MARA Diversifies Revenue Streams with Kaspa Mining and Expands Leadership in Digital Asset Compute

TLDR

One of our goals at Marathon is to support and secure the world’s leading blockchain ecosystem, Bitcoin. While we firmly believe in Bitcoin’s long-term viability and expect transaction fees to sustain mining revenues, we are pursuing new avenues for growth. Kaspa mining is just one of the many efforts behind this priority, similar to our initiatives in energy harvesting and technology products. This expansion creates a revenue stream that is diversified from Bitcoin while supporting proof-of-work (PoW) innovation. Kaspa’s fair launch, technology, and strong market position make it an attractive addition to our digital asset compute portfolio. Once fully deployed, our Kaspa fleet will represent approximately 16% of Kaspa’s global hash rate today.

We find Kaspa interesting for the following reasons:

• Kaspa is a fair launch and PoW digital asset with no pre-mine or ICO.¹
• Kaspa’s consensus mechanism uses the GHOSTDAG protocol for high transaction throughput and low confirmation times.²
• The Kaspa network currently processes one block every second, allowing for faster transactions and providing Kaspa miners with the opportunity to potentially earn more block rewards in a given time frame.³
• In contrast to Bitcoin's blockchain, Kaspa’s directed acyclic graph (DAG) structure allows for multiple blocks to be produced simultaneously, eliminating the incidence of orphaned blocks⁴
• Kaspa currently has a $3.9 billion market cap with approximately $64.8 million in daily trading volume.⁵
• Kaspa’s current circulating supply is 24 billion KAS with a current block reward of 103.83 KAS.⁶ The terminal supply is capped at 28.7 billion KAS.⁷
• Kaspa is a top 25 digital asset by market cap and top five PoW digital asset by market cap.⁸
• Our analysis has shown diversifying into alternative digital assets can strengthen returns in a bull market while mitigating losses in a bear market.⁹

Figure 1: Bitcoin Blockchain vs. Kaspa Directed Acyclic Graph¹⁰

Marathon CEO Fred Thiel recently participated in a fireside chat to discuss the company's long-term trajectory. In that discussion, he mentioned several strategies that the company is leveraging to diversify the business. Grid balancing, heat recycling, and waste energy monetization are all being leveraged to accomplish these objectives.

Internal analysis has identified opportunities for further diversification to complement our Bitcoin mining operations. Marathon is now expanding our digital asset compute operations to include Kaspa, an effort that may help us achieve our long-term objective of revenue diversification.

Kaspa was chosen for its fair launch, technology, rapidly developing ecosystem, profitability (enhanced $/kWh), and operational synergies with little to no reconfiguration of current data center sites. This increased profitability expands Marathon’s operational flexibility, opening new opportunities to deploy digital asset data centers in locations where Bitcoin operations may not be economically feasible.

Marathon’s interest in Kaspa began in May 2023 when the company started evaluating it as a potential way to diversify revenue while continuing to utilize our current infrastructure and expertise in digital asset compute. After successfully deploying our first Kaspa ASICs in September 2023, we began scaling its operations. Marathon purchased approximately 60 petahashes of KS3, KS5, and KS5 Pro ASICs from Bitmain to generate Kaspa. Once fully deployed, this would equate to approximately 16% of Kaspa’s global hash rate today. Though significant within the evolving Kaspa ecosystem, the Kaspa purchase represents approximately 1% of Marathon’s 1,100 MW data center portfolio.

The financial impact is dependent upon Kaspa’s price and global hash rate. However, Marathon’s profit margin on its Kaspa operations has been attractive due to the deployment of the most technologically advanced hardware, targeting in certain cases up to 95% margins.¹¹ This margin fluctuates based on electricity costs, Kaspa’s price, and other factors, but is often higher than the company’s average.

As evidenced by both internal and external research, the Kaspa ASICs are some of the most profitable computing devices on the market.¹² At the time of writing, a Kaspa-mining KS5 Pro is capable of producing approximately $79 a day in profit, compared to an BTC-mining S21’s $11.¹³ With this level of profitability, we are expecting a more rapid payback from the Kaspa ASICs. To date, Marathon has generated about 93 million KAS (c. $15 million).

The Kaspa ASICs are being deployed in our self-owned and operated Texas facilities. While the Kaspa project is not fully operational, we expect full energization in Q3 2024.

Marathon is actively managing its Kaspa treasury, strategically choosing to sell KAS to offset operational expenses, purchase bitcoin, or hold KAS depending on market conditions.

We have no current plans to expand our Kaspa operations beyond the initial order. However, we will continue to monitor the market for growth opportunities, including other PoW blockchains or digital assets, as Marathon continues to innovate and invest in securing networks.

Chief Growth Officer Adam Swick said, “Integrating Kaspa into our digital asset compute portfolio enables us to diversify our revenue streams and improve our profitability per kilowatt-hour. Bitcoin is Bitcoin, and nothing will ever take away its unique value proposition. However, Kaspa's innovative technology and dedicated community present a valuable opportunity for us to support and nurture proof-of-work innovation.”

Marathon’s commitment to Bitcoin and PoW has never been stronger.

• As of May 31, 2024, Marathon holds 17,857 BTC on the balance sheet.¹⁴
• Marathon has donated $500,000 to Brink in support of Bitcoin core developers and will continue to support developers.¹⁵
• Marathon incubated a new multi-chain layer-two network – Anduro – on Bitcoin aimed at accelerating Bitcoin development and adoption.¹⁶
• Marathon continues to support the Bitcoin mining industry through firmware¹⁷ and two-phase immersion cooling (2PIC) technologies research and development.¹⁸

Marathon’s Kaspa expansion creates a diversified revenue stream separate from Bitcoin while supporting PoW innovation. As Marathon looks beyond the next halving, we consider our responsibility to our shareholders and Bitcoin Network stakeholders. We expect this strategic move to positively impact our ability to serve both groups.

References

1. Kaspa. “About Kaspa.” Kaspa, May 23, 2024. https://kaspa.org/about-kaspa/.
2. Kaspa. “Features.” Kaspa, May 23, 2024. https://kaspa.org/features/.
3. Kaspa. “About Kaspa.” Kaspa, May 23, 2024. https://kaspa.org/about-kaspa/.
4. Ibid.
5. CoinMarketCap. “Kaspa Price Today, Kas to USD Live Price, Marketcap and Chart.” Accessed June 25, 2024. https://coinmarketcap.com/currencies/kaspa/.
6. Kaspa. “Tokenomics.” Kaspa, December 13, 2023. https://kaspa.org/tokenomics/.
7. Ibid.
8. CoinMarketCap. “Kaspa Price Today, Kas to USD Live Price, Marketcap and Chart.” Accessed June 25, 2024. https://coinmarketcap.com/currencies/kaspa/.
9. Based on Marathon’s internal analysis conducted in May 2024.
10. Kaspa. “Features.” Kaspa, May 23, 2024. https://kaspa.org/features/.
11. “Real-Time Mining Profitability.” ASIC Miner Value. Accessed June 25, 2024. https://www.asicminervalue.com/.
12. Ibid.
13. Ibid.
14. “Marathon Digital Holdings Announces Bitcoin Production and Mining Operation Updates for May 2024.” Marathon Digital Holdings, June 5, 2024. https://ir.mara.com/news-events/press-releases/detail/1359/marathon-digital-holdings-announces-bitcoin-production-and.
15. Munawa, Frederick. “Crypto Miner Marathon Pledges $500k in Matching Funds to Brink for Bitcoin Development.” CoinDesk Latest Headlines RSS, May 23, 2023. https://www.coindesk.com/tech/2023/05/21/crypto-miner-marathon-pledges-500k-in-matching-funds-to-brink-for-bitcoin-development/.
16. “Marathon Digital Holdings Introduces Anduro, a New Multi-Chain Bitcoin Layer-Two Network.” Marathon Digital Holdings, February 28, 2024. https://ir.mara.com/news-events/press-releases/detail/1344/marathon-digital-holdings-introduces-anduro-a-new.
17. “Marathon Digital Holdings Releases Industry-Leading Bitcoin Mining Firmware and Control Board.” Marathon Digital Holdings, March 25, 2024. https://ir.mara.com/news-events/press-releases/detail/1348/marathon-digital-holdings-releases-industry-leading-bitcoin.
18. “Marathon Digital Holdings Unveils Two-Phase Immersion Cooling System to Optimize Data Center Operations.” Marathon Digital Holdings, March 26, 2024. https://ir.mara.com/news-events/press-releases/detail/1349/marathon-digital-holdings-unveils-two-phase-immersion.