Have you ever thought about hosting a Bitcoin miner before?
Were you thinking, I'm not sure about the ROI.
It takes a bit long.
The machine prices are quite high.
I don't really know where to put it.
And so the risk is just too high for me.
I could just buy Bitcoin instead.
And that, to be honest, is a good baseline to have for when you try to host a Bitcoin
miner and think about it.
Because instead of buying the machine, you could just buy Bitcoin instead.
However, there is a great way to make this work.
Clients come to me for two reasons.
They want to make more Bitcoin than they could have bought today, or they want to have a reliable, positive dollar cash flow, fiat cash flow for as long as possible.
Hashrate up. Hardware sales, advisory, hosting, and side brokerage.
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More Bitcoin than you could have bought today and a long, reliable, positive cash flow.
the best way to do that is hydro mining. If you choose to host a hydro miner today we can start
with one unit. They're available right now. We can host them in a low risk environment with a great
operator in the US for 7.5 cents. The uptime is 95% guaranteed meaning that should you drop below
the 95% you get automated uptime credits on your next hosting bill. They start from around $7,000
and most importantly they offer two things they offer a very reliable long physical lifespan and
second of all should they ever be on the brink of profitability and reach the end of their financial
lifespan we can switch the machines to a profit split to keep them profitable for longer in the
next few minutes i want to explain the numbers around this hosting offer a bit more in detail
so stay tuned so in this video i'm going to get into the so in this video i want to give you guys
a couple more details and also go into the numbers to explain how the profit split works financially
so that you understand how we keep the machine as profitable as possible for as long as possible
So we are going to host AH3880 machines from Auradine.
They all in cost about $7,285.
We host them at 7.5 cents.
I've projected a runtime here of 36 months for now.
The hash price average I've set in Bitcoin terms to 39,000 sets per petash per day.
We're not going to resell the machine.
and I've assumed a $150,000 Bitcoin price on average over those 36 months.
Here you can see that the ROI in Bitcoin terms is about 32 months.
This calculator I leave it in the description I know I have covered this in a different focus episode on my channel before So have a look at that if you want to understand these numbers in more detail
So here I have created two scenarios.
One being the bullish scenario and two being the bearish scenario.
In one, I've assumed a bit comprised of 300,000 and the average sets I've set at 40,000 sets per petahash per day.
The same runtime, no sale.
and then we are at a 20-month ROI for the machine.
On the other hand, if you go into the bearish scenario,
150,000 average Bitcoin price and 27,500 sets per petahash per day,
then we're at an ROI of 85 months.
What you can see here, and this is where most people get a bit unsure
when it comes to hosting, is that the span between the ROIs
and the scenarios is quite vast.
Of course, you have to make assumptions, right?
That's how investing works.
if you want to understand this before you make the purchase.
But the ban between 20 and 85 months is quite huge.
How do we negate this?
We negate this by doing two things.
First of all, we are running hydro machines.
So those machines run very, very, very cool.
And they keep the degradation of the chips to a minimum.
These machines run very stably from the data that we've seen.
So these can last six, eight, even 10 years if I had to put my money on it.
If they fail, it's going to be the PSU. They're going to be in warranty. But my assumption is that these machines are perfectly designed to last for as long as possible versus air-cooled machines, which most people host, which have, you know, moving parts. They get in touch with their environment. They might be of a poor design quality when it comes to maybe BitME machines over micro BT machines, right?
So there's a lot more things that can go wrong with air-cooled hosting than with hydro hosting.
If the operator knows what they're doing, which of course we have made sure,
then the risk of physical failure of the machine is minimized.
Now, getting into the profit splits.
On the left, you can see the same machine that we had before.
On the top here, though, you can see I've set the electricity cost at $0.05 per kilowatt hour
and the profit cost at 50%,
meaning you're giving up 50% of the profits to the host.
The way this works and why we do this is as follows.
Should the machine ever be on the brink
of financial profitability,
then we choose to switch the machine
into a profit split model,
which means you pay for the power
and then anything that is a profit
gets split with the host.
You might be seeing a reduced uptime from 95% to 90%, meaning there is cheaper power prices available.
And the offer of the profit split obviously depends on the market conditions when it's switched.
However the host has guaranteed that every 12 months we will have an offer to switch to a profit split that we can either take or leave and then if we decide to leave we can just take the machine with us and host it elsewhere
Obviously the exact profit split offer depends a bit on the market conditions when we get there
however currently this is something that could be realistic with a lesser machine so I've gathered
data and used data from previous deals that we have done in the same facility. What I want to
explain with these numbers is how the profit split works on a financial basis. On the left,
we have our machine. Maybe it's now hosted at a lower uptime, 90% instead of 95%, which gives us
access to cheaper power prices where the machine is hosted. The important bit here, though, is that
essentially a portion of the hosting agreement becomes flexible according to how much profit
the machine is bringing in okay so if the hash price is low like right now around 35 right you
would be paying an electricity cost of 335 dollars your revenue would be 575 your profit share cost
half of the profit would be 120 dollars and your total cost would be that 454 which brings you to
a total cost per kilowatt hour of 6.8 cents and obviously that's lower than the seven and a half
okay and the profit again this is important right even at a low hash price of 35 you would be
bringing in 120 dollars of profit if the machine now becomes more inefficient these numbers might
get lower the overall revenue might decrease and if we then hit with a low hash price environment
Like last week, we had a hash price between 25 and 30.
And then in those scenarios, especially with then all the machines, you want to be protected to the downside.
Okay.
Now here, should hash price ever go to 25, our effective hosting rate becomes 5.6, 5.5 cents.
What you're giving up on the flip side is the upside.
And that's where the host gets to partake in the deal and have an upside as well.
So if hash price goes back up again, now let's say hash price reaches 90.
Obviously now your specific per kilowatt hour hosting cost is quite high.
However, you remain online even in the low hash price environment,
which at this point when the machine is dated should be the priority.
You don't want to reach your break even and then have to turn off.
That's exactly what we're trying to avoid with this setup.
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The way Bitcoin mining works is that it's a global competition.
I've explained this in previous episodes on the Focus series.
You can watch those back if you want more detail.
But essentially, the profit split agreement is all about keeping the machine online and running profitably.
We don't want to be in a scenario where we have to turn off the machine because we're losing money.
We want other people to get there before us because as soon as they have to switch off their machine,
difficulty goes down, hash price goes up, and we remain profitable and stay online for longer.
At the end of the day, once the machine is close to being paid off or has already paid itself off,
then we just want to keep the machine running as long as possible.
So with the hydro hosting we cover those two things.
We make sure that the machine is physically reliant.
We can rely on the machine for a long long time without having to touch it.
And secondly once that is solved we solve for the financial reliability as well
to keep the machine running for a long time in a profitable environment.
So solving for the physical reliability and the financial reliability
removes, not entirely, of course, but removes the larger risks of not being able to make your Bitcoin
back and having an instable, maybe cash flow positive asset that you might not have fun with
for the long haul. So exactly, if you think back to the beginning of the video, we want to solve
for those two things. We want there to be less risk of not being able to make your Bitcoin back
in a hosting environment. And second, we want to make sure that you have an asset on your hand that
you can reap the rewards of for a long, long time, even if you think in dollar terms and want
positive dollar cash flow on a monthly basis. The reason why I think hosting is difficult
is because it's a very hands-off approach to Bitcoin mining and you're leaving a lot of margin
on the table. So this in turn means again that you have to extend the lifespan of the hosting
environment and the hosting arrangement for as long as possible to reduce the risks. So
if you are thinking about a investment into Bitcoin mining, then I think this is the right
way to do it. If you want to understand some of these concepts in a bit more detail, please have
a look at my channel. There are a few focus episodes out there already where I talk about
mining on solar or what the hash price does when hash rate goes up and down, why I think that AI
maybe has a downward pressure effect on the difficulty overall over the next couple months
and years. All of those topics I explore over there. With that being said, have a great day.