Bitcoin mining made 23-year-olds millionaires

Bitcoin mining

Important data:

  • Brent Whitehead and Matt Lohstroh mine bitcoin with combustion gas from drilling, according to their website.
  • Thus, Giga places a cargo container with bitcoin miners near an oil well, redirecting the natural gas to generators that convert the gas into electricity for the miners to use.
  • According to Denver-based Crusoe Energy Systems, this method reduces CO2 equivalent emissions by 63%.

Brent Whitehead and Matt Lohstroh, students at Texas A&M University, made the decision to start mining bitcoin in the oil fields of East Texas. Back in 2019, when it came to oil and gas companies cooperating with bitcoin miners, the idea was seen as both avant-garde and taboo.

Due to their belief in the potential of bitcoin, Whitehead, an engineer who comes from a family with a long history in the oil and gas industry, and Lohstroh, a bitcoin enthusiast, invested everything they had earned from side jobs. from high school in lawn care and gardening at Giga Energy Solutions, a company that mines bitcoin from stranded natural gas.

Oil and gas companies have been grappling for years with the question of what to do when they accidentally drill into a natural gas field. Unlike oil, which can be transported by vehicle, natural gas must be transported through a pipeline. If a drilling site is close to a pipeline, operators can simply pour the gas into the pipeline and receive what the customer is willing to pay on the spot. Drillers often burn it if they are more than 20 miles from a pipeline. The result is that oil fields are often engulfed in flames.

Drillers not only cause environmental damage, they also lose money. It seemed to these two Aggie graduates that there was a major problem with an obvious solution.

An oil well becomes a bitcoin mining facility, with natural gas diverted to feed the oil well’s miners. Giga is a cryptocurrency mining company. According to Denver-based Crusoe Energy Systems, this method reduces CO2 equivalent emissions by 63%.

Growing up in the oil and gas industry, I saw a lot of flares. “I realized he was a waste,” Whitehead told CNBC on the sidelines of the North American Prospect Expo in Houston. “It is a novel strategy to reduce emissions and, at the same time, commercialize the gas.”

It has agreements with more than 20 oil and gas companies, four of which are publicly traded. Additionally, Giga claims to be in talks with sovereign wealth funds and rapidly expanding. This month, Giga’s 11-person team increases by six.

Lohstroh and Whitehead are among a growing number of entrepreneurs who are confident in the ability of bitcoin mining to fundamentally alter the economics of the energy business.

According to Lee Bratcher, president of the Texas Blockchain Council, “they are generating revenue from mining stranded energy bitcoin, while also addressing the environmental issue of flared gas.”

Bitcoin, according to Giga executives, could usher in a new era of financial freedom.

“There’s no one to take care of it, and you don’t have to ask,” Lohstroh observed. “It was because of this that I became interested in bitcoin.”

CNBC reports that Whitehead agrees, stating that his beliefs in self-sovereignty, privacy, and individualism led him down the bitcoin rabbit hole.

“I was more anxious about adoption than price.” “I thought it was fantastic for humanity,” Whitehead said of the event.

Bitcoin meets oil

Bitcoin mining can be considered both a layer of network security and a method of generating new bitcoins at the same time.

A bitcoin mining system uses computer software to try to solve a task in the shortest time possible. The resolution of the challenge results in the creation of new bitcoins and the updating of the digital ledger that keeps track of all bitcoin transactions.

According to Steve Barbour, founder of Upstream Data, a Canadian company that manufactures and distributes portable mining devices for oil and gas facilities, bitcoin is a portable market that can be taken directly to the power source.

Oil and gas facilities in Texas are typically located in remote locations far from major population centers.

It is often too little to justify the effort and expense of building an entirely new pipeline for a gas well that is not already close to one. And if a driller can’t sell the gas immediately, he often dumps it on the spot.

A common solution is to simply vent the methane into the atmosphere, which is bad for the environment because methane has a much greater warming effect than carbon dioxide. Torch burning is a more environmentally friendly option.

However, according to Adam Ortolf, director of business development for Upstream Data in the US, flares are only 75-90% efficient. They pointed out to him that “even with a torch, some methane is emitted.”

On-site bitcoin mining can be quite beneficial in these situations.

It is claimed that when methane is driven through an engine or generator, it is totally consumed and is not filtered or vented into the atmosphere.


“However, no one will pass it off as a generator until they can make money,” he continues, adding that “until natural gas is commercially viable, producers won’t absorb it.”

Bitcoin allows oil and gas companies to burn methane internally instead of externally, thereby reducing the amount of stranded gas.

The process of persuading people that placing an ASIC trailer in an oilfield is a smart idea, on the other hand, took Ortolf years.

It was mocked in 2018 when the idea of ​​mining bitcoin with burning gas was floated. “Commercializing hydrocarbons in the absence of a counterpart was ridiculous.”

Upstream has grown a lot in four years. It is now used in bitcoin mining in North America.

“It’s the most wonderful gift anyone could give to the oil and gas business,” says Orolf. According to the author, “they were leaving important hydrocarbons on the table.” Now they can sell energy anywhere in the world.

Meanwhile, bitcoin miners can take advantage of low-cost energy.

In Barbour’s view, a bitcoin mine’s dispersed outlets and ongoing energy use make it a perfect fit for the energy needs of the oil and gas industry. “It’s a perfect match,” says the author.

Ignoring the haters

After finishing his parents’ lawn in Buna, Texas (population 2,000), Whitehead received an unexpected text from Lohstroh, a former classmate and good friend. Lohstroh proposed using a mobile bitcoin mining container from Upstream Data, which they could attach themselves to a gas well.

I need to find some combustion gas right now,” Whitehead explained to the audience.

In reality, Whitehead descends from a long line of “wildcats” who have been involved in high-risk drilling operations throughout history.

“I like to refer to myself as a digital wildcatter, as bitcoin mining is moving to natural gas wells,” he explained.

Whitehead and Lohstroh boarded a plane for Canada a week after receiving the text. They had to take a U-Haul truck for three hours to Upstream’s Calgary facility because neither of them was of legal driving age, but they weren’t bothered by the inconvenience.