How you build

Chad Harris, Riot/ Alright. Welcome back to the best and last session of the day, about bitcoin mining. We're going to talk about this in a bit, but Gideon and Griffin are going to wrap up the day. Gideon and I contributed an article to Nate explaining why Texas is emerging as the bitcoin capital of the world. We believe this one is the largest bitcoin mine in all of the US. Riot is here. Chad Harris is CEO of Whinstone out there every day in Rockdell building this. I think this talk is a chance to talk about how you build, not just in terms of the nuts and bolts but the mentality and I tihnk Rockdale is a case study that when people talk about how wasteful mining is, but the economic impact that they are having on Rockdale is phenomenal. He comes down to the Houstin bitcoin meetup regularly. Come up and tell people what we got on the video behind us. A lot of people don't even know what a mine is, so let's show that too.

Thank you so much. I'm going to stand down here. My name is chad Harris, CEO of Whinstone US. We're owned by Riot Blockchain. We were acquired May 2021. This company started in my office with 1 miner and my son. I had no idea about bitcoin and I got in a commercial argument with a bank and they froze my bank account and then they sued me. I went to my youngest son who had been buying bitcoin since 8th grade in 2011 and I asked him to tell me about bitcoin and how do I do this. What I found is that I quickly learned that bitcoin mining was about energy. It took me moments.

One of the companies that sponsored here, Priority Power, there is a longstanding relationship between Jock Bick and myself. John returned my phonecalls when I was broke, and he continues to return them today. John showed me a spreadsheet one day and I literally registered in my head: this is a business of energy that happens to have a widget called bitcoin at the end.

What I ended up doing was through a series of getting ourselves to Rockdale, Texas and it's a long story, it's written and talked about a lot. What I realized in building this facility was that we were transferring energy into opportunity. That's the most important component. We take energy and transform it into opportunity. The first opportunity is the jobs required to build these infrastructures.

This building is our first original construction is 63,000 sq ft because we didn't have enough money to build two buildings. We were going to put 64,000 Antminer S9's in one building. As you look through this building, you will see racking systems. We designed and built our own racks. What we realized is that I found the tax and sales tax credit was more valuable to our company than hiring people. So I used the sales tax abatement savings and I put it all into people because the only thing that this business requires is people. The biggest problem with bitcoin mining today is that people don't believe that there are human beings working in these places.

We recently hit our 195th W2'd full time healthcared 401k'd employee. We have 453 full-time contractors that have moved their businesses to Rockdale, Texas to support our build out. If our smallest building is 63,000 sq ft. Our biggest building is a sprung structure. In a time when commodities were struggling, we had to have a solution to build buildings quickly. Bitcoin mining is about scale and speed. It takes 7 weeks to put up the sprung building. What you can see here, this is our immersion system. As you can see, we built our own PDUs, we designed our own tanking systems, and all thoes things took place in Rockdale.

You might have recently heard that Riot acquired ESS Metron which was with Whinstone on day one. The very first day that we went to Rockdale to try to build this mine, they were there. At 8am, we have a video of him saying there's no way you guys can do it. At 5pm, there's this video and he says I think you can do this. In December 2021, Riot acquired them because they had been an integral part of making this happen. This substation right here has actually 800 megawatts of capacity built into it. We have 100 MW in reserve in event that one of the other structures goes down. In 183 days, we built the transmission, the interconnect, the first 63k sq ft building, the first substation (300 MW), and turned the power on, and COVID. We did it because we didn't know any better, we had nothing better to do with our time. Most people, and Gideon I will give you credit, he is 100% responsible for my success. I was buying Hodl Ranch and on July 8th, 2019 they rescinded the article and I was pissed. So what did I do? I went and built it anyway. I know I know, I'm just joking. Every piece of equipment you see, we bought our own cranes, our own delivery trucks. One of the biggest things I joke about in this type of construction is, what do you do with the miner boxes?

The miner boxes if you literally, if you imagine, have 4 pieces of trash. If you have 100,000 machines now you have 400,000 pieces of trash. So we have our own trash service, our own crane service, our own maintenance team. We built all this into our own infrastructure. In order to build the shelving, we needed 100 people. We make one single cut, one 12 inch cut builds this 950 feet long on each side and it was designed in my office in New Orleans. We built our first shelving on 2x4's. You can see it's unistruct, coming in 20 foot lengths. The building is also 20 feet tall too.

What we did along the way that I think is really interesting is that we continued to improve our product. When you go to building one, all the way to the last one... we have built a modular electric system that allows us to transfer it into any type of application, use immersion, it can go through any building. We spent the time to do it.

One of the things, and if you haven't done immersion at scale, and we hadn't done it at real scale, and then we decided to do it, it's more difficult than you think. You have hydraulic problems, air getting trapped in dry coolers. One of the interesting things about building this kind of system is that you have the opportunity to create anything you want along the ways. If you can imagine looking across here, all of our new buildings have 23 miles of conduit because we put the conduit in the ground this time. We decided we didn't want to look at it. The substation has an infinite bus charged at 700 MW. A lot of people don't know I bought all this equipment in October 2020. I purchased it well in advance of Riot ever purchasing us. I was going to figure out how to get the money to do this, eventually. It takes partners and team members to build these.

As we created the jobs, ... we created these jobs in Rockdale, and the social impact that has happened.. we've increased month over month 25% sales tax revenue in the county. In the county, 54% month over month. They have had more money come into their town. Bitdeer is right next to us. There's two companies hiring and spending money. What's happened is that checks have been written to the school over $500k annually to help fund the schools. That's what drives this business from hey they use power to hey you create opportunity.

One of the greatest things in building this, we spent all our time working on the community. The value that has been given back to us is 10x more valuable than anything we did. If you think a town that has 5,590 people, this town was riddled by industrial disaster. In 2005, Illumina closed in 2008, they lost about 3000 jobs total. The downtown lost all its businesses and slowly but surely the life is coming back into the town. From our very first employee who still works there, to our very last hire that happened today, all those people now have high paying jobs, better healthcare, 401k's and all the things that are really important.

When we're arguing with government, it's no longer an argument about oh it's wasteful, no it's creating opportunity that this created the jobs and created the money and the sales tax. This created opportunities for families and we happen to end up with a really good asset at the end. Everyone in this room calls it bitcoin, of course. That's the interesting part that people don't spend a lot of time talking about. Forget about the switch gear. Where does the value come from? The value is our ability to transform a community. There are 254 of them in Texas. 254 communities in Texas that need the same thing. That's where this becomes important.

When you start thinking about this kind of infrastructure, what are the real things? Priority Power talks about this a lot. They start with a load study, an FEA with the transmission they have to do an upgrade, then you have to get a long-term PPA. But the parts that people miss? You need all the conduit in America. You need all the wire in America. YOu need all the electrical components you can get your hands on, to build this. This core business is about material procurement and hiring intelligent people that can be re-trained into new components.

When I give people tours, Parker and Unchained is going to send something out where they will facilitate a tour in Rockdale so you can come and hang out, touch and feel all of this stuff. I talk about the immersion system a lot. The picture will roll up here. Why not stack them? Why not make them more dense? The future employee that we believe will be the most beneficial to this business will be a single mom. The single mom because they will do one thing: anything to provide for her family. She needs a good paying job, and she needs healthcare, and a retirement. We designed our immersion system to be at a height that didn't have any barriers to entry, was safer because obviously if you know anything about dielectric fluid, it's like a slip and slide. You're not on lifts. It's at a lower point. We put a breaker at every single miner. It makes it easy to train everyone to work on it. Single moms are our number one employee. These people want the opportunity for new jobs.

As you can understand, obviously you plug it into a network, there's electrical, etc. When you sit here and look through the process, you can change in the buildings. We single stacked transformers in the beginning, but now on building F you can see we stack 4 up. Along the way we learned we could create more efficiency in power by reducing distance from transformer to transformer to switch gear to operations. We didn't know to do it, we researched and tested it. The process that comes along with it-- smart breakers are very important, but with the process, you have to hire the best people. Riot Blockchain is looking for the absolute best people even if it's not what they do.

The process is very simple. We originally had a building that had 20,000 miners that we moved from air to immersion. Lots of people ask why we don't have 4 immersion buildings that we're building. The simple answer is that we can't get enough parts, heat exchangers, pumps. We were over by 200 megawatts, and then we were going to build 200 MW of air instead. We have a failure of 1 machine to 32 machines in 1 tank. Every tank has its own heat exchangers and its own pump. The heat exchanger extracts the heat from the oil. We cool the heat exchanger with water. We run the oil temperature is averaging at about 70 degrees today. It's running pretty efficiently. We use a product by Exon Mobil that is the same fluid that is in your shampoo, and we don't recommend you to drink it. Long exposure, your hands turn red.

What we didn't realize, here's the thing we didn't realize when we were building this business. We had to become a level 3 security company in the State of Texas. You can't carry a gun on a facility and say you're security unless you're level 3. We had to create an entire safety team. We have 22 people on our safety team. They go around and say you can't do that. It's those kinds of things, we knew to do it but we didn't know about it. Now someone runs security, someone runs logistics. Our logistics team runs 24/7. If you want to know how we built this so fast, we worked 3 shifts per day, 7 days per week. We take any shipment any time. If they can't reach someone, I'll unload the trucks. We work in 1 day what people work in 3. Most people aren't willing to do it. But to run these things efficiently, that's what it takes.

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