Marathon CEO Fred Thiel is making a play for the AI market on his terms

Fred Thiel is the Chairman of the Board of Directors and Chief Executive Officer of Marathon Digital Holdings, bringing over 35 years of extensive experience in the technology sector. In this discussion we cover a wide range of issues including how Marathon is adapting to the wave of smaller miners gravitating towards artificial intelligence, what separates his firm from some of the other pure-play miners, and how U.S. politics and the upcoming presidential election will affect the outlook for the mining industry.

Forbes: Can you give an overview of how you've tried to position Marathon Digital Holdings within the world of bitcoin mining?

Fred Thiel: We look at ourselves as sitting at the point of convergence between energy transformation and digital infrastructure. From a bitcoin mining perspective, we're the largest of the publicly traded miners today, operating 13 sites across four continents. We use a variety of different technologies and we're the only one of the large bitcoin miners that has a fully vertically integrated tech stack. What that means is we operate our own mining pool, which is what orchestrates all our miners around the world and is the interface to the Bitcoin blockchain. All the other miners use third-party pools that are either Foundry, for example, or Chinese pools. We also operate our own firmware, which runs in miners and then we have developed and designed our own cooling infrastructure. We have single-phase and dual-phase liquid cooling, both of which don't use water, so that is totally water-free, and this is a really exciting area as we move into providing digital infrastructure to the AI industry because it's the exact same infrastructure that's used by both industries. The other thing that is unique is we cofounded a company called Auradine, which is the only U.S. bitcoin mining ASIC manufacturer. Their miners can support multiple chip failures and still run so they can operate in wider temperature ranges. So what does that all add up to? To me, it means as a miner we have access to technologies that not necessarily other miners do and we continue to press the envelope on deploying that technology. Our data center in Abu Dhabi, which is all liquid immersion cooling, is a preeminent site. There are two data centers, a total of 250 megawatts, that have 99.8% uptime running in a very harsh environment, which is obviously the Middle East desert next to a body of water. It's very humid so liquid cooling is the only way to go.

Our strategy initially was one of being asset light. We focused on just growing rapidly by hosting with third parties. Then earlier this year we shifted to vertically integrating and we acquired 54% of our capacity’s infrastructure, and as we continue to grow in coming years that number will get closer and closer to 100%. We tripled our capacity in 2023, we'll double it again this year and we'll continue to grow at a pretty great rate. Lastly, we're the second largest holder of bitcoin of publicly traded companies in the U.S. and our strategic focus really is to amass as much bitcoin as we can. That's our core treasury asset and we do that through mining and also going into the markets and buying opportunistically when it makes sense.

Forbes: What metrics do you pay the most attention to and how does the development and investment you detailed help give you a leg up on the pure bitcoin miners?

Thiel: A couple of things. I talked about how we operate 13 sites on four continents. We don't have a concentration in a particular region or state. Riot Platforms is 100% concentrated in Texas today. They're trying to solve that by acquiring Bitfarms and then they've acquired another small site, I think in Kentucky. CleanSpark was heavily focused on Georgia. Now they're focusing on Kentucky as well. The challenge with being focused on just one area is you're very susceptible to your energy utility and energy market pricing in that region. In the case of Riot, they have the double whammy of two big sites in Texas and you have curtailment issues, weather issues and community issues, which in Texas are not small things. In the case of CleanSpark, they operate lots of very small sites. Operationally that is a very different issue because now you have to have people spread all over managing these disparate small sites and it may mean you don't have the opportunity to really aggregate the scale and get the benefits of scale in the same way. But Marathon is operating on different continents, so we also have the ability to avoid the risk of regulatory regime issues in the U.S. For example, in the Biden budget, there were attacks specifically on energy used by bitcoin mining. The Harris administration seems like they are befriending AI, but they are still going to be antagonistic to bitcoin mining. By the way, you can't give AI energy at one price and not give bitcoin mining energy at the same price. Not only would the industry attack that issue, but it's a type of commercial discrimination, which could be viewed as illegal. But more importantly, there is a huge symbiosis between AI and bitcoin mining because AI workloads vary just like demand on the grid varies and bitcoin miners have a unique ability to synchronize their load to AI miners loads such that you don't get this huge variance of demand on the grid. So when you marry bitcoin miners and AI operators together, you get a much better grid profile. You have the ability to stabilize the load, and you have an ability to use more of the intermittent energy—solar, wind—than AI can use.

If you look at our technology piece, operating our own pool, it's very transparent to our investors; they can see every block that we win. By operating your own pool, you do a couple of things. One is you pay a pool operator a percentage of your winnings for them to operate the pool. It's 1% or 2% depending on the size of the miner; we don't have to do that.

Then we have systems like Slipstream, a non-standard block submittal service that people in the Ordinals world really love. It allows us to get higher fees for submitting blocks to the network than the normal mempool would pay, so that gives us additional revenues on top of the traditional transaction fees that we get. We also have a Layer 2 called Anduro, which people are now starting to develop applications on.

Forbes: Can you speak a little more about how Anduro is constructed?

Thiel: It's a Bitcoin L2 that is essentially a clone of the Bitcoin network. It can process transactions much faster. It can do things that you can't really do as easily on the L1 of Bitcoin, but it anchors all its........

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