MARA Stock: Bitcoin Miner Marathon Digital's Solutions to the World's Energy Problems | Adam Swick

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Welcome to another episode of Opto Sessions. We’re thrilled to have with us today Adam Swick, the Chief Growth Officer at Marathon Digital Holdings. Adam’s journey in the business world is nothing short of impressive. Before joining Marathon, he was a principal at Refinery Ventures, where he played a crucial role in driving growth strategies for their entire portfolio. Prior to that, he was the Director of Strategic Finance at Kraken Digital Asset Exchange, overseeing the company’s financial health and strategic planning. Adam also founded Swick Capital, a crypto asset hedge fund. How are you doing, Adam?

1:15

Adam: Great! Thanks for having me, doing very well today. How about yourself?

1:22

Host: Really good! I’ve been excited about this interview, so it’s great to have you on. You’re calling from Minneapolis?

1:35

Adam: Yes, Minneapolis, Minnesota. Somewhat new up here, so I’m not a true Minnesotan yet. I still need to brush up on my winter sports and become more of a hockey fan.

1:53

Host: Is HQ for Marathon there?

1:55

Adam: No, my wife’s job brought us here. Marathon is fully remote, so we have people scattered across the country. Our mailing address these days is in Fort Lauderdale, Florida. We’ve got offices there, and some people go to the office in Irvine, California, as well as at our mining sites, where we have people managing the machines.

2:33

Host: That’s amazing – over 100 people now?

2:35

Adam: Yes, and it used to be a lot lower. When I joined at the end of 2021, I was the ninth person.

2:59

Host: How old is Marathon?

3:03

Adam: Marathon has an interesting history. It started as a traditional mining company, literally digging in the ground for minerals, pivoted to real estate, then into a patent troll company. Then, around 2017-2018, the company pivoted to Bitcoin mining under new leadership.

4:03

Host: Wow, what a journey. Could you give us an overview of Marathon Digital today? How big is the business, its growth rate, and main activities?

5:17

Adam: We describe ourselves as a global leader in leveraging digital asset compute to support the energy transformation. That means Bitcoin mining is at the core, but our operations go beyond that. We focus on digital assets and compute to secure blockchains, and we’re exploring how digital asset compute can help in energy transformation through modular loads. Our miners range in size, are interruptible, and are location agnostic. We’re seeking the cheapest power sources globally. Today, we have about 30 exahash of compute power, which is roughly 5% of the global Bitcoin network.

6:56

Host: Outside of Bitcoin mining, what else does Marathon do?

7:01

Adam: Our core business is Bitcoin mining, but we’re also focused on utility-scale mining and energy harvesting. The idea behind energy harvesting is to partner with those who have energy issues, like flare gas, and use Bitcoin mining as a solution. Additionally, we’ve developed proprietary technologies, like cooling systems, that we’re beginning to sell to other miners and data centers.

10:36

Host: Does the technology division include blockchains you’ve developed?

11:03

Adam: Yes and no. We created a Layer Two Bitcoin blockchain called Enduro, which is built on Bitcoin. It's meant to increase Bitcoin’s programmability without creating a separate token. It’s really about encouraging Bitcoin adoption.

13:45

Host: What are Marathon’s current plans for growth?

14:13

Adam: We’re targeting 50 exahash by the end of the year, which is an incredible amount of growth. We’re expanding through new sites and more efficient machines. Additionally, we’re growing our energy harvesting business and our technology division. We’ve also set a goal to ensure 50% of our revenues come from overseas by 2028.

16:04

Host: What about the Bitcoin you mine? Do you hold on to it like MicroStrategy, or do you sell a portion?

16:23

Adam: We believe in Bitcoin and have accumulated over 17,000 BTC. Generally, we sell enough Bitcoin to cover our operational expenses, like electricity costs, but we aim to hold as much as possible.

18:03

Host: Regarding the future, when the last Bitcoin is mined, will your revenue mainly come from transaction fees?

19:05

Adam: Yes, after the last Bitcoin is mined, transaction fees will become more important. Transaction fees already make up a percentage of our block rewards, and as Bitcoin usage increases, so will transaction fees.

22:31

Host: How do you maintain a competitive edge long-term through energy efficiency?

24:03

Adam: Efficiency comes from three key areas: securing low electricity prices, having the most efficient machines, and investing in technology. We’ve also developed our own mining pool and cooling technologies, like single-phase and two-phase immersion cooling, to reduce energy costs and increase performance.

29:16

Host: What are the financial fundamentals of the business? Year-on-year revenue growth, profit margins, and key costs?

35:03

Adam: Revenues in Q1 2024 increased 223% to $165 million, up from $51 million in Q1 2023. Electricity costs are our primary variable expense, and we’re also heavily investing in new machines. With recent changes to accounting standards, we now mark Bitcoin on our balance sheet at fair market value, which can lead to fluctuations in reported net income.

39:11

Host: Do you plan on producing your own energy in the future?

40:00

Adam: We’re constantly evaluating this. We’ve partnered with wind farms and explored options like solar and even flare gas. Long-term, I think we’ll see a blending of energy generation, storage, and digital asset data centers at power sites.

44:03

Host: There’s still some negative perception about Bitcoin mining and energy use. What’s your take on that?

44:22

Adam: The idea that "using a lot of energy is bad" is oversimplified. In many cases, like flare gas or excess renewable energy, Bitcoin miners are using energy that would otherwise be wasted. We’re part of the solution, not the problem.

46:29

Host: Since the halving, how have miners been impacted?

46:51

Adam: The less efficient miners have started unplugging their machines. While we’ve seen new, efficient machines come online, it’s clear that the halving has pressured those who weren’t prepared. This presents opportunities for us to acquire sites and machines.

48:50

Host: Lastly, what’s your take on the proposed Biden mining tax?

49:27

Adam: We’re watching it closely, but diversification is key. We’re also working on educating regulators about the positive impact we have, like balancing grids and utilizing wasted energy.

51:19

Host: Great insights. Just a quick question before we wrap up: What traits did you notice in successful founders during your time at Refinery Ventures and Kraken?

51:42

Adam: The most successful founders were mission-driven and saw their work as more than just a job. It was about solving a deep-seated problem they were passionate about. Execution was also critical – having a big vision is great, but making it happen is what sets successful founders apart.

53:33

Host: Thanks, Adam. This has been a fascinating conversation. Any final thoughts or where can people follow Marathon for more updates?

53:52

Adam: Thanks for having me! You can find Marathon at mar.com and follow us on Twitter @MarathonDH. You can also find me on Twitter @SwickTalk.