Russell Willans and Andrew Sanchez have forged an unusual path as outback miners.
Instead of physical commodities, their secret facility in regional Western Australia is searching for some people’s new age version of gold.
They’re mining bitcoin, a divisive digital commodity that technically only exists as a complex code on a computer network.
And right now, after a massive crash, the price of an individual “coin” is surging again on trading markets past US$70,000 each.
“We’re super excited,” Russell says.
For the uninitiated, bitcoin mining is more reliant on computing and microchips than pick-up trucks and diggers.
“I guess the term is a misnomer,” Professor of Information Systems at The University of Sydney, Daniel Schlagwein, explains.
“Bitcoin mining is really a process of keeping the bitcoin network running.
“The mining aspect is that you are rewarded for doing this work for the bitcoin network by being issued bitcoins for performing this infrastructure work.
“It’s transaction processing. It is data processing.”
So how exactly do you mine bitcoin?
Bitcoin was launched in 2009 by an unknown coder, generally referred to by the pseudonym Satoshi Nakamoto.
It was billed as a decentralised currency, away from the authority of central banks.
Bypassing the conventional financial system, it has a code that allows anonymous transactions, which over the years has led to concerns that bitcoin is facilitating money laundering, drug trafficking and other illegal activity.
While it is technically autonomous, the bitcoin transactions still need computers to manage it, which is where “bitcoin mining” comes in.
Every 10 minutes or so, the bitcoin protocol spews out a random number. The computer that guesses this number and solves the puzzle first wins an allotment of bitcoin.
When the cryptocurrency first launched, the amount of bitcoin on offer was very high, at a time when the individual market value of these coins was very low relative to fiat currencies, such as the US or Australian dollars.
And, with not so many people competing, you could guess the code to win bitcoin using a home computer set-up.
That is how “home miners” like Russ and Andy started out.
After initially dismissing bitcoin as “magical internet money”, Russ became a convert around 2018 and started setting up the technology to unlock it at home.
“I was building PC rigs and mining that way,” he remembers.
While doing this as a hobby, Russ was working in the oil and gas industry in Western Australia. He was on site around 2019 when he got chatting to his co-worker about cryptocurrency.
As it turned out, Andy was mining in his spare time as well.
The duo’s friendship developed, with Russ and Andy advising each other on their complex hobby.
As more people were getting into bitcoin mining globally, the technology required to win a round of puzzle solving was far surpassing your standard home setup. Andy and Russ were buying up increasingly complex tools.
One day, a few years ago, Russ and Andy realised their own operations were literally getting too big for their homes.
Andy was ordering equipment that was like “running two turbines in the living room”, while Russ was tripping over cables in his living area.
“I was building Frankenstein’s monster,” Russ says.
“It was pretty crazy. I think we were both on the verge of our wives going, ‘Enough is enough. It’s us or the crypto mining’.
“So, Andy and I put our heads together and said, ‘Let’s build our first farm’.”
What is a bitcoin farm?
Again, the analogies aren’t particularly accurate here.
The “bitcoin farm” operated by Russ and Andy today, through their company Metamining, is actually a bunch of shipping containers in the outback with technology that mostly operates remotely.
Russ and Andy declined to disclose the location of their facility, citing security concerns. They say they’ve partnered with a remote landholder to provide them with a cheap energy source.
“It was a fantastic opportunity that came just at the right time, because I think it saved both our marriages,” Russ says.
“And we were able then to really scale up in a big way.
“They’ve built infrastructure such as solar and wind farms. And we’re piggybacking off that green energy.
“There’s obviously massive power needs for bitcoin mining.”
Over the years, there have been ongoing concerns about bitcoin mining’s enormous energy usage and associated carbon emissions, akin to entire countries.
In the Northern Hemisphere, an Australian-founded company Iren is running five facilities across Texas and British Columbia that are being run by hydro, solar or renewable power purchase agreements.
The sheer size of Iren’s operations show just how far bitcoin mining has come in 2024, and what small-time operators like Russ and Andy are now up against to claim their prize.
Iren’s facilities span entire plots, and between them are still only able to solve enough coding to claim around 300 bitcoin a month.
Even at bitcoin’s current peak, Iren’s revenue is hugely offset by its power bills.
“Last month, we made around $US14 million in revenue against a power cost of around $US6 million,” its Australian-based co-founder Daniel Roberts told ABC News.
Mr Roberts insists the company is profitable, but Iren’s financial results from last year show it posted a loss of $AU260 million.
That was after write-downs on its assets, as bitcoin was plunging in value during the 2022 and 2023 fallout from the FTX-scandal and other issues.
Iren’s share price has also crashed 80 per cent since it was listed on the US Nasdaq stock exchange, at the last peak of the market in late 2021.
So is bitcoin mining profitable?
There are now millions – if not tens of millions – of computers globally competing for bitcoin, the University of Sydney’s Professor Schlagwein estimates. Even a ban by China on bitcoin mining isn’t thought to have massively dented the market.
Russ and Andy, who also operate a side business that helps other people get into mining, say they’ve recently had a surge of enquiries from people wanting gear, now that the asset is rallying again.
“You’re competing with other bitcoin miners around the world and their hardware costs, and particularly their electricity costs,” Professor Schlagwein says.
“Generally, the best technology wins.
“It is a very tight margin in a very competitive market.
“If people envision bitcoin mining as a genius, get rich, quick scheme, that’s not at all the case.
“I think people that got “rich” with bitcoin are typically the ones that have invested in it and are using it as an asset class, rather than running the infrastructure.”
And bitcoin miners are all about to take a hit to their revenue stream, as part of a pre-coded event that sounds like it’s out of a dystopian novel.
In May this year, a four-yearly event called the “halvening” is expected to occur, where the amount of bitcoin that successful miners are rewarded with every 10 minutes will go down by half.
The reward is currently at 6.25 bitcoin, and will soon go down to just over 3.
Historically, crypto-enthusiasts argue that the “halvening” pushes up the price of bitcoin, because it promotes scarcity and therefore market hype for more people to buy the existing coins in circulation.
However, some economists aren’t sure the “halvening” has that much impact on prices anymore, because the amount of bitcoin left to be released is relatively low.
Of the 21 million bitcoins ever designed to be released, about 15 years after the first one came out of the vault, there are now only about 1.4 million new ones left to be mined.
They’ll be let out at an increasingly slow rate over the next 100 years.
Iren’s Daniel Roberts is still banking on the “halvening” pushing up prices further, however says the company will be profitable long-term from a second revenue stream. That is where miners are paid for processing transactions on the so-called blockchain.
“The design of bitcoin is, I would argue, quite clever,” Professor Schlagwein says.
The whole industry also needs bitcoin to stay high
As the halvening looms, the bitcoin miners are also banking on the price of this asset continuing to soar.
It’s been rising in recent months, back again to a record high above $US70,000, in the wake of an approval of several exchange traded funds (ETFs) in the United States.
These bitcoin ETFs will allow people to get a slice of the action, without being directly exposed to it through so-called crypto wallets.
Crypto enthusiasts have been cheering this approval, and say it’s an example of how bitcoin and other forms of cryptocurrencies are destined to go mainstream.
However, there are still a lot of crypto-cynics, including University of Canberra economist Professor John Hawkins.
As he notes, the US regulator only approved those ETFs begrudgingly.
“It is a speculative bubble and speculative bubbles crash eventually,” Professor Hawkins says of bitcoin and cryptocurrency generally.
He believes that, unlike property investment or buying shares in a company, crypto-assets have no inherent value and are simply market hype.
In other words, he thinks they’re a ponzi scheme, propped up in price by roping in the next sucker.
“Mostly with speculative bubbles the price ends up at some fundamental value and the problem here is that bitcoin has zero value,” he says.
“Bitcoin mining is very complicated but essentially pointless.
“To create something that’s essentially a gambling token, I don’t think it’s a good use of energy.”
Professor Schlagwein is less scathing. When it comes to energy use, he argues that it might be worthwhile to replace entire buildings of bankers with independent machines.
And, when it comes to bitcoin’s future, he says the best indication of where it is headed is the past.
“I’ve (been told) the narrative of the tulip mania ponzi scheme (since) 2013. I’m an empirical researcher, and I look at how reality is performing,” he says.
“The jury is still out. I think we don’t know for sure if this is going to collapse, or if this is going to further increase and effectively become a form of a digital scarcity asset, the same as gold.”
For now, back in outback Western Australia, Russ and Andy are celebrating their latest gold rush.
Their goal is to win and hold enough bitcoin and then “cash out at the peak of the market”, although as general crypto-enthusiasts, they also want to support the entire system beyond profit making.
“Both of us are just two blokes that work in the oil and gas industry,” Russ says.
“So we’re trying to keep it fairly manageable.”