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Watts Next: Bitcoin Power or Energise AI?
To produce Bitcoins, big computers solve tricky maths problems. Which means Bitcoin mining is essentially turning electricity into digital currency.
When brothers Daniel and Will Roberts used renewable energy to power their Aussie Bitcoin mining computers, investors went nuts. They were turning clean power into digital gold and investors poured in millions to their company, Iris Energy.
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​With a mountain of specialised machines chewing through power and pumping out Bitcoin, things were going well.
But in 2022, post-COVID inflation hit computer chip prices, and energy input costs were on the rise. To make matters worse, the price of Bitcoin fell.
As their operating margins were squeezed, Iris Energy shares suffered, and the brothers had to do something to keep their investors happy.
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The Strategy Standoff
Now it’s time to put yourself in their shoes. You have all this computing power, do you:
a) Switch away from Bitcoin mining and lease your computers to companies to use in their AI (artificial intelligence) applications?
Or do you:
b) Keep focused on Bitcoin mining and lease your computing power to other prospective miners.
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Which would you choose — pivot to AI computing, or turn into a Bitcoin mining utility?
The Strategy Standoff
Strategy A: From Bitcoin Miner to AI Authority
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Iris Energy could turn its renewable energy-powered mining computers into data centres to serve the need for AI processing by big firms like Microsoft.
This would tap booming demand for AI computing.
Multinational clients would love the renewables story because they’d made market commitments to sustainability.
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However, this would change the kind of business model investors bought into (from a mining firm to a server company), and Iris would need deals with companies with massive buying power.
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Strategy B: Invent Bitcoin Mining-as-a-Service (MAAS)
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This would see Iris keep focused on Bitcoin but shift their model from self-financed mining to providing mining platform services (that is, selling computing to firms looking to get into or expand Bitcoin mining but finding themselves without access to enough data processing capacity).
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This option would tap the Iris Energy knowledge and understanding of Bitcoin, improve their profitability and have customers feeling good about their environmental credentials.
On the other hand, this model would limit Bitcoin upside (it’s not their Bitcoin). Iris would become a B2B utility with a changed earnings profile that might disappoint investors.
So, Which Did They Choose?
Cast your vote to find out!
Good job, Strategy A was chosen!
Better luck next time, Strategy A was chosen!
But what did this mean for Iris Energy...
Outcome: Facilitator Commentary
Matt Braithwaite-Young
Managing Partner
t +61 2 9002 3100
Iris Energy rebranded as IREN in 2024, signalling its shift to a focus on clean energy computing and moving them well beyond bitcoin mining and launching them into the booming AI server market.
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Iris Investors are Happy with AI Shift
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Investors have the joy that comes from high margin, long-term contracts with blue-chip customers!
Iris Energy computers that minted Bitcoins (and were not making much money) are now IREN for-rent AI computers offering better return on the energy input.
A Move from Bitcoin Mining to AI Brains for Hire
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Persistent post-covid silicon chip shortages and the ever-increasing cost of electricity was met with the explosive rise of AI coming the other way. It meant the same renewable electricity they already had contracts for could earn IREN much more than Bitcoin if it was pointed towards AI services.
The 100% renewable energy model was a selling point to major tech clients with big sustainability commitments and staring down massive energy requirements for providing AI to customers. (To give you an idea, AI computing uses so much electricity that Microsoft has announced plans to restart the Three Mile Island nuclear reactor in New York!)
Once IREN saw the sparkle of AI gold, they doubled down on the switch and built a massive fleet of computers in Texas and British Columbia. Then they sold Microsoft a five-year, US $10 billion contract.
Lucky investors! IREN market cap jumped to US$16.5 billion, and while the excitement and relief of escaping the Bitcoin trap has faded, the company is still at $14 billion as I write this.
How to Power Your Own Switch
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This strategy shift success was built on Iris Energy clearly understanding their looming problem and the strengths they had in renewable power contracts and data-centre capability.
Tapping a new growth market for higher-yield outsourced AI computing was a great move.
When an industry hits hard times, your smart move might be to press ahead. Or it might be a good idea to change direction like Iris Energy.
Either way, it’s a good idea to understand and use your unfair advantages when you want to win. And you’ll want to make sure your leadership team are aligned on the choices.
At Turning Leaf, we help you get your leadership teams to see your strengths, identify your options, align their own teams and get commitment to action. If that sounds interesting, you know who to call!
Matt Braithwaite-Young | Turning Leaf +61 2 9002 3100
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