The Global Investor

Episode 9: Profiting from Crypto Mining in Good and Bad Times with Rolf Versluis

October 03, 2019 Season 1 Episode 8
The Global Investor
Episode 9: Profiting from Crypto Mining in Good and Bad Times with Rolf Versluis
Chapters
The Global Investor
Episode 9: Profiting from Crypto Mining in Good and Bad Times with Rolf Versluis
Oct 03, 2019 Season 1 Episode 8
Obris Podcast by Crown Private
Armed with an electrical engineering degree, Rolf Versluis’ career has spanned from commanding nuclear submarines to crypto mining and more. He and his partners are currently launching the SAIL Crypto Mining Fund.
Show Notes Transcript

Armed with an electrical engineering degree, Rolf Versluis’ career has spanned from commanding nuclear submarines to crypto mining and more. He and his partners are currently launching the SAIL Crypto Mining Fund.



Speaker 1:
0:08
[inaudible].
Speaker 2:
0:11
Welcome to the global investor podcast. The goal of this podcast is to offer investors and entrepreneurs insights and practical guidance to dramatically improve the kinds of deals you invest in and the returns you get. My name is James Evenston. I'm one of the partners at crown private and our investors syndicate [inaudible] over us isn't about exceptional people, unique experiences and bespoke investment. We invest in a spectrum of deals from established companies to startups and we do so with a proven formula of due diligence, structuring and management. Our guest today is Ralph verse Luis, uh, armed with a degree in electrical engineering. Ralph's career has spanned from commanding nuclear submarines for the U S military to crypto mining. And more much of Ralph's attention today is occupied with crypto mining. He and his partners are currently launching the sale crypto mining fund, a fund that he'll share about in this podcast. Good morning, Raul. Thanks for joining me this morning. Where do we find you today?
Speaker 3:
1:17
Oh, I'm just North of Atlanta and Georgia in the United States of America.
Speaker 2:
1:22
Perfect. Perfect. Uh, I appreciate you joining us. Look forward to about 45 minutes of talking about crypto mining and the things that are you're passionate about. So I gave folks a bit of an introduction on you, but, uh, the real starting question is, um, how did you get
Speaker 4:
1:39
from engineering students to a running a nuclear submarine to, uh, now, uh, crypto mining and establishing your own fund?
Speaker 3:
1:51
That's a pretty wide range there. I like doing new and different things and I'd always wanted to be an engineer building things of, of technical stuff. So, um, when I had the opportunity to go to the United States Naval Academy and, uh, get my electrical engineering degree there, uh, I did. And the nice thing about that is it comes with a minimum five year in denture in the U S Navy, which is a good organization for learning management and leadership and things like that. And I decided to go on, on nuclear submarines. So there was a, uh, an initial year of postgraduate training in a nuclear operations theory and practice. Um, then went out to Hawaii. It was on a fast attack submarine, uh, when all over the Pacific for four years. And when that was done, I decided I had enough of that and I got out and wanted to get into the business world and realized, um, I wasn't really a practicing engineer, uh, because I hadn't done been doing designs.
Speaker 3:
2:47
Um, and I didn't know anything about the business world. So I spent the next few years learning that from a standpoint of sales in a few different industries, industrial water treatment, um, and then a semiconductors. Then I went and worked for Cisco systems, uh, back in about 2000. And, um, that was a good time to be working for Cisco systems. Uh, there was, um, and that's where I have opportunity to participate in one of those technology waves that replaces things. Some people might remember that regular phone systems, uh, PBX is, were replaced by data networks and voice over IP. And then furthermore, now we have, you know, video that's just easy to use. Uh, back then it was just a dream back then. You still had to pay for each minute of long distance calls that Chad to make. Um, so, uh, was that Cisco for a couple of years and then left and started, um, my own reseller from reselling the Cisco and so, uh, selling products and services and support contracts, um, yeah.
Speaker 3:
3:50
And move to the Southeast to do that and got the opportunity to, uh, put my sales and technical experience to use as well as build a company from just credit cards all the way up to over 50 million in sales per year and a 60 employees. Okay. The other thing I learned about technology waves is that they don't last forever. So in 2012, my partners and I decided that we're going to look to try to sell the company. I was still profitable, but the big fat part of the profitability of the wave wasn't there anymore. So we were able to sell the company buy a 2014, 2015. And um, that was great. That worked out. Fortunately, along the way we had done some investments into commercial real estate. And so I had the chance to just sit back a little bit and think about what I enjoyed doing and what I wanted to do.
Speaker 3:
4:43
And I played with a few different technologies, three D printing and flying drones commercially and I bought a cryptocurrency might accept, been following Bitcoin from the outside, uh, for, for a number of years. It's just when you're involved in running a business, you have to focus on that business. You can't really do other things. And so I was very happy, um, to, to sell that information technology business. And I bought one minor, uh, an async minor that mine Bitcoin, uh, because I didn't, I tried to figure out how profitable this stuff was and it was very difficult to spreadsheet out because there's so many different moving parts. And for the folks that don't know, um, Bitcoin mining is, um, having special purpose machines that solve hash functions. And for Bitcoin it happens to be shot two 56, a secure hash algorithm, two 56 bit, I think. Um, and by doing that, it helps solve the puzzle to figure out which entity gets to, um, bundle the next set of transactions and attached it to the blockchain every 10 minutes. And the bonus for solving the problem is getting brand new Bitcoin awarded to whoever solves the problem. So that's how it started with one as an experiment. Yeah.
Speaker 2:
5:59
Buying commercial drone equipment. You've bought one Bitcoin mining machine. Right? So how did you get from one to however many hundreds that you probably have right now?
Speaker 3:
6:10
Well, fortunately I bought this at just about the best time to start Bitcoin mining, which is when you come, because if you look at the price of Bitcoin versus the U S dollar or other currencies, it goes in cycles. It goes in cyclical waves that go up by a order of magnitude every time. And so at this point in time when I started a Bitcoin was right around $250 per Bitcoin. Oh. So, yeah, I bought some Bitcoin and then I bought a minor and all the people that had been mining as the price went down, many of them had gone out of business. So the overall amount of miners on the network, uh, the overall network hash rate was very low. So I bought a miner and ran it and it costs me about $50 a month in electric power at my house, which is 12 cents per kilowatt hour.
Speaker 3:
7:02
And I would earn about $80 a month in Bitcoin at, you know, 250, $300 a Bitcoin. And I'm like, well, I dunno if I do 10 of these, uh, why don't I try to do that. So I went and rented a small industrial office space, ah, that got 200 amps of 240 volts electricity and feed as many Bitcoin miners as I could into their 30. Okay. And I ran that. Are we still at 200 for the price of Bitcoin or is it 300 400 500? Um, which was good because there's a lag. As the Bitcoin price goes up, coming out of a bear market trough, there's a lag in people being able to buy and put equipment onto this, onto the network. In fact, it's very easy to order a pallet full of Bitcoin mining special purpose machines. It's difficult to find a place to plug them in.
Speaker 3:
7:58
Each one of these uses about 1500 Watts of power. How does that compare to something in the house? What's that? If you take a a hairdryer and you probably don't have a hairdryer, but if you take a hairdryer, I don't have one either. But I got ours, my wife and my sons, they all use hairdryers. We all used to use them. Right? So turn it on, lay it on counter in your bathroom and close the bathroom doors and just leave it on 24 hours a day. Think about how warm that bathroom would get and how much electric power would use. That's one Bitcoin miner. Okay. That was running 30 of them. And so this is where my, uh, a Navy nuclear power plants and electrical engineering training and information technology with network security and uh, things like that background came into play. It was very straight forward for me to design a system that would provide the electricity a network together, maintain the data security as well as bring in cooling.
Speaker 3:
9:00
They're just straight forward engineering calculations. Each miner, which is about this big uses somewhere between 200 and 250 cubic feet per minute of air. So the important thing is don't let the exhaust go back to the intake because then it gets into a positive feedback loop and everything overheats and breaks down. So with using very simple math here, 30 minors means I need 6,000 cubic feet per minute of air. So I put a vent in place and bought a fan that was about 10,000 cubic feet per minute and started running it and it was profitable. So I'm like, gosh, this is, this is nice. Well, what I have to do to make this my full time job as it were, where it could pay for all my family's numerous expenses. We have four teenagers. Yeah, that's fairly expensive. Um, and so I came, uh, to the number of 200 after on 200 minors, uh, a nonstop, uh, to be able to do this.
Speaker 3:
10:02
And, uh, was talking to a friend of mine who was also interested in. So he was interested in partnering. I'm like, all right, well, the two of us, we have to do 400 monitors. And so we got the funds together and went and rented, rented a, uh, a space and uh, started doing the build out and filled it with 400 miners and everything was working great. Uh, we were still continuing to go and at this point, Bitcoin was maybe a thousand dollars, uh, per, per Bitcoin. And during that next year, if this was 2017, it went up to, I don't know, 20,000 for the coin. And so the bad part about being in a market like that, a fast growing market is sometimes you can think that you're really, really smart when you've actually, you've just been really, really lucky.
Speaker 3:
10:54
And so one of the things that I learned running my business was that there's always downturns and you always need to maintain, um, don't overspend. You always need to maintain dollars in the bank. And if you can keep from going into debt at all, that's important. So we made sure that we kept a reserve and didn't spend too much mistakes. Absolutely. We made some mistakes, uh, bought a little bit, uh, too much of one type of machine cause we mind more than Bitcoin. Uh, back then it was Bitcoin and uh, light coin and dash and other cryptocurrencies as well because there's a balance between them. In fact, right now, in early September of 2019, uh, the price of Bitcoin compared to the price of all the other cryptocurrencies, uh, is huge. I think from a market dominance cap. If you look at market capitalizations, Bitcoin is about 70%.
Speaker 3:
11:49
However, this is a pendulum that swings back and forth. Um, and unfortunately, so many people see things in a static kind of way or a linear kind of way instead of a cyclical way. So it's important for us is to be able to say there is a cycle and we'll try to identify what different parts of the, uh, Bitcoin to Fiat price cycle we are as well as different, uh, other cryptocurrencies. So right now we're mining Bitcoin, Bitcoin, cash, light coin, Z cash, uh, horizon, uh, a theory, um, a few different things that we're mining. We get a really visceral feel for the price because every month we have to sell crypto or we have to have enough money to pay for the power bill. Sure, sure. With the different partners that I'm involved in. So there's three different small, uh, crypto mining, uh, ventures that I'm involved with right now.
Speaker 3:
12:44
Our total electricity costs is about $80,000 a month. So four for three years, we've had to run a business where our business, the only form of income from that business is cryptocurrency. We have to figure out how to keep that cryptocurrency secure, how to be able to convert it into us dollars cause that's what we pay our electric bills and taxes, network, uh, costs in and new equipment. Um, and then to be able to convert that to USL or bring it back to our bank account and do everything else that a small business needs, maintain insurance, keep the bankers happy, uh, pay all your taxes, all that good stuff. So, um, the cryptocurrency mining businesses are really the ones that in many cases lead the way for being able to operate in a cryptocurrency type environment.
Speaker 2:
13:40
Yeah. Yeah. Okay. So couple of questions on, on this one would be, um, during the high cycles, probably pretty easy to manage, manage the fun side of it, low cycles. Uh, how does one, how does one actually stay up, stay afloat or succeed in those low, low cycles and particularly when they don't necessarily, yeah, we could predict that it's going, things are going to go down, but, but when we went from 20 to what we went down to like 3000 from 20, 30 teams, how, how does one manage that? Such a significant drop? Because you've already built up the infrastructure, you have your hundreds and hundreds of miners and you have your, you paid out your costs for electricity and everything else. Uh, how do you manage those low sides,
Speaker 3:
14:32
those little periods? Yeah, I mean, part of the, uh, costs and essentially a fairly significant cost is building out the power and data network infrastructure. Uh, so getting a building or a facility, buying all the electrical gear, getting all the electrical gear and hooking it up to the power distribution units, the uh, cooling systems and setting it up in a way that it works well. And that can take a while to do. If you're doing a building that can take almost a year to do with all the permitting. And other types of things. Finding a building, uh, we've more recently moved to using containers, uh, that are in a unique way that, um, we're gonna talk about that in detail. Um, but, and then the miners themselves, they go through technology cycles where they get replaced. And here my semiconductor industry, uh, experience comes in handy. You can add, it has to do with semiconductor wafer dye size.
Speaker 3:
15:26
And so the state of the art on your cell phone, for example, um, the processor in that and memory is right now seven and amateurs, seven nanometers, pretty small. Uh, that's majority of mining equipment out there, uh, is operating at about 16 nanometers. But there's new mining equipment that is coming out this seven denominators. So it's about two to three times as power efficient. Hmm. So not only do we need to, uh, say, okay, we're going to mine and then sell, uh, in into dollars, but we also have to be cognizant of how often do we have to replace all the mining equipment. So we need to maintain a reserve to be able to do that. Nice thing about buying money equipment is I usually buy it from China or from other places where people accept crypto currency. So I don't have to do the conversion to the U S dollar.
Speaker 3:
16:20
Like it's, it's so fun actually spending Bitcoin, a soundbite, $100,000 worth of Bitcoin miners, uh, or like coin miners or whatever. I'll do the figure the deal out and then I'll send Bitcoin or Lite coin or whatever. I used to pay for it. And seriously, within just a few minutes they've got the money and they're shipping, no dealing with banks, no answering questions on who you sending it to, a need of these people, all that kind of stuff that you do with a wire transfer. But during the down cycle, um, the nice thing is many miners don't operate very low cost operations, especially the ones that get into it late in the game. So one of the things I figured out is it was very difficult for me to plan out everything. Um, and it's hard for me to predict the future. Uh, it's hard for a lot of people to predict the future.
Speaker 3:
17:12
Yeah, I should just focus on, uh, things that I can control and the things I can control are what I'm mining, what my costs are and what my reserves are in the security of my cryptocurrency. So we're right here in North Georgia. Uh, some of the original, uh, power dams are still working there over a hundred years old. So there's a lot of infrastructure to provide electric power that's already been fully capitalized, appreciated, all that kind of stuff. So just as a commercial business, we get pretty good electric rates, even only using a one to two megawatts of right around five and a half to 6 cents per kilowatt hour, which is pretty good. And it's possible to get somewhere between three and a half to 4 cents in other parts around the Southeast. So this is actually one of the most, uh, competitive places for electric power. The other externalities are, um, you know, I don't have to pay for extra security.
Speaker 3:
18:11
Uh, business is pretty easy to do in America and it's, and it's legal. So by keeping the cost low of having low power costs, low rent costs, not having any employees, just me and my partners doing the work. Excuse me. Were you able to keep our overall costs low? So many people focus on the price of the actual electricity is the main driver. Well that's certainly a large costs, but what I learned, uh, operate my it business previously is payroll can be a very large part of any business expense. Yeah. So, uh, what we do is keep a reserve of U S dollars. And so during the downturn, like for about six months, whatever we were mining in the downturn, we just held onto it. We didn't sell $3,200 Bitcoin. We were just paying our bills in dollars that we had built up when Bitcoin was somewhere between six and $15,000 and sold.
Speaker 3:
19:12
That's the part of, that's important about having a reserve, uh, without having to go to banks for loans or if you're forced to sell when the market set as low as kind of a tough spot to be in. Exactly. Now, that was the only time really when the amount of a Bitcoin and other cryptocurrencies that we were mining was the same amount that we had to pay out every month. Any other time. There's a significant gap. We're bringing in more crypto currency than we're paying in electric prices per month. So, uh, that's the way we made it through the low part first, by realizing that we're in the downward part of the cycle and selling a lot of it in the down, selling it for whatever we pay for our electricity prices in, in our part of the cycle. And then realizing that there's going to be an end to the cycle.
Speaker 3:
20:02
Also, if you look at a graph of the Bitcoin hash rate, as the price went down, there was a lot of people that unplugged their miners because they had higher operational costs, higher electric costs were older, a gear that wasn't as efficient. How often do you have to replace a miner? Um, you replace it when it's unprofitable. Uh, so the, when its speed is too slow to, uh, to do what it's supposed to do, right. And that follows the semi kit there. Wait for production cycle for the people that are making the purpose specific miners this year has been possible to by seven and almond, a Bitcoin miners that those aren't the fat part of the market. Um, and it's still early and there's a premium to be paid for those. In fact, in January, February, we were able to, because it was really the teeth of the bear market and people had been running out of money left and right, we were able to go buy hundreds of used equipment, minors, basically 90% discount to what they were selling just a couple of years before and they're still profitable, um, mining things.
Speaker 3:
21:09
So that's what we're running now. Mostly a older gear and we're gonna wait ill, what I learned in the box industry is I call Cisco and it takes about a year and a half to actually bring in hardware to market. You can maybe bring it to market in, uh, six to 12 months. But the people that make Bitcoin mining equipment, probably when the Bitcoin price spikes from that 3,200 up to about 8,000, they said, okay, let's start making some equipment. And you look back to when that was, that was about March. So I expect a large amount of, uh, mining equipment to be coming onto the market here between now and the end of the year and the price to go down significantly. I don't like to buy technology when it's super expensive. I like to buy it when it's more readily available and at a better price. Right, right. So keeping your costs low is actually one of the secrets to success. Uh, it just like in regular business, keeping your costs low while delivering a quality product, um, is, is the secret to success and the mining business as well.
Speaker 2:
22:14
Are we seeing a surge in minors coming up, new minors coming on, or are people coming back that were away, they sold off their equipment?
Speaker 3:
22:23
Well, I don't know. That's hard to tell. Um, because everybody's very secretive in this industry. In fact, um, one of the things that I do is I have a YouTube channel and blog where I talk about how it's possible to be very profitable as a mid size, uh, as mid size mining operator because all you see in the news is very similar to what you see in the news or regular businesses. It's for large businesses who want people to invest or buy their stock. You don't hear much about all the mid size extremely profitable business that are probably right around you because they have no reason to advertise to the general public. And it's the same thing with crypto mining companies.
Speaker 2:
23:05
Gotcha. Gotcha. Let's go back to just some real, a couple of real basics for people that we have listeners and viewers that don't really understand the crypto world. Um, we will reference your YouTube channel in the, uh, on the document
Speaker 3:
23:21
for the, on the global
Speaker 2:
23:23
Esther podcasts. But, um, a miner, you're buying a, it's basically a computer
Speaker 3:
23:30
that is, what is it? So what is its purpose? Yeah, its purpose is to do, uh, calculations, uh, and very high speed. So no, to be a little bit more, uh, explanatory about it. Um, people pool their together into a mining pool. And this mining pool is software that, um, provides a whole bunch of instructions to all the miners on what to calculate. Um, because the calculation for solving the mining problem is basically take a list of transactions, maybe three to 5,000 transactions and run them through a hash function. I dunno, multiply one number by the next number and then throw away anything leftover is one type of hash function. Um, okay. And in doing that, uh, that, that rapid calculation, the target is to find an answer that has, I don't know, 0.0, zero, zero, uh, maybe 12 to 15 zeros at the end of it.
Speaker 3:
24:32
So it put in one number and run the calculation. And if the answer is wrong, you put it in the next number, run the calculation, put in the next number. And so the pool tells all these miners to run these calculations very fast. Now, state of the art mining machine is operating at, we'll say 50, uh, 50 Terra hash. So that's 50 trillion calculations per second just for one mining machine. Wow. There's, uh, there's millions of these out there that are operating. So there's a lot of, um, calculations that are being done to try to find the answer to the problem. With the reward, of course, being able to append the next chain of transaction or block of transactions for block chain, getting the newly created, uh, Bitcoin as well as the, um, fees. So every time a transaction is done, there's transaction fees. So the miners get the transaction fees as well.
Speaker 3:
25:29
Um, so how does that, uh, how does that work and make money? Well, by putting our miners and joining them them to a pool, we get a payout every day, whatever percentage of the hash that are miners contribute to the pool. So we have a steady flow of cryptocurrency income that we get paid out daily. We, uh, put that into our secure wallets. Uh, we'll put some in long term storage, we'll put some onto an exchange and then, uh, watch the prices because the prices go up and down. Um, and at local high points we try to sell. So like last month, I think it was last month, Bitcoin hit $15,000, so we sold some then, uh, which was great because we needed it to pay at the end of the month or the electric price. Um, and we're, we're watching. So in effect, we have to know a little bit of technical analysis on price charting and, and things like that.
Speaker 3:
26:27
I wouldn't say that we're gurus at it, but just like most investors who look for good entry points in, uh, buying stocks, uh, if there's a, a support level, you try to buy it in the support level. Um, anyway, uh, we're buying new cryptocurrency every day and there's a, a nice, uh, shift back and forth between Bitcoin and other cryptocurrency prices. And there's a, there's a as much of a shift between a Bitcoin price and us dollar price and there's more and more us dollar trading pairs out there. So it becomes fairly complex. But at the end of the day, we use our expertise to be able to build power systems and cooling systems that are very efficient. We buy these mining devices, uh, at good prices. We operate them, uh, very efficiently to maintain uptime. We generate new cryptocurrency and keep it secure. Uh, and then we sell it for the best prices possible to pay our bills.
Speaker 3:
27:25
And we maintain the difference as our retained crypto earnings are retained a U S dollar earnings. And over time we build up a larger and larger amount of that and periodically we spend some of that to buy new equipment. Um, and the idea being that once you get the initial power and cooling infrastructure set up, that's going to have a good 10, 15, 20 year lifetime and then you can slot new mining machines in periodically and uh, year after year, cause we're in this for the longterm, we're able to build up a reserve of cryptocurrency. We're able to build up a reserve us dollars and of course with a fund re able to show that the fund has assets as well as to be able to take some of those reserve dollar in crypto and return it to the fund idea. That's the purpose behind the exercise as it were. Gotcha. I'd like to focus on something
Speaker 2:
28:23
I know you're very passionate about right now. And that is, uh, the where you've taken this business to today at the Panama event. You shared with us in your presentation about the, uh, the use of containers. And I'm, I'm not gonna ask you specific questions on that because I know some of the information is proprietary. Uh, that's part of your secret sauce. But I'd like you to tell our listeners and viewers about, uh, where you guys have gone in the development of your mining equipment.
Speaker 3:
28:55
Sure, absolutely. Why as well, I mean, what, why, why would I want it in a container? Yeah. Um, we were, uh, about a year ago we were driving around. Alright. Try not try. We were visited a few different, uh, cryptocurrency mining facilities, uh, working to line up to buy used minors cause we knew it was going to be a good time. So we, uh, me and my partners LaVar and Reggie and I, uh, had an opportunity to go to a few different places. And, uh, there was one place that was huge. They had, um, 20, about 22 megawatt transformers sitting in their parking lot. Uh, all the electrical switch gear inside side. And this is right here in, um, in the Atlanta area and the entire building was Darby. And I asked the person I was meeting with, I said, what happened? Like, Oh, that building owner got into a dispute with the power company over the electric rate that was going to be charged.
Speaker 3:
29:53
So, um, just cell in the building and left and to go do something else. And that was further validation, um, that to be able to have not just a portable container but one that can actually still be picked up and brought somewhere else, uh, was very important. So when we built out our facility in Delonda, which is about a half hour drive North of where I'm at now, we bought a building and an acre of land, um, and started building out a internal facility, uh, that could, uh, run about a thousand minors. And, uh, at the same time I bought a shipping container and came up with a design that would run, there's about 200 in there now, but it shouldn't, should it fit about 300 KM comfortably. [inaudible]
Speaker 3:
30:37
doing shipping containers for mining is nothing new. People have been doing that for many years and in fact, in your area in Washington, a standard thing is to just buy a container, cut holes in it, fill it with minors, powered up electricity and you're off and running, which is great. It's nice low cost way to do that. There are temporary structures, there's less permitting and zoning required and it's very straight forward. The problem is that only deals with some of the potential issues to mining because once you drop a container and cut holes it and hook it up, you're essentially in a fixed position. If you get into a dispute with your power provider or have the opportunity to find power at a less expensive price somewhere else, you really can't take advantage of it except by doing a full mother build out. So one of the main points that I wanted to do in the design of our container was to make sure that we could unplug it, close the doors, and move it not just on a truck anywhere, but actually on a container ship because Moo shipping heavy things by water is the least expensive way to do it.
Speaker 3:
31:35
Right. And that way it would reduce risks. It reduced and give us the opportunity to find low cost electricity with doing land and power leases. And by having the mobility of it, if someone decides to change their mind or change the terms of the power lease, we could just pack up our stuff and go. So it gives us better negotiating ability. And although I think it's extremely unlikely if a Bitcoin crypto currency mining was outlawed here in the United States, we would be able to unplug, close the doors and ship them to another place. In fact, I've had the opportunity to talk with some Latin America people in some Latin American countries where the government has overbuilt the hydro power structure and there's actually just extra electricity that can be had at a very competitive price. So although it would be difficult for me to go to one of these places and do an onsite building build out, there's no reason that we can't build one of these.
Speaker 3:
32:34
Uh, gosh, I call it fourth generation. It's my fourth generation design that takes him account. A lot of the, uh, lessons learned for not just getting something up and running, but keeping it running. That's always the hard part, isn't it? Keeping things running. Correct. Uh, in fact, we have, uh, just this weekend, one of the motors on the fan there, there's a, a broken motor winding. I think we're still under warranty on that, but you know, uh, that's one fan out of eight that's not operating. Everything's still up and running. If what I just had one intake van, one exhaust fan, a motor winding being down would be a really big problem. Sure. Uh, so again, that's one of the things that I learned in the Navy. Uh, run a nuclear power plant of South submarines is always have redundancy and have the ability to shut things off to do maintenance.
Speaker 3:
33:22
Those things are operating 24 hours a day. Got to have a lot of bearing lubrication grease in there and got to shut things out. I mean this is silly real things like that, but those are really important to maintaining uptime and not having to replace equipment more often. So the container is designed to, because it's actually less expensive than doing a build out in building it. It's a more quick and it provides insurance against the risk of, uh, of uh, regulation changes as well as provides the opportunity to find out the low power, uh, places and goes to get low fat. And have you guys transfer this to, uh, from, uh, just developing your own, having your own containers to actually selling sewing to others as well? Yes, we are offering them to people for sale. Um, they're fairly expensive. Uh, this is a capital intensive business.
Speaker 3:
34:22
Um, well one version of it where if you want to drop it in and run miners out of it, um, is it costs about $170,000 to be able to run 300 minors. And the w I have a design that I'm working with a a power company for power distribution units. I think of them as a large power strips that have full remote monitoring and control capability. Sometimes you just got gotta like with your computer, you got to unplug it from the wall and to reboot it. It's the same thing with these mining servers. Sometimes you just got to unplug them from the wall and reboot it. So if we're going to be setting up these, uh, containers and remote areas, in addition to the regular monitoring systems that we have, we also have to be able to actually turn off and turn back on the individual miners remotely.
Speaker 3:
35:09
So those power distribution units for that are a little more expensive. Got some custom design. But at the end of the day, for one of these remote, uh, operating, um, systems, it's about $200,000. And crypto currency mining is a capital intensive business. So yes, there are people that want to buy these. And when I tell them I need 50% of the money up front, um, they're like, yeah, we're not quite ready to do that. But we also haven't really gotten into the, uh, trying to find customers and sell these. Um, because even at those prices, there isn't a lot of profitability in them. Um, but when people, uh, are in a spot where they bought a few hundred miners and they have them sitting there on the pallets and they don't have a place to plug them in, that's the type of customer that we want. So yes, we build this thing in about two months. Um, you have minors that are sitting, they're useless. If you, uh, provide us some buns, we'll get this going for you. And then we'll, we'll, we'll ship them a container
Speaker 2:
36:11
and then they can plug and play. They can put, put in the, but then you're all,
Speaker 3:
36:16
well, what I also learned is people don't just want products. They want a complete solution that means products with services. So, and there's a lot of different services that people can take and can get from us. They can not take, but they can pay us for them. Uh, planning services, uh, best practices for operational, how to set it up, uh, how to get it running and kind of being, um, their technical and operational backstops so that they can, um, if they may not be as experienced, uh, as they want to be, they know that we have a team of experienced people that can help 'em out if they thought right now. So let's just
Speaker 2:
36:54
say I buy a, I buy a container and I take it down to Argentina where certain areas where the cost of electricity is extremely inexpensive. Um,
Speaker 4:
37:04
will you supply the remote equipment is so that I can monitor it from, from a far enough that I'm just going to sit in my office
Speaker 2:
37:11
office here. But, uh, do you supply everything that I would need?
Speaker 3:
37:15
Yes. And this isn't, this isn't software that we build ourselves. This is a commercial mining software that, uh, is best practices. But yes, absolutely would, um, we'd put it on site there, but show you how to access it remotely and a lot, it does a lot of stuff like if us up a minor stops mining, it'll try to reboot it or restart it or things like that on its own. Uh, it also gives you how much it's, uh, mining and how much that compares to the sell price. So it gives you a good feel for profitability. But yeah, it's that type of thing that the full system and what we've also learned is if you want to ship stuff internationally, not only does the shipping container not have to have any holes in it, uh, the wood has to be specially heated so that there's no, uh, insects in it. If you want to have it available for import into that country, uh, it has to be fireproof wood. There's all, there's all sorts of things and sure we can make one totally out of metal if we needed to. Um, it's just for flexibility cause the miners changed designs all the time. Absolutely easier to build some parts of it out of wood. Well, I can, I can, uh,
Speaker 2:
38:18
I can tell you that so many of us really aren't interested in doing our own operations. However, uh, we got excited in July when you presented on the sail crypto mining fund that you guys are establishing. So just to want to go there for kind of our last few minutes, but let me just give a little introduction to our listeners and viewers. So Ralph and his two business partners, LaVar and Reggie have a figured out how to do this well as you have demonstrated in, in this, this conversation, Ralph, and now you are launching a fund that will allow others to invest in what?
Speaker 3:
39:05
Yeah, so, uh, over the years people have asked, can, can I invest money into a, your mining? And when I look at what that would entail, in many cases it would entail doubling or tripling the size of my operation, which would mean a lot more work for me, um, without actually getting any additional financial benefit. So for many years I've told people, no, there's really not interested in taking on any investment money. However, once, uh, Reggie and LaVar and I and those guys are experienced crypto mining, uh, gentlemen as well, uh, got together and built North Georgia crypto mining as a mining business, hosting, uh, services, and with the idea of building out these containers and selling them to people. Um, then folks, again, assets, can we invest in this? And we're like, well, it's not really very exciting to invest in a sales and services company.
Speaker 3:
40:03
Uh, what do you want to invest in? Is the crypto mining, right? And they say, yes. Okay. So we came up with the idea of being able to do a pure play investment into crypto mining. And that's what the purpose of the fund is. So the purpose of the fund is to invest in crypto mining and be able to get the proceeds and benefits from that. So as we bring in, uh, money into the fund and we're looking for initial, uh, about two and a half million dollars, uh, we would be able to, uh, start a company here locally. We call that, well we would call it distributed power technologies. If we wanted to, uh, mine in Argentina for example, we could start a local company there in Argentina that would be owned by the fund. Maybe the same thing in Guatemala or maybe the same thing in upstate New York, Canada, there's, there's a lot of different options there.
Speaker 3:
40:53
But we start with what we know that we know that successful and then, uh, that company would buy containers, uh, that are fully built out and ready to go essentially at cost, uh, for us. And if we raised the two and a half million dollars, we should be able to buy about three to four containers and fill it with state of the art mining equipment. Of course, we would use all the best practices that we've learned over the years of mining, of getting things at good prices, buying in volume, and then find places to situate these three to four containers and operate them. And so all of the assets would be completely owned by the company that's 100% owned by the fund. And that mining company would get, we buy equipment and services and everything else, but all the, uh, proceeds and all the profits after doing the best practices of maintaining some crypto reserves, maintaining some in hardware wallets, putting some on exchanges, keeping a dollar reserves the, and so this is no two, three, five years cycles that we're operating right now on the Bitcoin price.
Speaker 3:
42:05
So, um, this would enable people that invest in the fund to get the profits from a crypto mining company. And the longer that the, that people keep their money invested in the fund, the better off it'll be because some of the first a use of the funds will be to buy the container infrastructure, the power and cooling. And that has a good, you know, 10 to 15 year life. So as that, um, done, uh, by putting in the mining machines and uh, upgrading them periodically with new technology, uh, everything becomes more and more profitable. But the nice thing about the font is people can put money in. Um, if they like what the story is and what the reports and the information that's coming out, they can put in more if they need to, they can take their money out later on. Um, so we thought it was a better to do it this way then to establish, uh, a a mining company, which is a very capital intensive business, and then do seed round and a series a and series B, and then look for people to get their money back when it goes public or it gets bought.
Speaker 3:
43:15
And this is not that type of, uh, this is not that type of industry. The type of industry is, um, you invest and then you operate very profitably as much as you can over the cycles and then get cashflow on a regular basis so people could then take distributions. Maybe they wanted to or not gonna call them distributions. They can, you know, take money out of the fund every year if that's what they feel like doing. Um, so I thought it was a great idea that Marvin came up with the idea of doing this as a fund that then creates businesses that are pure play mining businesses because it really gives people the ability to invest in crypto mining but still know that they can take their funds out. Uh, and perhaps even in not just their local currency but also in cryptocurrency. Yeah.
Speaker 2:
44:09
Is a, a, what you guys are doing is very good example of the type of deals that we invest in, the funds that we invest in. And that is that, um, the expertise of you and your two partners,
Speaker 2:
44:22
uh, you're applying that to a, a very complicated industry. You've made it, you've I over and over you. Let's keep it simple is what you're, you're saying in terms of how you, how you're developing this and you guys, uh, where I'm going is that you guys collectively really know what you're doing. You've figured out how to, how to, how to succeed at it, and you just keep improving the efficiencies on that. So I think for us, uh, our goal is to reduce risk wherever possible. For our investors. And so that's what you guys have done for yourselves and that's what you're doing with the fund as well as to make it, keep it as simple as possible in a very complicated and complex environment, uh, but then keep figuring out to keep making money on it. So, um, we're pleased to be involved with this. So Marvin that you referenced, it is my business partner with crown financial and uh, for this is, uh, the fund will be available exclusively to accredited or sophisticated investors. And by contacting us, we can get anyone the details on, on the fund. It's about to be launched, I believe, what in just the next few weeks, right?
Speaker 3:
45:38
Yes. It's important to get the, uh, fun paperwork done, uh, correctly kind of issues with the security exchange commission or anything else. Uh, but once we do that, we're really going to, um, uh, work to meet, to raise the amount of money that we're looking for initially and then get going.
Speaker 2:
45:58
Yeah. I don't think that's going to be very difficult. We've already had significant expressions of interest just waiting for you to, uh, to get ticket to get it launched. Uh, so that is what this is. This is exciting. I, uh, I had wanted to interview you ever on this ever since the, well actually a year and a half ago when you presented on your mining operation at our Austin meetup, when you and, and grant a [inaudible] gave us your, uh, your son gave us your, uh, your business model. So a, I appreciate what's happened in 18 months since, since that, uh, Austin meetup and I look forward to what's going to happen over the next few, as you said, five, five to 10 years in this. It's a young industry, but you guys have really matured quickly in that.
Speaker 3:
46:43
It really is, it's a, I love being in young, in industries that are rapidly growing and rapidly changing. That's one of the strengths that I've learned that I have is to be able to figure out new technology quickly and how to make money and, and apply it. Uh, and that's really where, uh, you know, I get the joy from. So yeah, by being doing this phone, we have the opportunity to do this at a slightly bigger level and do it a more international. And I, I've, uh, me and my partners have both enjoyed, certainly meet, uh, the folks at [inaudible] in Panama that the folks that we hadn't met before. Um, but also the opportunity like, Hey, if, you know, we had, if we got to travel to Argentina or you know, some other country to, to set these up, I would that. So, you know, so just being able to do things at a slightly bigger level, it doesn't have to be a monster big level or like bit theory or all these other large mining concerns that are doing hundreds of millions of dollars of investment and setting up things in caves in Norway and Iceland. You can have a very profitable mining facility if you focus on costs and focus on operating it in a profitable manner. So that's where we're looking to do.
Speaker 2:
47:57
Yeah. And that's what you're already doing. You're just scaling it, so. All right, well, Hey, this is great. I thank you very much for sharing your time. And your expertise with us, and we'll make things. We'll make the, uh, the documents available soon to those who, uh, are accredited or sophisticated investors that can, that can invest in it. Uh, but Ralph, thanks very much for your time.
Speaker 3:
48:21
Pleasure. Yeah. Appreciate that opportunity. Thanks, Dan.
Speaker 2:
48:23
Talking to you. Alright. Take care. You can stay tuned on our website for forthcoming events. Our members and guests are an amazing group of self-made and accomplished investors. We come from 15 countries in a wide variety of professions. We share the common pursuit of surrounding ourselves with great people in great places and gaining significant returns and investing. Thanks for joining me this week.
Speaker 1:
48:56
[inaudible].
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