Proto Rig: How Block’s New Mining System Could Transform Bitcoin Mining

Speaker A: Foreign.

Speaker B: Welcome to Compass Mining podcast. I'm Nina Xiang. We've got our own Tatum K. From Compass Mining with us today. Hi Tatum, welcome.

Speaker A: Hey Nina, thanks for having me.

Speaker B: So Tatum is our large scale project lead and also oversees safety for our Denver service center. Longtime mining expert and the legend in the mining space with his own show. And we're going to talk about something really big today. Proto Rig, a bitcoin mining system made by Jack Dorsey's Block Inc. Designed and developed by engineers behind Apple and Tesla. A bitcoin miner that's completely going to reshape the bitcoin mining space. Um, and also I think what's amazing is that this project started back in 2021 so it's like a four year effort and finally we got to see and touch this new mining uh, machine last week. So Tatum, what's your initial reaction to this new miner?

Speaker A: Well initially I was uh, just already just super excited to have a little more competition in the mining world because right now it is dominated by Micro, uh, BT and Bitmain with ant miners and what's miners. So anything to add a little competition is going to be uh, exciting in my eyes. Uh, and this is one of those manufacturers that releases something that actually looks like it's going to stand a chance, uh, up against these other giants in the space. Um, and also it's just completely different too at the same time. Um, the modularity of it. I, I don't even know if that's a word but it sounds good. But uh, the modular making, yeah the modular design of the miner is brand new and I mean I've repaired many ASIC miners before and you can do it, it's not like impossible. But Proto is making it to where you don't have to be a minor technician, you don't have to know every bit of what you're doing. It's it, it's essentially uh, a plug and play miner with, with the different parts of it. Uh, I want to get my hands on one to actually see how easy it is to, to, to do these swaps with the hash boards and uh, but I mean watching the presentation just looked like there was no effort opening it up and it, it made me feel uh, excited but also a little nervous because while this is new and it's exciting that we have something new, new is not always awesome because we're used to what we're used to right now. I mean our, most of our fleet is ant miners and they all have a lot of the similar, same uh, same things across all the models, uh, just recently with the S21 pros, XPs and pluses, is the first time that we've gotten a new form factor or at least a massive form factor change from Ant Miners. Um, as opposed to like, we've had, uh, some chassis that were like an inch longer and an inch shorter. Uh, this changes just everything altogether. Um, and I am both excited and nervous about it.

Speaker B: Um, that's really interesting because, um, I think you, as someone who operates, repairs, maintains miners for years, and you could see that this huge, dramatic change coming, uh, into this space and there's definitely come with change, there will be uncertainty, there will be new things you have to get used to. Perhaps the entire mining facility or sites will have to be different somehow. Right?

Speaker A: Yeah, that's one thing that I have a lot of questions on that weren't addressed. Um, I messaged, uh, Thomas Templeton asked him afterward. I was like, hey man, look, I know you got like a million of.

Speaker B: Wait, who's Tom Templeton?

Speaker A: He's the head of product, uh, for bitkey and Proto, uh, uh, at Block. And I told him, I said, I know you kind of had a big day, you know, just launching Proto, nothing crazy. Um, but I told him, I was like, hey, I have all of these other questions that are not just the basic. Is it better than the last miner? Is it good? Like, I got nerdy questions. I have, uh, questions from a field deployment standpoint. And so I'm, I'm actually writing up a lot of questions to talk with him soon and hopefully get some answers from a deployment perspective. Because one of the major things that I thought about was how is this going to differ with, uh, you know, these massive deployments that are moving all over the place. Things are changing every single minute. Uh, like with, with Ant miners. Ant miners and what's miners? They. I like to say that they are, they're, they're delicate, but they're not fragile. Um, um, it's not the greatest framing for it, but what I mean is that you need to treat it nicely and, and the nicer you treat it, the longer it'll run. But also if you tip it over or something in the shelf, it's not going to be a catastrophic failure or something like that. With this modular design, I feel like that might be an issue.

Speaker B: Right. It falls off the rack and could just like, right. Be in pieces.

Speaker A: Right. I mean, like, it doesn't look like there's any screws that would hold everything in place. And also like, the, the fans, they rattle and Create vibrations all the time. Like I, uh, in one of our deployments, I remember I opened up a container and there were I think three or four miners that were hanging off of the shelf by their cord because they had rattled out. And we were like ah, this wasn't expected. So we had to put like little rubber feet on them. And you know, if something that's modular, m by design does that, then I feel like that's going to cause a lot more problems. And also I'm going to get into my logistics side of things. The inventorying of these different parts, I don't know what that's going to look like. I know that they're uh, they talked about fully open sourcing at all. So I don't know what that's going to mean on the market side of things. But yeah, there's just a lot of questions that weren't exactly answered. But the ones that we did get answered seem pretty promising.

Speaker B: So you talked about the feature where parts like fans like hash boards can be like uh, what they call dishwasher design. Right? You plug in, you take out. Uh, they claim you can change fans in under a minute. Kind of like clicking, click out. Um, m. That all sounds really nice. And I think that's one thing, uh, people are excited about reducing downtime because you don't have to take miners off rack. Um, they claim to potentially uh, say goodbye to downtime, which may be a little bit too uh, optimistic. But aside from this modular design, what other features are you really ah, excited about?

Speaker A: Well, I am excited to check out the firmware and see what that looks like compared to the user interfaces that we're kind uh, of used to, whether it's stock antminer firmware or maybe it's a third party like brains, Luxor, vanish, something like that. Um, I'm curious. It sounds like if they're doing all of this this much different, if they're doing this many things differently with the hardware side of things. I'm very curious to see what the firmware side of things looks like. Is there going to be uh, you know, customized tuning, customized fan speed? Um, they mentioned something about Stratum v2 being implemented, but that's not. That goes deeper in the weeds. It's not necessarily a hardware thing for that. But uh, I mean I just don't know what to even expect like is the, what's the ramp up time? Because I know whenever I uh, am testing some ant miners, I know how long to expect to start seeing the them hit the pool. Same, uh, Thing with what's miners is this going to be faster, slower. Also like I, I am a little skeptical, sorry Jack Dorsey about uh, the, the hot swapping. I uh, just don't know how that's feasible where you'd be able to change components while it's running. Which I was trying to see if that was what they meant and or I misunderstood it and I didn't get too much clarity on it but it sounds like that's the plan. Um, but from a, from just an operational perspective I don't know how that will work. If it is achievable, cool, I'm happy to be wrong. I just don't necessarily understand how that's going to work. But honestly uh, the main thing that I'm excited, two main things I'm excited to do is see what I can do with it physically and I'm going to you know, throw some on the rack and move them around while they're running. Just I love stress testing new machines. Um and the second thing is just seeing how it works on the other side of things in the firmware, in the user interface.

Speaker B: But also the software and what they call MDK Mining Develop Developer Kit are also um, another component to this overall what they call mining uh, system. So they claim this is first time the hardware, the software, the developer kit, the firmware are all going to be cohesive and that's going to give you you know, squeeze out more efficiency and um, better management and all that. Um, do you, you know, do you have any questions about that or are you optimistic?

Speaker A: The way that it was framed in the keynote sounded uh, like they were wanting to do infrastructure as a whole. Like they weren't manufacturing just a new miner, they were manufacturing a whole kit um, which is good. If you are building tools for mining operations and you're open sourcing them as well then there's not too much bad you can say about that. Um, I am curious to see how this all meshes together because it's not going to even when they hit market you're not going to have purely Proto rig uh facilities like that. That's going to be very. If it happens it is going to be rare. Um, so these things we now have to figure out from an operator's perspective how do these miners work with our other ones and does anything else that Proto is offering, I. E Proto Fleet, um, uh the anything else from mdk, uh any of their um, anything else that they announce like what is that going to do to our current setup? Are we going to be Able to put these just hey, we have some open slots where some ant miners used to be. Let's just put them there and run it. Or are we going to have to you know, dedicate a container to them or something like that. One thing that did kind of push the brakes for me a little bit was the power supply or power supplies as I should say because it's three 4,000 watt power supplies with two C19 cords. So what you're doing essentially is you're now uh, you're now messing with the continuity of how many miners you can get off of one PDU. Whereas a 48 port, uh, or not 48 sorry a 24 port PDU can in theory uh, have 24 ant miners hooked up to it where a 24 port PDU I guess would. Hold on, what is 24 divided by six? I'm stupid. Four? Yeah, four. I couldn't, I couldn't do that math. It's early but uh, it, I don't know how that's going to scale on the power side of things. That's 1200 watts for what I understand to be one unit. Um, and that's another thing that I was confused about was the what is one unit. They had something on display that was the what looked like three chassis, it had the six fans but I never got full clarity of was that one unit, was that three units that they put together because of the modular design. And then I did see pictures and in uh, a rack of a lot of them lined up. How many units was that? There's still just some questions that I have mainly just on the hardware and operation side.

Speaker B: Yeah, you raise a great question which is how are these ah, proto rig, um, system going to be compatible with existing miners. And you know that raised another question which is can you mix them in the same container on the same rack? Um, or is it going to be like Apple Computer, Apple's own ecosystem or versus Androids? They're going to be like um, kind of like guardrails or like fenced gardens kind of uh, arrangements. So those are all great questions and I guess we'll just have to wait for answers. But let's look at some of those key data or key um, metrics that they gave out for their miner, uh, what they claim to be. 14.1 joules per terahash, 800 uh, terahash and 1.5 times more power per rack foot. Uh of course on top of the features we discussed before, swappable hashboards, air cooled construction free and open source software and Made in America. Let's look at those numbers. Uh you ask whether the three parts are they three units or one units. I guess we don't know. But just look at those 14.1 joules per terahash and 800 terrahash. Does that give you anything to help you understand how this miner is going to be in terms of uh, hashing power and efficiency?

Speaker A: Yeah, I did see what made me think that three of those chassis, what we saw at the keynote was one unit was whenever I did see that 800 some terra hash and 1200 watt uh number but that also that it doesn't yield. I don't think that 14.1 joules per terahash is going to be the sticker efficiency. Uh they did I, they kind of were sneaky with their wording saying up to 14.1. So I'm assuming that it might have just spiked to hit that metric when they were testing or something like that. Um, but I think that we're going to see it a little higher, closer to 20 which is not going to be awful. I mean the top of the line miners right now are uh, just shy of 14 Mark I think I want to say that uh, the S21 Pro and S21 XP are around 30, 13 and a half I want to say. Um, so I can see where they're wanting to compete and look really attractive on that metric because that's a lot of what people look for. They want to see the best efficiency. That's uh, not always 100% what you need to base everything off of when you're looking at a minor though. Uh, so that's what I'm not too worried about it. If they can give me something close to, close to 14.1 joules per terahash I'd be more than happy. But it does seem like a powerful machine. Um, but with that kind of hash rate and those kind of power supplies it's gonna, it, it's gonna take up a lot of power. Uh so I am curious to see how many make up. I mean also one thing that I'm curious about is like is that power draw going to be consistent? Is this going to tune up and down and change? Because that's going to, that's going to be a whole new world of different things. If you pull out one of the hash boards which in from what I understand you're supposed to be able to do while it's running, what's that due to that, that, that power, that power supply, like is it going to have and also what about the heat that are coming off of those hash boards? That's one of the things I just don't understand. Um, but this is going to change the scaling of mining uh and it's hard to say if it's going to be objectively for the good or for the bad. I personally think that it's good to have some new ideas because if Proto doesn't nail it the first try with this completely new revamp of what we expect a uh, Bitcoin miner to be either them or someone else is going to fix it later on and use something that they made. Uh, like they're, they're pioneering just a different concept altogether. We've been in this pattern of shoe boxes is what everyone calls them like the new. The next miner is not going to be something. The only thing that's going to change on the next um, ant miner is going to be a better efficiency. Presumably that's usually what it is and it might weigh you know 10 pounds more like they did with the S21 plus but you're, they're not going to be like oh yeah you can now make it dance on command or something like that. Like this is the first time we've seen something like new, new in, in the large scale mining world and I'm excited for it. I think that it is going to be a good, a good thing for the ecosystem.

Speaker B: Right. Um, so one thing like I'm kind of confused is so they uh, the proto rig miner uh uses the most advanced um chip technology, 3 nanometer uh chip process already the most advanced chip technology you could use nowadays. Um and if they're using already the most advanced chip technology then I guess they could um, really improve or optimize the efficiency. Um, piece of the puzzle. Um, but they're not really jacking that to the maximum they could. Um, I wonder if you have any insights into that and how does their chip comparing to other um, popular miners in the market.

Speaker A: So that's one thing I haven't um gotten that far into is the actual ASIC that they're using. Um, I tried looking up some things but I wanted more specs and I just couldn't, I wasn't able to find all too much and I think that's because they're wanting to not release everything just all out at once. But um, I uh, I mean if it's going to be comparable with the, the what I think the newest one From Minor, the BM 1370s I'm pretty sure if it's going to be comparable with that then that changes way more because if these are American made chips then look, I mean we're in a completely exit velocity basically. I uh, know that you know with this administration, uh, we're wanting to mine in America and keep all the mining in America uh, sourcing and also operating and I think that having those, those resources domestic is a huge, huge positive because I mean here at Compass we have, we sell parts and uh, for miners and sometimes some of those parts if we need to put an order in, we won't see them for four weeks maybe. Um, and then when they come in they're you know, oh we only got four out of 20 boxes and the others may come, may not. You know that that's a headache. Doing that domestically is going to change the game drastically uh, where we don't have these crazy lead times for literally anything that we need for these miners. So I am very excited to see how the Made in America part of that is going to play out. I hope that it's sustainable because I think one of the biggest needs that no one really is addressing in mining is just having uh, abundant resources that are compatible for miners in the States.

Speaker B: Right. So that comes to the Made in America part. And we know that Proto uh, design their own chips and because they are a team from um, Apple, Tesla and all the other uh, Block units, um, and they have actually deep expertise in chip design. So they design the chip and the chip was manufactured by TSMC in Taiwan. And because that is the only Fengjui nowadays that's capable of doing the 3 nanometer uh, process. And um, I think in one of the interviews actually Will Foxley who previously worked at Compass Mining, uh, he just talked to also someone from Proto and uh, they mentioned they are looking forward to bringing the manufacturing part of their minor uh, ASIC chip to the U.S. uh, I would imagine that probably will be with TSMC's Arizona foundry. Um, that's potentially looking at um, uh going up to the 3 nanometer chip process sometime next year. So seems like all ah, those pieces are in the roadmap and um, it is completely possible that they're going to make the chip manufacturing um, happen in the U.S. in addition to you know the design part is already done in the US by the team over at Block. Um, so aside from Made in America part that's going to be bringing a lot of um, benefits to the bitcoin mining sector here in the U.S. um, how about any other um, I guess concerns or challenges? You see you foresee that they could uh, encounter once they bring this to market. And before that question like how long is it going to take for them to actually come to market because they haven't announced the pricing. Uh, it seems like there are still some time off from you know, really coming up to uh, coming onto market.

Speaker A: Yeah. I want to say that I saw somewhere on the launch day I want to say that I saw something about Q2.26 but I could be just making that up. But even so that sounds reasonable. Even so, I don't know if that, I don't know how realistic that is because like you said we still don't have a price like that was. Obviously everyone wants to know how much does it does the newest miner cost? And they're very tricky with that and I mean props to them that uh, that was a really great troll giving us this whole suite of products and not telling us the price. But um, I mean I understand like it, it's, it's a very fluid um. Uh, I can understand why they wouldn't immediately. Maybe they don't even know themselves honestly because I, if they're going to be ah. There's a lot of factors that I'm imagining are going to go into pricing. The, there's going to be that premium of being new, um, the newest with these metrics of efficiency that's going to be something that bumps the price up. Um, this is a completely new manufacturer, uh, that from a reputable parent uh company. I think that's going to also be something that drives the price up. However then you look at like the manufacturing in America, once that's fully over here, uh, in whatever is currently being manufactured in the States, I think that that's going to drive the price down. I could have this all backwards as well. There's just a lot of factors that are different for these miners.

Speaker B: That's interesting. You're saying that if the manufacturing comes back to the US it's going to drive the price down.

Speaker A: I think so. That's just my assumption. Um, because I think that a lot of uh, I mean the, there's a lot that goes into international business that I don't even fully understand. But um, having something that is relatively speaking local, uh, and not having to deal with everything logistically, uh, from you know, shipping from uh, wherever they're Taiwan, China, uh, wherever they're going to be, uh, wherever they get made is going to cut a ton of time, is going to cut a ton of cost. Uh, and maybe they can see that as a way to make it more Affordable or maybe they could fluff it up a little more. But there's just so many, so many questions on what they're going to be. I'm still just shocked that we don't have a price yet. But I can only imagine if I have to give a ballpark of what I. Let's, let's, let's each throw a price out of what we think. I'm gonna say ballpark of 15,000 I want to say for one unit.

Speaker B: So one unit with three kind of like subunits.

Speaker A: Yeah. So we'll call 5,000 per one or. Okay. I think, I think it's going to be pretty, pretty close around there I think.

Speaker B: Yeah, I uh, would uh, you know, if I have to. You have to bet on it. I would bet on your guest here.

Speaker A: Ah, don't do that. That's usually not a good idea.

Speaker B: Um, so of course like you know, Proto, they previously had an agreement to sell their um, their new 3 nanometer chip to core Scientific. It's a ah, total of about 15 exahash um per ah second of hash rate. There's not a lot of details in that but at least we know that their chip is being utilized uh, by one of the big miners. And um, we would probably, you know it'll be great if we can learn something, you know more about this partnership and how that chip performs if it has been put into you know, actually mining Bitcoin, uh, for some time. So. But there's not a lot of information there but unless you know more on that.

Speaker A: Yeah, I'm going to be honest, I didn't know about that until you said it. Okay, count me out of that.

Speaker B: All right. All right. Okay, so I think, are there anything else that we should discuss about this um, new mining system? Uh, because we're running out of time. Anything else you want to add?

Speaker A: Um, not really aside from just my gratitude to Proto for. I know this has been like you said, it's been going on since around 2021 and um, the roadmap has changed uh, a few times throughout the years. I remember um, reading the MDK releases a couple years ago and it's nothing like uh, what we saw last week and I think that's a good thing. So I want to just give my utmost thanks to Proto for actually doing the thing, getting it done. Um, and also I just think that this is going to make for a really good follow up episode. After I'm able to mess around with a few of these, uh, then I'll give you, then you need to block out like three hours because I'm going to have a lot to talk about.

Speaker B: Definitely would definitely have to do that. And also one of my uh, I guess thoughts about uh Proto Rig is um they have gone through uh a super long uh research and development phase uh lasting almost four years and also with an elite hardware software team based in uh the US So I can't even imagine the cost that has gone into their research and development and contrast that with what those Chinese uh minor um uh manufacturers how their R and D would be like. And um, they probably have uh, dozens or hundreds of um engineers based in China probably develop something, design something new in a much, much shorter time frame. When you look at the R and D cost here it's just probably a ah difference of several times at least. Um so if they are going to price this miner um on a similar level to those um, the current leading minor manufacturers then financially this is not going to be something that's probably going to be beneficial or profitable to Block. And I think they're making this uh, their mission clear from all of their announcements that their primary goal is to um, expand, ensure decentralization for the bitcoin mining a Bitcoin's ecosystem. And so I think the underlined uh message um there is that they're not looking for financial returns here. At least that's not their primary objective. So just for that huge um, um probably we should all say thank you to Jack Dorsey and Block for doing this um because you know putting financial returns secondary is not something that you usually see in today's world.

Speaker A: Yeah it's uh. This is a, this is a major, this is a major event for a multitude of reasons. Like I mean like you just said there's there's layers to this uh and I can only hope that this is just the beginning and we're going to see more of these types of announcements and companies pop up and I encourage that. I want competition because at the end of the day we're all working on the same mission. There's healthy business competition between companies but at the end of the day they're still my boys. I talk to people who work for other mining companies all the time and get help from them. I give them help. So this is uh, I just got goosebumps thinking about just everything that's going to come off of this. Super excited.

Speaker B: Yeah. And I think one thing we didn't talk about, we'll talk about next time which is uh, how this miner is going to be um, used in home solo mining. The whole objective is decentralization. So hopefully, maybe there is another angle that m, you know, this is going to be something more suitable or that works out better for solo, um, minors at home. Um, so hopefully we can talk about this next time. But for now, thank you so much, Tatum, for sharing all your insights. It's been really interesting talking to you.

Speaker A: Absolutely. Thank you for having me.

Speaker B: All right, thanks for tuning in to the Compass Mining podcast. Be sure to follow us on social media for the latest update, updates, insights, and more episodes coming out. And stay tuned. We'll be back soon with more conversations from the front lines of bitcoin mining.