Riot Blockchain made an especially memorable splash into the Bitcoin world in 2018 when it changed its name from Bioptix to Riot Blockchain.

The name swap was initially viewed with large amounts of skepticism–why was a drug manufacturer getting into the digital asset market? Was it merely a ploy to snag unsuspecting retail investors into pumping the firm’s stock, or a true pivot into Bitcoin?

The story is nearly forgotten four years later. Instead, the brand is well known in the Bitcoin space for its monumental efforts of making Texas Bitcoin country. In this piece, we analyze Riot Blockchain’s vertically integrated strategy, including its Whinstone and Corsicana facilities.

Operational overview

Operationally, Riot Blockchain sits in a strong position. The firm has over $439 million in cash and crypto, including $331 million from a filed $500 million ‘At the Market’ offering. The total basket will provide some financial cushion as they navigate through this current Bitcoin bear cycle.

Year-to-date, Riot Blockchain has mined 2,800 Bitcoin–a total only exceeded by Core Scientific (CORZ). As of June 30, 2022, the Castle Rock, Colorado-based firm holds approximately 6,654 self-mined Bitcoin.

The firm’s participation in the ERCOT grid enables the company to participate in grid revenue programs during times of high demand, such as in June to September. The company actually benefits from this curtailment, in the form of rewards which are applied to offset costs in future years.

Riot Blockchain is not only vertically integrating its infrastructure, but consolidating its mining operations. For example, a hosting contract with Coinmint, LLC was recently terminated, and Riot Blockchain are now in the process of relocating these miners at the Whinstone facility, thereby reducing their costs considerably.

In recent months, like many other miners, the company has sold part of its monthly Bitcoin output, to pay for operational and capital costs. Riot Blockchain CEO Jason Les has recently highlighted to shareholders the firm will continue to ‘hodl’ some reserves. But the company, already having a strong unleveraged balance sheet, will decide how to best navigate the market as current debt facilities remain much in favor of lenders.

Hosting or vertical integration?

Having full control of one's business stack is one strategy Riot Blockchain has leaned into. By owning every aspect of its operation, or at least as much is physically possible, its thought the firm can be more robust against market forces.

In the table below, we see that Riot Blockchain has outperformed Marathon Digital in terms of Bitcoin mined for each EH/s deployed every month, year-to-date. Marathon Digital, as described in Part 1 of this article, has struggled to get machines online due to troubed hosting arrangements. Iris Energy (IREN) is also included as the miner who has currently achieved the highest average, year-to-date production by EH/s for comparison, according to self-released numbers.

From these values alone, we see that Riot's model has led to higher performance since January 1. Of course, its worth noting that Bitcoin mining is a long term game.

Whinstone

Many Bitcoiners have come to know Riot for its Whinstone facility – a gargantuan operation a few hours drive from the Texas state capitol, Austin.

Riot acquired a number of data centers across the US, including the Whinstone Facility in Rockdale, Texas, from Northern Data AG, a leading developer and operator of High-Performance-Computing (HPC) infrastructure solutions.

Northern Data themselves had acquired the facility in 2020 and successfully demonstrated its set of capabilities in establishing one of the world’s largest HPC centers. Whinstone was purchased for a consideration of $651 million, of which $80 million was paid in cash plus a fixed 11.8 million shares of Riot common stock, thereby providing the opportunity for Northern Data AG to become a minority shareholder.

At 400 megawatts (MW), Whinstone is the largest Bitcoin mining facility in North America with projections for a total of 750 megawatts (MW).

With over 200 employees, the site provided Riot Blockchain with 300 MW of developed capacity and hosting business at a low-cost, long-term power supply agreement of $0.029 kWh.

Riot Blockchain, now masters of their own destiny, set about planning and expanding capacity at the site by a further 400 MW with an additional four buildings. Two of the four new buildings use the latest immersion cooled technology, with the other two buildings using Riot Blockchain’s own designed ‘air cooled’ facilities.

Riot Blockchain will continue to be a host at the Whinstone facility, providing infrastructure to clients, such as Rhodium. The self mining business is currently operating at 4.4 EH/s using some of the most efficient S19j and S19j Pro miners with plans to increase this to a total of 116,500 mining rigs or 12.6 EH/s by Jan 2023.

Corsicana

In April 2022 Riot Blockchain again made the headlines when it announced that it had initiated a large-scale, 1 gigawatt development, fully utilizing immersion cooled technology, to expand its Bitcoin mining and hosting capabilities in Navarro County, Texas.

Once completed, the site will consist of ten, 100 MW buildings, of which the first four (400 MW) are currently being developed with cost estimates for this phase of the expansion, approximately $333 million and scheduled to be invested over the remainder of 2022, 2023, and the first quarter of 2024.

With potentially 265 future jobs at this facility, this phase will create an additional hash rate of 16.4 EH/s, once the S19 XP’s have arrived, and that’s without calculating any uplift or benefits associated with immersion technology.

Immersion Cooling

One added benefit of operating and owning its own operations is the implementation of the best mining technology available, particularly immersion cooling.

While the firm has yet to release any data, Riot has committed to dunking 200 MW worth of equipment at Whinstone. They have fully committed to utilize this technology at the Navarro site, leaning on studies showing a potential increase in both hashrate of up to 50% and increased efficiency by 25%.

Two other major miners, Argo Blockchain and Marathon Digital, have also announced intentions to execute on immersion tech. The former has also implemented immersion at their flagship site Helios, in Dickens County, Texas, which energized in May 2022.

Fred Thiel also highlighted at the AIM Summit in London that Marathon Digital will be using the technology to host its order of 78,000 Antminer S19 XP Bitcoin mining machines from Bitmain, taking the hash rate of each machine from 140 TH/s to potentially 180 TH/s.

Overall, between vertical control of its own business stack and immersion–not to mention cheap long term energy contracts–Riot Blockchain should keep ahead of the chasing pack. The firm’s future hashrate projects managed against their current uptime and efficiency lend to a healthy confidence in the firm’s future operations. Riot is likely to maintain and grow its position as one of the big public miners in the United States.