Marathon Digital Holdings Inc. (NASDAQ: MARA)

Marathon Digital Holdings Inc. (NASDAQ: MARA) is a digital asset technology company that mines cryptocurrencies with a focus on the blockchain ecosystem and the generation of digital assets. It owns cryptocurrency mining machines and a data center to mine digital assets.

Marathon is one of the largest enterprise Bitcoin self-mining companies in North America and aims to build the largest Bitcoin mining operation in North America at one of the lowest energy costs. The company currently operates its proprietary data center in Hardin, Montana, with a maximum power capacity of 105 megawatts. The company also owns 2,060 advanced ASIC bitcoin miners at a co-hosted facility in North Dakota.

Marathon plans to grow by improving Bitcoin production though increasing its hash rate. As the company continues to deploy more powerful miners, it increases its hash rate and therefore the probability of earning bitcoin. Marathon also intends to “de-risk” the business by becoming more resilient to potential declines in the price of Bitcoin. By remaining agile and leveraging its scale, the company can negotiate favorable contracts and quickly adapt to changing circumstances, mitigating risks to the business. Marathon is convinced that adoption of Bitcoin as a digital currency is accelerating, and the company is scaling as Bitcoin appreciates in price.

Marathon is on track to deploy a total of 133,000 miners, which are expected to generate approximately 13.3 Exahash by mid-2022. This fully deployed hash rate, which the company aims to achieve by July 2022, represents a 7,123% increase in hash rate since January 2021.

Marathon helps investors gain exposure to Bitcoin without having to deal with the complications of holding the cryptocurrency directly. The company plans to be 100% carbon neutral by the end of calendar 2022.

Operations

Marathon believes mining is the engine that fuels the Bitcoin ecosystem. Mining verifies transactions and provides security to the Bitcoin blockchain. It is how new Bitcoins are added to the market. Mining works as Bitcoin transactions are pooled together in a “block.” Once a block is formed, miners compete to solve the block, like solving a puzzle. The puzzle is difficult to solve but simple to verify, like Sudoku for example. Once a miner solves the puzzle for a block, the transactions in that block are “verified” by the network. The new block of verified transactions is attached to a chain of prior blocks, hence the name “blockchain.”

For solving the puzzle, a miner is rewarded with Bitcoin. The current block reward is 6.25 Bitcoin per block. One block is solved, on average, every 10 minutes. This is the process Marathon engages in to mine Bitcoin. The company controls some aspects of its business, but others are out of its control. For example, Marathon controls its hash rate, or the rate at which its miners perform computations to solve a block. The company also controls its cost of electricity to operate its miners and, of course, its corporate expenses. Marathon cannot control the market price of Bitcoin, nor the price of miners. It also cannot control the block reward, which is periodically reduced based on an established formula.

Market Overview

According to a market analysis report from Grand View Research, the global blockchain technology market size was valued at $3.67 billion in 2020. Grand View forecasts the market could expand at a CAGR of 82.4% from 2021 to 2028. That CAGR projects a market worth a whopping $450 billion by 2028.

Grand View points out that blockchain has emerged as a highly promising technology. Blockchain provides an open, immutable, distributed public ledger that can be accessed by several parties involved in a transaction, and it acts as a universal depository of all transactions between the involved parties.

The increasing worldwide acceptance of cryptocurrencies is one of the major drivers of market growth, Grand View reports. Commercial and central banks across the world are now using blockchain technology for payment processing and issuing of their own digital currencies. The technology enables cross-border payments that are less expensive and faster as compared to traditional systems.

Management Team

Fred Thiel is CEO at Marathon. He previously co-founded and served as chairman of Sprocket, a blockchain and cryptocurrency technology and financial services company. Prior to that, he served as chairman and CEO of Local Corporation, an $80 million Nasdaq-listed leader in online local search and digital media, mobile search monetization and programmatic retargeting markets. During his career, he has held the title of CEO across multiple companies, raising more than $150 million through both public (IPO and secondary offerings) and private capital sources.

Jim Crawford is COO at Marathon. Prior to Marathon, he served as Chief Information Officer at Modavox/Augme Technologies. He is a named inventor on several internet technology patents pending with the United States Patent & Trademark Office. He was a founding member of Kino Interactive LLC, as well as a founder of AudioEye Inc. (NASDAQ: AEYE). Mr. Crawford received his MBA from Washington State University.

Simeon Salzman is CFO at Marathon. Prior to joining Marathon, he served as the CFO and senior vice president of the Las Vegas Monorail Company from 2018-2020. Before that, he served as the CFO for Wendoh Media and Corner Bar Management from 2015-2018. He holds a bachelor’s degree in accounting and a bachelor’s in criminal justice and criminology from the University of Maryland. He is a Certified Public Accountant.