Tesla founder Elon Musk’s foray into bitcoin this week comes after a flurry of interest from mainstream US financial institutions including PayPal, Square and Visa.
Iris has mined bitcoin for almost two years in a facility which hosts computers drawing 9 megawatts of power. The fresh capital will allow it to build another 21 megawatts in two new data centres. It is also looking to acquire additional Canadian sites.
Iris receives regular income in bitcoin for its mining, which involves using raw computing power to find a solution to the SHA-256 algorithm that secures the bitcoin network. The outcome is probabilistic: the amount of bitcoin received is directly linked to the amount of computing power. Approximately every 10 minutes, 6.25 bitcoins are provided to the miner that solves the problem and then provides security to the network, known as the “block reward”. Iris does not hold bitcoin and instantly liquidates it into fiat currency.
“We sell bitcoin the day they are mined,” Dan Roberts explained. “We don’t hold or keep it. This, and the focus on renewables and integration with energy markets, is one of the reasons it is popular with institutions.”
Iris’ mining currently represents less than 0.5 per cent of total bitcoin mining activity, but Mr Roberts said he is hopeful of increasing the share after Iris invests in new application-specific integrated circuit (ASIC) SHA-256 machines and the Chinese manufacturers lose some of the competitive advantages they once had in bitcoin mining.
“With the commoditisation of computing power, over time we are seeing a 180-degree shift away from the players with access to the newest technology, towards players who can develop and build large-scale, energy and data centre infrastructure projects with access to institutional capital markets,” said Mr Roberts, who left his executive role at Palisade in 2018.
Iris’ board includes Canadians Brian Fehr, the former owner and managing director of energy project construction firm BID Group, and Brian Fry, the co-founder of RackForce, Canada’s largest cloud hosting provider.
Oscar Oberg, lead portfolio manager at Wilson Asset Management, which has made a small pre-IPO investment in Iris from its micro-cap fund, said: “These guys are building data centres using the cheapest source of energy they can find, which is renewable, and they will have a lower cost of production to conduct bitcoin mining versus their competitors.”
“They have a very good board and management team – being ex-Palisade and Macquarie they know what they are doing – and we see it as an infrastructure play.”
WAM has invested in data centres NextDC and Megaport and took part in the pre-IPO round for Sovereign Cloud, which listed in December. Mr Oberg said the growing US institutional interest in bitcoin, and Tesla’s huge investment this week, helped to validate the investment.
“Interest [in bitcoin] is building, and we wanted to be part of the first…