When he brought up the idea of mining Bitcoin from excess gas, the student Whitehead was told by the oilfield owners "that was the stupidest thing" he had ever heard.
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| Whitehead and Lohstroh. Photo: Matt Lohstroh |
A year later, this idea was rated "stupid" bringing in two students Brent Whitehead and Matt Lohstroh $4 million in revenue, which is expected to grow to $20 million by 2022. They also helped create an array. new business for energy miners, as assessed by CNBC.
However, their journey experienced many difficulties and many risks, before starting to be recognized by the giants in the energy mining industry.
From the idea of being ridiculed
The story begins in 2019, when the two are students at the University of Texas. Lohstroh is described as a "Bitcoin-obsessed" finance student, while Whitehead comes from a family in the oil and gas industry.
"Being in this industry, growing up, I've been surrounded by gas towers. I understand how wasteful they are," Whitehead said.
Their intention is to convert gas - which oil fields have to burn to avoid processing - into electricity. The electricity will be used to power the mining machines. They decided to put all the money from their high school part-time jobs to found the company Giga Energy Solutions, with the goal of mining Bitcoin from natural gas. At that time, the cooperation between an oil and gas company and a cryptocurrency mining company was unprecedented and even considered taboo.
One summer day in his senior year of college, Whitehead was helping his parents drive a lawn mower at their home in the small town of Buna, in southeastern Texas, when he received a text from his friend. Lohstroh suggested buying a container of portable Bitcoin miners from Canada-based company Upstream Data and shipping it to a local gas well.
"I went straight up to my dad and said, 'You have to find a burning tower right now,'" Whitehead said. A week later, the two flew to Canada, struggling with dozens of jobs to transport Bitcoin miners back home.
Steve Barbour, the founder of Upstream, at the time warned Lohstroh not to rush to buy these machines because they were still in beta. However, the warning has no effect. "They are true Bitcoiners. Two positive and entrepreneurial guys," Barbour commented on the young partner.
Once the necessary equipment is obtained, the challenge is to find more oil fields with gas towers to expand the size of the miner. The two attended the 2020 North American energy business NAPE summit to distribute more than 1,000 flyers to oil bosses. However, what they received was a mockery of the crazy idea. Some say this is a good idea, but they don't believe it can work.
At that time, Covid-19 began to hit the world, the cryptocurrency market also entered a period of decline. Giga Energy Solutions' business growth was almost frozen. The group was forced to change direction, looking for small-scale oil fields. According to Whitehead, such companies are often easier to circumvent regulations, and if his team can use up all the gas, that's a good opportunity for these companies.
The real turning point came for the two young men in December 2020, when the Bitcoin price increased and reached the $20,000 mark. The big players in the oil and gas industry are starting to pay attention to cryptocurrencies. Leaders of a number of companies listed on the stock exchange gradually approached Giga Energy Solutions to discuss cooperation.
"We meet people from eastern Texas to Saudi Arabia, show them a Bitcoin mine. They love it," Whitehead said.
When Oil & Gas Combines Bitcoin
Bitcoin mining is simply a process of running a computer to solve math problems and receive rewards in Bitcoin. The more powerful the computer, the faster the software works, the better the chances of a reward, but also the greater the power demand.
"The interesting thing about Bitcoin is that a lot of people underestimate and don't believe it's meant for mobile markets. But you can bring it right next to energy," said Steve Barbour, founder of Upstream specializing about mobile Bitcoin mining solution, said.
As the solution of the Whitehead and Lohstroh team, containers containing thousands of Bitcoin miners are installed next to an oil field, then receive power from generators directly connected to the gas wells.
The fact that Bitcoin miners can be brought anywhere also helps solve the big problem of remote oil fields. According to CNBC, energy companies for years have struggled with the problem of dealing with the amount of methane gas encountered during oil extraction. The profits from this gas are not enough to cover the costs of building pipelines, so many oil fields let them fly into the environment, or treat them by burning. That's why oil fields are often associated with the image of fire wells, which are towers for burning methane.
According to experts' estimates, burning gas is only effective from 75 to 90% of methane gas into the environment, while it will emit CO2. If they are put into the generator, 100% of the methane gas will be processed. Research by Crusoe Energy Systems shows that converting natural gas from oil wells into electricity will reduce CO2 emissions by 63% compared to traditional combustion methods.
"This is the greatest gift that the oil and gas industry can have. Now they are no longer subject to geographical restrictions on turning their energy into money," said an Upstream representative.
As one of the pioneers of oilfield mining, Lohstroh thinks that the next stage, the energy-producing company will be able to become a Bitcoin mining company on its own.
Texas oil residents like Brent Whitehead were formerly known as "wildcats" - a reference to those who specialize in the high-risk job of exploratory drilling. However, Whitehead now identifies himself as a "digital wildcatter", a play on words for his new job - applying digital technologies to profit from nature.
Via CNBC
