0:02

We're using 55% roughly renewable

0:04

energy among this industry. That's actually really

0:07

good. I think the public Bitcoin miners

0:09

have more desire to use renewable energy

0:11

than folks who are not publicly

0:14

traded. The

0:17

fourth Bitcoin halving is officially here.

0:20

We've reached block 840,000. I'm

0:23

Natalie Brunel of the Coin Stories Podcast, which

0:26

is powered by Bitier. I'm

0:28

here today with a distinguished panel

0:30

of executives from leading public mining

0:32

companies. Here with me is Fred

0:34

Thiel, CEO of Marathon. Harris

0:37

Bosset, Chief Strategy Officer at

0:39

Bitdier. Tyler Page,

0:41

CEO of Cypher Mining. Zach

0:44

Bradford, CEO, CleanSpark. Nazar

0:46

Khan, COO, CTO, and

0:48

co-founder of TeraWolf. All

0:51

right, I want to get right into it. So let's

0:53

talk a little bit about this halving because I think

0:55

that it can be confusing, especially for newcomers. Can

0:58

you just talk about how it

1:00

demonstrates the elegance of Bitcoin's programmatic

1:02

monetary policy, how predictable it is,

1:04

and how we've really never had

1:06

a macro asset that behaves in

1:08

this way? Bitcoin halving

1:11

essentially takes the incentive that was developed

1:13

to get miners to want to mine

1:15

and weans them off at overtime

1:18

as transactions and adoptions grows

1:20

so that ideally transaction fees would make

1:23

up the bulk of the revenues for

1:25

miners. That's the elegance in it. I

1:27

think it controls the supply of

1:29

Bitcoin, of course, which is its primary purpose, but

1:32

it also forces an efficiency on the industry. And

1:34

I think that, I don't know if that was

1:36

a side effect, but I think it's a very

1:38

good effect. So we look forward

1:40

to the halvings. I think they're actually really

1:42

good for the industry. Part

1:45

of the genius and the elegance of

1:47

the design of the protocol is that

1:49

with the halving, you have

1:51

fewer and fewer new Bitcoin coming

1:54

to market, obviously, over time. That

1:56

actually mirrors real

1:58

world commodities. of ways. And

2:00

so this having is actually very significant. So

2:03

with this having the amount of new

2:05

Bitcoin coming to market every year will

2:08

actually be less than the amount of

2:10

new gold mined every year. So

2:12

in as much as people are using Bitcoin as a

2:14

store of value and thinking of it as being a

2:17

hedge against governments inflating your

2:19

money away or any kind of inflation, it's

2:21

now officially transitioning into

2:23

an even harder asset in terms of

2:26

new supply coming to market than gold.

2:29

You know, I think that what's amazing about the

2:31

protocol is how it is. There's

2:33

some adventure here and it pleaders to it

2:36

in the sense that it's driving towards

2:38

what we drive for. So it's pushing

2:40

humans that you pronounce for greater efficiency. So

2:42

look what's going to be scarcity, which

2:44

we see as increasing value. So

2:46

when you combine those pieces together, you have something

2:48

that's now predictable in a way that no fiat

2:51

currency ever is. We know exactly how many Bitcoin

2:53

there's going to be. We know when new Bitcoin

2:55

is going to come to market. And

2:57

again, it pushes everybody towards more

2:59

efficiency, which also helps drive value of Bitcoin

3:02

up on a long term basis. Yeah.

3:04

And part of the ingenuity is built

3:06

upon the predictability, I think is unpredictability. I mean,

3:08

as Jack just said, you kind of know, you

3:11

know, when every block is coming, you know, when

3:13

a having generally is going to occur. But if

3:15

you think about just where we are today and

3:17

where we're going to be two or three havings

3:19

from today, you know, five of us out here

3:22

and tried to say, you know, where are things going to

3:24

be? We probably have 27 different answers. And

3:26

so what's interesting that I find is, is

3:28

that layered on top of this very predictable

3:30

and very disciplined and kind of clean approaches

3:32

is you kind of put real world on

3:34

top of it. And when you start to kind

3:36

of layer in what's happening on a macro environment,

3:38

right, that's where you start to see, I think,

3:40

kind of the unique properties that everyone just discussed

3:43

here with respect to kind of how hard the

3:45

asset is. And so, you know, as we sit

3:47

here, you know, we're excited about the having and

3:49

kind of what's going to bring. Because again, for

3:51

those that can kind of manage through that, you

3:53

know, there's a tremendous amount of value to be had. So that's kind

3:55

of, you know, what I find unique and

3:57

kind of elegant about it. I think it's important to just look

3:59

at the numbers. numbers too, right? So

4:01

there's 21 million total Bitcoin by 2140, more than

4:03

100 years from now. But

4:06

only 1.3 million remain. And

4:09

of those 1.3 million, half of those are

4:11

going to be mined in the next four years.

4:13

And 1.1 out of the 1.3 million will

4:15

be mined over the next 10 years. So this

4:18

next four to 10 years is really the

4:20

vast majority of the remaining Bitcoin will be

4:23

mined during that time. So it's just an important time,

4:25

I think, in Bitcoin. Of

4:27

course, mining has

4:29

rewards all the way to 2140. Plus,

4:31

of course, the fees will take over at some point. But

4:34

I think it's a really interesting time for Bitcoin.

4:37

Yeah, and it's been interesting to see some of the

4:39

changes we've seen in fees and a very different macro

4:41

environment than we saw in 2020 for the last half.

4:44

The Bitcoin industry in general has really matured

4:47

and grown so significantly over the last four

4:49

years. So what are some key differences that

4:51

you all see with this halving compared to

4:53

the ones in 2016 and 2020? I

4:57

think the biggest difference is

5:00

the institutionalization of Bitcoin has

5:02

driven a different investor class

5:04

up until really beginning

5:07

of this year. Bitcoin is predominantly

5:09

a retail investor's paradise, which

5:12

meant that it was very emotionally driven. Now

5:15

you have longer term traders working

5:17

in the marketplace. The ETFs

5:19

are still 90% retail

5:21

buyers, but you're seeing institutions now

5:24

actually look at onboarding. You have

5:26

one of Germany's largest state-owned banks

5:28

has just decided they're going to

5:30

offer corporate customers custody as

5:32

opposed to retail. Obviously, Michael

5:35

Saylor has been touting the corporate

5:37

treasury thing, and more companies are

5:39

actually evaluating it. So I think

5:42

that's the biggest change, but that has an

5:45

impact on Bitcoin's price longer term, which means

5:47

less volatility in the price. And

5:49

so the question is, how does the mining

5:51

industry transition from a business where you're paid

5:53

to do what you're doing versus you're now

5:55

just a network that collects fees? And

5:58

that requires a whole different level of efficiency. in

6:00

a very different business model than one where you

6:02

just build big data centers and mine

6:05

a lot of Bitcoin. I'm going to dig into some of that

6:07

a little bit. I think the key

6:09

with that is when you look at scale, I think scale

6:11

is going to be more important than ever in the coming

6:13

years. If you go back to the beginning of the last

6:15

cycle, any

6:18

one that wanted to have a startup and

6:20

wanted to mine Bitcoin could easily get into

6:22

it. I think that's actually, if you were

6:24

to think of the grand scheme of maybe

6:26

the push for efficiency, I

6:29

believe it will continuously decentralize in

6:31

all these different places. Every

6:33

single operator I think will have to

6:35

have scale to overcome just the baseline

6:37

cost of what it's going to take

6:39

because then your overhead goes further. At

6:43

the beginning, a year ago, all of

6:45

us could have reached even the very

6:47

largest miners. Only one or two or three X

6:49

a hash at the beginning. Now

6:51

you're looking at the scale and public

6:53

miners, we're talking about 20 and 30 and 40

6:56

and 50 X a hash. I

6:58

think it's changed where it's fully switching

7:01

to large institutions. We're going

7:03

to see nation states, like mine, we already

7:05

are, and there's going to be a lot

7:07

more of it. From a competitive side, although

7:10

it will stay decentralized, I think it's going

7:12

to be composed of very large players. I

7:15

think to Fred's point, as Bitcoin

7:18

grows, it has to access deeper, larger

7:20

pools of capital. And so

7:22

it did start with personal things. But

7:24

it's growing and there's much

7:26

larger pools of capital out there than what

7:29

have been accessed so far by Bitcoin. So

7:31

I think sort of the natural evolution

7:33

of it. And to support

7:35

the kinds of Bitcoin prices that we

7:37

all expect several years from now, I

7:39

think it's just natural that it will have

7:41

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8:40

today. I think also the

8:42

barrage of news that happens in this space,

8:44

there's so much of it that sometimes you

8:46

lose track of time. So your question about

8:48

what's different between the last halving and this

8:50

one, think about it this way, MicroStrategy

8:52

hadn't purchased a Bitcoin at the last halving. So

8:55

that seems like he's been in that trade for

8:57

a long time. That's

8:59

only within this halving epoch. So

9:03

lots of things happen on the path

9:05

to adoption. So at the last halving,

9:08

regular questions people like us would get

9:10

would be like, is the United States

9:13

going to ban Bitcoin? Now

9:16

we have Larry Fink on television once

9:18

a week talking up Bitcoin and BlackRock

9:21

has raised an immense ETF

9:23

that's outperformed everything. So we're

9:26

on this path to institutionalization, and

9:29

it seems to be accelerating. So there are many implications

9:31

for our businesses, but like it's

9:33

also the rate of adoption is

9:35

still very, very early. From a miner's

9:38

perspective, we run a business that looks on

9:40

a spreadsheet kind of like commodities production.

9:42

Except the difference here that I often

9:44

try to remind people is it's a

9:47

little bit like if you were an

9:49

oil producer, but like in the late

9:51

1800s, the car is just getting invented.

9:53

So like the real use of the

9:55

commodity is just getting figured out. So

9:57

it's still really early, right? Bitcoin's 15 years old. old,

10:00

but I mean, from my perspective, it's

10:02

still pretty early in the adoption cycle.

10:04

Absolutely. And then to Tyler's point, I think

10:07

for me, the biggest difference is just the

10:09

intersection of Bitcoin and the real world. So

10:12

whether we're talking about how it impacts the

10:14

energy, whether we're talking about monetary policy, whether

10:17

we're talking about how it can

10:19

be used in different ways. So that's,

10:21

I think, it manifests itself whether it's adoption or

10:23

things. It's really that intersection between Bitcoin and the

10:25

real world. And if you go back for six,

10:27

eight years, I mean, there was

10:30

a small hinterland of people that were

10:32

believers that have been critical to the

10:35

space. But now you're seeing, I think,

10:37

more and more so the average person is aware

10:39

of it. They

10:42

may have a view that's good or bad, but I think

10:44

that's only accelerating. And to Tyler's point here, as we look

10:46

the next four years, I mean, I think sitting

10:48

here four years from today, we'll probably be saying the same

10:50

thing again, which is, hey, to Tyler's point,

10:52

it's like the 1800s for the royal. And

10:55

now look at how much adoption has occurred and look

10:57

at how many more people are involved in a number

10:59

of different ways. A global spread, really,

11:01

right? I mean, we didn't really see much Bitcoin

11:04

in the Middle East or in South America or

11:06

places like that four years ago. And so I

11:08

think this increased globalization

11:10

is important adoption worldwide.

11:13

So I think that's going to have a big effect as well. Yeah,

11:15

we seem to be at an inflection point.

11:18

We've also never seen a new all time

11:20

high prior to the next halving, right? But

11:22

fees have increased. And I know they're great

11:24

for miners, but not some great for users

11:27

who are watching this, who are listening to this.

11:29

So what are your thoughts on the fee structure?

11:32

Feeds are going to continue to go

11:34

up as transaction volumes on the base

11:37

level are going to be focused

11:39

on bigger and bigger transactions. We

11:42

launched a product called Slipstream, which lets

11:44

people essentially reserve block space. It's

11:46

had a huge amount of interest from financial

11:48

institutions. Why? They want to

11:50

reserve the opportunity to book transactions in

11:53

a timeframe so they don't suffer slippage. And

11:56

that's going to become very, very important

11:58

going forward. you'll

12:00

see really more consumer transaction

12:02

volumes happening. This is, you know, transactions

12:04

under $1,000. But think about it.

12:07

There are fewer Bitcoin

12:10

than there are millionaires. So

12:12

there are not enough Bitcoin to go around for every millionaire

12:14

on this planet to own a Bitcoin. Soon

12:17

it'll be, there won't be enough for every billionaire

12:19

to own a single Bitcoin. And

12:22

as that happens, the transaction sizes

12:24

become bigger and the fees

12:26

as a percentage of the value of a

12:28

block are going to actually come down. Ordinals

12:31

are going to move to L2s. All of these

12:34

NFTs, etc., are going to move to alternate layers because they

12:36

won't be able to afford the fee structure. But

12:38

the only way mining will exist in its

12:40

current form is you essentially

12:43

have to be at a place in 2028 where

12:45

transaction fees are 2 or

12:48

3 Bitcoin per block. Otherwise,

12:50

the existing model where you pay 2 or 3

12:52

cents for energy isn't going

12:54

to work anymore. And you're going to have to find ways to mine

12:56

for free. I think

12:58

also the use case for Bitcoin

13:00

is still hotly debated. Is it

13:03

a store of value? Does it

13:05

optimize transactions, etc.? I

13:08

do think, personally, I know there's people that

13:10

disagree with this, but it's

13:13

a very valuable savings technology.

13:16

And so there's a universal need

13:18

globally for people to convert the

13:21

fruits of their labors into savings. That's

13:23

sort of a largest addressable market

13:25

thing on earth that every

13:27

human needs that. And

13:30

so the ability to have

13:32

this decentralized, stateless store

13:35

of value, at least my

13:37

personal view, is sort of the real

13:39

best use case for Bitcoin. There

13:42

may be many wonderful layer 2s and

13:44

things that are built around that to

13:46

enable transactions, to make remittances cheaper, to

13:48

do all kinds of things. There

13:51

are also other FinTech technologies that

13:53

may develop that better. And

13:56

so we'll see. Of

14:00

course, as a miner, we always like transaction fees to

14:02

go up. But I think

14:04

it's probably the layer two ecosystem

14:06

that gets built on top of that may drive

14:09

the fees up, but it does come

14:11

down to use case. And maybe over the next

14:13

two having epochs, we start to see, do

14:16

transaction volumes gravitate towards other

14:19

chains? Do L2s take

14:21

this? And do we see new use cases? We

14:23

didn't have things like ordinals and inscriptions a

14:27

year ago, basically. And so there may

14:29

remain sort of new uses of block

14:31

space. We don't even anticipate it. We

14:34

did a huge debate on ordinal. And some

14:36

people do think that there's a sense maybe

14:38

maybe some kind of big

14:40

people of them within Bitcoin, like they

14:42

get too high. So they decrease, they

14:45

get affordable again. Maybe there's no exclusivity.

14:47

Is that the case, you think? That was

14:49

the case last year, certainly, in both May and

14:52

late November going into December, where you had

14:54

days where there were some blocks that ate

14:57

Bitcoin per block in transaction fees because somebody needed

14:59

to push something. But I think what you're going

15:02

to find is people will adapt,

15:04

innovation is going to happen. There'll be all

15:06

sorts of exciting things happening at L2s. But

15:09

at the end of the day, financial transactions,

15:12

if you think about the UTXOs are on

15:14

the Bitcoin blockchain. And so that's where people

15:16

are going to want to have finality for

15:18

large financial transactions and as sovereigns

15:20

start owning this. And imagine

15:22

a world where Bitcoin is at a million. Now

15:26

you have all of a sudden large

15:28

countries even holding potentially assets in Bitcoin.

15:30

They are going to want to transact

15:33

on the base layer. And they are

15:35

going to be transacting in $100 million

15:38

blocks, if you would. So that's why

15:40

the fees are going to, the base layer are going

15:43

to have to go up. You know, something else about

15:45

that too is, again, if we talk about the human

15:47

behavior component of fees going up

15:49

actually creates more value for the layer

15:51

2s. So the layer 2s ultimately have

15:53

to have a reason to exist. And

15:56

that's why I think that we're going to see greater

15:58

innovation because One

16:00

thing we're good at as humans as

16:03

mankind is solving problems when they're presented

16:05

to us. And so I think that

16:07

if it just becomes viewed as either

16:09

an opportunity or as a problem,

16:11

I think that's where layer 2 is developed to

16:14

be something more meaningful to

16:16

allow Bitcoin to be more accessible because

16:18

ultimately Bitcoin's value is based on its

16:20

adoption. And I think that's what we

16:22

all want is as many ways for

16:25

anybody, whatever country you're in, to get

16:27

access to Bitcoin. That's what we want

16:29

that really democratizes it and creates

16:31

the human component value of

16:33

what Bitcoin really is. And

16:36

I can't get up in my show this year

16:38

if you haven't yet. Make sure to consolidate your

16:40

UTXOs. You're going to do that with their fees.

16:42

Continue to get up. I want to

16:44

turn now a little bit to hash rate

16:46

because since the big names, Manny Van and

16:48

Chyna, we've seen more hash rate moves to

16:50

the United States but also get distributed really

16:53

around the globe. And this is an ongoing

16:55

trend this past year. There has been more

16:57

hash rate coming online from outside the

16:59

United States. So what is the driver

17:01

of this? Well, we're certainly focused

17:04

on pushing 50% of our revenue offshore. So

17:07

we operate on three continents today, North

17:10

Africa, the Gulf region. We

17:12

operate in Paraguay and Latin America, and then

17:14

we operate in North America. And

17:16

we're going to continue to grow our offshore

17:18

business because the US power markets between

17:21

the AI data center craze that's

17:23

going on right now, the rush

17:26

to acquire utility scale power sites,

17:29

is going to essentially drive my knee

17:31

into smaller and smaller and smaller sites

17:33

and smaller configurations, more automation. And

17:36

otherwise, the large sites are going to be

17:38

pushed offshore where you still have a gigawatt

17:41

hydro dam that has excess capacity. But

17:43

in the US, between what

17:45

Congress is likely to enact regarding

17:49

energy pricing, there's a huge shortage

17:51

of transmission capacity in this country.

17:53

You can't add more generation efficiently

17:56

in this country. And

17:58

there are some states where they

18:00

say, oh, we underestimated the power requirement by

18:02

30% for the next three years. Those

18:06

are not places where they're going to enable Bitcoin miners

18:08

to come in and be

18:10

good citizens and load balance their grid because

18:12

there just isn't energy for them. I

18:15

think that we're taking a little bit

18:17

of an opposite approach where we're actually

18:19

finding the pockets because I think what's

18:21

important is miners,

18:23

we talk about grid services all the time.

18:26

I think that the choice between going

18:29

offshore or staying onshore is really how

18:31

much of that service can we actually

18:33

provide. To a different point, being

18:35

a smaller is going to be part of the

18:38

point. The background being in the microgrid

18:40

space where it's about small pockets,

18:42

I think that's where it does come in

18:44

the US. I think that

18:46

there is the potential for a future

18:49

where at least innovative grid providers and

18:52

utilities, there is a

18:55

small Bitcoin mine that is managed

18:57

purely remotely, that's immersion cool and

19:00

that you basically have a milk run where

19:02

instead of having tech staff at these large

19:04

sites, they're running site-to-site sites in

19:07

a small geographic area and they're serving

19:09

this hub station and that hub station

19:11

in this neighborhood and that neighborhood. But

19:14

technology needs to improve and I think

19:16

we'll get there. That's where I think it does

19:18

trend in the US. More

19:21

mega sites, I think mega sites do end

19:23

up slowly moving offshore but I think it's

19:25

a very long process. I think established sites

19:27

are here to stay but I think establishing

19:30

new large scale sites is going to be

19:32

more difficult over the next four years. If

19:35

you look at what happened post 2020,

19:38

I said a low hanging fruit,

19:40

the Bitcoin miners went after aggressively.

19:42

Those sites that had an

19:45

abundance of power, there was an imbalance between

19:47

supply and supply. Five

19:50

of us here at the table plus 15 other

19:52

people were running around the country, I guess pulling

19:54

low hanging fruit. As

19:56

we look at the landscape today, a lot of

19:58

low hanging fruit has been taken. taken care of

20:00

and so some people are looking offshore, facts that

20:02

kind of, you know, looking kind of in scale,

20:05

but I think the main thing

20:07

to kind of understand is as the industry matures,

20:09

you know, we call kind of most of the

20:11

operations we all do today is base load. Like

20:13

the idea is that we buy a miner and

20:15

it runs 90, 80% plus

20:17

percent of the time. And

20:20

as I think kind of the decentralization, decentralization

20:24

continues to occur, you're gonna find that

20:26

not all mines are gonna be base load. Some of

20:28

them are going to be designed to operate 40% of

20:30

the time because that's where their demand

20:32

profile fits in with what's happening with the broader

20:35

context. And whether that's 20 megawatts or 200 megawatts,

20:37

there's gonna be a function of kind of what

20:39

the underlying supply, demand and

20:41

transmission looks like. And so I think what we're seeing

20:43

globally is that people have looked and said, hey, this

20:45

is what's happened in the US, let's

20:48

take that and let's kind of improve upon it. And that

20:50

will feed back to what's happening in the US as well.

20:52

But I think again, fundamentally, it's that low hanging fruit

20:54

was taken off the table and now you're really

20:56

having to kind of understand and find those pockets

20:59

to play. And I think they're all gonna be

21:01

different flavors. And I think as we look four

21:03

or five years out, I think you'll start to

21:05

see Bitcoin miners that are focused on base load.

21:07

You'll see Bitcoin miners are focused on kind of

21:10

mid-merit, right, because there's going to be that stratification

21:12

and their economic models are gonna be dependent upon

21:14

kind of how that works. And so we're

21:17

seeing that playing out both here and I think overseas

21:19

as well. To oversimplify and expand

21:21

on that a little bit maybe. I mean,

21:23

I think we see it, yeah, there's

21:25

kind of two branches going forward.

21:27

So remember, of course, our business

21:29

depends on cheap electricity. That's like

21:31

90% of the kind of variable

21:33

operating expense. So as

21:36

long as Bitcoin rewards keep going down, you're gonna

21:39

constantly, when we talk about the drive for efficiency,

21:41

it's this search for

21:43

cheap stranded electricity basically.

21:47

So there's probably a bifurcation in our mind

21:49

at least that you'll

21:52

either have to go overseas to places that have sort

21:54

of vast natural resources but

21:56

not enough demand basically to soak

21:58

up all that potential. for electricity

22:00

generation, or you're

22:02

going to have to look in places where you can

22:05

do what Nazar

22:07

was referring to, the sort of

22:09

monetizing your flexibility. The

22:11

thing that's probably, I think, most

22:14

underappreciated about these companies and sort

22:16

of Bitcoin mining at an industrial

22:18

scale is just how

22:20

valuable it is as a

22:22

resource to the grid to be

22:25

able to curtail a large user

22:27

of electricity quickly. So

22:30

what you can effectively do if you stay

22:32

domestic as opposed to, so I think there's

22:35

kind of two worlds. You can go overseas

22:37

to places that are maybe less explored, and

22:39

you have to make risk decisions about how

22:41

stable that regime may be or that source

22:43

of power, or do they change the rules

22:45

or add attacks or something changes. Or

22:49

you focus and really monetize

22:51

this flexibility. So

22:53

sometimes we're using the power to mine Bitcoin.

22:56

Other times, we're not trying to run 100% of the time. Other

22:59

times, you're providing that electricity back to the grid. You're

23:01

selling the power. You're putting it into

23:03

battery storage. You're doing something else with it.

23:06

And there's kind of an optimization around that to keep

23:08

driving your costs lower. So it's one of two ways.

23:11

But now the mining industry has gotten to a

23:14

scale that it's so large in

23:16

the sense that you make these very large

23:18

capital allocations decisions that take long time periods

23:20

to pay back. It

23:23

gets tougher. You have to decide where are you going

23:25

to make your commitment. And it's not

23:27

like, well, I'll just fire up this rig. And if

23:29

they change their mind, I'll move it down the street. It

23:31

starts to become a much larger question. I think it's just

23:34

natural. Most of the world is

23:36

outside the United States. And Bitcoin

23:38

mining is one industry that's pretty easy

23:40

and portable in terms of it's much

23:42

easier to place a Bitcoin mine in

23:45

a remote area than, say, an AI

23:47

data center or something that requires another

23:50

thing like a stock connector fab or something

23:52

like that. So I think a lot of

23:54

parts of the world are anxious to get

23:56

technology or leading edge. development,

24:02

and it's natural for a

24:04

lot of that to go outside the United States. As

24:07

bit dear, we're still very much vested in

24:09

the United States and globally, right? So we're

24:11

going to grow dramatically many hundreds of megawatts

24:13

within the United States, but also many hundreds

24:15

of megawatts outside the United States. But

24:18

just from, you know, the U.S. is only a

24:20

small part of the world. So naturally, I think

24:22

there's going to be a lot more outside the

24:24

United States overall, maybe not among public Bitcoin miners,

24:27

but overall, then there will be within the U.S.

24:29

Well, there are so many misconceptions around

24:31

the energy used within this industry. And

24:34

we're in the Human Rights Foundation headquarters,

24:36

and they actually have these placards that

24:38

say, not mining, Bitcoin is wasting energy.

24:40

And so I want to talk a

24:42

little bit about that, because someone described

24:44

miners as profit maximalist,

24:46

profit-nasty. You're always going

24:49

to have to pay the cheapest sources of

24:51

energy, like you mentioned, Heather. But

24:53

there has been this growing awareness

24:55

and really scrutiny about the sustainability

24:57

of mining corporations. What type of

25:00

energy are you using? Is it renewable?

25:02

So how do miners gain a balance

25:04

between these items? How much Bitcoin

25:06

mining is using renewable energy? And what

25:08

are the challenges that you face in

25:11

this area? So I think we're

25:13

using 55 percent roughly renewable energy

25:15

among this industry. That's actually really

25:17

good. And I

25:19

think the public Bitcoin miners have

25:22

more incentive, more desire

25:24

to use renewable energy than folks who

25:26

are not publicly traded. So

25:30

we're doing a lot. And I think a lot of stuff

25:32

that we're doing right now is really good, helping balance grid.

25:35

I don't think that relieves the pressure on us. We should

25:38

always think about how we can do more. And I think

25:40

we can do a lot more over the future. I

25:42

think that some of us get larger, more

25:44

credit worthy, and can establish that

25:47

we can actually be a source of

25:49

initial offtake for new renewable projects. And

25:51

I think that's going to be some

25:54

place where Google and Apple play today. I

25:56

think we can start playing a role there

25:58

in the upcoming. coming years as

26:00

well. So I think we should

26:03

always feel a pressure as you know people that live

26:05

in this world of how we can do more next

26:07

year and the year afterwards. But I think we've been

26:09

doing a lot and I'm I'm actually pretty proud of

26:11

the fact that we're 55% even today

26:14

right. I mean we were really profit

26:17

maximalist. It wouldn't be 55% is that

26:19

eventually Bitcoin

26:23

miners are going to be energy generators.

26:25

You know whether it's NASA's point of

26:28

you start working with a renewable

26:30

energy provider and you provide baseload offtake

26:32

from them until they get transmission capacity

26:34

or you do energy harvesting which is

26:37

an initiative we've started where you're taking

26:39

biomass you're taking stranded methane you're taking

26:41

landfill methane and you're generating electricity from

26:43

it and then you're selling heat. You'll

26:46

notice I didn't say you're mining Bitcoin. One

26:49

of the most interesting things we have found

26:51

is when we engage with governments around the

26:53

world and we talk about taking

26:56

stranded energy generating heat 50% of

26:58

industrial electricity uses for the heat

27:01

generation and re

27:03

feeding that heat back into an

27:05

industrial process. They

27:08

ask us how we do it. We say we use

27:10

electronics to generate heat. They say that's great. We

27:12

tell them it's mining Bitcoin. They say we don't

27:14

care at that point because their interest is in

27:17

the fact that we're dealing and mitigating something

27:20

whether it's biomass from agricultural biomass whether

27:22

it's dairies and manures but there's a

27:24

huge amount of this out there a

27:27

huge amount of methane that needs to

27:29

get mitigated and then generating heat that

27:32

has a huge implications and we're doing

27:34

pilots of heating buildings in Finland. We're

27:36

taking off of landfill. We're

27:39

talking with governments about taking large

27:41

amounts of corn waste and

27:43

rice waste from ethanol and methanol production and

27:45

this is in countries where they prohibit Bitcoin

27:47

mining today but the government is saying to

27:49

us no we want you to come in

27:51

and do this. Even the beer industry. carbon

28:00

Bitcoin miner, 95% plus of

28:02

the electrons we consume today,

28:05

electrons we consume, come from

28:07

zero carbon energy sources. The

28:10

reason that was foundational to

28:12

starting of the company is

28:14

when you look at it, people use

28:17

the word stranded energy quite a bit. I think it's

28:19

a bit more nuanced than that. If you think about

28:21

how the grid operates, it's really

28:23

the most important factor is overall system

28:25

utilization. If you think about the power

28:28

consumption that occurs at the peak, it's

28:30

two and a half X what occurs at

28:33

the lowest point in the day. It's

28:35

less about where it's

28:37

being consumed and how much it's being produced and where. It's

28:40

more about how do we increase overall system

28:42

utilization. As Bitcoin miners and as what's

28:44

been core to TeraWolf is really making sure that

28:46

our loads are assets back to the grid. We're

28:49

not burdens to the grid, we're assets back to

28:51

the grid. So long as we're doing that, and

28:53

whether you're doing that at two megawatts or 200

28:55

megawatts or anything in between, if you're

28:57

an asset back to the grid and

28:59

you're helping with that overall system utilization, you're going

29:01

to find a welcoming counterparty to work with. To

29:03

the extent that you're not doing that, whether

29:06

you're two megawatts or 200, size really doesn't

29:08

matter. If you're not, you're going to find

29:10

regulators and governments that are trying to put

29:12

their hands up and say, hey, not here.

29:15

I think we need to make sure that as we

29:17

talk about this, it's not just a word that we

29:19

say, but really

29:21

think about how do we do it in

29:23

a way that is, again, facilitating that transition

29:25

and is providing benefit to others. When

29:28

you increase system utilization, by definition, you're

29:30

lowering the per unit economics for everybody

29:32

else. I think it's also another misunderstood

29:34

point is that if Bitcoin

29:37

miners are doing their thing, they should be

29:39

driving down the overall cost of energy for

29:41

everybody else in that area as well. That's

29:43

really core and critical to how we approach

29:45

and think about things. The

29:48

thing that's not sustainable about renewable energy is

29:51

the financial model usually. We

29:53

actually started CleanSpark as a

29:55

renewable energy company. We were

29:57

doing renewables with voluntary and

30:01

very very few projects doesn't matter whether

30:03

they are utility scale or commercial scale

30:06

have any sort of financial return that

30:08

is advantageous to the end user because

30:11

it just takes so long to ultimately

30:13

generate the payback. The

30:15

reason it takes so long is because I

30:17

think we use power. You take a

30:19

commercial building and it uses a lot of power 8 or 10

30:22

hours a day and a lot of

30:25

times when it's using the most power the

30:27

opposite when renewables are there. And

30:30

what Bitcoin can do to

30:32

actually make financial models for

30:34

renewable energy more sustainable from

30:36

a business practice is to

30:38

be the first user. We

30:40

can help get projects established, we can help them get seen

30:43

then. But that's where

30:45

we can have a real change because

30:47

otherwise another thing that's not sustainable most

30:50

of these projects to work require government

30:52

subsidies. And so this allows

30:54

governments to not have to subsidize the building

30:56

of renewables but instead moves that

30:59

into the commercial space in

31:01

a private market which I think is a

31:03

huge benefit in energy markets in general. Because

31:05

again when it's subsidized by the government that

31:07

ultimately comes right back around to the rate

31:10

payer. And so that's where

31:12

I'm sure many of us have seen

31:14

it in our areas that we operate

31:16

in in rural Georgia we can actually

31:18

help reduce energy prices because of how

31:20

we consume and use energy on the

31:22

grid. And I think one

31:24

other thing you know sort of I

31:26

agree with what's been said here but I

31:29

think one other thing about the industry on

31:31

this issue that is very valuable

31:34

is that unlike the traditional

31:36

data center business that business

31:38

model again on a spreadsheet is

31:41

sort of higher cost, higher

31:43

revenue. Bigger

31:45

name companies that can fund things with debt

31:47

and build large scale expensive

31:50

projects. One

31:52

of the things about Bitcoin mining is this relentless

31:54

drive to push down costs actually causes a lot

31:56

of innovation on the edges. So

31:59

like for example on this particular topic,

32:01

one of our data centers at Cypher is

32:04

connected to an off-grid wind farm that

32:07

was underperforming. There is no grid

32:09

connection. So literally when the wind

32:11

blows, our machines are hashing.

32:14

When it doesn't, they are not. So

32:17

this is a way that basically weakened

32:19

by power at a higher rate

32:21

than that wind farm would have been selling

32:23

to the natural market. This is an illustration

32:25

of Zach's point that if you build a

32:27

renewable but you get past subsidies that come

32:29

from the government, in order for it to

32:31

stand on its own two feet, our

32:33

industry is very valuable because we're looking

32:36

for that cheap power. We

32:38

innovated a way to work directly, basically,

32:40

with just that wind power. And

32:42

so that's a perfect example of the private sector

32:46

finding a way that's beneficial to everyone.

32:49

It's time for a quick break to hear

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consultation with the Bitcoin Way today. All right,

34:34

back to the show. Well, I want to

34:36

dig into revenue streams just a little bit

34:38

because people say that having is a supply shock,

34:40

but it's also a revenue shock for all of you that

34:42

I know you've been preparing for. You're already thinking about 2028,

34:44

you said earlier, Fred. The

34:48

mining industry obviously is extremely competitive.

34:50

Everyone has to find an edge.

34:53

I've heard of some companies diversifying

34:55

revenue streams by getting into AI. We've

34:57

mentioned our here on the

34:59

show we're using heat from the operation for

35:01

various purposes. So I'd love to hear some

35:03

ways that all of you are really innovating

35:06

so that you can stand out from the

35:08

pack. Well, we're doing it in

35:10

really a number of axes. One is

35:12

energy harvesting that I talked about earlier.

35:14

We're taking stranded energy resources,

35:18

getting paid to take those, and then

35:20

selling heat back into processes. The goal is to

35:23

get the zero cost energy. If

35:25

you have zero cost energy, you can mine

35:27

Bitcoin forever. You

35:29

don't have to worry about it. The other thing

35:31

is you need to be able, as Zach mentioned,

35:33

run systems with full automation, full lights out

35:36

operations. So it's a milk run to services

35:38

system. So you need to invest in technology.

35:40

The second thing we've done is invest in

35:42

technology. We've built everything from our own pool

35:45

that operates all the way down to the

35:47

firmware and the miners. We've invested in building

35:49

the only USA minor, Auradine,

35:51

and now we've launched a whole line

35:53

of immersion systems

35:56

for dual-phase immersion. Why? We

35:58

believe that companies will

36:01

be wanting to monetize their energy

36:03

by mining Bitcoin when it makes

36:06

sense. When they have

36:08

that, especially battery manufacturers, we've had a

36:10

lot of really interesting conversations with battery

36:12

companies about this. What

36:15

that then enables is you will have millions

36:17

and millions and millions of intelligent devices all

36:19

over the world that mine Bitcoin every

36:22

now and again. They

36:24

do it at zero cost because they're

36:26

using their own energy arbitrage. I

36:29

think when the intelligence goes down to the chip at

36:31

that level, which I believe will be

36:33

available by 2028, this

36:35

business changes completely because if you have

36:37

millions of people mining that don't pay

36:39

for energy and you have

36:42

industrial miners paying a lot of money for

36:44

utility scale sites, it's

36:46

an unfair advantage to the small

36:48

guy. I think that's where this industry goes.

36:51

I think every company needs to find a

36:53

way of differentiating itself and

36:55

adding value over what could

36:57

be just a commodity business of Bitcoin mining. In

37:01

our case, we're going with technology focused

37:03

very much on the semiconductor aspect. There's

37:06

been, I think, very little innovation

37:08

since 2014. The

37:11

chips that are used for Bitcoin mining have

37:13

improved dramatically since 2014, but

37:16

it's been almost all based on

37:19

improvements in manufacturing from TSMC.

37:22

There's been little change in the

37:24

architecture, the microarchitecture of those chips.

37:27

That's my background. It's also the background of some of

37:30

the founders of Bitdear. We feel like

37:32

there's a huge disruptive improvement that

37:34

can happen there. That's

37:37

one of the areas that we're focusing on to

37:40

differentiate ourselves from everyone else. We've

37:42

always focused on taking a counter-cyclical

37:44

approach to both the cycle, but

37:47

also on the diversification is a

37:49

big conversation point right now. We're

37:52

choosing to not do it. What we're

37:54

instead doing is we're choosing to invest

37:56

in focus. What I mean by that

37:58

is... We are

38:00

always trying to make sure we master the

38:02

domain that we're on right now, which is

38:05

the coin mining. We want to have the

38:07

highest up time, the most efficient suite, and

38:09

be able to run that above anybody

38:12

else. Now, how we

38:14

do that without losing focus

38:16

is having strategic partners. So

38:19

rather than like, like, Marathon has done a

38:22

lot of investing in their

38:24

own technology. We are partnering

38:26

with other groups and

38:29

our belief is that they then they can

38:31

focus on being the very best at

38:33

what they do. Whether it's firmware, whether

38:35

it's a platform, and

38:37

then we can just kind of piggyback on

38:40

top of their success and do what we

38:42

do best and the last thing we do

38:44

best. We think that's the best way to

38:46

really consolidate and use our resources and events

38:48

better. You know,

38:50

running a public company, we generally

38:53

have a relentless focus on profitability

38:55

over the long term for our shareholders.

38:57

Profit, Nancy. I

39:00

mean, but by responsibility under the

39:02

law, basically. That's not to say

39:04

we don't consider other stakeholders, but

39:07

that's the primary stakeholder

39:09

that, frankly, I serve. So

39:11

I think on to that end, we

39:15

believe that the asymmetric

39:18

potential risk return

39:20

of Bitcoin mining at this point in

39:22

the adoption cycle still

39:24

provides what we think will be the best returns over

39:26

time to shareholders. That's not to

39:29

say we won't look at things like AI

39:31

or certainly lots of the innovative

39:33

ways to integrate with the energy generation industry

39:35

over time, that sort of all

39:37

things we look at. But at this point

39:39

in time, I'd say somewhat different than some

39:41

of the other folks here were very much

39:43

focused on mining

39:46

with the best possible unit economics and focused

39:48

on Bitcoin mining. Yes. I mean, our backgrounds

39:50

from the energy infrastructure space, it's not so,

39:53

you know, 20 plus years I ran around

39:55

the world trying to figure out where

39:57

to put power onto the grid and how to do so.

40:00

most efficiently, both operationally, as well as kind

40:02

of identifying. And so that remains our focus.

40:04

And as we look at kind of

40:06

where we are today and where things are going, we

40:09

think there's going to be more demands

40:11

for power to support data

40:13

and high performance compute than there are

40:16

going to be places to actually run

40:18

it. And so we're really focused on

40:20

ensuring that we're identifying those best possible

40:22

locations that have the lowest possible cost

40:24

and have the highest kind of zero

40:27

carbon characteristics of the power associated

40:30

with it. And so that's where we are and

40:32

where we'll play. If you look at the two

40:34

sites we have, one of the

40:36

sites is in the middle of Pennsylvania. It's adjacent to

40:38

two and a half gigawatt nuclear plant. And

40:40

the very first customer at that site was

40:42

us. I mean, I sat there and worked

40:45

with the owners of that facility and educated

40:47

them on what Bitcoin mining was, the value

40:49

of having a large load that kind of

40:51

sit adjacent to this large kind of power

40:53

generation station that wants to run 98% all

40:55

the time. And

40:58

who was the second customer that came to that site? Amazon.

41:00

I mean, so they now have looked and said,

41:02

hey, you know what, this is actually ingenious. I

41:05

mean, this is large scale power at a low

41:07

cost that has a zero carbon source. And so

41:09

as we think about where we are today and

41:11

where we're going, it's going to be continuing to

41:13

focus on again, bringing that infrastructure,

41:15

that energy infrastructure that's going to

41:17

support both Bitcoin mining, again,

41:20

we have, you know, a

41:22

long way to go at our sites as well as some of the other

41:24

things. Well, you're bringing me to the next

41:26

question because there have been some reports

41:28

that the competition to secure favorable

41:31

electricity rates with utility companies, it

41:33

is getting stiffer due to these

41:35

massive data centers from our AI. They're

41:38

drawing in a large amount of

41:40

capital and they're really, I'm reading, keeping

41:42

electricity bid three to four times

41:45

what you guys were paying before potentially. So

41:47

these AI companies obviously are very well-funded,

41:50

potentially willing to pay more than Bitcoin mining

41:52

companies. So how are you guys dealing with

41:54

this, preparing for the future and navigating this

41:57

emerging challenge? The challenge with the AI.

42:00

LLM training sites

42:03

is they need very sophisticated

42:05

network infrastructure. They need very high

42:07

speed access to the internet to

42:10

get the data in and out of their systems. And

42:12

so that limits geographically where they can

42:15

locate. Because typically it's near metropolitan

42:17

areas. Now the state of Virginia has just

42:19

put a moratorium on data centers. So not

42:21

Bitcoin, my data centers, because there are just

42:23

too many of them in the state.

42:27

And as you move from Netflix and

42:29

kind of cloud provider and hyperscaler

42:33

to AI, the power consumption

42:35

goes up by factors of

42:37

magnitude. And so now all of

42:39

a sudden you have this direct competition. Most AI guys

42:41

are willing to pay 8 to 10 cents a kilowatt

42:43

hour, where a Bitcoin miner ideally

42:45

wants to pay 2 to 3, 3 and 1

42:47

half cents a kilowatt hour. And

42:50

the difference is we can curtail.

42:52

They can. We

42:54

can locate where there are low speed

42:57

internet connections or no internet connections and

42:59

use satellite connections. So

43:01

Bitcoin miners are being pushed to the edge,

43:03

basically. I think

43:05

there's a way for us to work together with, you

43:07

know, it doesn't have to be either or. I

43:10

think there are some sites, especially some very large sites, where

43:12

you can combine both AI and

43:15

Bitcoin mining, not in the same buildings, the

43:17

same data centers, but with the same substation.

43:19

I think there's ways of taking advantage of

43:21

that. But they're

43:24

very different businesses in terms of

43:26

the expertise that's required in the

43:28

economics. But

43:31

Bitgear is getting into AI at

43:34

a modest level initially, but

43:36

we're looking for partners and are speaking to

43:38

several people. We think there's a lot of

43:40

synergy in a lot of what we're doing

43:42

and what AI can do, including even our

43:44

chip development. We think there's some crossover

43:47

there. I

43:49

think if

43:51

you look at what we have,

43:54

they want, ultimately they're willing to pay

43:56

more for power, but they don't

43:58

have to. long-term

44:00

basis to increase our asset

44:02

value. But because we are

44:04

a flexible load, I think we're a

44:07

lot more friendly to utility. So utility

44:09

to understand that, but we want to

44:11

fair versus the data center. Georgia is

44:13

also another state. It just removed the

44:15

cell-cance incentives for data centers. And

44:17

it did so because there was so much demand,

44:20

but they did not want them to come in.

44:22

And so that was a point of attraction, so

44:25

they removed it to avoid these big AI data

44:27

centers coming in. Because again, they

44:29

hog the energy and they hog it 24-7

44:31

with an inability to be interrupted. And not

44:33

a lot of people are talking about their

44:36

energy use compared to the Bitcoin value. Oh,

44:38

and it's substantially more, substantially more. But I

44:40

think a lot of that's changing, right? So

44:43

everyone's saying here, they're willing to pay

44:45

more. And I think traditionally the data

44:48

center operators, whatever the cost of

44:50

energy was, the cost of energy, it was a relatively

44:52

small portion of their overall cost base. And so they

44:54

didn't really focus on it. If

44:56

anyone is to believe the amount of demand that

44:59

AI is gonna pull, and for it

45:01

to be as pervasive as people say, the cost has to

45:03

come down. They can no longer continue to pay 10 cents.

45:06

And so I think part of the

45:08

discussions that we have, that I have,

45:10

I think the Bitcoin miners are the kind of

45:13

leading edge of the sphere, because we are demonstrating

45:15

how you should do this. And curtailability, people talked

45:17

about it. And I think there's

45:19

curtailability and kind of backup power supply. Traditional

45:22

data centers want to have a diesel generator

45:24

sitting at the site to be able to

45:26

support the data center if power

45:28

kind of goes out. Both of those,

45:30

the curtailability has to be embedded into it.

45:32

And I think more and more as the

45:35

forward thinking players in the space think about

45:37

how they're designing their LLM models and how

45:40

they're supposed to work, they are thinking about how

45:42

do we curtail our loads? And I think that's

45:44

going to be pervasive everywhere in the next two,

45:46

three years. And the second thing is, is this

45:48

idea that you have to have a backup generator

45:50

at the site, and you

45:52

have a centralized place where all of your activities

45:55

occurring, is I think also going to change. And

45:57

so if you think about Bitcoin, we talked about

45:59

decentralization. And then while we may not have as

46:01

much decentralization as we want, it

46:04

is the most decentralized secure network that exists.

46:06

And so likewise, the trends that we're seeing

46:08

in the AI space are that compute is

46:10

also going to start to decentralize. And so

46:13

those players that are going to be

46:15

most successful in that space are going to be

46:17

able to have to reflect on, hey, how do we curtail so we

46:20

can kind of drive down our costs? If

46:22

we drive down our costs, it's going to be

46:24

more pervasive and more used. And second, how do

46:26

we make sure that we can decentralize our compute?

46:28

And again, Bitcoin miners have a lot to be

46:30

able to talk about with respect to that. So

46:32

we actually see from an infrastructure perspective a number

46:34

of parallels on where Bitcoin has been and

46:36

where, you know, at least I see kind

46:38

of where the AI demand is going, because

46:40

if it's going to be the same as

46:42

it is today, it's not going to be

46:44

what people think is just physically not going

46:46

to work. One thing that changes the economics

46:48

here is that right now, if you establish

46:51

an AI data center, the overwhelming cost or

46:53

the overwhelming amount of capital goes to Nvidia.

46:55

And that's because so it's just so large.

47:00

Just like Bitcoin. It's so large that the cost

47:02

of electricity is sort of just a footnote at

47:05

the bottom. But that's going

47:07

to change as Nvidia faces competition,

47:09

when the cost of that capital

47:11

drops dramatically or significantly, then the

47:13

cost of electricity is going to

47:15

become more important. And so,

47:17

you know, of course, you know, the big hyperscalers

47:20

are developing their own chips. And

47:22

so you will come up with a

47:24

reasonably competitive chip in the not too

47:26

distant future. So I think that whole

47:28

economics of AI will change and

47:30

electricity will become a more important part of it. So

47:34

I agree with another on that. I think that, you

47:36

know, they're not going to want to spend eight or 10 cents

47:39

in perpetuity. It's

47:41

a two step process in AI versus

47:43

Bitcoin mining, which is a single phase

47:46

process. In AI, you

47:48

have to train models. That

47:51

requires this density of power. Once you

47:53

deploy a model, you can deploy it

47:55

at the edge and it can run

47:57

with curtailment options because you load balance

47:59

across multiple. edge nodes. But the

48:01

learning has to be centralized. And

48:03

so while we are still ingesting huge volumes

48:05

of data and

48:08

sorting out all the copyright issues that

48:10

are being created by that, you have

48:12

these large data center

48:14

needs. But even once

48:16

inference becomes the primary consumption of

48:18

AI versus learning, new knowledge is

48:21

going to have to be incorporated.

48:23

And so I really don't see

48:25

this in

48:27

the next 10 years, becoming

48:30

back to a place where Bitcoin, mining,

48:32

and AI can sit side by side

48:34

at similar costs with similar characteristics.

48:37

The other thing about AI is

48:39

that right now people are using

48:41

a technology that's several decades old

48:44

for training. It's just been scaled up. And

48:46

there are a lot of really interesting work going

48:49

on on how you can get by using

48:51

far less compute to do the

48:53

same thing. And eventually somebody is really going to

48:55

have a breakthrough there. And then you're going to

48:57

see the level of compute required to do the

48:59

same training drop dramatically. So

49:01

I think we're at the

49:03

very beginning of AI in terms of the scaling

49:06

thing. And I definitely think there's going to

49:08

be disruptive technology that we see

49:10

over the next few years. The other thing

49:12

that's going to be underestimated is how long

49:14

it's going to take to build these data

49:16

centers. Everybody's talking about what they want to

49:18

do. But again, these data centers

49:20

are fairly complicated buildings with cooling and everything

49:22

else that goes into it. I don't see

49:24

it as disrupting our space for at least

49:26

two to three years. And that would be

49:29

very quick compared to how most of these

49:31

projects go. So we could be talking about

49:33

this maybe impacting us as

49:35

we approach the 2028 happens. But

49:37

to that point, you said we mentioned earlier, Zach, I

49:39

think what is true, right,

49:41

is that for all of us, I think

49:44

the infrastructure that we have is not being

49:46

properly valued because there is a real alternative

49:49

use case for it. And we can see

49:51

clearly, just with recent transactions, that people are

49:53

willing to pay a lot more for it.

49:55

So I don't think

49:57

of it as kind of a zero sum, like it's either

49:59

or. it has to be zero sum.

50:01

But again, I think what we are doing

50:03

highlights, again, the importance of the energy infrastructure

50:05

and how that can play out in kind

50:07

of alternative use cases as well. The

50:10

best thing I think is that the AI lobby, which

50:13

has much deeper pockets than the Bitcoin mining

50:15

industry, is going to be lobbying the government

50:17

in the US for, et cetera, for more

50:20

transmission capacity, more interconnect capacity, better internet, et

50:22

cetera, et cetera, all the things that are

50:24

beneficial to us. The challenge is going to

50:27

come at the local level where

50:29

they're going to be lobbying for their use case for

50:31

a limited amount of power versus our use case. But

50:34

I think overall it bodes very well for the

50:36

electrical infrastructure in the US. It'll

50:38

be interesting to walk through these developments. I

50:41

really want to turn now to

50:43

discussing the risks about centralization because

50:45

many people are concerned about centralization

50:47

within the mining industry from everything

50:50

within ASIC manufacturing, the

50:52

chip manufacturers, mining pools. I

50:54

mean, mining is distributed

50:56

around the world. There are miners everywhere, but

50:58

there are very few mining pools.

51:00

So how legitimate do you think

51:02

these concerns are and what are the potential

51:05

long-term consequences and industry

51:07

solutions to maintain decentralization?

51:10

Very legitimate concern because you have

51:13

two pools that basically together could

51:15

collaborate and do a 51% attack

51:17

if they wanted to, one

51:19

of which is an offshore pool.

51:23

We operate our own pool. We do it because

51:25

we prefer having control of our own destiny. It's

51:28

actually not difficult for people to operate their own

51:30

pools. They could do it. The problem is the

51:32

economics. If you're a small scale miner, the

51:36

likelihood that you're going to win a block in

51:38

your own pool, while statistically the same as you

51:40

would in a big pool, the

51:42

difference is instead of getting small portions of

51:45

everybody's hash rate, you're not dependent on getting

51:48

a block maybe every month versus

51:50

getting a little bit of every block that's been won during

51:52

the course of the day by a big pool. So

51:54

a lot of people opt not to do it.

51:57

But most of the foreign countries that are mining

51:59

Bitcoin as sovereigns. firms are operating

52:01

and beginning to operate their own pools because

52:03

they don't want anybody to be able to

52:05

restrict them from transacting their Bitcoin. And

52:08

over time, that's going to become more and more important.

52:10

As we see this long

52:12

tail of Bitcoin mining with intelligent

52:15

devices in places mining Bitcoin,

52:18

the whole concept of pools will again become

52:20

very decentralized. But a pool is really an

52:23

orchestration layer. As Stratum 2

52:25

becomes more prevalent, then the miners are

52:27

really in control of their own destinies

52:29

and that whole concentration issue of pools

52:32

disappears completely. So I think this

52:34

is a moot point long term. There's

52:37

a transitionary period where there's some concentration, but I

52:39

don't think it's a big issue. And

52:41

with Stratum, hopefully that reduces any chances

52:44

of censorship at that block level. A

52:46

lot of people are concerned about that. Yeah,

52:48

I mean, the only the, you know, I

52:51

took a knee when I became CEO of Marathon in 2021 because

52:54

our pool could filter out

52:57

OFAC noncompliant wallets. Right.

52:59

The fact of the matter is, you know,

53:01

Bitcoin don't have serial numbers. So

53:03

you're tracking based on wallets. You

53:05

can take a pristine wallet and pollute it

53:08

with some dust from a wallet that's on

53:10

an OFAC list somewhere. And now that wallet

53:12

will be on an OFAC list. And so

53:15

filtering based on wallet addresses just doesn't

53:17

work as much as the government

53:19

in Washington would love to be able to do

53:21

it. I think there's some people in Washington who,

53:23

you know, over the age of 55 don't really

53:26

understand that Bitcoin's just like the dollars in

53:28

their bank accounts don't have serial numbers. You

53:30

know, people think that, well, no, my dollar

53:32

bill there, B of A has a serial

53:34

number. It does not. It's fictitious. It's just

53:37

a ledger entry. I don't think the centralization

53:39

concerns are near the top of my

53:41

list, to be honest with you. I

53:43

mean, I think the point is to expand a little

53:45

bit on what Fred said, you

53:48

know, a miner can switch

53:51

what pool it's using basically

53:53

instantly. So if there's

53:55

concern that like there's a regulatory body that

53:57

would capture the pools that have

53:59

the hash rate and then corrupt the network,

54:01

it's not really a risk in the sense that

54:03

as soon as that happens, all the hash rate

54:06

will flee that pool. And

54:08

while it's not optimal for smaller

54:11

miners to Fred's point to run

54:13

effectively their own pool and use their own hash

54:15

rate directly, it can be done.

54:17

I mean, the people at this table certainly

54:19

could do it, right? You would introduce more

54:22

volatility to your returns, but it's something that

54:24

can be done. But I don't,

54:27

that is not something I lose a lot of

54:29

sleep about, the sort of capture of the pool.

54:34

If Washington got really adventurous on wanting

54:36

to filter transactions at the miner level,

54:38

it starts to get scary because then

54:40

you have questions as a US public

54:42

company, like are you complying with that

54:44

regulatory body or not? And

54:47

then on the other pieces you referenced, the

54:50

ASIC manufacturers, things like that. I

54:53

do think one of the benefits of getting

54:56

to this industrial scale level of the network

54:58

is that it's really prohibitively expensive for something

55:00

like that to try to capture the

55:03

network. I know

55:05

Bitmain is very large, they're the largest rig

55:07

manufacturer, they run a lot of their own

55:09

hash rate, but I

55:11

still think there's enough diversification. It's not something

55:13

I lose sleep about. The other thing is,

55:15

if you are that large, think how much

55:17

value you have tied up in the value

55:19

of the network being decentralized. By

55:22

capturing it, you would instantly destroy

55:24

your own value. Again,

55:27

I'm sure there are edge cases that people worry

55:29

about that I think this is, it's

55:32

interesting to discuss, but I haven't found

55:34

something that gives me great concern yet.

55:36

At the ASIC level, there's more diversity

55:39

in ASIC availability and machine availability today

55:41

than there was at the prior having.

55:43

This is the first time Bitmain, MicroBT

55:45

are on the same kind of cycle,

55:47

where before it used to be kind

55:50

of a flip-flop. Now MicroBT is, they've

55:53

taken some serious market share from

55:56

Bitmain. Riot has gone all in on

55:58

MicroBT, I'm sure. A number of

56:00

the large miners have ordered micro-BT machines. I know

56:02

we have. But

56:05

we think the diversity is great because now you're

56:07

starting to get to a place where you'll

56:10

have a specific miner model for a

56:12

specific use case. I need something

56:15

that's liquid on basic cold. I need

56:17

something single phase immersion. I need something

56:19

dual phase immersion. I need something that's

56:21

air cold that can operate in 50

56:23

degrees C ambient. All of

56:25

those types of things will just breed better

56:27

variety, better selection and make the industry much

56:30

healthier. Yeah, I think that ASIC

56:33

mining manufacturers have gotten more diverse certainly than

56:35

four years ago. And we're adding

56:37

to that. There is still

56:39

a concentration and I'm not sure anything can be

56:41

done about it if you

56:43

go down one step lower. I mean, everyone's still

56:46

using TSMC as their source. I

56:48

guess there's one using Samsung, but that's sort of

56:50

small. And, but that's,

56:52

that has a concentration effect on many

56:54

different areas, not just Bitcoin. So I

56:56

think that's something that needs to get

56:58

handled, but it's got to be done

57:00

at a larger level than just Bitcoin.

57:03

Bitcoin miners defend Taiwan. Yeah.

57:06

And centralization is all relative, right? I mean, I think

57:08

with the ethos of Bitcoin is, you

57:11

know, everyone has their laptop and the world's

57:13

completely decentralized. And so are we at that

57:15

end of the spectrum? No, but versus any

57:17

other network that's out there, the level of

57:19

decentralization that exists, you know, we think is

57:21

actually profound. And, you know, to both

57:24

Tyler and Fred's point, I mean, I

57:26

would say the five or eight largest Bitcoin

57:28

miners three, four years from today, will all

57:30

will be running their own pools, right? I

57:32

mean, it's just kind of a scale and

57:34

a matter of time that's seeing. So some

57:37

of the, you know, the concerns I think

57:39

are, again, so the other folks have said

57:41

here, not real. And again, I think where

57:43

we can continue to highlight the value of

57:45

Bitcoin is again, like lay, you know, compare

57:47

our centralization, as you want to call it,

57:49

against any other network that exists. And by

57:52

far and away, a level of decentralization that

57:54

exists here is again, unique. And that positive

57:56

incentive system that really works for us as well. You

57:58

know, I agree with what I'm saying. everybody said.

58:00

So rather than repeat agreement, I think

58:02

maybe I'll talk about practicalities, because I

58:04

think that's maybe insightful, is

58:07

how are we actually addressing this? So

58:09

we actually have three backup pools. So

58:12

we operate on a foundry, which is one of the big

58:14

ones. But we are ready at a moment's notice if we

58:17

ever needed to, to fall over to a pool. We

58:19

also will have our own mining pool at

58:22

some point. You know, it's, pools make it

58:24

easy, risk things and take the

58:26

volatility out. But in a,

58:28

especially in a high fee environment, there's

58:31

no reason that all miners of large scale

58:33

will not have their own pool. It just

58:35

won't make sense because all the

58:37

other pools, the high fee environment creates risk

58:39

for a mining pool that that's the only

58:41

service they provide. And so they

58:43

have started to change the rules to make

58:45

the fees ultimately lower to where they pay

58:47

out. That's going to give us the incentive

58:50

also to further diversify into all of our

58:52

own pools on a long term basis. So

58:54

they got a practicality point of view, all

58:57

the pieces in place. I'm sure all the other

58:59

miners have backup pools upon backup pools too.

59:02

And then I think actually there's

59:04

an opportunity in where there is

59:06

some concentration related to the actual

59:09

apex themselves, because, you

59:11

know, being a believer in competition breeds

59:13

a better product. And so I think

59:15

that right now you have small groups

59:17

that have an aim to take out,

59:20

you know, the big guy, which has

59:22

been in right now and

59:24

in looking at it that way, they're going to have

59:26

to beat them. They can't just catch up. And

59:29

so I think if you take scrappier,

59:31

smaller companies and give them an incentive

59:33

to not only catch up, but to

59:35

pass, that's what's going to make

59:38

them successful. And I think that's good for

59:40

all of us. So I think it breeds

59:42

really solid competition as the environment is right

59:44

now. Some of you brought

59:46

up Washington. So I have to ask

59:48

you about President Biden's latest budget proposal

59:50

because it raised some eyebrows in the

59:52

community, laid out plans to bring in

59:54

more than $2.3 billion in the next

59:56

five years. And they want to

59:59

check Bitcoin main potentially 30% for

1:00:01

energy use. I would love to

1:00:04

get your reactions. How are you

1:00:06

educating policymakers to support this industry

1:00:08

as opposed to proposing

1:00:11

such extreme legislation?

1:00:14

I think part of it is a question

1:00:16

of we

1:00:18

have never taxed the use of

1:00:20

a commodity by a specific industry

1:00:23

type and so this is something

1:00:25

that the if

1:00:27

it were to be enacted into law would go to

1:00:29

the Supreme Court very quickly. Not

1:00:32

just by our industry but by lots of other

1:00:34

people who would

1:00:36

just view it as a perfect case

1:00:38

of government overreach and so I don't

1:00:40

worry so much about it happening in

1:00:42

that way. Plus very quickly

1:00:44

people will say well wait a second the AI

1:00:46

industry is also a big user of energy so

1:00:49

if you're gonna generate a tax and you want

1:00:51

revenues for the government focus on the people who

1:00:53

are really doing it. Go across all data centers

1:00:55

make it fair. So I think if it were

1:00:57

to come into fruition it would

1:01:00

be highly watered down. In its

1:01:02

worst case scenario would it drive the industry

1:01:05

offshore? Sure you raise the cost of doing

1:01:07

business by 30% you're gonna push everybody offshore

1:01:09

so you have to kind of head

1:01:11

your bets. We have no

1:01:14

idea for example whether the Biden

1:01:16

government or a Trump government would

1:01:18

want to prohibit the use of

1:01:20

Chinese technology period not just imported

1:01:23

from China but Chinese origin

1:01:25

manufactured in Malaysia Indonesia Thailand

1:01:27

Mexico wherever being

1:01:29

used. We don't know those

1:01:31

things and so you have to as you

1:01:34

scale the risks and downsides of these types

1:01:36

of issues become bigger for us but

1:01:38

educating Washington is really just about knocking on

1:01:40

a lot of doors talking to staffers who

1:01:43

can educate their bosses because

1:01:46

the bosses really don't get it other than

1:01:48

a few limited number of people who have

1:01:50

actually done the work to study and learn

1:01:52

the vast majority turn to a staffer and say what

1:01:55

do you think about this and so you have to

1:01:57

educate the staffers and just a lot of door knocking.

1:02:00

I'm very sanguine about this news in

1:02:02

the sense that I'm friendly in the

1:02:04

camp that generally everything's good for Bitcoin.

1:02:07

In some ways, the fact that this

1:02:10

is used for headline attention grabbing validates

1:02:12

our industry's arrival

1:02:14

in a lot of ways. The

1:02:16

Bitcoin mining, the miners are now protecting one

1:02:19

and a quarter trillion dollars of value, and

1:02:21

that's after a recent sell off. This

1:02:23

is a real industry with real

1:02:26

companies and real budgets, providing jobs,

1:02:28

paying taxes at the state levels.

1:02:31

If it gets more and more attention,

1:02:33

in some ways, that's validating its arrival

1:02:36

as a part of the firmament. That

1:02:38

doesn't really answer your exact question, which is, what

1:02:40

do you do? Of course, I can agree with

1:02:42

Fred. We try to be proactive. We

1:02:44

work with different lobbying organizations to

1:02:47

point out these very bizarre questions

1:02:50

about why is this industry being picked on? It doesn't

1:02:52

make sense. It rhymes with the

1:02:54

discussions we've been having for years about, what about

1:02:56

Christmas lights? They use more

1:02:58

energy. It feels very similar. I

1:03:00

think the one other thing about this particular issue

1:03:02

is that it does

1:03:05

reinforce, like a lot of these things, what

1:03:07

happens with increased competition with AI? What

1:03:09

happens with the halving schedule? What happens

1:03:11

to all these things? It reinforces why

1:03:13

building a sustainable business model as a

1:03:15

miner needs to focus on those unit

1:03:17

economics and having the lowest cost to

1:03:20

produce you can create. Because let's say

1:03:22

they do pass a tax that's

1:03:24

going to favor the people with cheaper energy more

1:03:26

than anyone else. I

1:03:29

don't think it instantly means it would go all

1:03:31

offshore. I'll talk my own book a little bit,

1:03:34

but we're known for having very low power costs.

1:03:36

Of course, we would not want to support any

1:03:38

kind of tax. If something

1:03:40

against everyone's better efforts, if somehow that

1:03:42

happened, okay, we'd still

1:03:44

be cheaper than most people are today on

1:03:47

their power costs. It reinforces yet another reason

1:03:49

on the pile why the industry has to

1:03:51

be more efficient over time. We're

1:03:54

not very worried about this exact legislation getting through.

1:03:56

I think if something gets through, it'll

1:03:58

be very watered down from this. much

1:04:00

better. I think one

1:04:02

of the side effects of the ETFs that will

1:04:05

have an effect here is that as

1:04:07

more and more people get involved with

1:04:10

Bitcoin, it'll be much harder for politicians

1:04:12

to enact legislation specifically against Bitcoin. Right

1:04:14

now, you know, there are

1:04:16

fewer people involved but when it's, you know,

1:04:19

your grandmother and a bunch of other people

1:04:21

have investments in Bitcoin, it's going to be

1:04:23

very difficult for a politician to take a

1:04:25

stance just against Bitcoin. I mean this

1:04:27

isn't the first time this same

1:04:30

tax was proposed as those people are saying here,

1:04:32

you know, it came and went. I mean I

1:04:35

think it's important to think, you know,

1:04:37

a lot of times in the Bitcoin space we

1:04:40

preach the choir. We're all believers, we're all very

1:04:42

passionate about it, we believe it, we believe it

1:04:44

brings good and I think that's true.

1:04:47

When we are engaging with those that don't have

1:04:49

that same view though, I think

1:04:51

we as a community, and I'm putting my finger

1:04:53

on myself, you know, first is I think

1:04:56

we have to be more engaging and more

1:04:58

transparent and a lot of times what I

1:05:00

think happens is the second we see some

1:05:03

sort of pushback, we kind of retreat and

1:05:06

sometimes it's justified. I

1:05:08

mean the whole EIA fiasco I think, I mean

1:05:10

how they went about trying to capture

1:05:12

information, you know, so sometimes while

1:05:14

it may be justified, sometimes I do think that

1:05:17

the burden should be on us to

1:05:19

be able to kind of educate and if

1:05:21

we're more willing to engage in a more transparent

1:05:23

way and in some sense demystify what we're doing,

1:05:25

you know. Even today it's

1:05:28

shocking to me that when I actually

1:05:30

talk to people and tell them like, what, how does

1:05:32

a Bitcoin mind work, what do you do, they're like,

1:05:34

that's all it is. And so the demystification of what

1:05:37

we do and how we do it I think is

1:05:39

important for that kind of adoption

1:05:41

and interest and so all those staffers and

1:05:43

all those kind of representatives and centers can

1:05:45

have a much clearer understanding of it because

1:05:48

a lot of times right now they're going on a

1:05:50

premise that's probably as far from the truth as possible

1:05:52

because they're just some concept in their mind and they

1:05:54

haven't really been able to engage and so I think,

1:05:56

you know, we have a burden as a community to

1:05:58

I think be more of a open and transparent

1:06:00

and trying to engage. And again, I completely understand

1:06:02

that a lot of times we're not reciprocated in

1:06:05

that. I mean, we're gonna have

1:06:07

to deal with that. But at the same time, I think again,

1:06:09

the more we can do that, the more we can kind of

1:06:11

address some of these things. And over time, you'll just start to

1:06:13

see that, and I tell people all

1:06:15

the time, there's a right way to mine Bitcoin, and there's

1:06:17

a wrong way. Not all Bitcoin mining is perfect. If you

1:06:19

do it in a certain way, you can increase costs. You

1:06:21

can have problems, right, to the grid. And so I think

1:06:24

the discussion we should be is like, yes, there is a

1:06:26

right way to do it. And by the way, that right

1:06:28

way to do it is also the right way to integrate

1:06:30

large loads of any kind into the grid. And

1:06:32

let's talk about all of that. Like, we're more than

1:06:35

happy to talk about what are the parameters and how

1:06:37

this should happen. And so I think we have to

1:06:39

work together to kind of shift the discussion that way.

1:06:41

And if we do so, I think those that are

1:06:43

engaging with us will start to see that we're really

1:06:46

kind of in asset as a part of that discussion

1:06:48

rather than kind of an adversary. I think a big

1:06:50

part of this, I don't think the conversations happen in

1:06:52

Washington. I don't think that's where the meaningful conversations happen.

1:06:55

Where they happen is what we refer to

1:06:57

as our front door approach. It's about having

1:06:59

the community that you operate in understand

1:07:02

Bitcoin, what it does,

1:07:04

and how it's benefiting that community. When

1:07:06

that happens, that's a community that then

1:07:09

isn't complaining upstream to anybody else. Because

1:07:11

one thing we know is politicians are always

1:07:13

looking for a headline. And so we think

1:07:15

the most important thing that we can do

1:07:17

as Bitcoin miners is not be the headline

1:07:20

for the complaint, whether it's noise,

1:07:22

power, all the other lists that

1:07:25

everybody loves to publish. Instead,

1:07:27

it's about being a good citizen right

1:07:29

where you live. It's about

1:07:31

using the local workforces. It's

1:07:34

about making an impact where it matters because

1:07:37

then the headlines don't happen first.

1:07:39

And then the second is bringing

1:07:41

the senators or bringing the House

1:07:43

of Representatives to then cover those

1:07:45

communities into the community. I think

1:07:47

walking a senator through a Bitcoin

1:07:49

mine is really what should happen.

1:07:52

I think all of us have engaged on Capitol

1:07:54

Hill. But how many

1:07:56

of us want senators through our facilities? I know

1:07:58

it's one thing that we're really... focusing on,

1:08:00

because I think the grassroots side is

1:08:02

where it's going to matter more. It's

1:08:05

awesome. Once you can touch and

1:08:07

feel what a Bitcoin mine really is and experience

1:08:09

it, everything starts to make a lot more sense.

1:08:12

While I don't disagree with that, I think it's very important to

1:08:14

do the grassroots. That works really

1:08:16

well for the politicians in the states where there

1:08:18

is a lot of Bitcoin mining. So

1:08:21

in your case in Georgia, Texas, North

1:08:23

Dakota, but

1:08:25

it's less than 10 states. The

1:08:28

problem in Washington is you have

1:08:30

members of Congress, influential

1:08:32

members of Congress, who write letters

1:08:35

like Senator Warren, two people

1:08:37

like the head of the CFTC,

1:08:40

now saying, you had meetings with Sam Bankman

1:08:42

Fried. You need to report on this. Well,

1:08:45

hey, her whipping dog, Gary Gensler,

1:08:48

had a very near

1:08:50

relationship with Sam Bankman

1:08:52

Fried's family. And

1:08:55

she's not growing about this.

1:08:57

The politicians in Washington are,

1:08:59

let's just say, soapboxing this

1:09:02

issue. There are 50

1:09:04

million voting Americans or

1:09:06

voting eligible Americans who have owned crypto or own

1:09:08

crypto. They happen to all be under the age

1:09:11

of 45 for the most part. Most

1:09:13

of the members of Congress are over the age of 45. You

1:09:16

have a generational shift that's

1:09:18

about to happen where the

1:09:20

crypto savvy, the crypto willing,

1:09:22

the crypto wanters, like

1:09:25

my kids, millennials, for example, who all have

1:09:27

invested in crypto before I even got involved

1:09:29

in it, this

1:09:31

is an issue for them. And it's something they really want.

1:09:34

And I think that's when this is

1:09:36

going to change. You start getting the old guard unelected

1:09:38

all of a sudden, and they lose office

1:09:41

because some crypto bro took their seat. That's

1:09:43

going to be an issue. And many people do

1:09:45

feel that we need a generational shift in

1:09:48

Washington. Absolutely. And it's going to happen no

1:09:50

matter what, because they're pretty old. And

1:09:54

yeah, I think there's also a change in our industry,

1:09:56

right? We started off as a small scrappy industry, a

1:09:59

little belligerent. and we didn't have

1:10:01

that much impact. So we were sort of

1:10:03

ignored by politicians. But as we grow, as

1:10:05

we mature, we're going to have an impact.

1:10:07

And like any industry, people are going to

1:10:09

say, hey, what are you doing there? It

1:10:13

looks like you're impacting my daily life.

1:10:15

And so we have to learn

1:10:17

how to just sort of work with that. I like

1:10:19

what Fred said about working with politicians. I think that's

1:10:21

really important. As the industry matures, it grows. We

1:10:24

live in the society. We have to be able to

1:10:26

engage with the people that we've elected. And

1:10:29

I think just in a more mature

1:10:31

way, you know, everyone's not

1:10:33

against us. We're not fighting

1:10:35

this uphill battle. There are a lot of allies. And

1:10:38

there are people who are yet to be allies, right? I mean,

1:10:40

I think we

1:10:42

overreact a lot of times. And I think we can just

1:10:44

be more calm, more chill, and realize that

1:10:47

a lot of people don't understand. And maybe

1:10:49

we need to change some things, too, right?

1:10:51

We're not right about everything as much as

1:10:53

we'd like to think that. And so let's

1:10:55

engage with the wider society and see where

1:10:57

that takes us. But we're here to

1:10:59

stay. I'm sure of that. So everyone

1:11:02

has to adapt a little. Those are fair points.

1:11:04

I had the chance to visit Capitol Hill to

1:11:06

educate on Bitcoin. And I was encouraged by a

1:11:08

lot of the people in Congress who actually

1:11:10

did seem like they understood Bitcoin. And they

1:11:12

were for favorable regulations

1:11:15

that encouraged Bitcoin model to grow and

1:11:17

to stay in the United States. And

1:11:20

then I was disappointed by some of

1:11:22

the members of the summit. Obviously, a lot

1:11:24

of people are familiar with the Elizabeth Lincoln

1:11:26

stance, but also with the Biden administration. And

1:11:29

I think that there's nothing less American than trying

1:11:31

to decay what is the

1:11:34

energy use rate, because it will seem that

1:11:36

Bitcoin will start looking at who can take

1:11:38

claims and who can be a tourist and

1:11:40

whether you can use your Russian mission. So

1:11:42

we do have to, I think, be really

1:11:44

thoughtful about making sure policymakers are aware of

1:11:47

our industry and what we're doing. Funny thing

1:11:49

I find is the people that say Bitcoin

1:11:51

is not a good investment. If

1:11:54

you looked at the performance of Bitcoin over a

1:11:56

take pick your time period, it's been the best.

1:11:58

And yet you still have people. that say we're

1:12:00

looking out for you and you shouldn't invest in

1:12:02

Bitcoin because it's not a good investment. I mean

1:12:05

to me that's the most kind of

1:12:07

you know kind of damning of them

1:12:09

all is because literally the data is like

1:12:11

I said pick any time period you want

1:12:14

and look at the performance of Bitcoin they

1:12:16

doubt China anything else and yet they still

1:12:18

try to tell people it's not a good

1:12:20

investment. And the fear that Bitcoin is going

1:12:22

to displace the US dollar is so unfounded

1:12:24

if you were to look at it. If

1:12:28

anything Bitcoin helps the US dollar gain

1:12:30

dominance. You know a curious thing

1:12:32

Tether is the single biggest contributor

1:12:34

to the US dollar growing a

1:12:36

little bit again as a reserve

1:12:38

asset because they hold hundreds

1:12:41

of millions hundreds of billions of dollars

1:12:44

in treasuries and you know they

1:12:46

have supplanted Japan as a buyer

1:12:48

of US treasuries and then over

1:12:50

time people are going to get

1:12:52

it. You know we're in that transitionary phase where

1:12:54

you know the next buggy whip

1:12:57

got invented and then somebody invented a car

1:12:59

or you know people are going

1:13:01

to put the 12 propellers on an airplane

1:13:03

versus starting to use jets. It's that transition

1:13:05

period we're going through. Alright well

1:13:07

we have to start to back off but I'm

1:13:09

going to ask you just very very simply and

1:13:11

directly why should someone invest in a public

1:13:13

Bitcoin mining company as opposed to just

1:13:16

buying Bitcoin? You're

1:13:18

investing in all sorts of things depending

1:13:20

on the type of exposure you want

1:13:22

and volatility you want. So you can

1:13:24

invest in gold or you can invest

1:13:26

in gold miners or Buffett has chosen

1:13:29

to invest in gold miners because he

1:13:32

prefers having the ability to in

1:13:34

an upswing in price maximize the

1:13:36

profit potential because a miner has

1:13:38

relatively fixed costs and if the

1:13:40

commodity they're mining goes up in

1:13:42

price then their profit margins increase.

1:13:45

If you're mining Bitcoin it's

1:13:47

the same thing you look at historically

1:13:49

how Bitcoin miners have traded versus Bitcoin.

1:13:51

Bitcoin price moves one or two percent

1:13:54

Bitcoin miners move three to five percent

1:13:56

there's beta and there

1:13:58

are certain traders who like that. data for

1:14:00

the average consumer, they may not like that

1:14:02

added volatility. And so this

1:14:05

type of additional volatility is very attractive

1:14:07

to people on Wall Street,

1:14:09

hedge funds. They trade in and out

1:14:11

of our stocks. We're highly liquid, most of us. We

1:14:14

provide a great ability for them to go

1:14:16

long Bitcoin, short of minor, do vice versa.

1:14:20

And now they're doing it with ETFs because ETFs settle

1:14:22

T plus 1. And so

1:14:24

now they've found that they can do this

1:14:26

with ETFs nicely. I think post-habit, you'll see

1:14:28

the money will start flowing back into Bitcoin

1:14:30

miners again. And I think there's a reason

1:14:33

that that happens. In terms of that data,

1:14:35

it's the only place, unless you're mining Bitcoin

1:14:37

yourself, that you can gain exposure to an

1:14:39

entity that's buying Bitcoin under spot. Otherwise

1:14:41

if Bitcoin is $50,000, $70,000, $200,000, $1 million at some point, a

1:14:44

miner generally

1:14:49

if they're running comfortably is the only

1:14:51

place you can gain exposure below that spot

1:14:53

price. And if that miner then

1:14:55

adds it to their capital stack and structure,

1:14:58

you get that benefit as a shareholder. So

1:15:00

I think that's why miners become a really

1:15:02

interesting place. And that's why you can get

1:15:04

that data on the trade

1:15:06

where you get more than just the

1:15:09

upswing in Bitcoin value. The other

1:15:11

thing is I think it's an interesting

1:15:13

place that we're going to see from

1:15:15

a distant investment standpoint, this leads to

1:15:18

quality. Right now there's

1:15:20

between 21 and 25, depending on how

1:15:22

you measure Bitcoin miners that are how

1:15:24

it's traded. And I really see that

1:15:27

consolidating to a much smaller group. And

1:15:29

then that group is going to be able to be stronger and

1:15:31

able to be able to do more in

1:15:33

Bitcoin mining space and therefore produce more

1:15:36

Bitcoin, lower cost structures, things like that.

1:15:39

So I think that it's a really interesting time

1:15:41

to get involved. And I

1:15:43

think all of us own Bitcoin and believe in Bitcoin

1:15:45

directly. But I think for myself,

1:15:47

I think it's a great investment point. It's the

1:15:49

only place to get it from left and you

1:15:52

would be able to buy it directly from somebody

1:15:54

else. The other piece, I think beyond the levered

1:15:56

exposure that's been referenced, which I

1:15:58

think is pretty obvious people

1:16:00

can see that. As

1:16:02

an investor, you do have now long

1:16:04

exposure to some of these other themes

1:16:06

that are somewhat independent. So

1:16:09

the next ordinals type thing

1:16:11

makes transaction fees blow out

1:16:13

and they stay elevated, miners

1:16:16

are being paid transaction fees. The

1:16:18

world starts to appreciate the

1:16:22

value in a location agnostic

1:16:24

large user of electricity that's

1:16:26

instantly curtailable. There's a ton

1:16:28

of value that's underappreciated in that. That

1:16:31

sits within the mining companies. So to

1:16:33

the extent they're developing their own tech

1:16:35

stack to monetize that, there are what

1:16:37

I'd call related

1:16:39

but somewhat orthogonal investment themes that you

1:16:41

can get exposure to in a miner

1:16:43

that you can't get in Bitcoin directly.

1:16:46

To build off Tyler's point, I think there's

1:16:48

a number of free options embedded within these

1:16:50

companies. And so everyone looks and says what's

1:16:52

your hash rate, how much you produce, and

1:16:55

so we're making Bitcoin and making money. But

1:16:58

embedded within that, again, whether it's energy transition,

1:17:00

I mean there's a massive shift on happening

1:17:02

in the energy space, and the

1:17:04

energy, the power market is many

1:17:06

multiples of what the Bitcoin market is. We are playing

1:17:09

in that and there are services we're providing where

1:17:11

there are effectively free options kind of built into

1:17:13

that. From a tech perspective, again, the curtailability of

1:17:15

our loads and how we do that and how

1:17:17

we bring things back up is going

1:17:20

to be applied in other places as well. And

1:17:22

again, free options and all of us are spending

1:17:24

time thinking about how do we do that, what's

1:17:26

the technology, what's software, how do we actually implement

1:17:28

that. So again, there's a number of free options

1:17:30

embedded in here. So it's not just you're buying

1:17:32

Bitcoin for below spot, but then also I

1:17:34

just think there's a number of embedded free options in here that

1:17:36

you just don't get by buying Bitcoin. All that being said, everyone

1:17:39

should buy Bitcoin before you get your whole Bitcoin

1:17:41

before you can. But again,

1:17:43

in addition to that, the miners I think

1:17:45

provide a unique way to play the space.

1:17:47

Yeah, I agree with everything that Sussman said.

1:17:49

I'd say in addition to that

1:17:52

in terms of Victor, we have really

1:17:54

a technology angle where we feel like that's

1:17:56

going to add a lot of value above

1:17:58

and beyond just the mining. that we do, which

1:18:00

I think is clearly a good

1:18:02

thing to invest in. I think as

1:18:04

part of a balanced portfolio, Bitcoin, Bitcoin

1:18:07

mining, and I think

1:18:09

sort of a good balance to have. We've

1:18:12

earned 6.25 Bitcoin at 3.125. Coin

1:18:15

Stories is brought to you by Bixby and

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1:18:32

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Martin Music boost 1000 stats to say,

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sounds like Saylor is describing Noster when

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talking about identity. Is he purple pilled

1:18:53

yet? Well, if you're asking if

1:18:56

he's on Noster, yes, he is at Saylor.

1:18:58

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1:19:14

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