Failure Analysis
Core Scientific's failure was a cascading collapse triggered by overleveraged expansion during the 2020-2021 bull market, combined with catastrophic counterparty risk and operational inflexibility....
Core Scientific \USA
Core Scientific was a vertically integrated Bitcoin mining and blockchain infrastructure company that owned massive data centers, mining hardware, and provided hosting services. They promised investors exposure to Bitcoin's upside while generating predictable revenue from hosting fees, positioning themselves as the 'picks and shovels' play during the crypto gold rush. The value proposition was compelling: institutional-grade infrastructure that would profit regardless of Bitcoin's price volatility, combined with direct mining operations for maximum upside capture.
Discover the reason behind the shutdown and the market before & today
Market Analysis
The Bitcoin mining industry in 2024 has consolidated dramatically. Public miners now control approximately 28% of network hashrate, up from 15% in 2021, but...
Startup Learnings
Commodity businesses cannot sustain SPAC-level growth expectations. Core Scientific's SPAC merger forced them to deploy capital rapidly to justify valuations, leading to expansion at...
Market Potential
Bitcoin mining has matured into a low-margin, capital-intensive commodity business. The 2024 halving reduced block rewards to 3.125 BTC, compressing margins further. However, institutional...
Difficulty
Rebuilding requires massive capital expenditure for data centers and ASIC miners (hundreds of millions), access to cheap electricity contracts (increasingly competitive), sophisticated thermal management...
Scalability
Bitcoin mining scalability is fundamentally constrained by physics and economics: electricity costs, hardware depreciation, network difficulty adjustments, and Bitcoin's halving schedule. Unlike software, you...
Rebuild & monetization strategy: Resurrect the company
Execution Plan
Phase 2
Deploy 500 NVIDIA H100 GPUs in a modular container with immersion cooling. These GPUs can mine Bitcoin using modified firmware or run AI training jobs. Total capex: $15M for hardware, $2M for container and cooling infrastructure.
Phase 3
Build workload orchestration software that monitors: (1) Real-time electricity prices from ERCOT/grid operator, (2) Bitcoin network difficulty and price, (3) GPU rental demand from AI customers. Algorithm automatically switches between mining and AI training to maximize revenue per kWh.
Phase 4
Launch with two pilot customers: (1) An AI research lab needing 100 H100s for 2-week training runs at 40% below AWS pricing, (2) A Bitcoin mining pool for off-peak hashrate contribution. Prove the switching mechanism works and generates higher revenue than single-use infrastructure.
Phase 5
Collect 6 months of operational data showing: energy cost per compute hour, revenue per workload type, demand response credits earned, and total ROI. Use this data to raise Series A and replicate the model across 10 sites in different grid regions.
Monetization Strategy
Three revenue streams: (1) Bitcoin mining revenue during off-peak electricity hours (typically 10pm-6am) when spot prices are $0.01-$0.02/kWh. At 500 H100s mining, expect 2-3 BTC/month at current difficulty, worth $180K-$270K monthly. (2) GPU rental revenue during peak profitability hours. Rent H100 clusters at $2.50/hour per GPU (vs. $4/hour on AWS) to AI customers for training jobs. At 60% utilization, 500 GPUs generate $900K monthly. (3) Demand response credits from utilities for load curtailment. Texas ERCOT pays $500-$2,000 per MW per event. With 5MW capacity and 20 events annually, earn $500K-$2M yearly. Total monthly revenue: $1.3M-$1.5M. Operating costs: $200K electricity (at $0.02/kWh average), $100K facility/cooling, $50K labor, $150K equipment financing. Net margin: 40-50%. The model scales by replicating sites in different grid regions with renewable curtailment problems. Exit strategy: acquisition by energy company (NextEra, Vistra) wanting to add flexible load assets, or by cloud provider (Oracle, CoreWeave) wanting cheaper compute infrastructure.
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