But beneath the wellness oasis lies a hidden operation: a dozen Bitcoin mining units are churning away 24/7 to power the spa’s two heated pools.

Inside the 11,000-square-foot refurbished factory, Bathhouse began its pre-crypto days in 2019 with three thermal pools (one hot, one tepid, one cold), two saunas, a steam room, and two hammams—heated marble stones for patrons to lay on. The permanently toasty environment translates to a whole lot of energy use. 

“Our ConEd bill kind of makes us want to throw up,” Bathhouse cofounder Travis Talmadge recently told Fortune.

Bathhouse began mining Bitcoin on its premises in 2021, using miners as “fancy pool heaters” to generate cryptocurrency in addition to heat. Miners now power its two heated pools using residual heat.

“We’re basically in the heat-delivery business, or that’s a big portion of what we do,” Talmadge said. “The ability to pull heat off of mining Bitcoin made all the sense in the world—like we get a rebate for the energy that we buy.”

From dingy to designer

Talmadge met his cofounder, Jason Goodman, in 2014 thanks to a serendipitous Airbnb booking. Talmadge was vacationing at a property Goodman owned in Montauk, and the pair struck up a friendship over campfire hangouts on the beach. 

Goodman had been going to New York City bathhouses for post-gym recovery for years, and was mulling over starting one of his own. In 2016, Talmadge tagged along on one of his visits—and became an instant convert. “I get it now,” he remembers saying.

Goodman and Talmadge, who have backgrounds in real estate and in institutional brokerage, respectively, loved the communal wellness experience but were frustrated by the “dingy” quality of some bathhouses. They saw an opportunity to update the 5,000-year-old tradition for a modern crowd. 

“Nobody was doing it from a place of New York City’s best hospitality standards, and from a place of modern design standards,” Goodman said.

Down the rabbit hole

While considering various ways to “trim the fat” of the business—particularly its “staggering” $20,000-per-month energy bill—Goodman and Talmadge each developed an interest in cryptocurrency, which Goodman chased down several YouTube rabbit holes.

In mid-2021, he came across a video of a man in middle America who had figured out how to heat his pool by mining Bitcoin. He sent the video to Talmadge with no additional context. “Oh my God, this makes the most sense in the world,” Talmadge remembers thinking.

They started running experiments with two miners made from off-the-shelf parts from Home Depot, PlumbingSupply.com, and DCX. In late 2021, they scaled up the operation to power the two heated pools in Bathhouse’s Williamsburg location using 12 Bitcoin miners that generate about 1,200 terahashes per second.

At Bathhouse’s location in the Flatiron District that’s set to open in the new year, all four hot pools and three hammams will be heated by 14 bigger, better Bitcoin miners at a 2,600-terahash-per-second rate.

Back to ASICs

Bathhouse uses off-the-shelf ASICs (Application Specific Integrated Circuit)—essentially computers designed specifically for Bitcoin mining. “They have a huge problem—they have to dump heat,” Goodman said.

At Bathhouse, Goodman and Talmadge converted the miners for immersion cooling instead of air-cooling. “We strip the fans off, we put them in a special dielectric fluid,” Talmadge explains. “And so now, instead of that heat going into the air or being hot to touch on your computer, it’s much more powerful than that. It goes and heats the oil around it, and then you pull that heat out eventually on a heat exchanger.”

The heat exchanger on the tank has four ports: hot oil in, cold oil out, cold water in, and hot water out. The water from the “hot water out” port runs in a loop from the heat exchangers on the mining tanks to the heat exchangers in the pool plumbing, recycling the energy used by the miners to heat the water in the pools.

Courtesy of Bathhouse

Bull market

Goodman and Talmadge say Bathhouse’s energy bills have not changed much compared to the pre-crypto days.

“We have to buy this energy anyway,” Talmadge said. “Whereas before, we got just heat out of it. Now we’re getting heat, and we’re getting assets.”

Bathhouse does not have any plans to sell the Bitcoin it mines. Instead, proceeds are stored in self-custody as the property of the company. 

“We are not trying to recover our energy costs necessarily with Bitcoin,” Goodman said. “We want to treasury the Bitcoin because we’re long-term believers in Bitcoin.”

Moral compass

In June, Bathhouse posted an Instagram Reel explaining its mining process. Users flocked to the comment section, voicing their concerns about the environmental impact of mining cryptocurrency and asking Bathhouse for more transparency. Bitcoin is estimated to consume 127 terawatt-hours (TWh) of energy a year—more than some countries, including Norway, according to the Rocky Mountain Institute.

“I think this is an important topic,” Goodman said. “Who decides which use of energy is moral, and which use of energy is not moral? Why is a pool heater a moral use of energy and a Bitcoin miner not?”

Goodman and Talmadge pointed to the massive amounts of energy used by internet servers, the stock market, and even mobile phones—and reiterated that Bathhouse is buying the same amount of energy as it did before it began mining Bitcoin.

“I would argue that Bitcoin is a very moral use of energy,” Goodman said. “Because having fair and equitable money is a very important thing for society.”

To the moon

Goodman and Talmadge hope to see more businesses mine cryptocurrency on their premises. “There’s a lot of use cases for this,” Talmadge said. “You could heat all the domestic hot water in a building with Bitcoin miners. Hotels, anybody with big pools.”

Following the opening of its new 36,500-square-foot location in the Flatiron District, where a day pass will cost $70 on weekdays and $85 on weekends, Bathhouse has plans to expand to Chicago and other cities. And yes, they’ll be bringing the Bitcoin miners with them.

“Our plan is to continue building great bathhouses, continue heating our pools by recycling heat from mining operations, continue to treasury that,” said Goodman. “To go along for the ride.”