Energy is life.
Intro
In the first installment of this Compute Infrastructure series, I wrote about an AI company called Together that is building a decentralized cloud to fuel open-source AI development. I recommend checking it out if you are interested in a primer on the parallel frontiers of decentralized compute and open-source AI. In conducting this research I discovered that Together is partnering with a compute infrastructure company called Crusoe Energy to power its cloud. This article is focused on how Crusoe is building a new stack for compute to power energy-intensive applications like bitcoin mining and AI, and how this infrastructure accelerates clean energy abundance for a more prosperous future.
The Crusoe Approach
When you drill for oil, you create natural gas as a byproduct. Oil producers have the option to compress and transport the gas somewhere else to be sold, but the problem here is that it usually costs more in transport and storage than the producer would earn from the sale. Since this option would result in a net loss, producers flare the gas, which means they light it on fire. This process wastes energy and creates significant greenhouse gas emissions (GHGs). The worst impact to the environment is from the methane that escapes uncombusted in the course of the flaring process. Methane is 80X more potent than carbon dioxide so even in small quantities it contributes significantly to GHGs. In meeting the world’s demand for oil production, we currently flare 14 billion cubic feet of gas that is burned as waste per day.
Crusoe’s Digital Flare Mitigation (DFM) technology deploys on-site infrastructure to convert this natural gas into energy for computing applications. Being able to convert and use the gas on site eliminates the transaction costs that would otherwise make converting natural gas into power unfeasible. This process eliminates 99% of the methane that would have otherwise been released into the environment through flaring and also reduces emissions by capturing demand for compute that would otherwise tax the main grid. Pretty cool.
Crusoe installs and operates DFM modules on oil fields and taps into gas lines on site to fuel generators that produce electricity to power data centers. These data centers power energy-intensive computing systems that live in as cloud-based applications or internet protocols. It currently has data centers across the US with plans for international expansion. The global nature of operations will be critical to address the flaring problem on a greater scale, since 90% of the world’s flaring occurs outside of the US.
The other component of Crusoe’s approach is focused on accelerating the transition to renewables. This means converting stranded energy from carbon-free resources — like solar and wind — using its Digital Renewable Optimization (DRO) process. Renewable energy production currently has its own inefficiencies. Although you don’t have to deal with natural gas waste that is being flared and contributing significantly to greenhouse gas emissions, there is still a significant excess of power because there is relatively little demand near the sites where the renewable power is being produced. If you’ve ever driven by wind turbines on a road trip you’ll understand why — wind farms are generally located in remote and less inhabited, less industrial areas. And like all sources of energy — which inherently seeks to dissipate and reform — it is difficult to catch and keep, i.e. transport and store. While there is plenty of renewable energy to be had in this vortex of water, wind and sun that we call home, it’s grabbing it that’s the challenge. Fossil fuels, by contrast, provide us with a source of energy that is already stored and much easier for us to release on demand, with the catch of course being the environmental hit we take in the process of extracting its limited supply.
“Moving power is hard, storing power is even harder.”
- Chase Lochmiller, CEO & Co-Founder, Crusoe Energy
Crusoe is negotiating between the realities of our legacy infrastructure and the growing demand for compute to transition towards a future where clean energy has replaced fossil fuels. Building a new energy system takes time. While we build the clean energy system of the future, we also need to clean up our existing energy system to buy time along the way. We buy time to implement the renewable future by eliminating waste and generating more energy from the infrastructure that is already in place. Also, by the work of people who are committed to doing hard things.
“I’m attracted by difficult. Difficult is a fucking magnet for me. I go straight to difficult. And I think it probably goes back to this idea that there are lots of smart, really gifted, really talented filmmakers out there that just can’t do the difficult stuff. So that gives me a tactical edge to do something nobody else has ever seen, because the really gifted people don’t fucking want to do it.”
- James Cameron, Director (+ Renaissance Man Extraordinaire)
Bitcoin Mining
Crusoe began its operations by deploying modular data centers filled with Bitcoin mining rigs directly onto oil production sites, where it took possession of the otherwise wasted natural gas (via compensation for oil producers) and used DFM to convert it into electricity for mining Bitcoin. The barrier to setting up bitcoin mining solutions is relatively permission-less to begin. You only need a processing unit (for Bitcoin mining, the most commonly used is a specialized hardware circuit called an ‘ASIC’), an internet connection and some cooling infrastructure to convert your energy source into bitcoin. Whether or not the setup can generate profit depends on your energy costs and scale, but the ability to set up and contribute to securing the bitcoin network by computing hashes is available to almost everyone. Obviously the lower the cost of energy, the greater the potential for profit.
Crusoe set-up shipping containers filled with bitcoin mining rigs onto oil fields to use its DFM technology to convert the natural gas into power for mining bitcoin. The company discovered that there was more operational complexity than anticipated in maintaining containers spread out over a remote landscape. To help address these challenges and scale its operation, Crusoe acquired a competitor called Great American Mining in October of 2022. This acquisition provided the company with 4,000 ASIC miners, new facilities, experienced employees and established relationships with large-scale energy producers across multiple states. At this point it could integrate its technology across GAM’s facilities, which increased the scale of its operation.
Crusoe also looked to vertical integration to help scale its mining business. For example, the company acquired a supplier that it was using to design its modular data centers for mining on site. This acquisition not only helped the company to reduce its manufacturing transaction costs but also gave it a platform to advance the electrical and data center infrastructure that it would need to build out its advanced cloud computing stack.
“Bitcoin mining made it possible.”
Bitcoin provides an opportunity to turn the abundance of low cost power into financial return. Crusoe was creative and ambitious in how it approached this opportunity, including by using different project financing mechanisms to advance growth without diluting equity. These efforts in turn created the foundation to enter the AI compute marketplace with the infrastructure and scale needed to provide a competitively-priced clean cloud solution. Following the company’s trajectory is yet another example of how the destinies of cryptocurrency and AI are intertwined through compute.
From Bitcoin to AI
AI models run on accelerator cards otherwise known as GPUs. These cards use a large number of specialized cores (i.e, an A100 GPU has 512 “tensor cores) that perform a certain matrix multiplication (i.e., 4x4) per single cycle. Training large models must distribute the model parameters across multiple GPUs. This process involves significant coordination across multiple nodes that need to frequently exchange information to work together. In centralized data center environments, multiple devices or instances share computing tasks via a high-speed network. To conduct the same training in a distributed environment is a much harder problem to solve, but also reduces costs and democratizes access to building AI systems.
AI is compute-bound; compute access points and cost barriers are infrastructure-level concerns that influence the AI industry on the ground floor. Most AI startups will use a cloud provider (i.e., AWS) as a sort of middleman to access compute. It is more practical and cost-effective for most companies to contract for compute through the cloud rather than drawing that power from the grid themselves. In certain instances it might make sense for AI companies operating at a large scale to build their own data centers. But usually, this aspect of the AI stack is handled by cloud service providers, big and small.
In tandem to scaling its bitcoin mining business, Crusoe has spent the past few years building the cloud infrastructure that is required for high-performance AI computing workloads. This means infrastructure that connects state of the art hardware with the latest in networking infrastructure to deliver power for the most energy-intensive AI tasks. On a practical level this translates to supercomputers equipped with the latest NVIDIA GPUs along with cooling, networking and storage capabilities that provide the performance and scale required to train large (i.e., language and generative) AI models.
Downstream of chip design, the company is vertically integrating its own computing stack. Vertical integration here refers to working at the layer of the energy system first. Traditionally, cloud providers are working one step above the energy layer and one step below the product or application layer. They draw the electricity for their data centers from the carbon-intensive grid, which is expensive and generates new GHG emissions as do all energy intensive-applications powered by the grid. To disrupt this stack requires creating an energetic alternative to the grid. Crusoe does this by repurposing wasted energy and using it to power a virtual cloud-like AI platform.
Energy Abundance in Transition
Given the elegance of converting wasted energy into low-cost power, one of the most interesting questions to ask here is why hasn’t anyone done this before? To begin with, the energy sources that Crusoe is working with are most often produced in harsh conditions and remote locations that don’t support a workforce. Even if they did, the amount of energy that is wasted by a single site may itself not be enough to power an entire industry that would otherwise geolocate to take advantage of that power. The dynamics of this have altogether made it an unattractive value proposition for legacy industrial applications. It is, however, attractive for technological applications that do not need to be physically located by the source of energy. While it is difficult to move power, it is much easier to move data. This establishes a digital pipeline that can extract value from remote locations for globally situated computing workloads.
Modern computing demands more energy but can also be powered more efficiently across space. All of a sudden the wasted energy that would have cost too much to turn into usable power can be absorbed via on-site data centers to power global, virtually-located applications. By understanding this new demand for virtual energy we begin to see how energy systems transform with technology.
To live well, energy consumption is non-negotiable. The U.S. Department of Energy concludes:
“The nation’s standard of living depends in part on energy consumption. Access to adequate energy is now and will continue to be required to achieve a high quality of life.”
- Nuclear Energy Research & Development Roadmap – Report to Congress, April 2010
We need energy. For everything. To thrive, to learn, to innovate, to build, to dream, to create. The environmental impact of energy consumption cannot be solved by reducing the demand for energy as the fuel of life. In fact, you might even say that reducing the demand for energy is antithetical to life, and oppressive in its deprivation of life when sought to be instituted from above.
We believe energy should be in an upward spiral. Energy is the foundational engine of our civilization. The more energy we have, the more people we can have, and the better everyone’s lives can be. We should raise everyone to the energy consumption level we have, then increase our energy 1,000x, then raise everyone else’s energy 1,000x as well.
- Marc Andreesen, Techno-Optimist Manifesto
Technology makes access to an abundant supply of clean energy an economic reality. The demand for compute combined with flexibility in how it can be delivered incentivizes finding low cost points of conversion — such as resources that would otherwise be wasted and renewable sources of energy that are abundant in supply.
As human beings, we have a universal energetic destiny irrespective of the state or status of our birth. Solutions like Crusoe that operate on the premise of “always more, but constantly better” are not only efficient but also elegant in how they respect the equal and abundant energetic claim of every person. It is nearly impossible to have had an intimate experience of the developing world without coming to understand the inviolable current of demand for more energy to support life. Instead of looking at climate change as a matter of reducing energy consumption, we should approach it as a matter of harnessing more energy in harmony with the earth.
“Without energy, there is poverty and death.”
- Cully Cavness, President & Co-Founder, Crusoe Energy
The fact that humans need energy is non-negotiable and our approach to mitigating environmental impact should begin with that constraint. The solution cannot be reduced to reducing greenhouse gas emissions because that is just one part of the story. Rather, how can that be accomplished while continuing to harness more energy to improve quality of life for everyone, today? That’s the game.
I’ll leave you with something I think about a lot. If you were to analogize the history of the Earth to a 26-mile marathon, just the first stride would land you 150,000 years before all of recorded human civilization. This means there could be an untold number of civilizations that have formed and been reduced to dust in the history of the world, and our era is no different. Whether it began 10 or 10,000 years ago (in the grand scheme of things, it’s all the same) we do not belong to the future of our geological epoch any more than we belong to each other, today. So let’s start there.
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