Bitcoin Mining CEO Says Big Investors Plan To Enter Industry This Crypto Winter

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Foundry CEO Michael Colyer

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Mike Colyer joined Foundry as founding CEO in October 2019. In this discussion, we discuss how Foundry navigates this crypto winter and the uniquely challenging environment it presents to bitcoin miners. Colyer also shares his thoughts on what it’s like to be a Digital Currency Group portfolio company and how Foundry does business with other subsidiaries such as Genesis Trading and Grayscale. He also shares some key predictions for 2023.

Forbes: Can you please explain Foundry’s business lines?

Mike Colyer: At Foundry, we are focused on empowering decentralized infrastructure. Half of our business is proof-of-work. The other half is focused on proof-of-stake. On the proof-of-work side, we provide all kinds of services to miners. Our goal is to grow the North American mining ecosystem and we support miners by providing services such as FoundryX which is a marketplace for buying and selling machinery, logistics services, deployment services and an academy . We now have miner management software and we manage the largest pool in the world, which is the Foundry USA pool. The other part of our original business was equipment financing. In late 2020 and early 2021, we were one of the largest equipment financiers in the market. We also provide staking services for over 20 protocols. We are really focused on Ether (ETH) right now. Both of our businesses are truly institutional-grade client oriented. We do not focus on retail. We really work with the big listed mining companies and then on the staking side we focus on providing staking services to institutional staking clients.

Forbes: What is it like to be a holding company within the Digital Currency Group?

Colyer: Foundry is a 100% subsidiary of the Digital Currency Group (DCG). About three years ago, Barry Silbert, the founder and CEO of DCG, decided that institutional money was going to flow into bitcoin mining and he really wanted to start a company that could help those institutional investors navigate the world. mining space. I started in late 2019, and over the past three years we’ve grown Foundry from a clean sheet of paper to 170 employees focused on building the mining ecosystem. Being part of DCG has been great in the sense that Silbert allows us to think long-term, in terms of decades, and not really worry about month-to-month, quarter-to-quarter results. other. It also helps us understand how we can leverage the DCG brand, its balance sheet, and its portfolio companies to bring value to the decentralized infrastructure space. We are in a way the technical arm of the DCG ecosystem. We have a lot of engineers, we have a lot of people who are super passionate about decentralized infrastructure and it was great to be part of the DCG ecosystem.

Forbes: Can you tell us a bit more about how you interact or do business with some of the other DCG portfolio companies?

Colyer: When we launched Foundry, we worked closely with Genesis. They were able to provide capital to start our equipment finance business. We have no exposure today with Genesis lending activity. In our equipment finance business, we will end the year with less than $3 million in loans remaining on our books. We stopped lending to miners about a year ago; we just felt like it was getting risky and we started cutting back on that part of our business. We also worked closely with Greyscale to create Grayscale Digital Infrastructure Opportunity, LLC, which is a vehicle to help institutional investors invest in the mining ecosystem. We are entering a new phase of the mining cycle. Mining goes through a four-year cycle and we are now entering a phase where there are a lot of distressed assets or distressed miners, and it is possible to re-enter the space. We’ve worked very hard with Greyscale to create a product that helps people navigate the ecosystem. Genesis has a very strong trading and derivatives desk and we use their services to liquidate the bitcoin we mine.

Forbes: Can you give an example or two of how the supply chain finance business works?

Colyer: Most of the gear is made in Southeast Asia by Bitmain and MicroBT and there’s usually a six to nine month lead time from when you have to put down your deposit to when the machines are actually shipped. In our equipment financing business, we asked customers for a 20% down payment, we provided 80% financing, and we placed orders for these machines. We had fairly aggressive loan terms, a 12-18 month repayment period and a high interest rate for teenagers. Logistics is a big problem getting equipment to the United States and transporting it. So we created a logistics company to help miners, who often don’t have very large teams.

Forbes: Let’s get into the crypto winter. How is Foundry tackling this challenging mining environment?

Colyer: We are in crypto winter and miners are struggling, especially those who have used a lot of leverage. Our goal is to continue supporting the mining ecosystem. We participate in the various bankruptcies, try to bring the projects to life, to continue to move them forward. We just completed the bankruptcy process for Compute North, which is a great team that got into over-indebtedness. They had some great sites and projects that we want to keep moving forward, including a miner management software suite for enterprise-wide mining. We were able to hire this team and we want to be able to bring this software to the rest of the industry. There are also a lot of people on the sidelines who are interested in investing in these distressed assets and they just don’t know how to navigate the space. People say it’s crypto winter, but there are some very big traditional investors who are considering investing in this ecosystem.

Forbes: What are your thoughts on some of the regulatory headwinds facing bitcoin mining in particular?

Colyer: Obviously, we were very disappointed with Governor Kathy Hochul for signing the moratorium bill into New York. We believe this is bad legislation, the wrong signal to send and the wrong direction to take. We have a whole public policy team and we are really focused on helping educate policy makers around our industry. The reality is that we find that people don’t understand what we do and why we do it. But once they do, they light up. We hope that by putting a lot of effort into educating policy makers, they can write better legislation and create better policies to support the industry, instead of being afraid of it and trying to drive it out. Bitcoin mining is an innovation in itself for our power grid. We work with some of the largest energy providers in the country. They’ve done a lot of experiments, a lot of pilot programs over the last two years. Bitcoin mining is a large controllable load. And our power grid needs to be stabilized 100% of the time. Bitcoin mining provides this controllable load stability to the network. As we add more and more renewable energy sources, you need to balance that with controllable loads. I don’t want to have to turn off my lights or my air conditioning or my heating, just to check the power grid. I would rather bitcoin miners turn their machines on and off. What we’re seeing is that this is probably one of the biggest innovations to hit the grid in a long time and energy companies are really excited about it. I just think in the long run it will be part of our basic infrastructure as a nation. Batteries do the same thing, but you can’t make large-scale batteries today. I think bitcoin mining is going to be that bridge to bring us into the future of renewable energy. It’s super exciting and as people start to understand it becomes less scary for them.

Forbes: Predictions for 2023?

Colyer: I think 2023 is going to be a long and tough year for bitcoin miners, and we’re here to support them through our miner services. On the staking side, I think eth staking is going to dominate the headlines through 2023. We are long-term bullish on the space. We have been through many crypto winters in the past. So now is a good time to keep your head down and keep building.

Forbes: Thank you.

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