Original Title: "Can Bitcoin Miners ‘Do’ AI? Not Really"
Written by: Colin Harper, Content Lead at Luxor Technologies
Translation: Luffy, Foresight News
The Bitcoin industry, particularly mining, is no stranger to hype. Now, a new technology has emerged: artificial intelligence.
ChatGPT and other large language model programs (commonly referred to as AI) have made waves in workplaces and the online world this year. Consequently, references to AI naturally appear in cryptocurrency news.
For example, some Bitcoin miners have publicly stated that they are seizing the opportunity in AI, attempting to put outdated hardware to work. However, not every company is executing the same functions as AI data centers or reaching the same scale. In fact, the tasks performed by this outdated hardware are quite different from those required for typical AI services, and some miners are simply seeking to profit from the hype.
Can Bitcoin Miners Provide AI Services? It's Complicated
In recent months, HIVE, Hut 8, and other Bitcoin mining companies have announced new high-performance computing (HPC)/AI strategies. Most of them possess computing hardware that has been phased out due to Ethereum's transition to a proof-of-stake (PoS) consensus mechanism, which ended the era of Ethereum mining. Some miners claim they can rent out their computing power for high-performance computing (although Hut 8 has been doing so since 2022).
High-performance computing is a general term for any number of data center tasks. However, when miners talk about HPC, they specifically refer to cloud computing or graphic rendering, among other things. Hut 8 earned $4.5 million from such services in the first quarter and $4.3 million in the second quarter, while HIVE's pilot project earned $200,000 in the first quarter, with no mention of any HPC revenue in the second quarter in the company's SEC filings. Hut 8 has a contract with Interior Health in British Columbia to provide high-performance computing services until 2028. The company acquired a 6-megawatt facility that provides these services when it purchased Toronto's TeraGo data center business in 2022.
These types of computations differ from training AI models or providing support for ChatGPT. Miners do not have the appropriate computing equipment to support such work, nor do they have the necessary power and network infrastructure (AI computing requires at least 1 TB of network bandwidth per second, a requirement far beyond the capabilities of industrial-scale mining facilities, which typically have bandwidth of 1 GB per second).
The true cost of a real AI data center may be 10 to 20 times the cost of a Bitcoin mining facility per megawatt (according to ERCOT, one megawatt can power about 200 homes in Texas). Additionally, the power costs for such facilities would be double that of miners, potentially reaching up to 15 cents per kilowatt-hour. The electricity prices typically used by U.S. Bitcoin miners are 5-8 cents.
The cost of running HPC facilities far exceeds that of Bitcoin miners
Riot Platforms estimates that the cost of building a Bitcoin mining facility near Corsicana, Texas, will be $833,000 per megawatt of power capacity, with an initial construction capacity of 400 megawatts.
In contrast, the average cost for North American HPC data centers is $9.5 million per megawatt (according to Turner & Townsend's 2022 Data Center Cost Index).
The high cost is due to the complexity of these data centers. They require higher-quality power infrastructure and network equipment, not to mention more space, better cooling, and more powerful backup generators to ensure 99.99% uptime in the event of a power outage. In short, these miners do not have the funds or market capacity to build AI systems, or even the ability to build a traditional data center.
This cost applies only to traditional high-performance data centers and may not necessarily apply to functional data centers with driving engines such as OpenAI's ChatGPT and Microsoft's Bard.
Miners May Attempt High-Performance Computing, But Not AI
Many Bitcoin mining companies have emerged from a sudden shift in business lines, but at this stage of development, these companies should be cautious when attempting to curb the hype surrounding HPC/AI and other areas.
The two largest publicly traded Bitcoin miners, Riot Platforms and Marathon Digital, announced their Bitcoin mining businesses in 2017, but these companies were already listed before entering the cryptocurrency space. Marathon Digital's predecessor was Marathon Patent Co., which profited from buying and selling various technology patents, while Riot was a pharmaceutical company.
Both companies have become among the world's largest Bitcoin miners, and this transition has paid off.
However, for a major Bitcoin miner to transform its mining facility into an AI data center would be extremely difficult and expensive. It is also worth noting that in the traditional data center market, miners would be competing with the world's most powerful tech companies such as Google, Amazon, and Microsoft.
Applied Digital is an exception: it is a data center company that also helps clients host Bitcoin mining equipment. This distinction is important because traditional data center operators find it easier to deploy Bitcoin mining equipment on-site than miners do to build a data center from scratch. The 2023 AI hype wave pushed Applied Digital's stock price to $10.24, but it has since fallen significantly to $5.68 at the time of writing. As shown in the following image, Applied Digital and mining stocks are currently generally hot, so we advise investors considering these stocks to proceed with caution.
This year, Bitcoin mining stocks have surged alongside related assets, but many are hoping that AI can regain its bullish momentum.
Conclusion
When the hype subsides, the market will tell us which companies are in a favorable position to capitalize on the AI wave.
For miners, they may provide graphic rendering services, but they will not use their mining hardware for ChatGPT. So, when you see AI mentioned in a press release, don't be misled—it may not be what you imagine.
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