Bitcoin enthusiasts, miners, and oil & gas execs gathered at a meetup in Houston to talk about the future of bitcoin mining.
HOUSTON – On a residential back street of Houston, in a 150,000 square-foot warehouse safeguarding high-end vintage cars, 200 oil and gas execs and bitcoin miners mingled, drank beer, and talked shop on a recent Wednesday night in August.
These two groups of people may seem as though they are at opposite ends of the professional and social spectrums, but their worlds are colliding – fast. As it turns out, the industries make for compatible bedfellows.
Just take Hayden Griffin Haby III, an oilman turned bitcoiner. The Texas native and father of three has spent 14 years in oil and gas, and he epitomizes what this monthly meetup is all about.
Haby started as a surface landman where he brokered land contracts, and later, ran his own oil company. But for the last nine months, he's exclusively been in the business of mining bitcoin.
As Haby describes it, he was "orange pilled" in November 2020 – a term used to describe the process of convincing a fiat-minded person that they are missing out by not investing in bitcoin. A month later, he co-founded Limpia Creek Technologies, which powers bitcoin mining rigs with flared, vented, and stranded natural gas assets.
"When I heard that you could make this much money per MCF (a metric used to measure natural gas), instead of just burning it up into the atmosphere, thanks to the whole 'bitcoin mining thing,' I couldn't look away," Haby said. "You can't unsee that."
When China kicked out all its crypto miners this spring – an exodus which Haby calls the "Chexit" – that poured kerosene on the flames. "This is an opportunity we didn't think was coming," he said.
Haby tells CNBC they are already seeing demand rushing to Texas, and he is convinced that the state is poised to capture most of the Chinese hashrate looking for a new home on friendlier shores.
Bitcoin miners care most about finding cheap sources of electricity, so Texas – with its crypto-friendly politicians, deregulated power grid, and crucially, abundance of inexpensive power sources – is a virtually perfect fit. The union becomes even more harmonious when miners connect their rigs to otherwise stranded energy, like natural gas going to waste on oil fields across Texas.
"This is Texas, boys. We got what you need, so come on down," said Haby. "We are sitting on the energy capital of the world."
"I think Kevin Costner said it best: 'If you build it, they will come,'" said Haby.
An underground meetup of bitcoin miners and oil & gas execs was held at a 150,000 square-foot warehouse safeguarding high-end vintage cars.
Parker Lewis is one of Texas' de facto bitcoin ambassadors. Everyone knows him. Everyone likes him. And virtually any bitcoiner you ask refers to him as the future mayor of Austin.
Lewis is an executive at Unchained Capital, a bitcoin-native financial services firm. He isn't in politics – yet — but he is hustling across the state of Texas to spread the good word on the world's biggest cryptocurrency. In May, the Houston Bitcoin Meetup consisted of only 20 people in a fluorescent-lit conference room in an office. Then Lewis decided to get involved.
"I just knew Houston would be prime to explode because of the energy connection to mining – if we organized a good meetup," Lewis told CNBC. "It's also key to Texas being the bitcoin capital of the world."
His efforts are paying off. Wednesday's meetup drew more than 200 attendees from across the state of Texas, as well as California, Colorado, Louisiana, Pennsylvania, New York, Australia and the UK.
The buzz was electric on Wednesday night. You had to shout to be heard. And no one in the room mentioned any cryptocurrency beside bitcoin. There was also an unmistakable air of stealth – and FOMO. The people who showed up to this event did so, at least in part, because they didn't want to get left behind.
Capturing excess and otherwise wasted natural gas from drilling sites and then using that energy to mine bitcoin is still firmly in the category of avant-garde tech.
Haby, who's affable and an open book on most things, clams up when it comes to sharing the location of his company's mining sites. "West Texas" is as much as Haby would give CNBC, though if the name "Limpia Creek" is any indication, that would place them 100 miles due north of Big Bend National Park.
His secrecy was par for the course that evening.
Oilmen, turned bitcoin miners, Griffin Haby with Conner Murphree and Jordan Kuntz at one of their bitcoin mining sites in Texas.
Bitcoin miner Alejandro de la Torre was born in Spain, but he's spent years minting bitcoin all over the world, most recently in China. When Beijing cracked down on all things crypto, De La Torre got a call from his boss at 3 A.M. telling him he had to go to Texas. He was in Austin the next day.
Since then, he's been shipping his new-generation mining gear to the U.S. in bulk.
"It's all through ships and from the Pacific side," De La Torre told CNBC. "The port depends on the location of where the rigs will end up."
That was as much as De La Torre would divulge, because, as he explains it, any further details about the destination, or the gear itself, could give his competitors an edge.
Bitcoin believers care a lot about privacy, as do the oil and gas guys. Some cited non-disclosure agreements as a reason to speak to CNBC in vague platitudes about business deals. Others were only willing to share their thoughts on the condition of anonymity. And some attendees worried about their job security should their employer find out they were there.
These weren't tycoons -- they were mostly up-and-coming young execs, hungry to get ahead and make a name by taking a gamble on bitcoin mining.
For years, oil and gas companies have struggled with the problem of what to do when they accidentally hit a natural gas formation while drilling for oil. Whereas oil can easily be trucked out to a remote destination, gas delivery requires a pipeline.
If a drilling site is right next door to a pipeline, they chuck the gas in and take whatever cash the buyer on the other end is willing to pay that day. "There's no choice. There's no middle finger. Whatever gas comes out that day has to be sold," explained Haby.
But if it's 20 miles from a pipeline, things start to get more complicated.
More often than not, the gas well won't be big enough to warrant the time and expense of building an entirely new pipeline. If a driller can't immediately find a way to sell the stash of natural gas, most look to dispose of it on site.
One method is to vent it, which releases methane directly into the air – a poor choice for the environment, as its greenhouse effects are shown to be much stronger than carbon dioxide. A more environmentally friendly option is to flare it, which means actually lighting the gas on fire.
"Chemistry is amazing," explained Adam Ortolf, who heads up business development in the U.S. for Upstream Data, a company that manufactures and supplies portable mining solutions for oil and gas facilities.
"When CH4, or methane, combusts, the only exhaust is CO2 and H2O vapor. That's literally the same thing that comes out of my mouth when I exhale," continued Ortolf.
But Ortolf points out, flares are only 75 to 90% efficient. "Even with a flare, some of the methane is being vented without being combusted," he said.
This is when on-site bitcoin mining can prove to be especially impactful.
When the methane is run into an engine or generator, 100% of the methane is combusted and none of it leaks or vents into the air, according to Ortolf.
"But nobody will run it through a generator unless they can make money, because generators cost money to acquire and maintain," he said. "So unless it's economically sustainable, producers won't internally combust the gas."
A panel of bitcoin miners and oil & gas execs share what it's like to mine bitcoin in Texas.
Bitcoin makes it economically sustainable for oil and gas companies to combust their methane rather than externally combust it with a flare.
"There is no such thing as stranded gas anymore," said Haby.
But Ortolf has taken years to convince people that parking a trailer full of ASICs on an oil and gas field is a smart and financially sound idea.
"In 2018, I got laughed out of the room when I talked about mining bitcoin on flared gas," said Ortolf. "The concept of bringing hydrocarbons to market without a counterparty was laughable."
Fast forward three years, and business at Upstream, a company founded by lead engineer Steve Barbour, is booming. It now works with 140 bitcoin mines across North America.
"This is the best gift the oil and gas industry could've gotten," said Ortolf. "They were leaving a lot of hydrocarbons on the table, but now, they're no longer limited by geography to sell energy."
It is also helping to curtail the overall carbon footprint of some of these oil and gas sites. Recent production stats show that in the U.S. alone about 1.5 billion cubic feet of natural gas is wasted on a daily basis. And these are just the reported numbers, so the actual figures are likely higher.
Meanwhile, bitcoin miners get what they want most: cheap electricity.
The thing about all these grand visions for bitcoin mining – to stay the course, it requires some manpower on Capitol Hill to safeguard its plan to scale. And right now, politicians in Washington are scrambling to figure out what and how to regulate cryptocurrencies and all the ancillary services that make up the wider ecosystem for digital currencies.
That's why another big topic of conversation at the Houston Bitcoin Meeting was political activism.
"Who knows a staffer or a representative?" one member of the crowd posed to the group. At least half a dozen people raised their hands and one stepped up to confirm they would reach out to their contact in Senator Cruz's office.
There was a sense of momentum in the audience. Several people made the point that the bitcoin contingent across the country had paralyzed a $1 trillion rubber-stamped, bipartisan bill, no small feat for a voting bloc which hitherto hadn't been viewed as much of a threat on the Hill.
But it's not just about being on the defensive for these tens of millions of voters and bitcoin faithful. They're going on the offensive by working to install like-minded people into office so that they can do something "before they do it to us," as one member of the audience said to the group. They're also teaching veteran lawmakers about bitcoin, as many representatives don't understand it.
"We need to target anyone who is anti-bitcoin. There are 45 million of us in America, and we are not silent," said this same attendee.