Luxor’s Aaron Foster on Bitcoin Mining’s Growing Sophistication

Aaron Foster, The Company’s Director of Business Development, Joowed In October 2021, and Has Seen the Team Grow from Room Rouge 15 to 85 people in the span of something and a Half years.

Foster Worked A Decade in the Canadian Energy Sector Before Coming to Bitcoin Mining, Who’s Is One of the Reasons Whi He’ll Be Speaking About The Future of Mining in Cany and The B This Year, May 14-15.

In the lead-up to the event, Foster Shared with Coindesk his Thoughts on Bitcoin Mines Turning to Artificial Intelligence, The Growing Sophistication Various Forms of Risk.

This interview has been condensed and edited for Clarity.

Mining Pools Allow Mines to Combine their Computational Resources to have HAVE HIVER CHANCES OF RECEIVING BITCOIN BLOCK REWARDS. Can you explain to US How Luxor’s Mining Pools Work?

Aaron Foster: Mining Pools Are Basically Aggregators that Reduce the variance of Solo Mining. WHEN YOU LOOK AT SOLO MINING, IT’S VERY LOTTERY-ESQUE, MEANING THAT YOU COUPLANCE PLUGING YOUR Machines in and You Might Hit Block Rewards Tomorrow-or You Might Hit It 100 Years From Now. But You’re Still Paying for Energy During that Time. AT SMALL SCALE, IS NOT A Big Deal, As You Scale That Up And Create A Business ARUNOUND IT.

There is a kind of mining pool Called pplns, which means pay-peer-last-n-shares. Basically, that means the Miner does not get paid unless that mining pool hits the block. That’s Also Due to Luck Variance, So IT’s No Different from that Solo Miner’s Sity. However, that Creates Revenue Volatility for Those Large Industrial Mines.

SO We’re Seeing The Emergence of What We Call Full-Pay-PER-SHARE, OR FPPS, AND that’s Luxor Is Operation for Our Bitcoin Pool. With fpps, regardless of whather we find a block or not, we’re still paying Our miners theirrs revenue bassed on the Number of Shares they’ve submitted to the pool. That gives revenue cereult to miners, assuming Hashprice Stays the Same. We’ve Effectvely Become An Insurance Provider.

The Problem is that you have need a very deep and strong Balance Sheet to Support That Model, Because While We’ve Reduced the Variance for Mines, that Risk is Now Put on Us. So we need to plan for that. But It Can Be Calculated Over a Long Enough Period of Time. We have a figurent partners in that regard, so that we don’t bear the full risk from risk from balas sheet.

Tell Me About Your Asic Brokerage Business.

We’ve Become One of the Leading Hardware Suppliers on the Secondary Market. Primarily with north America, But We’ve Shipped to 35+ Countries. We Deal with everybody from Public Companies to Private Companies, Institutions to Retail.

We’re Primarily a Broker, Meaning We Match Buyer and Seller, Mostly on the Secondary Market. Sometimes we do not interact with asic manufacturars, and in Certain cashes we do take Principal Positions, Meaning We Use Money from Balance Sheet to Purchase Ashon. But The Majority of Our Volume Comes from Matching Buyers and Selers.

Luxor Also Launchened The First Hashrate Futures Contracts.

We’re Trying to Push the Bitcoin Mining Space Forward. We’re A Hashrate Marketplace, Depending on How You Look at Our Mining Pools, and We Wanted to Take A Big Leap and Take Hashrate to the Tradfi World.

We Wanted to Create a Tool that ALLOWS INVESTORS TO TAKE A POSION ON HASHPRICE WITHOUT Effectvely OWNING MINING EQUIPMENT. HashPrice is, You Know, The Hourly or Daily Revenue That Mines Get, And that Fluctuates A Lot. For some people’s is about Hedging, for Oters Is Special. We’re Creating A Tool for Mines to Sell Their Hashrate Forward and Use It As A Basic Collateral or A Way to Finance Growth.

We Said, ‘Let’s Alev Miners to Basically Sell Forward Hashrate, Receive Bitcoin Upfront, and THEN THAT Operations. ‘ IT’s Basical the Collaceralization of Hashrate. Soy’re obligated to send US x Amount of Hashrate per month for the lenth of the Contract. Before that, they’ll Receive a Certain Amount of Bitcoin Upfront.

There’s A Market Imbalance Between Buyers and Selers. We have a Lot of Buyers, Meaning People and Institutions Wanting to Earn Yield on Their Bitcoin. What you’re lending your bitcoin at is effectvely your interest raate. However, You Could Also Look at It Like You’re Purchasing That Hashrate at A Discount. That’s Important for Institutions or Folks that don’t want physical exposure to bitcoin mining, But Want Exposure to Hash Price or Hashrate. They do that syntheticly through the purchasing Bitcoin and Putting It Into Our Market, Effectvely Lending that Out, Earning A Yield, and Purchasing That Hashrate at A Discovery.

WHAT DO YOU FIND MOST EXCITING ABOUT BITCOIN MINING AT THE MOMENT?

The Acceptance and Natural Progression of Our Industry Into Other Markets. We Can’t Ignore The AI ​​HPC Transition. Instsead of Building these mega mines that are just massive buildings with Power-Dense Bitcoin Mining Operations, You’re Starting to See Large MINers Turning Into Power InfraC Intelligence.

Using bitcoin mining as a stepping stone to a larger, more capital Inteensive Industry Like Ai is Exciting to Me, Because It Kind of Gives US A BIT MORE ACCEPTANC Different Angle. I Think The Biggest Example is the Core Scientific-Coreweave Deal Structure, How they’ve Kind of Merged Those Two Businesses Together. They’re complimentary to each. And that’s Really Exciting.

WHEN YOU LOOK AT OUR OWN PRODUCT ROADMAP, WE HAVE NO CHOICE BUT to Follow a Similar RoadMap to Bitcoin Mines. A Lot of the Products that We Built for the Mining Industry Are Analogous to What Is Need at A Different Level for AI. Mind You, It’s A Lot Simpler in Our Industry than in ai. We’re Our First Step Into The HPC Space, and It’s Still Very Early Days there.