2024-01-18 18:22:04 ET
Marathon Digital Holdings, Inc. (MARA)
26th Annual Needham Growth Virtual Conference
January 18, 2024 3:45 PM ET
Company Participants
Salman Khan - Chief Financial Officer
Chris Brendler - Head of Investor Relations
Conference Call Participants
Presentation
Unidentified Analyst
Okay. Cool. I think these are on now. Great, so I think everyone in the room, knows me at this point, but we're joined by the folks at Marathon. We have, Salman Khan, CFO; Chris Brendler, Head of IR at Marathon. Super excited to have him. Obviously, one of the largest miners and I believe, the second largest holder of Bitcoin out there after…
Salman Khan
That's right.
Unidentified Analyst
Yeah. So…
Salman Khan
The largest in mining space.
Unidentified Analyst
Yes, the largest in mining.
Question-and-Answer Session
Q - Unidentified Analyst
Great, well, I guess, first off, we've seen a number of miners come through. What would love to just kind of take a step back though, hear about Marathon overall, maybe the evolution of the business, and then where you guys differentiate? So I think a lot of investors look at the space and think, hey, look this is a very commoditized space. Where can you gain an edge?
Salman Khan
Yes. Marathon, first of all, thanks for having us here. It's been a great day today. Marathon is the largest, publicly traded Bitcoin miner and we are a truly global company. We have operations in the United States, in Texas, Nebraska, North Dakota, and then overseas in Abu Dhabi and Paraguay. And the company has grown exponentially over the last few years. We have followed something called asset light strategy, where we have invested our capital in miners and saved about 30% to 40% capital on the infrastructure side and instead hosted our machines at third-party sites. And that has given us that upside as the Bitcoin price goes up our fixed -- cost structure remains fixed and as a result of that we keep the price money when the price goes up.
Lately we announced an acquisition that has resulted in, which we are very excited about, it gives us the opportunity to have a portfolio based approach where we own infrastructure and sites and control the power side of the business, as well and provides us opportunity to do energy arbitrage. So all in all, it's a great growth story, and we're very happy and pleased where we are. And this is just the beginning, we feel that this space is in its infancy stages, and we're proud of what we've achieved so far, and there's a lot to come from here.
On top of that, our management team is one of the best in the sector. Our CEO comes from tech background, entrepreneurship, and has taken companies public very successfully in the past. And I come from energy background, traditional energy, oil and gas, been through down cycles, up cycles over the last 20-years, and have been exposed to technology industry and had the opportunity to establish a renewable energy business in solar, wind, and geothermal. And that all of those skills combined together in our team across the board gives us a competitive edge compared to others.
Unidentified Analyst
That's great. Thanks for that. You mentioned that acquisition, which has allowed you to lower power costs in Q3, I know that's been a key point for investors as they think about Bitcoin miners is who's the lower cost operator. What's interesting now though is, you know, Bitcoin prices keep going up, maybe they get 50,000 plus, does the focus then shift back to growth mode, growing hash rate, and maybe there's kind of less scrutiny on the power cost side?
Salman Khan
Yes, global hash rate, as you rightly said, it's been growing, it's been surprising everybody and continues to grow. And what we -- as miners can control is not the global hash rate, but the how efficient we are as operators. And that includes not only operating costs, but also the cost, the capital, how we deploy it and efficiently deploy it. And all those things combined together is important for operations.
When it comes to cost, operating cost, halving coming up in the near-term, and obviously we are planning for a very long-term, not just this halving. I know halving is an event that people talk about because it's coming up pretty soon, but from a long-term perspective, operators who will have a low-cost environment, who will be able to sustain downturns and take the advantage of upturns or bull markets, they will be successful.
And in the short run, with the global hash rate where it is and the halving coming up and older miners out there, about 30% to 40% of the miners are inefficient. That may not survive less than $30,000, $35,000 Bitcoin price. And that can have a pretty serious dent on the global hash rate in the short run. In the long run, obviously, things will play around demand and supply and things will catch up. But, and this is where Marathon is looking long-term. We are viewing two sides of the business; one is the large-scale utility-scale projects, more than $100 per megawatt -- I'm sorry, more than 100 megawatt type projects, which would be similar to how other competitors of Marathon are doing.
On the other hand, we also have opportunity, which is unique to us is energy harvesting opportunities. And that's where we're looking at smaller sites, 1 megawatt to 50 megawatt. And opportunities such as, for example, take the heat 95% of the power that goes into the miners is converted into heat. And we're piloting how to capture that heat and convert that into shrimp farming, for example. We don't intend to be in shrimp farming business, but it’s a byproduct that can reduce our costs and increase our revenues and solve the problem for our stockholders. So something called zero cost strategy, that's one way of doing it.
The other pilot that we're running is looking at landfill methane gas. And methane, just a reminder it's 80 times more harmful than carbon. And 80 times, so think about it for a second. So we are running a pilot with a partner and very pleased with the results. Our cost to mine per Bitcoin is significantly lower about $10,000 per coin, which is very attractive to us. Obviously, there's capital costs that may be needed to expand it further and finding those sites is not easy. So not saying it's a piece of cake, but we do have that bandwidth and we do have that team that can go out and make things like those happen. So all those things combined together cost is important many miners, who are with older machines and high costs will not exist in the next few months.
Unidentified Analyst
Talk to us about where you are then with rig purchases, your latest machines, kind of, which generation those are? And how you're thinking about the overall fleet?
Salman Khan
Yes, so we are one of the most efficient fleets in the industry. We are hovering around 24, 25 joules per terahash. And as we -- I mean this is a newer industry, so most of the public companies have more efficient machines than others. But as I said, between 30% to 40%, we believe machines are inefficient in a $30,000 price environment post-halving. And as we move forward from here, it's an interesting market out there and we want to be opportunistic about it and get the right machines at the right time, at the right price. And it's not just about the most efficient machines, it's the pricing as well. Same as the case with -- it’s -- when we think about financial investments, as I call it, investing in machines, investing in infrastructure, buying in assets organic versus inorganic growth, you have to look at what is the cost of buying that.
So the M&A transaction that we announced, that was at the right price, at the right time. That's why we executed that. And that's an example of going into the right pricing. Chris?
Chris Brendler
I would just say, Marathon as a company has been, sort of, more tilted towards next generation machines. I think with our cost structure and the extra spread we pay our hosting providers, I think it makes sense to be investing in the most efficient scenes possible. That's why we've dumped so much of our 2021 capital raising into the XP's, and you'll expect us to do the same with the next generation models. We have announced that we have segment exahash on order. They're not all from Bitmain, there's some MicroBT and Auradine in there as well, but they're all like the next generation, closer to 20 or below jules terahash. And that's kind of future-proofing. As you go through these halving cycles, really is the -- it's not the miners that go out of business in terms of the companies, although it can be. It's really the machines that are most at risk.
The older machines will not be able to survive. And we've got pretty good data on this now. And so publicly available data. You can sort of go to the, I think Coin Metrics has the best job of sort of mapping out exactly what the network looks like. And yes, over 40% today, it's actually gone up.
Unidentified Analyst
Yes.
Chris Brendler
Because as the Bitcoin price has rallied and transaction fees have increased most of the network hash rate increase we've seen in the fourth quarter is because all the machines are coming back online. So I think it follows that as the network economics change and the halving, those machines will be the first to fall offline. So I'm pretty optimistic given the recent behavior. It seems rational that we'll see the network hash rate come down into halving, but you never know, obviously. It’s -- there's a lot of different factors at play.
Unidentified Analyst
It's a good segue because we've heard from a lot of different miners today that everyone's growing hash rate, sometimes multiples, but also most of the folks think hash rate comes offline at the halving. So I guess how do you reconcile the two? So understood that there's older gen machines, but all the public miners, which is a good chunk of the hash rate out here, we've seen in some cases even up to 5 times exahash planned for not too long after the halving. So I guess what are your plans post- halving? Do you see continuing to grow hash rate, or are you going to be very cost sensitive? Where, say, Bitcoin comes down even a bit more. It's $35,000, $40,000. Does it make sense to take some hash power offline and kind of waited out?
Salman Khan
Yes, it's a very complex question. And it’s the way to view this is that we've got a very strong balance sheet. We’ve got -- obviously depending on the day of the pricing of Bitcoin we were approximately billion dollar in cash in Bitcoin combined together, we’ve reduced our debt significantly last year at a discount saving $100 million for the company by doing that. And this acquisition that we just closed that we announced last week, that gives us ample amount of bandwidth to put miners at a very low cost of operation.
So all of that combined together and then the very efficient machines that puts us at the forefront of the industry when it comes to mining efficiently in a very low price environment. We feel very comfortable and very blessed that events like having this time around specifically, although it may result in the industry bleeding and some people going out of business, for us we have ample amount of liquidity to go for a number of years, even if the price stays very low, static for the next couple of years. And that is a very unique position to be in. Not everyone is in that position.
The other thing that is important for us is, as the price goes down, and companies start shutting down, the hash rate will start to come back up at some point in time, because it's a demand and supply game. During that period of time, we may have more opportunities to consolidate the industry. And this is no way a guidance, but it's more a methodical thought process that we have a unique position, compared to our competition where we have this asset-light situation that we've addressed with this asset-heavy acquisition. But this is not where we're stopping, there's more opportunities out there.
Unidentified Analyst
Yes.
Chris Brendler
So answering on that, on the industry, I was modeling this as a sales analyst, I always thought that as you got closer to having, capital flows would slow down and the network hash rate would start to slow down. And we've seen the opposite, right? And I think it actually makes sense. What you're seeing across the industry is miners looking to upgrade their fleets, because everyone kind of knows that even the J PROs will be at risk. The S19s I think will be the first sort of recent model to start turning off and then the J Pros and eventually the XP's. So I think it makes sense for miners to invest heavily in next generation machines now so they can be ready for the having when it comes in April and I think you'll just see the upgrade cycle play out. So it's the only industries in the world that's like forced to get more efficient every four years.
Unidentified Analyst
And would you say that the efficiency gains though in new rigs are we almost at the point where they're as efficient as can be? It almost seems like we're going to get to the point where you can actually start depreciating these over five years versus they have a two-year almost useful life here, because there are just limits to how efficient these rigs can get so I guess after this having what moves the needle in terms of getting more better economics. Is it just starts to become more power dynamics, because the rigs maybe aren't going to get any more efficient?
Salman Khan
Yes, rigs are still continuing to get efficient, more efficient with time. We're seeing, with the passage of time, technology improving and it's a difficult business to be in being a manufacturer. So efficiencies and differentiation in the product and technology and the software, all that stuff becomes important. And we're seeing that the technology keeps on improving with time and machines becoming more efficient. The thought that -- the way I see this is that that's why we have these two-pronged approach to the business. You've got this large utility scale business and then you've got this energy harvesting business, and that's where your older miners could be placed into the energy harvesting business, to cycle the life of the asset.
And I think my perspective is that this is certainly not two years it's more than that. That you can utilize miners more than that, especially the more efficient ones. But there will come a time, your question is reasonable, they will come a time that it will plateau, and it will be interesting to see how these miners can go on for years and years and create value.
Unidentified Analyst
Got it. And is there any, we've heard a lot about power curtailment credits, power sales. Is there any power dynamics at play for you guys that you can employ to lower your all in power costs?
Salman Khan
So the acquisition that we just announced that is Texas and Nebraska 290 megawatts in Texas and 100 megawatts in Nebraska and the one in Texas obviously we are going through a freeze right now in our climate related impact and in our weather-related impact in the Texas region or [Arcot] (ph) region. When that happens, we curtail and the way this works is that we have attractive rates in that region, because we participate in that demand management. And as we curtail our power, we get paid to do that and by reducing our costs to buy the power in the usual times. And then on top of that we have hedge that protects our interest on the power cost side so as you can see this is a -- this industry is a very interesting industry we don't control global hash rate, but everyone wants to grow if you don't grow you're going to be left behind so your share of the global hash rate goes down.
On the other side cost side you've got to solve the problem of the power. And the lower your cost, the better margins you have. And that includes not only power asset management, but also hedging and reducing your costs. And demand management, certainly the grids love that because think about being in Texas right now, you've got extreme weather conditions, you need that power to heat the houses and keep people alive and Bitcoin mining industries providing that right now. And that's something to be proud of.
Unidentified Analyst
That's great. And just also, as we are on this acquisition, you inherited some hosting contracts from this what is the longer-term strategy with that? Is it to get back those back in the South mining remind us also how much time is on those?
Salman Khan
Yes, so 390 megawatts out of that about 64 megawatts, 65 megawatts. We are already there with that amount 65 megawatts in there. The remainder of the, there's an 80 megawatts, 85 megawatts that is readily available for us right now where we can put our miners we already have 7 exahash miners in order for which are being delivered this starting this month so that provides us a great opportunity to place those miners. And then on top of that there's about 245 megawatts left which is hosted and about half of that the contracts are expiring in the next six months. So it gives us additional 120 megawatts capacity. The rest of the 120 megawatts depending on how having goes and the contract goes for a year or so out from here. But there are opportunities to bring our own miners and put them in place because the rate of return for us is way better within our own mining operations.
Unidentified Analyst
Yes. At that site, I believe it's around $0.04 and $0.045?
Salman Khan
Yes.
Unidentified Analyst
So power cost, pretty low there. So if you do get the full, I guess, 390 megawatts self-mining at that rate, that's about a 30% reduction in your portfolio power cost.
Salman Khan
That's right.
Unidentified Analyst
Yes.
Salman Khan
That's right.
Unidentified Analyst
Okay, got it. I guess also talk a little bit about, so the balance sheet is healthy, a lot of cash, a lot of Bitcoin. This acquisition seems to certainly make sense. Lowers your power cost, which has been a key point for folks. Are you seeing other assets out there in the marketplace where you would look to do this maybe a few more times?
Salman Khan
Yes, so it's, as I alluded to in the beginning, mergers and acquisitions sounds sexy and nice, but you've got to pick up the right opportunities. And this acquisition made sense for us, pricing was what we felt was good. And at 250,000 per megawatt, roughly speaking, that becomes more attractive. Think about it. If we have to build the side, some of our competition that's building large scale sites right now are paying $700,000 to $800,000 per megawatt. We bought this and that's four years out from here. And there's more risk in consulting as you know, with the passage of time, permits, and things like that.
Here we acquired something which is readily available and provides us access to hash very quickly at a very low cost. So cost is an important element, right? And that becomes the question mark as to opportunities are there. We get calls every day from somebody, and it's a small industry, and we are viewed as an industry consolidator, we have the bandwidth, we have the capacity. Well, we want to be picky and choosy as to what we go for and from here. I mean, we feel very good where we are right now.
Unidentified Analyst
That's great. Is there any other areas you see that you could lean into to lower power costs? I know in the past it's been mentioned that some of the companies that you have your A6 plugged in at who are hosting you there might be an opportunity to rework some of those contracts. Is there anything on those dynamics there you could talk about?
Salman Khan
Yes, our focus has been to bring our cost close to zero, right? And that’s our CEO talks about that zero cost strategy and some of that can be achieved not just by the traditional mode, but also through the energy harvesting businesses that we talked about earlier. And the contracts are out there. They're subject to can they be open for negotiation? Sure. Our eyes are on the on the prize money. We feel that being at the top quartile rate of return type company with very efficient operations is the answer for this and that's what our eyes on it.
Chris Brendler
One thing I’d add is that I've been telling people to put myself and hat back on is that you know Marathon has been looked at as a higher cost operation, because of our hosting contracts and our asset life strategy, but we're actually the only minor that has the opportunity to lower our costs by changing it with transactions like this, you know well, the other minors that have their own operations, you can't really go much lower than the electricity costs we're already paying. So we're kind of unique in that we have this opportunity to lower costs through this transaction and then potentially others. But I think we're looking for transactions that help lower costs. If it's shrimp farming that gets us there, or if it's M&A, we're considering all things. I do think we're not that interested in buying companies. I think we're more interested in infrastructure at this point, because we'd rather run stuff ourselves and use the latest generation of miners than take over older, unprofitable miners at this point.
Unidentified Analyst
Great. Talk to us how Garden City has progressed. I didn't know there's been delays there at that site. Not on you guys. I believe those are all with applied digital, they have delays with -- I don’t know what is, is it transformer issues or?
Salman Khan
It’s a funny business in the sense that, yes we have the permits, but then you have to get the utility to say yes go ahead, so that red tape process, as I would call. That takes some time. The facilities were constructed and nicely done by APLD, and our miners were there, delivered timely. It took some time to get the go ahead from the utility, and that's a little bit of a hard burn for us. But we're finally there, and we're happy that it's energized. And it's operating.
Unidentified Analyst
So is it fully energized or I believe we had them yesterday, they still said 65 megawatts need to come online? Or is it?
Salman Khan
No, it's fully energized.
Unidentified Analyst
Oh, everything's going online.
Chris Brendler
Yes, so you on our website, you can see our locations and how much is online in Garden City, it's at 4 out of 4.1. So it's almost 100% there as of December 31. So…
Unidentified Analyst
Got it.
Chris Brendler
Maybe a different aspect of that site, it’s not online yet, but for Marathon we’re fully online [Multiple Speakers]
Unidentified Analyst
Yes, okay.
Chris Brendler
Looking for more.
Unidentified Analyst
Great we’d love to turn it a little bit broadly on the space in mining in particular, but obviously the Bitcoin ETF has come out there's been interesting dynamics there's traded for what I guess five days now. Do you think this is a popular question so I'm sure you've already gotten in a number of times, but with an ETF out there especially you guys were sitting on so much Bitcoin, you people will say okay, well [Indiscernible] almost a peer play Bitcoin trade out there, I can do -- I don't need minor exposure in maybe in particular Marathon which could be just kind of Bitcoin privacy?
Salman Khan
Yes, so I I'd like to look at the data because data is king historically last year Bitcoin if you had invested in Bitcoin you would have gotten about 150%.
Chris Brendler
Yep.
Salman Khan
Increase in your appreciation from January 1 through December 31 versus our stock, which went up 570% or so, roughly. So there's that delta between bitcoin and miners that will always exist. And there's a lot of history of ETFs, let's bring you all to Gold ETF, let’s look at all ETF, so theirs is a lot of history out there. There are people who would be interested in investing in ETF for sure, because they want to allocate something, they don’t know that companies, they just want to exposure to Bitcoin and that’s a great way of getting that. But if you want to great way of returns you would pick stocks that will get you that way to return. And that’s why miners give that premium to the investor. So that’s the way we view it, that’s the wat it has existed for other industries and that’s the way I believe it's going to play out from a long-term perspective.
Now in the short run there will be some pluses and minuses as we are seeing right now with the ETF just launched and the demand will be generated through investors if even if everybody invests 0.5% or 1% of their portfolio towards ETF those ETF's have to go and buy Bitcoin. As those at spot ETF's and that will drive up the price. In terms of where do we come into play, look micro strategy would be a good competition to ETF's probably, because that's their strategy to buy and hold Bitcoin we are a miner, we just happen to hold Bitcoin because we view that as a valuable investment for us and we read that as an investment as disclosed in our financials. And our investors frankly love that and we get that premium to our stock versus others as a result of that and the arbitrage and the liquidity that we have in our stock price.
Unidentified Analyst
So there is certainly a lot of liquidity in the stock. I believe it's one of the most traded on the Nasdaq. I guess is there any plan that they may be moving forward you would sell more Bitcoin as you operationally produce it or is the strategy still to hold a you know a considerable amount?
Salman Khan
So we're long on Bitcoin we believe the Bitcoin price from a long-term perspective will be great and we view this investment as going to be one of the most profitable investments for us. When it comes to monetizing Bitcoin, last year we monetized Bitcoin to pay for our operating costs for example, run the operations, pay for employees and things like that. And for growth capital and for buying minors and sides, all that stuff is paid through our ATM or our equity. And we view that mix to be very valuable. It has worked out very well for us historically. And it all depends on the market conditions, how the market conditions would play out. As of now we feel equity and Bitcoin mixes is good. They may come a time in near future where just equity may be more valuable, they may come a time where just Bitcoin may be valuable.
So it’s a great problem to solve and great optionality to have frankly from a feel blessed to be in that situation to be making those decisions where you have to pick and choose one or the other.
Unidentified Analyst
Understood, thanks for that. And also, as we think about the whole industry, and I've asked all the biners here, and Chris maybe you have some insights in those. It’s been hard to gauge how much nation states or mining, but you keep hearing about it. Do you guys seen anything concrete where nation states are mining Bitcoin, they are actively involved and is that kind of apply pressure to some of the public miners here, which maybe can access as low as…
Salman Khan
Yes, it’s a million dollar literally million dollar question. It’s well China banned Bitcoin mining a lot of those miners moved towards the West, so most of them came to Texas and Kazakhstan and other places. And mining didn't stop, mining continued. But we keep on hearing that China is still, there are people mining there, Russia and other country where there's mining going on. As the price of Bitcoin goes down to the point that some of those miners are not profitable, at that point in time, it will be interesting to see because these sovereigns they may continue to hash and we may not, it’s not easy the decline in the has rate the way you would expect in a normal market condition, where 40% of your miners are not profitable.
So it would be interesting to see how that comes into play, but we don't know for sure how much is from China and Russia and other places, but it will be interesting to see how it plays out for the halving.
Chris Brendler
That's a great point. I didn't think about that. So you know if we're wrong about how much hash rate comes offline it may be because they have different incentives and there may be more mining going on at the state level that we didn't realize. But unfortunately, I haven't seen good data, I think it doesn't feel like it's the majority. It's fairly interesting that the public miners share has kind of fluctuated around 20%, 25% and not really growing. And even though the network has rate has grown so much. I also think you think that the discussion earlier of the tools for terror has the older machines are online and none of the public miners that have older machines that I know. So that also lends creates to, you know, something else mining out there, that’s not doesn’t have to seem the center structure, so I think the halving will be a great of looking at that.
Unfortunately I don’t think we’ll get much better data, this is going to have a, you know, you want to broadcast if you're doing it at scale in Russia or China, so, you know, we'll have to be left guessing. But I think it's one of the things that, you know, it's really a risk for the industry, long-term. You know, there's no barrage to entering this in this business. We think we do it really well, but there's all kinds of companies that also do this, and as long as they have the same economic incentives, we're going to be just fine. If there's different incentives out there that may be a little bit different than where we're challenging, but we're ready for anything at this point.
Unidentified Analyst
There you go, as you do think out successive halvings though, does it become a time where Bitcoin miners need to move more upstream integrated with energy producers, you do get to the point where nation states are maybe the only ones left that can do it profitably, I guess how do you think about maybe not necessarily this halving, but one more halving or maybe two halve?
Salman Khan
Yes, from a very long term perspective, it would be speculative at this stage, but it makes sense that there could be some play with the energy industry and balancing the grids, you know battery technology isn't good enough to provide that arbitrage that it was supposed to provide for solar and wind. What miners can do is that they can provide that arbitrage. We can shut down miners by flick of a button and switch them on very quickly without losing much. And utilities and grids love that. And that is an aspect that makes it very attractive for that side of the industry for Bitcoin mining.
Look at the end of the day, it's the lowest cost producer and the most innovative company that's going to survive from a very long-term perspective. And whether it's the company, whether it's the sovereign, only time will tell. At some point in time, you can compete when there's a level playing field, but if there are countries, who have very low cost of power, and it's difficult to compete with that as in a market economics perspective.
Chris Brendler
The only other add there would be the transaction fees. For years, folks said, you know, said, you know, how are transaction fees going to take over for the block board? That, you know, no one's paying transaction. Well, now we know that people actually do pay transaction fees. They're very significant, and I'm feeling more encouraged about the longer term outlook of Bitcoin mining, as the block reward reduces because of the transaction fees that we've seen recently, but also because, you know, the network is brilliantly designed. It rebalances. So if they're block rewards or insufficient given where Bitcoin price is, the network cash rate will just have to come down. There will always be miners. They'll always be paid based on their costs. So as long as, you know, no one solves electricity problem, I think there will always be miners. And we may, at some point, see an all-time peak in the global network hash rate because, you know, the successive halving's make the hash rate continue to go down.
Salman Khan
Yes. I come from oil and gas industry, and for 20 years, I've lived on down cycle and up cycle. The difference between that industry and this industry is that, you've got ExxonMobil can go out and have a huge discovery of oil, and suddenly you have ample amount of supply. In this case, you cannot have that discovery. It's mathematically restricted, and that puts this asset in a very different class, compared to other assets. Even for gold, you can have a discovery, and you can have more gold in the market.
Bitcoin is limited by capacity by design, nobody can change that. And that puts it in a position that it will be very valuable at some point in time, whether it's a few miners left or a one miner left from a long-term perspective, it will be very valuable. And just like Chris said, it's the transactions, the, call this, like, the Internet of the 90s. I’m a 90s kid, growing up in the 90s, how the Internet was. There was nothing on the Internet. And how trillion of dollars of businesses have been built on top of that few decades later. Bitcoin is that infancy stage technology. There will be a lot built over a period of time, and there will be ancillary businesses that come on top of this. So the future is bright.
Unidentified Analyst
That's great. And that segway segways me to my last question, Chris. I appreciate you bringing up transaction fees. So mostly driven by ordinals, it seems right now at one point, it was, you know, a few weeks ago, maybe a month ago, it was 30%, 40% of block rewards for these transaction fees. When I talk to a lot of buy side folks, they don't have the transaction fees built into their models. Do you think this is sustainable and it's going to stay elevated where folks should start building in these transaction fees [Indiscernible]?
Salman Khan
I think it's a little bit early. We are still going through that process and discovering as to where does this land. Obviously, we're very pleased to see the transaction fee go up, from a longevity standpoint, a very long-term perspective, absolutely, there will be a fee. There is a fee, but, it will increase with the passage of time. And as the subsidies keeps going down in the in block that miners are earned. There will come a time where the fee is going to be higher than what you earn as a Bitcoin, block. So we expect that to happen from a long-term perspective. Only time will tell whether what we've seen, through the ordinals in the last couple of months. Well, is that sustainable or not?
Chris Brendler
Yes. The only thing I'd add that we've been thinking about recently is the is the havoc. You know, Bitcoin transaction fees are not denominated are not affected by the halving. So just mathematically, the day of the halving, they'll double as a percentage. And then also, just given what the halving does, it's going to reduce network cash rates, the increased block time, so more demand for block space. So I would think there'd be natural pressure on transaction fees to go up even more. And given the math of bigger percentages as well. We still, internally, haven't really muddled that in. Like, it seems like it's a lot of upside, because transaction fees, especially in December, was very powerful for us. It's all profit, basically. We're not planning on it. So, hopefully, it continues, but, it'll be interesting to see what happens in April.
Unidentified Analyst
Yes. that's where I was kind of thinking of it as just a potential upside surprise is that hasn't really been baked into any models.
Chris Brendler
Yes. Right.
Unidentified Analyst
That's great. With that, we could take a few questions from the audience here. Yes.
Unidentified Analyst
Yeah. So, first of all, just interested in what you guys are doing on the just monetizing byproducts, waste products, and some of the landfill gas. Background about my previous life with some clean tech projects, but how scalable do you think that is? I mean, obviously, the landfill gas, all sorts of issues with that [Technical Difficulty] gas, with the inconsistent gas we use engines on there rather than fishing turbines. You know, that I was in the shrimp farming and monetizing the waste heat, but how scalable do you think that is?
Salman Khan
So I'm supposed to repeat the question. I'll repeat the question. The question is about landfill gas and how difficult it is. It can be challenging and how skilled, but, it can be for us, and the shrimp forming, that was the other question. It's a valid question. It's this is a difficult problem to solve. It's not an easy one. Otherwise, anyone would have solved it. But we believe we have a solution out there. And, our tech team has done a great job in -- an ops team going out and running this in a test phase, and it the results look very promising. The question is, can we repeat this and get the same results again and again, and only time will tell. We feel very opportunistic about, you know, optimistic about it. But it's, there are a lot -- there's a lot of stranded gas and stranded energy out there in the world.
And it cannot get to the grid because it's too far away. It's in a far flung area. And that's where Bitcoin miners like us become because we've got those modulars, where we can put those containers and put those modules in there. And quickly start hashing. So that puts us in a very unique position, and, we feel that's a -- it's a solvable problem in terms of the scale. It can grow very quickly. It's a matter of spending time and energy and finding those opportunities and seeing if it's economical continuously economical with the similar amount of results that we've seen so far. So more to come on that. I hope that answers the question. Yes. , yes.
Unidentified Analyst
Yes. That's great, that you guys are doing it.
Salman Khan
Yes.
Unidentified Analyst
So sounds like so have you guys actually done any scenarios of modeling on how much of your fully depreciated fleet that you need to recycle and redeploy to making other zero cost, like, [Indiscernible] farming projects that would fully offset your cost down to zero.
Salman Khan
So the question is about, fully depreciated machines if we've done an analysis of how much machines do we need to cycle towards our energy harvesting business. So there's no need for us as of now. Our machines are one of the most efficient in the industry at 25 hovering towards 24 joules per tera hash, and the newer miners that we're looking at is are in the high teen type situation. So we expect our fleet to remain very young, in the near-term, so there's no push from economics perspective and also, miners perspective. All we're doing is we're planning for the future, because none of the miners right now are talking about this, and there will be, an aha moment for the industry that there's the older miners.
What do you do with that? There will be a maintenance capital going forward, and we're at the forefront of that. We're planning ahead and, trying to put these miners to use, and we feel good about that.
Unidentified Analyst
Great. We're actually I think we're 45 seconds over. So if there's not any other questions, I want to thank, Salman and Chris. Appreciate you guys being here.
Salman Khan
Great. Thanks, John. Appreciate it.
Chris Brendler
Thanks for having us.
Unidentified Analyst
Thank you.
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Marathon Digital Holdings, Inc. (MARA) 26th Annual Needham Growth Virtual Conference