From Flared Gas to Bitcoin: How Mining Turns Waste Into Wealth

What we talked about.

Adam grew up in Colorado and first heard about Bitcoin in 2014 during a road trip from a wedding in Telluride, but he didn't buy any and moved on with life. After college he became director of sales and marketing for an oil and gas production reporting software company, working closely with upstream producers and learning firsthand about the industry's costly flared gas problem. In early 2018, after seeing headlines about the bitcoin price crash and mining death spiral, he set out to prove Bitcoin was a scam by studying how mining worked. Instead, understanding proof of work and thermodynamics convinced him it was legitimate. He realized flared gas could be converted into electricity and used to mine bitcoin, turning a wasted, fined liability into revenue. After his employer laughed off the idea, he searched for infrastructure builders and discovered Steve Barber's company, Upstream Data. A cold email led to a two hour call, and Adam began raising capital to build his own flared gas mining operation, determined not to sell his growing bitcoin stack to fund it.

An oil and gas insider explains how he went from calling Bitcoin a scam to mining it with wasted flared gas.

The questions, and the answers.

How did you first learn about Bitcoin?

I first heard about Bitcoin in the summer of 2014 during a five hour drive back to Denver from a wedding in Telluride, Colorado. A friend who was a hardcore bitcoiner gave me the whole bitcoin speech, but when I asked how it was actually produced or mined, he couldn't explain the mechanics. I thought it was cool but didn't buy any, and I went on with my life until college ended.

What drew you back to Bitcoin in 2018?

In early 2018 I was working in oil and gas software sales when I saw news articles about the bitcoin bubble popping and the mining death spiral. I assumed it was a scam and figured the scam's epicenter must be in how bitcoin was produced, so I set out to learn how bitcoin mining actually worked to prove it was fraudulent.

What changed your mind about Bitcoin being a scam?

Once I understood how a computational hash works, the simplest execution a computer performs, and how that ties to thermodynamic law, I realized proof of work is legitimate. You can get more efficient but never reach zero energy, so from energy input you can accurately determine how much computational work, and therefore bitcoin, can be produced. That's when I knew this wasn't a scam.

How did your oil and gas background connect to Bitcoin mining?

I worked with upstream oil and gas producers selling production reporting software and constantly heard about their flared gas, wasted hydrocarbons they had to burn and often got fined for. Once I understood bitcoin mining just needs energy as input, I realized flared gas could be converted to electricity and used to mine bitcoin, turning a costly waste problem into a revenue source.

How did your bosses react when you pitched mining bitcoin with flared gas?

I ran the numbers and told my bosses I thought I could solve an operator's flared gas problem by mining bitcoin. They openly laughed in my face. I'd only been in oil and gas about seven months, and here I was proposing to solve a hundred year old flaring problem with what they saw as magic internet money. Looking back, I understand why they laughed.

How did you connect with Steve Barber of Upstream Data?

I got a Google alert that led me to Steve Barber's Upstream Data website, and I knew halfway through the homepage that I wanted to work with him. I sent a cold email to their sales address in mid 2018, and what was supposed to be a 30 minute call turned into two hours. He was miles ahead of me in thinking through the opportunity.

What did it cost to get started with a mining setup on flared gas?

For a small setup, combining the engine, the data center, and the miners, you're probably looking at around 45 to 50 thousand dollars total, often built around something like a 50 kilowatt engine. It's modular and scales with however much gas is available at a site. If you have a lot of gas you can add a lot of engines; if you have little, that's your constraint.

Why didn't you sell your Bitcoin to fund the mining buildout?

By the time I was raising capital I'd been putting every spare dollar into bitcoin for about five months and had accumulated a decent stack. Selling it to fund mining felt antithetical to the whole long bitcoin thesis, since the point was to hold, not liquidate. I feared I'd never get that bitcoin back, so I looked for other ways to fund it.