures but is consolidating most mining assets under Electron due to alignment and institutional discipline.
Mining vs. Holding Bitcoin:
- Rafa notes that for most, buying bitcoin is generally better than mining, but strategic, well-structured mining adds diversification, smoother returns, and optionality (e.g., potential synergies with energy assets).
  
  “If you just buy bitcoin and let it sit…nothing wrong with that. But having, you know, a business behind it that can be generating income that…can be substantially better than just buying bitcoin.” (Rafa, 25:52)
Optionality through Mining:
- Tether mining opens doors for grid management, AI/HPC pivots, integration with energy assets, and risk hedging.

5. Operational Details: Geography, Scaling & Governance

[33:12–40:50]

Geographic Reach:
- US: Texas (largest), Oklahoma, Wyoming
- Canada: Small site
- Norway: Small presence, not expanding
- South America: Brazil—described as an emerging, highly promising opportunity due to excess renewable energy and utility-level curtailment.
- Vision: Deploy small, test deployments in new regions, scaling only after success.
Operational Discipline:
- Institutional-grade processes—investment memos, rigorous modeling (“You either run the numbers or the numbers run you over.”).
- Transparent and hands-on management, especially vital in an “amateur-heavy” industry.
Lessons from Bad Sites:
- Experienced “disasters” with unreliable hosts or regulatory nightmares—always initiate with small deployments to minimize risk.

6. AI & HPC Impact on Mining, Power Markets & Bifurcation

[40:50–49:11]

AI Changing Power Market Dynamics:
- Exploding demand for high-quality, grid-adjacent, redundant sites for AI/HPC.
- Mining cannot and should not compete for these premium sites; focus remains on lower-cost, fit-for-purpose facilities.
Anticipated Market Shift:

“People think all electrons are the same right now... There’s going to be a flushing out. I think we’re six months to a year away from… a bifurcation of the market.” (Rafa, 00:00 & 42:28)
- Many minor-grade sites aren’t suitable for AI, so repricing and market segmentation is expected.
Bullish on Energy Innovation:
- Rising power demand will stimulate new energy development and grid innovation, which is “massive for humanity.”
  
  “There is a direct correlation between progress and energy use. And I think what we are seeing with the need for power, for AI, for bitcoin mining, it’s actually extremely bullish for human civilization in the medium to long term.” (Rafa, 00:52 & 42:28)
Mining vs. AI Pivot:
- Electron remains 100% focused on Bitcoin mining, unlike most peers pivoting to AI/HPC.
- Emphasizes their “lean” structure and cost-control, citing SG&A at just 3.8% of revenue (industry peers as high as 20–50%).

7. Mining Economics & Halving Era Outlook

[49:31–57:27]

Network Hashrate Trends:
- Recent hashrate dropped from 1.275 ZH to 800 EH in a historically large pullback, signaling lower growth ahead.
- ASIC demand is low, prices are falling, and only a few buyers (like Electron) are scaling.
  
  “Nobody’s buying machines at scale other than us, right?” (Rafa, 53:45)
Difficulty Adjustment as Self-Correction:
- Long-run, the halving will force inefficient miners offline, favoring the most cost-competitive.
- Optimistic this is a “contrarian” moment to double down on mining as others pivot to AI.

8. Unseen Opportunity: Utilities & Mining Convergence

[57:46–59:44]

Energy Grid Synergies:
- Predicts “early innings” for integrating mining with utility load management (e.g., using miners instead of “giant toaster” load banks).
- Expects utilities to wake up to the unique flexibility and value bitcoin miners provide:
  
  “When we started, [utilities said] ‘I don’t want anything to do with bitcoin mining…’ Now…these guys…get paid daily in bitcoin, and they like it.” (Rafa, 57:46)

9. IPO Plans & Governance

[59:44–61:03]

No Immediate IPO Plans:
- Prepares company for future optionality (“maybe” an IPO one day), but has sufficient backing and prefers the private route—at least for now.

Memorable Quotes & Moments

On Market Cycles & Timing:

“By the time that everybody’s capitulating… it’s usually the right time to be positioned. I think bitcoin is much bigger than these cycles… Long term, this is very, very bullish.” (Rafa, 07:20)
On Investment Philosophy:

“You either run the numbers or the numbers run you over.” (Rafa, 18:16)
On Energy and Progress:

“Demand leads to innovation… There is a direct correlation between progress and energy use.” (Rafa, 00:00 & 42:28)
On Surviving Industry Turbulence:

“I like that it’s raining and I like that, you know, we’re keeping our course. This is when we’re going to overtake people. Maybe we’re wrong. Maybe bitcoin mining is dead… But mining by definition has a self correcting mechanism through the difficulty adjustments.” (Rafa, 49:31)

Timestamps for Key Segments

05:09 – Bitcoin volatility & price discussion
08:09 – Rafa’s background & how Electron started
11:24 – Structure, assets, and scaling of Electron
14:46 – Swan-Tether-Electron legal backstory
18:16 – Tether’s mining strategy; benefit of mining vs. buying
25:03 – Why Tether is a miner (portfolio rationale)
33:35 – Where Electron mines: US (TX, OK), Brazil, Canada, Norway
40:50 – Strategy: small-scale testing in new geographies
42:28 – How AI/HPC competition is transforming power and mining markets
49:31 – Mining costs, efficiency, and post-halving survival
53:45 – Network hashrate and ASIC market trends
57:46 – “Unsexy” utility-company mining synergies
59:44 – IPOs and company governance

Tone and Language

Thoughtful, analytical, and candid; Rafa frequently punctuates technical analysis with personal anecdotes and market-wide observations.
The hosts maintain a blend of technical curiosity and industry-wide perspective.

For Listeners

This episode is a must-listen for anyone interested in industrial-scale Bitcoin mining, power markets, and how legacy crypto giants like Tether are pivoting from tokens to tangible, cash-generating infrastructure. It’s dense with insights about industry economics, energy-market shifts, and the real-world challenges of running a global mining business as the world’s power needs and market incentives change.

End of Summary

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Transcript

Rafa Zaguri (0:00)

People think that all electrons are the same right now and the sites are going out for sale, you know, in very, very similar terms. There's going to be a flushing out. I think we're six months to a year away to actually getting to the point where, you know, there is a repricing and kind of like a bifurcation of the, of the market. We've seen greenfield size go for a million dollars per megawatt, which is insane and crazy. You know, if they are high quality size, close to urban areas that have access to water, they have redundancy, right? All of these things that we know AI, HPC really wants, they are going to trade at the premium and we're not going to compete for that power. We're not going to compete for those times. There's this misconception also that power is scarce, demand leads to innovation. There's no other way around it. And it's great. It's massive for humanity, right? There is a direct correlation between progress and energy use. And I think what we are seeing with the need for power, for AI, for bitcoin mining, it's actually extremely bullish for human civilization in the medium to long term.

Colin (1:01)

Welcome back to the Block Space podcast

Charlie (1:03)

brought to you by CleanSpark.

Colin (1:04)

One of the largest bitcoin miners in the world is also one of the most profitable bitcoin companies, if not one of the most profitable companies in any sector, and that is Tether. Tether has been quietly growing its hash

Charlie (1:18)

rate portfolio over the last few years

Colin (1:20)

and it has 50 exahashes of hash rate parked with Electron, a company helmed

Charlie (1:26)

by today's guests, Rafa Zaguri.

Colin (1:28)

Electron is a bitcoin mining management company that was spun off from Swan's bitcoin mining team in 2025.

Charlie (1:35)

Now, we won't be getting in to

Colin (1:37)

the legal drama between Swan, Tether and Electron in this episode, but we will be touching on Electron's portfolio management of Tether's mining assets. Where Electron is mining in which states and countries it is looking at mining in the future. Also, what Rafa thinks that the AI wave will mean. What for hash rate? And what exactly will be coming next

Charlie (2:00)

for one of the largest private miners in existence?

Rafa Zaguri (8:09)

Yeah, I'll, I'll condense, I'll try to go very quickly. I was born and raised in Brazil, right. And I think there are three things that through my life that made me very lucky. And also I think prime to, to grock bitcoin. When I saw bitcoin, you know, for the first few times. One is I always love computers. I started coding at an early age, you know, loved coding. You know, my hobby was coding. Even when I to economics, you know, I always loved coding. The second one is I lived in Brazil so I saw hyperinflation up close. You know, I grew up in Brazil in the, in the 80s and 90s where prices would change pretty much overnight. Right. And that you could see the value of money being destroyed very, very quickly and I think also primed me. And the third one is I live unfortunately through the financial crisis as well. Or was it Merrill lynch when that happened? You know, Merrill was bought by bank of America. I saw Wall street completely, completely be reignited from being, you know, something where everybody on my, on, on my age group wanted to go work at because it was the place where you could, you know, really put your brain to work. And there's a lot happening, a lot of opportunity to completely Change. I think banks should. They're utility companies. Right. And I saw that draining of talent. I saw the changing of risk taking and I saw the change of the financial institutions. And I also saw what made it collapse. Right. Which were wrong incentives and broken money at the end of the day. So very quickly in my career, as I mentioned, I worked most of my career in financial services. Worked at companies like Merrill, Deutsche, Goldman, doing different things mostly on the trading side. So I was a derivatives trading for a while, fixed income trading. Became an executive at banks, left the banks in 2016, went to be an entrepreneur, started the lending fintech and started a boutique investment banking company. The boutique investment banking company stayed small, but it's still around. The lending fintech took off. It went for series A, B, C, D, Series D. We raised capital from Softbank. I decided to exit the company and that's when I decided to like okay, what was the time to go all in in bitcoin? Really spend all of my time on it. And I was doing a little bit of everything was contributing to open source software, was reading of course a ton. And this was back in 2022, 2023 when this, all this all happened. Funny enough, never did too much mining. Did a little bit of mining like everybody, I think just to tinker around and understand how things work. I remember you know, having like a very, very old S3 and trying to plug it in and see how it would work and you know, was surprised of how much energy it actually consumed at the end of the month. But other than that at scale, never did anything at mining. For me bitcoin was a lot about thinking about bringing the Wall street world into Bitcoin and translating things like asset allocation efficient frontier. I wrote something called the Nakamoto portfolio at some point where would help people put bitcoin in their portfolios. This was kind of like where I saw it was easier for me to orange peel people and to actually have some impact in bitcoin. I happy to talk about Electron as well.

Rafa Zaguri (11:24)

So Electron now has been as a standalone company around a year and a half old, a little bit longer than that. We became one of the largest hash rates in bitcoin. Paolo mentioned this three months ago that we are at around 50 exahashes. It's pretty much where we still are. So that puts us among some of the largest miners in the world. Very fast growth. I can talk about the model that we adopted, you know, in the beginning we adopted a model that was very asset light. So it's kind of like got us through to market quickly, scaled very fast, 100% because of tether. The way that Tether has, you know, gave us the capital, the partnership that we have with them, I think it's very well aligned. And the fact that you're bitcoiners at the end of the day also helps, right. Particularly now like in cycles, in periods like this where everybody's thinking, oh now it's a time to step away and now is the time to do something else. If you are grounded in bitcoin, if you see the long term prospects of bitcoin as they see, as we see, we actually see this as an opportunity to do several things. Right. We are in 32 sites roughly in five different countries. Most of it it's in the U.S. i don't think that's a surprise for anybody. The U.S. i think still one of the best geographies to mine and for energy assets in the world. Around 200,000 ASICs that we've acquired have been deployed and are being deployed across the world. So that gives some sort of idea of the dimension of what we're building and what we have been building. Right. The team is relentless in execution. Mining is not an easy business. As you know, you are going to be thrown several things along the way. You're going to have to dodge them, you're going to have to reinvent yourself, you're going to have to rethink how you're going to do your business. You're going to have to adapt. Right. And I think every cycle is different. You know, we're now thinking about what the, the next cycle is actually going to have for us, which is, you know, we, we should talk about that in detail because I think it's, it's interesting to see how the industry is, is evolving. They said very asset light. We have started to move into an asset own ownership structure. So now we own some of the sites. Very careful how we do things because you know this is an industry that first of all it's still in the. Even though mining has been around, it's still in development. Right. And technology changes. You need to understand what you're doing. There are a lot of amateurs still in the industry. Unfortunately. It's one of the key things that I think we bring in election is that you know, we are very institutionalized and we are very professional in the way that we deal all the way from like the hosting Contracts, the way that we've engage with people. Right. The transparency we provide to investors. Tether has access to pretty much everything that we do. They can see real time, all the sites, all the wallets. Nothing is hidden as it should be. Right. And yeah, that's kind of like how we operate. I think because of those things, it positioned us really, really well. And I'm still very excited about bitcoin mining. I think this is actually a good time, even though most of our competitors don't think so. Right. Think if you have the right capital structure, if you have the right partners, you have the right team, if you have the right mindset and if you have, you know, the long term view of bitcoin that we do, I still think it's a much better business than, than other businesses that, you know, other competitors are shifting to.

Rafa Zaguri (18:16)

Yeah, good question. So Tether does. Had. Does still has some hash rate outside of. Of Electron. So the, the. The evolution of this was the following. So Tether has around 150 portfolio companies, right? Everything from real estate, gold companies like Zopublic and Cassian, you know, Tether transparency and they. Deco Agro is a huge investment that they made. Right. So they have a lot outside of there. They of course have their liquid portfolio, but they have an illiquid portfolio that invests in different things. Right. Bitcoin and Bitcoin mining is of course a focus area because of everything that tether does. And then in mining, they've invested in a ton of companies. Right. And a lot of these I think are public, some are not public. But one of the efforts, of their internal efforts in the last few years have been trying to consolidate things into, you know, managers and areas that are doing well and in mining. And it's their worst, like we did it better than anybody else. So they gradually consolidated some assets and some mandates with us. Right. We're still going through some of these, analyzing if it makes sense. Doesn't make sense. Some of them just don't make sense. Right. For example, they had the mining in Uruguay that was a legacy site. Very bad terms that they had in terms of energy there. Not their fault, just the way that things evolved. Right. And it didn't make any sense to continue there and they exited that. Right. But there are others that do make sense. In the U.S. 100%, of course, the, the hash rate that they have, it's with us. And then outside of the US opportunistically, where it makes sense, we take a look at, at other things as well. Right. There are still other things that we're thinking about. This is an ongoing process about how if it makes sense to consolidate if we're going to do it, if we're not going to do it. On top of of all of that, Colleen, I think that it's what I mentioned at the beginning, the way that we operate, which is very institutionalized. Right. And like we do things that you would think would be basic, but people just don't do in the industry. Right. You know, we're going to do an investment, we write an investment memo, we do analysis. I love running numbers. I'm very data oriented. Right. So we'll have models upside down of everything that we do. By the way, one of the things we are considering doing is that, you know, we've, we've written a ton of research like in asics, the history of asics, the evolution of asics, you know, looking how efficiency have evolved over time. As an example. We have models, we're going to open source all of that at some point. I've been working on cleaning up that code to put it out there. But it does, I think, highlight the way that we think about everything. Right. I always say that you either run the numbers or the numbers run you over. So we always running the numbers and we're always going back and analyzing, reanalyzing things. And I Think that resonated really well with Tether and they're very good partners. They are bitcoiners above and foremost. I think that, you know, they are some of the best bitcoiners I've seen out there in sense that, you know, they've seen the good, the bad and the ugly and they continue to support bitcoin. They continue to think long term, as you should. And there's the other side to this. You know, the way that they look at bitcoin investing. Mining is a good. If you think about that in an asset allocation basis, if you just buy bitcoin. By the way, this is something they ask me all the time, like should I buy bitcoin or should I mine? And since we started this from the beginning, I always answered the question the same way, which I think is the right way. Just buy bitcoin. It's much better than mining. In most of the scenarios we're going to be better off just buying bitcoin. But the reality is that there are scenarios where you're going to be substantially better mining than buying bitcoin. Historically, particularly recently, you haven't seen scenarios like that, which is simplifying a lot. If you have a scenario where network hash rate does not grow nearly as much as bitcoin price, you are going to be much better off mining than you are buying bitcoin. Right? You also, you smooth out your returns a long time. So there's the benefit of that. So on an asset allocation basis, you're better off not being 100, just buying Bitcoin, but having some allocation to mining as well. You're going to have smoother overall returns the same way that you know, you would add an asset with very high volatility even if it has lower chance of performing than another to portfolio because it lacks correlation to your original thesis, right? So in a scenario where your asset is performing really well and going up this, this asset, maybe it's underperforming, but the opposite is also true. Like when this asset is underperforming, your other asset can be performing up, right? And you kind of smooth on your returns and you know that's, that's what you want, right? The end of the day, one of the key things that, you know, the companies miss a ton is that you want to have predictability a lot of things that you do and this increases your chance of having a more predictable business long term, right? So yeah, that's how we've, the partnership with Tether has structured. We've aligned incentives with them. I Think from the beginning as well. And the way that we, we do things, you know, if the, we perform, they, they make money, we make money. Right. Everybody is happy if we don't perform. You know, that's the way it should be. You know, there's no, no payments.

Rafa Zaguri (25:52)

Yeah, so yeah, so that's to my understanding. Right. Just to be clear, I don't work at tether. This is all based on conversations and you know, and some of these things I actually probably know less than you do. But my understanding is that they, you know, hard assets is at the core of what they do. So if you think about Tether's balance sheet, right, as I mentioned, simplify thinking about they have their liquid assets which are the Treasuries, you know, everything that we know about that, which is extremely liquid, as it should be because it's backing their deposits. And then they have an illiquid part of their portfolio, right. On that illiquid part of the portfolio there's a very big focus on looking to hard assets because that's diversification long term. That's probably what optimizes the chance of Tether being around. And that's being true for real estate. That's been true for bitcoin, for bitcoin mining and for other assets and for gold and other gold mines. Other things that they invest is kind of like their hard asset bucket. Right. In specifically about bitcoin, remember that Tether started because of bitcoin and because you know, of crypto to begin with. Right. So bitcoin, you know, as a court treasury asset is, is very strategic for them. It is, it has been the thesis from the beginning. Some of the tether guys would tell like, you know, never thought that tether as an asset would pick up the way that it did as quickly as it did. Right. And they, I think they monetize and capitalize extremely well on it. But it all came from, from bitcoin. Right. The other thing is though, it goes back to what I was mentioning. I think it does provide better diversification just in terms of returns. Right. If you just buy bitcoin and let it sit, it's you know, as idle capital as a treasury holding. Nothing wrong with that. But having, you know, a business behind it that can be generating income that, you know, you own, kind of like the tail side of the, of the returns. Because if, as we discussed, right. If you have scenarios where mining is going to do substantially better than bitcoin, than just buying bitcoin, it does have added values to that. I always say that, you know, you want to own as much optionality as you can in different business. I think bitcoin mining kind of opens doors to other optionality that you just wouldn't have by holding Bitcoin. You know, one example, just as one example is that, you know, as load balancing, as working with utility companies, things like that, if you just, just own bitcoin, you're never going to have that optionality. Right. Even AI hpc, bitcoin mining is closer to AI hpc, which doesn't mean you're going to do that now. But having that optionality, being able to pivot to that area is. It's how you optimize the potential outcomes for your company. Right. So bitcoin mining for Tether, I think opens, you know, a series. And we can go into these in details because it's something we look at a lot, but it opens a series of new doors that you potentially could in the long term also make businesses capitalize, learn from it. Right? So it's areas that could have synergies with other areas of your business. Take one example, they own a Deco Agro. A Deco Agro has energy generation. Right. Does it make sense for them to do bitcoin mining? Right. So. So I think there are many, many different ways that you look at bitcoin mining. And you can see that, why it makes sense for them as a, as a core investment, as a strategic investment. Just compared to just owning bitcoin. Right. So just compared to owning bitcoin, there are options, there's benefits. Right. And a portfolio, overall, it has massive benefits as well.

Rafa Zaguri (30:35)

Right. You know, funny story about that. I have a friend who is used to be a fixed income trader like me, right? And the way that I converted him to actually start looking at bitcoin was also mining. Because what I told her is that think about the NASIC as being like a fixed income bond, right? That you're putting principal into principal and then it will daily give you cash flows in bitcoin, right? And what you need to figure out is that what are your expectations of bitcoin price and network hash rate? And then you can kind of like just calculate that as a bond. And he loved it. He's like, oh, that I can get my head around it, right? There is this perception that mining is bad business, right. That it's unprofitable. And you touched on it. I think one of the key reasons is because a lot of miners just didn't have the right capital structure in place. It's an extremely capital intensive business. Business, right? And thinking about the right capital structure, one, that you don't have massive leverage, that you don't have massive interest rates, that you don't have massive dilution to your investors. It's critical. Otherwise it's going to be unsustainable in the long term, right? Because one of the things going to happen, either you're going to dilute your shareholders, you're going to go bankrupt, right? Or even worse, you're not going to Invest in the business and gradually you're going to end up with an older fleet and then yeah, you are going to be unprofitable with an older fleet along the, along the ride. Right. I always go back, institutional investors always ask me like oh what tell me about the economics of mining. I tell them like oh, the arrangeable too far. Just look at the economics of you know, a newer machine. Get an S21 XP Hydro for example. Right. These are machines with energy break evens at above 10 cents per kilowatt hour. Right. That you know, at 5 cents you're mining at like $33,000 per bitcoin. So the economic of the machine is good. Right. There's something else there that it's letting companies not be profitable. You have to ask yourself what it is. Right. Is it because the capital to buy the machine was expensive, Was it because they don't have those machines, they have older machines. Right. Or is it because, you know they're over leveraged and they can, they can pay for for it. Right. And unfortunately I think that's a lot of what has happened through our industry and we're seeing the results, you know, across many, not all, but then across many of the companies out there.

Rafa Zaguri (33:35)

Yeah, I don't think anything I'm going to tell is a surprise. Like in the U.S. texas is our biggest state. Right. We are in Oklahoma. Shocking. Yeah, exactly like that. That doesn't shock anybody. It is something actually. We are trying to diversify not because we don't like Texas. Texas is a good place for mine. I think it's the best place in the world to mine. You should have ample energy availability, you know very well. Definitely well regulated market. Right. A lot of clarity. But it's important to diversify and I think, you know, we've been looking at other places. What I love in the US is that the states like to compete with each other. So things like you Know, sales and use tax and other things are actually in front of some of these discussions right now, which is great to see. We are in Oklahoma. Look at Wyoming. I mean there's a little bit of everything in the US But Texas is that. That Texas and Oklahoma are the, the bulk of our operations. Then we are outside the US In Norway. We've been in OR for a while. Not looking to really expand in OR in or. I still think it's a regulatory environment that it's a little bit uncertain of where it's going to go. We don't have huge sites here, but we have some presence. We have one small site we're managing Canada, but it's small. And we're in South America in two places. I funny story I've been since I started mining. Everybody you know, kept asking me like, oh, what about Brazil? You know Brazil so well. You know, so people from there so well. Right. I think because I knew Brazil really well, I never really liked getting here because I know it too well. But the reality is that there are good things in Brazil. Brazil built a massive amount of renewable energy that was incentivized for decades. And the result is that if you look at northeast of Brazil, it's like this coastline that it's extremely sunny, it's fairly close to the equator, extremely windy. So it's one of the best places on earth for solar and wind power. So they built a ton of generation there. The problem is that they overbuilt and they can't put back to the grid. Right. So it started. Funny story, I started having conversations here in Brazil with energy companies like, yeah, we're looking to mine. Let's take a look at the site. And then he kept telling me about this problem of curtailment. Oh, there's curtailment, curtailment in Brazil. And I told him like, oh no, we have curtailment in Texas. I don't like curtailment. And it's only like you don't understand when we're talking about curtailment here, it's curtailment at the power generation side. We have to turn off the turbines because we can't put more energy to the grid because it will stress the grid. And so that for me, like, oh, that's curtain that I like a lot. Let's discuss getting bitcoin mining containers to these places and we'll start mining whenever you don't need the energy. Right. By the way, great location for older generation asics. Right. They can can just put them in there and say, yeah, you know, this is free energy, is energy we were going to be throwing away. We could mine there. So that it's all to say we have started mining in Brazil. We have a site here that started mining earlier this year. Very excited about Brazil. I think there are some good opportunities to. To explore outside of the US it's probably the country where we want to expand significantly next. Right. And then we're always looking at new markets. We look at, you know, we're looking to Oman. We're looking at the Middle east in a couple of places. Ideally, you know, I tell. I tell the team, I think it's better if we deploy like small amounts everywhere and start to test. And some of these are going to be disastrous. Some of these are going to work out and then we scale with time. Right. So if you make a mistake and make a small mistake and you just. Of course, correct. And if you don't make a mistake and may hit the jackpot in one of these places and actually really have low energy and. And it's exciting just going back to Brazil. I think that's the other area I talked about optionality in the beginning. The fact that the conversations here are happening at the utility level. The utilities are starting to understand that, oh, this is a kind of load that, you know, they didn't even know that it existed. Right. I still tell some of these guys, no, you can turn miners off, like in a heartbeat. Just tell me. And in five minutes everything is off. Right. And then whenever you need to turn on, it turns it on in five minutes as well. Right. Of course, we don't want to be turning on and off because that will be bad for the machines, but it's extremely flexible. So having these conversations around, telling them first that, you know, I don't have clients, at the end of the day, the bit. My clients, the bitcoin protocol. Right. And the bitcoin protocol doesn't care, you know, if I'm turning on and off. Right. It continues to chug along and that kind of changes the way that they save bitcoin money as a consumer of power. And these conversations, I think, are very interesting ones and they are going to happen more and more. Right. Think as with everything else, a lot of utility companies are going to probably try to mine, but then they're going to realize that this is. And some of them are ready, that this is a different skill set, that you need to have capital, you need to understand how to source the machines, which machines to source, how to deploy the machines. Right. It's a Very different business than what your use should be doing. They're going to try, we've seen they're going to try to go out, buy machines from Bitmain or whoever.

Rafa Zaguri (42:28)

I think when we think about one misconception, a lot of this is happening already, by the way. A lot of, you know, the demand for high quality sites is already off the charts. High multiples are being paid, right. We've seen sites go pretty much on greenfield sites go for a million dollars per megawatt, which is insane and crazy. You know, if they are high quality size, close to urban areas and have access to water, they have redundancy. Right? All of these things that we know AI, HPC really wants, they are going to trade at the premium and we're not going to compete for that power. We're not going to compete for those times. Right? It makes zero sense in terms of economics for us to pay any of that. Right. I think what the market hasn't realized yet is the fact that, you know, they are Size are just not that. Right. They either don't have redundant power or they are remote. They're not in good locations. They're far away from urban areas. Right. And these sites are going to initially what's happening. There's a lot of still of interest in talking about these sites for potentially AI, hpc. And we've seen a couple of these deals where people come in, do due diligence, everybody's excited, but then they get to the end and they bring a hyperscaler in. They're like, oh, you didn't check. We have 10 boxes. You had to check. You check seven. The other three are really important. We're not going to signing a contract with you. It takes time for that because everybody, because there's so much excitement, people think that all electrons are the same right now and the sites are going out for sale, you know, in very, very similar terms. At least in the beginning, there's going to be a flushing out. I think we're six months to a year away to actually getting to the point where, you know, there is a repricing and kind of like a bifurcation of the, of the market. When that happens, I think there's going to be an opportunity to, to acquire sites. I'm talking specifically about, you know, the high demand areas like taxes and other. Right. Outside of the world. There are so many opportunities. There's this misconception also that power is scarce. There's ample opportunities in power in the world out there. We don't have enough bandwidth to actually go through all the opportunities that land in our desk. A lot of it of course are waste of time, but there are many good opportunities in gas, in solar, wind, everywhere in the world that, you know, I think we are going to see a boom in energy development, which is another thing, another point to all of this, right. Demand leads to innovation. There's no other way around it. It takes time, right. And then when you have innovation, it tends to lead to lower costs as well. I think we're going to see a lot of innovation in energy and energy markets in the next decade. Right? And it's great. This is a massive for humanity, right? There is a direct correlation between progress and energy use. And I think what we are seeing with the need for power, for AI, for bitcoin mining, it's actually extremely bullish for human civilization in the medium to long term. Right. Going back to short term, I think we are starting to see some of these cycles come out. But right now it's not the time to compete for These sites. The second point you mentioned, which is specifically about taxes, regulation, our concerns actually even, you know, maybe more pedestrian than that. I'll tell you, like last year when the tariffs hit, we had machines that were, you know, about to be imported in the US Some of them from China, but some from Malaysia, some from other places, right. And we literally had to scramble to get like, you know, freight airplanes to put machines in, bring them to the US and that made me realize that the place in the world that I thought, you know, here we have rule of law, everything's stable, everything's predictable, right? Guess what? Not so much, right. Maybe for good reason, bad reason, or not getting to the politics of that. But as a business operator, that created a lot of headaches for us. It could be, have been catastrophic for our business, right? You know, imagine we have machines that have to come in and if I had to pay twice the amount of machines for machines were coming in, it would become an economical for us to, to actually mine, right? So the reason why we explored Brazil is that, you know, we had machines, the V Sports come from China through the U.S. like, okay, where do we place them? And Brazil seemed like, you know, a decent enough choice. And it's one of these things, right? You know, when things really change, you have to adapt. And that opens, I think, new opportunities. And that's kind of like I said, well, at this case, even with all the challenges of Brazil, I still think it makes sense to get in mind there, right? And then as we started to look, you know, Brazil is actually a very decently regulated market for bringing machines in, right? There's decent regulation how we import them. Yeah, you pay taxes, but then you have, you don't have sales and taxes and use tax as you would have in the U.S. so you make, you run the numbers and you kind of like understand, okay, here, here's how things going to happen here. Things going to happen. And diversification, optionality, back to the same point, is always more optionality is always better than less optionality, right? So our diversification is coming much more from that front than anything else. The specific issues with taxes, little less concern, but yeah, they are concerning. The good thing is that most of the sites we have in taxes we host. So worst case scenario, if something happens, we can just pick up the containers, leave, go somewhere else. Not what we want, massive opportunity cost. But ultimately the business lives to fight another day. The final thing, just to go back to AI hpc, we can go into, and we should into like a broader discussion about the two business Models, which is, I think there's going to be also a cleansing and the cleaning of the AI HPC business. You know, through the next three, five years. The good operators of course are going to make a ton of money, are going to try. We're going to do really well. The ones that really focus on capital structure in the right way, I think they're going to do extremely well. But there's going to be a lot of them that are not going to make it right. It's going to be very, very hard. It's a very different business than bitcoin mining. And I actually like the fact that right now I think we are probably the only bitcoin miners at scale that are 100% focused on Bitcoin mining. Right. I mean we're not doing AI hpc. We may long term but it's not our focus. We do it well. Our profit margins in bitcoin mining, they are very, very good and very healthy. Right. The other thing I forgot to mention is we're an extremely lean team. If you look at our SGNA as percentage of revenue, we're talking about numbers that are less than 5%. Look at the pub codes, none of them are anywhere close to that. Right. Some of them have SGNAs, percentage of revenue like in the 20% range. Right.

Rafa Zaguri (49:31)

Last quarter we were at 3.8%. So that tells you why, you know, we, we will survive. We're on the left because you're going to look at all these cost curves of the industry and say these guys minus 60, $70,000. It does not include SGNA. And include SGNA, we are at the far left end of the cost curve. So you know, this is another reason why for us it doesn't make sense to shift now. You know, we'll stay where we are. We're just going to keep our course. Yeah, there is, you know, I'm you know, in Brazil. I don't know if you know this but we had a very good Formula one driver, Ariton Senna. Right. Back in the, in the day Senna actually, you know, was a hero in Brazil. Because it was through a time that Brazil really didn't have much to, to cheer on. He was a killer when it rained and he had the phrase where he said, listen, on sunny days it's very hard to overtake people when it's raining. I can overtake 15 cars in a lap. Right. And he did. There's, if you google, there is a clip of him, I think it was donnington park in 93 or something like that. Where in it's raining. He starts kind of like in the back of the field and he pretty much passes the whole field in one lap. Right. So I'm not trying to compare as with Santa, but I like that it's raining and I like that, you know, we're keeping our course and you know, this is when we're going to overtake people and I think this is an opportunity for us. Maybe we're wrong. Maybe bitcoin mining is dead. Maybe it's never going to come back again. But guess what? Mining by definition has a self correcting mechanism through the difficulty adjustments. Right. So if we stay where, where it is, if hash bright continues where it is. Right. We're having a conversation this week, you know, we're running some numbers, we're running some models and know we're looking at the next happy like well if our predictions, you know, to just put linear predictions like hash price gonna go down, it's gonna be at $20 after the having. How is anybody going to survive that? And we were debating about that for a while and we're like guys, you know, at $20 per power/ per day, right. Vast majority of the miners are not going to be mining. Right. Because unless you have S21s and S23s and you have low energy costs, you're gonna have to shut down. What percentage of the network we're talking about that are actually newer generation market machines? 20, 30% maybe. Right. So that means that 70% of the network will be off, which means that, you know, hash rate will need to drop. There's necessarily, there's an auto correcting mechanism to that. Right. So our playing bitcoin mining is exactly trying to, you know, survive longer than than and you know, staying solvent for longer than others cannot. Right. And I don't think that has changed. I actually think that's it's the, it's the right time to probably be, be doing that right now. Right.

Rafa Zaguri (53:45)

Yeah. So let's look at some numbers. Right. So we hit at the all time high of hash rate. We hit an estimated amount of like 1.275 zeta hashes. Right. We saw like already one of the largest drawdowns in bitcoin history. Right. It went, if you look at the bottom, so we went 1 2, 75 and then it hit 800 exahashes. This dropped on. It's one of the largest in history already. Of course we had bad weather, of course we had but you know, like the still massive drop in hash rate. So I think the early signs is that the growth that we saw in the past probably is not going to endure in the future. Right. I go back to the core thesis of bitcoin mining which is, you know, I don't care so much about, you know, of course I care But I, it's much more about the, how the, the percentage of growth in network hash rate is going to compare to the percentage of growth of bitcoin price. And I think the odds on that right now are extremely favorable to anybody mining, right? Because bitcoin price, as we discussed in the beginning, I think the upside from here, it's probably much more positive than the downside. And then on network hash rates, right. I think that we are going to be seeing a period of probably relatively stable network hash rate at least for the next year, right? Everything you have to remember is that new hash rate coming to the network. It needs to come from somewhere, right? And it usually comes from newer machines hitting the market. There is no demand for Asics at large scale right now. We know this. There's nobody buying machines at scale other than us, right. It think about also manufacturing, right? If you are Micro BT Bitmain, right. You need, you need to start planning for 2027, 2028. You know, what they're delivering now was based on what they see that saw the last two years, right. There's a leads time around that. And you know, I don't know anything about how they're planning their, their future, but I can tell that they're probably not as optimistic. They cannot be, right? As they were, as they were before. So that, that's all very, you know, bullish for the way that we look at network hash rate and how it's going to grow at the end of the day, right. There is also something happening which is people still trying to mine, you know, even though even the guys are, they're pivoting, they're still mining, right. They're still leaving. Even though the margins are very, very thin, they're still there because it's better than not consuming the energy. They're going to try to sell their machines in the market, right? As you said, as you said, a lot of them are trying to sell the machines and that's going to put pressure down, I think in machine prices for the next six months a year. Definitely happening already. Even in newer generation machines, right. You can buy them at a significant discount from where you were last year. So again, for anybody that stays on this business, I think this is the perfect setup, right? You have a place where you're buying machines at a low potential, lower price network hash rates, the probability of it increasing significantly is not, not as it was before and bitcoin price where it is, I think you have potentially much more upside than you have downside, right? So when you put all of these things together. I do think this is the right time to actually be thinking about going to mining and not exiting. Right. But I understand like the public companies, they, they need to maximize shareholder value and quite honestly this is the way they maximize shareholder value right now. Right. Is that going to AI to be see the market rightly or wrongly? You know, the, for me the market is always right. The market is sovereign. Right. The market is paying a premium for that. But long term, being a contrarian also, you know, a lot of times pays out. Right. Because this is the theme right now. This is what the market is paying for the next quarter. Is this what the market is going to be paying for the next 10 years? I don't know. I, I would rather be on the other side of this, of this trade

Rafa Zaguri (57:46)

Yeah, we touched quickly and one, the one that excites me the most is the fact that, you know, people still haven't realized that this is a very different. And when I talk people so I just talk about utility companies, energy companies, power companies, right. That this is a very different kind of load that they are used to. And even if they build, you know, massive operations that will serve to AI, hpc, all of that, there's always going to be place for bitcoin mining, right? There's going to be a place because you are going to have loads sitting there that you can take. I give you one. We're having a conversation with these guys that had, you know, a load bank in one of their sites, right. I don't know what a load bank is, but it's basically a giant toaster that it's there because they need to consume energy at certain levels and from time to time they'll just turn it on to literally burn energy. This shouldn't exist. It's like, okay, take that off, sell it and we'll put old containers, old miners there. When you need to use the energy, put S19J pros there because this is free energy, it doesn't matter. And things like this and how to optimize the energy consumer. I think we are in the early, early, early innings of that market. We are going to see bitcoin mining getting closer and closer to utility companies, to power companies and for bitcoin, that's very bullish as well, because we've also seen in conversation, like we have partners that are in the energy market and when we started we would tell them like, oh, we're going to be doing bitcoin mining. Like, I don't want anything to do with bitcoin mining, right. And I don't want to do anything with bitcoin. And then they learn, and then they learn about bitcoin as an asset and then you're paying them in Fiat every month and then you tell them, yeah, by the way, if you capture bitcoin, this is how much you would have, right? And they start learning about bitcoin and these guys in specific, they now get paid daily in bitcoin, right. And they like it. So people talk about this, but I think it's super early and there's still a lot to happen. And when that happens, I think it's going to be massive for bitcoin mining as an industry and for bitcoin as an asset as well.