Ever wished Bitcoin mining was a bit less complicated? Luxor Technology gets it. They’re on a mission to simplify things for everyone in the Bitcoin mining world. To do just that, they’ve developed a whole suite of tools – think mining pools, hashrate derivatives, data analytics, and even an ASIC brokerage – all designed to empower miners of all sizes to grow and thrive.

Aaron Forster, Luxor’s Director of Business Development, has been part of this exciting journey since October 2021. He’s witnessed firsthand the company’s impressive growth, expanding from a tight-knit team of around 15 to a robust crew of 85 in just three and a half years.

Before diving into the world of Bitcoin, Aaron spent a decade navigating the Canadian energy sector. This background gives him a unique perspective, which he’ll be sharing at the BTC & Mining Summit at Consensus this year (May 14-15). He’ll be discussing the fascinating future of mining in both Canada and the U.S.

Leading up to the Summit, Aaron sat down with CoinDesk to give us a sneak peek into his thoughts. They chatted about everything from the increasing trend of Bitcoin miners exploring artificial intelligence to the ever-growing sophistication of the mining industry, and of course, how Luxor’s innovative products are helping miners manage and mitigate different kinds of risks.

Just a heads up, this interview has been condensed and edited to make it super clear and easy to read.

Let’s talk mining pools. For those who don’t know, they’re essentially a way for miners to pool their resources together to boost their chances of snagging those valuable Bitcoin block rewards. Aaron, can you break down how Luxor’s mining pools operate?

Aaron Forster: Think of mining pools as smart organizers. They bring together a bunch of miners to smooth out the unpredictable nature of solo mining. Solo mining? Well, it’s kind of like playing the lottery. You could strike gold tomorrow and find a block reward, or it could take, well, maybe a century. But whole time, those energy bills are ticking up! When you’re just dabbling, it’s not such a big deal, but when you’re building a serious business around it, that unpredictability becomes a real challenge.

Now, the most common type of mining pool you’ll hear about is PPLNS – that’s “Pay-Per-Last-N-Shares.” Essentially, with PPLNS, miners only get paid if the pool actually solves a block. So, you’re still dealing with that element of luck, similar to solo mining. This can lead to revenue swings, especially for those big industrial-scale miners who need more stability.

That’s where “Full-Pay-Per-Share,” or FPPS, comes into play. And guess what? That’s exactly what Luxor uses for our Bitcoin pool. With FPPS, miners get paid consistently for their work – based on the “shares” they contribute to the pool – regardless of whether we actually find a block at that moment. This brings a welcome sense of revenue security for miners, assuming the hashprice holds steady. You could almost say we’ve become a sort of insurance policy against mining luck!

The catch? This FPPS model requires some serious financial muscle. Because while we’re taking away the revenue rollercoaster for miners, we’re taking on that variability ourselves. We’ve got to have a solid plan to manage that risk. But thankfully, over longer periods, it becomes quite predictable. And we’ve got partners who help share that risk with us, so it doesn’t all fall on our shoulders.

Switching gears a bit, let’s talk about Luxor’s ASIC brokerage. What’s that all about?

Sure thing. We’ve really become a go-to place for ASIC hardware on the secondary market. While we’re strongest in North America, we’ve actually shipped to over 35 countries worldwide. We work with everyone – from big public companies and private firms to institutions and even individual retail customers.

Our main role is as a broker, which means we connect buyers and sellers, mostly in that secondary market. Sometimes we team up directly with the ASIC manufacturers themselves. And in certain cases, we even take on what we call “principal positions.” That’s where Luxor uses its own funds to buy ASICs and then resell them. But honestly, most of our business is in simply connecting those buyers and sellers.

And speaking of innovation, Luxor also pioneered hashrate futures contracts. That’s pretty cutting edge! Can you tell us more?

Absolutely. We’re always looking for ways to move the Bitcoin mining industry forward. Think of us as a hashrate marketplace in many ways, especially with our mining pools. We wanted to take things a step further and bring hashrate into the more traditional finance (TradFi) world.

Our goal was to create a tool that lets investors get involved with hashprice without needing to actually own any of that mining equipment. Now, hashprice – that’s basically the revenue miners earn, either hourly or daily, and it can bounce around quite a bit. Some use our tool for hedging against those fluctuations, while others might see it as a way to speculate. Ultimately, we’re providing a way for miners to sell their future hashrate and use it as a form of collateral, or even to help finance their expansion.

So, the idea is miners can sell their hashrate in advance, get Bitcoin upfront, and then use those Bitcoin as they see fit – maybe to buy more ASICs or expand their mining operations. It’s essentially turning hashrate into something you can secure financing with. They commit to sending us a certain amount of hashrate each month for the contract duration, and they get a chunk of Bitcoin at the start.

There’s currently more demand from buyers than sellers in this market. We have a lot of people and institutions keen to earn yield on their Bitcoin. The rate at which you “lend” your Bitcoin essentially becomes your interest rate. Another way to look at it is you’re buying that hashrate at a discount. This is particularly appealing to institutions or individuals who want exposure to hashprice or hashrate but want to avoid the complexities of physically dealing with Bitcoin mining. They can get that exposure synthetically by buying Bitcoin and putting it into our market, effectively lending it out, earning yield, and getting that hashrate at a reduced cost.

That’s fascinating. Shifting gears one more time, what really excites you most about the Bitcoin mining space right now?

For me, it’s the growing acceptance and the natural evolution of our industry into broader markets. We can’t ignore this shift towards AI and High-Performance Computing (HPC). Instead of just seeing massive, power-hungry buildings solely dedicated to Bitcoin mining, we’re starting to witness large miners becoming key infrastructure providers for the rapidly expanding world of artificial intelligence.

Using Bitcoin mining as a launchpad into even larger, more capital-intensive industries like AI is incredibly exciting. It brings a new level of validation to what we do because we’re approaching it from a completely different angle. The deal between Core Scientific and CoreWeave is a prime example – seeing these two seemingly different businesses come together and complement each other is truly game-changing.

When we look at our own roadmap at Luxor, we recognize we need to follow a similar trajectory. Many of the products we’ve built for the Bitcoin mining industry have clear parallels to what’s needed in AI, just on a different scale. Of course, things are currently much simpler in Bitcoin mining compared to the complexities of AI. But for us, this is a natural first step into the HPC space, and we are just at the very beginning of this exciting journey.