Karim Helmy and Brandon Bailey (Galaxy Digital) on Standardizing Miner Accounting (EP.264)

On The Brink with Castle Island

Galaxy Digital Mining Associate Brandon Bailey and Research Associate Karim Helmy join the show to cover a new accounting methodology for Bitcoin miners. In this episode:

• Galaxy's new miner margins accounting methodology
• Brandon and Karim origin stories in mining
• How the randomness-based miner fingerprinting works
• How Karim thinks about miner depreciation schedules
• Why the Bitcoin e-waste paper understates the expected lifetime of Bitcoin ASICs
• S9s are still a quarter of the Bitcoin network
• Why Karim and Brandon created the new accounting framework
• The differences between marginal, direct, and total cost of production for BTC miners
• Does the sell side capably cover Bitcoin miners?
• What you would expect to see for marginal and total cost of production for established Bitcoin miners
• Why miners focus on marginal cost rather than total in their storytelling
• Major bottlenecks preventing the addition of new hardware
• Why hashrate may not converge to price in the near term
• Why the chip shortage advantages incumbents in Bitcoin mining
• Why Kazakhstan is scaling back their Bitcoin mining
• Why mining manufacturers do not get priority access to the best foundry capacity
• Why established miners will be able to mine Bitcoin at favorable rates for the near and medium term
• Why of the accounting identities Galaxy would prioritize when evaluating public mining companies
• How Galaxy arrived at a 3 year depreciation period for the average mining unit
• What advice Brandon and Karim would give you public market analysts evaluating mining companies

See the full write up and sample model here.

Sponsor notes:

• This episode is brought to you by Withum, a top 25 accounting firm with a cutting-edge Digital Currency and Blockchain Technology practice. To learn more, visit withum.com/crypto
• OurCrowd analyzes companies across the global private market, selecting those with the greatest growth potential, then brings them to you. Get started at OurCrowd.com/otb