0:02

I do think that there's a world where this

0:05

materializes and Bitcoin is

0:07

incredibly valuable, but

0:10

a lot of the other like promise and

0:13

utility and like hope that I think early

0:15

Bitcoiners had, you know, is kind of negated.

0:17

Hello there from Bedford. Yes, I'm back home.

0:21

Had the most amazing time just

0:23

out in Africa. Just a

0:25

big shout out to Eric from Gridless for arranging

0:27

everything and also to Alex Gladstein for

0:29

everything he's been doing out in Africa and all

0:31

the great people he introduced me to. We will

0:34

be working on editing the film. We're just going to

0:36

finish off our Lebanon edit. It should be out very

0:38

soon and then we'll be on to editing this. It's

0:41

been a mad year. I can't believe it's already December.

0:43

So much has happened. We've done so much this year.

0:46

We've got so much coming next year. Crazy

0:48

times. Anyway, listen, welcome to the What Bitcoin

0:50

Did podcast, which is brought to you by

0:52

the massive legends at Iris Energy, the largest

0:54

NASDAQ listed Bitcoin miner using 100% renewable energy.

0:58

I'm your host, Peter McCormack. And today I've got a bit

1:00

of a different show. I've kind of got a mining roundtable.

1:03

When we were out in Fort

1:05

Worth recently, we got together Marty

1:07

Bent, Thomas Pachia and James McAvity,

1:10

where we kind of got together just to shoot

1:13

the shit on mining, discuss a number of

1:15

topics. So we got into miner centralization, the

1:17

security budget. We even got into drive chains.

1:20

It was a great show. Great chat. Love

1:22

all these guys. Really enjoyed it. And

1:25

I know you will too. So you got any questions about this show or anything

1:27

else, please do get in touch. You know, my email

1:29

is hello at what bitcoin did dot com. We

1:31

are staring down the end of the year. We've got loads

1:33

to do. We've got our event next

1:35

year in April. That's Cheat Code. If you want

1:38

to check that out, go to cheat code. OK,

1:40

more films being released, more podcasts. And

1:42

we've got a league to win for Real Bedford. Crazy

1:45

year. It's been absolutely magic. We've

1:47

done so much, but cannot wait to see

1:49

what we can do next year. All

1:51

right. You know how to get in touch. Enjoy the show. Oh,

1:57

we started you just hot mic people. We always do that.

4:00

disagree with that. What I disagree

4:02

with is that we

4:04

are expecting somehow, like if we're

4:06

expecting an ample amount of mining

4:08

revenue to exist coming

4:11

from transaction fees, we're expecting someone to

4:13

voluntarily pay that and build the business

4:16

around that. I just think that person

4:18

is always going to try and find

4:20

ways to pay less fees. So if it

4:22

was lightning, if we're going to assume that it's lightning down the

4:24

road, I believe that lightning

4:27

nodes will find ways to settle

4:30

less frequently to the main chain. And

4:32

so that revenue will not materialize

4:36

as readily for the miners, which I think

4:38

could be an issue. But I'm a miner,

4:40

so that's what I'm worried about. Yeah, I

4:42

think as readily is

4:44

the operative takeaway that I

4:46

took there. There are operational

4:50

constraints and there's runway and

4:54

cash flow concerns and things like that. As

4:56

the network grows, it's not really considering a

4:59

public mining operation as opposed

5:01

to a hobbyist or whoever

5:03

else would try and join the network. So

5:06

I think there's always going to be dislocations

5:08

there as like capacity grows

5:10

so vast. I

5:13

mean, people didn't really use liquid

5:15

for extended... Still don't. Yeah,

5:18

and lightning took a very long time. I think lightning is still flagging a little

5:20

bit. But

5:25

like, what do you think about the

5:27

lightning vulnerabilities with the pending

5:30

attacks? Yeah, the trusting miner vulnerability.

5:33

Can you explain that? The

5:38

pending attacks. So Antoine Riard

5:40

hit the dev mailing list last month to

5:42

disclose a bug that was discovered at the

5:44

end of last year. So the end of

5:46

2022, it essentially enabled this pending

5:50

attack where your channel

5:52

counterparty, if they were nefarious,

5:55

could work with the miners to sort of run up your

5:58

fees so you couldn't spend your energy. trend

6:01

of your transaction in the

6:03

channel and then essentially steal your funds.

6:05

But I think the

6:07

capital intensity of that particular

6:10

attack and the coordination

6:12

between the nefarious actor and the

6:15

mining polls, to

6:17

me, it seems like a stretch.

6:20

Antoine seems to think it's a

6:22

bigger threat than people are basically

6:24

putting it out there. But he also said he was going to execute

6:27

the attack on October 30th and it doesn't seem

6:29

like he's

6:32

the one who announced his retirement from

6:34

Lightning, right? Yes. Would

6:37

you qualify that as a rage quit? Potentially.

6:40

Yeah, he was not quitting Bitcoin, he

6:42

was just quitting Lightning. Because

6:44

of this? Because of this particular attack.

6:47

Yes. There's been a

6:49

lot of disharmony amongst Lightning core

6:51

devs, right? There's a lot of

6:53

different development teams and how they

6:55

want to approach scalability and security

6:59

issues differs pretty

7:02

widely. I think Evan and

7:04

his team at Zeus took a little bit of heat over

7:06

the non-custodial wallets that

7:08

he implemented at Pubkey, actually, onboarding

7:11

a couple of our bartenders so they were able

7:13

to accept Lightning tips directly and not have to

7:15

rely on a custodial solution.

7:19

I think what we might see in

7:21

the near term to deal with these

7:23

issues are nodes having more malleability

7:26

or customization, like setting

7:28

higher outflow,

7:30

outbound traffic limits or thresholds or

7:32

whatever, creating sort of cul-de-sacs, which

7:34

really fuck with the liquidity

7:37

issues network-wide if a Lightning node

7:39

is not a true

7:42

routing node. But there are regulatory pressures that

7:45

we've talked about at Pubkey before in terms

7:47

of the Bit license and whether or not a

7:49

Lightning node qualifies as

7:51

a money service business just because it's

7:54

simply doing some money transmittance. Money

7:58

service business, money transmitter. and bit license all

8:01

effectively the same thing just with different regulators.

8:04

So I think that, I don't know, from my perspective,

8:07

I think we're gonna see more

8:09

demand from users

8:12

for that customization to fit their

8:15

specific circumstances, but

8:18

it does cause, I think, rips across

8:21

the core development community. Would we be better off

8:23

with just one implementation of Lightning? I

8:26

like the diversity of experimentation. It's

8:28

still so early. That's the other thing. I mean,

8:30

going back to the whole fees conversation, particularly

8:36

those who've fud Bitcoin security budget

8:38

into the future, I think it's

8:40

completely asinine to project. I

8:42

do that. I know. I

8:44

think it's asinine to project future

8:46

revenues with this snapshot of

8:48

activity up to this point in time. Like adoption

8:50

is nowhere near where we think it can be.

8:53

Right. Let me ask you a

8:55

question though. Is it asinine for a miner, somebody

8:58

who's got extremely illiquid position

9:01

in the future revenue potential of

9:03

mining as a business, which is a function of

9:06

mining revenue, fees and subsidy, and the

9:08

price of Bitcoin. Is it

9:10

asinine for them to be zeroed in on

9:13

how fees are going to be increasing

9:16

in the future? No, not at all. But

9:18

I don't, I think it's

9:20

asinine, I just say it's not gonna happen. I

9:22

think, I don't know if we've ever discussed this,

9:25

Jamie, but I think you can apply. I love

9:27

talking about it. I think we can apply Jevons

9:29

Paradox to a Bitcoin UTXO. So Jevons Paradox is

9:31

typically referenced in wheel

9:33

and gas markets where when we found

9:36

petroleum products, we thought we're

9:39

gonna like, it's

9:43

a paradox because the more

9:46

efficient you become with a particular resource

9:48

and with petrochemicals became more

9:50

efficient very quickly,

9:52

paracine, the gas we put

9:54

in our cars, jet fuel, all of that. I think

9:56

you use less because you can do

9:58

more with less, but. Because you're more efficient

10:01

with it, it drives the demand up and you can do

10:03

so much more. That's what we see in oil

10:05

and gas markets. I think that same concept

10:07

can be applied to a Bitcoin UTXO

10:09

via things like SegWit,

10:12

Taprich, Snore, second layers.

10:15

They basically make UTXOs more efficient in

10:17

terms of what you can do with

10:19

them. You can do more with less

10:21

with a Bitcoin UTXO. I think

10:24

that will create an environment of demand for

10:26

UTXOs. It's unlike anything we've seen because it's

10:29

point in time. It's just a timing thing.

10:32

Very early. Is there a chart that tracks the

10:36

total revenue from fees

10:41

per block over time and as

10:43

it trended up? It has

10:45

a modest up-to-dollar terms. Yes, that's what

10:47

I care about. Just go to insights.brains.com.

10:49

I think they have that chart. In

10:51

Satoshi terms, it has a modest up-trend.

10:54

2023 has been an up-trend because of ordinals. If

11:00

you take ordinal spikes out of it because I

11:02

think that first ordinal spike was maybe like two

11:04

weeks, something like that. It doubled the block reward.

11:07

It doubled the block reward. It

11:09

was basically, I have the screen

11:11

behind me. It looks like an Eiffel Tower depending

11:13

on how they get it. There

11:16

has been a little bit of a step up recently.

11:20

If you were to take those out, pretty flat. I

11:23

think Clark Moody even has a more simplified

11:25

view of transaction fee

11:27

as a percent of block rewards and

11:30

de minimis for

11:32

the most part. It

11:34

is. I think there's- From

11:36

a miners perspective. To call it like fudding Bitcoin

11:39

and say I'm selling my Bitcoin or I'm no

11:41

longer interested in this network because fees haven't materialized

11:43

yet and this is going to be a problem

11:45

20 years from now, I think is asinine. I

11:50

think it is not asinine for a miner

11:52

or a Bitcoiner in general who believes that

11:54

mining needs to be healthy in order for

11:57

Bitcoin to be healthy. them

12:00

to be actively contemplating working

12:02

on funding and

12:05

researching ways that

12:07

L1 fees can rise while

12:10

Bitcoin scalability improves. That's

12:13

why something like drive chains is interesting

12:15

to almost every miner you tell it

12:17

to who doesn't necessarily understand the technical

12:19

details of it. But what

12:21

they do understand is that a drive chain

12:23

theoretically pushes revenue

12:26

from a layer 2 scaling solution directly

12:28

back to the miners. And

12:30

that is like the high level drive chains

12:33

pitch. I

12:35

would push back a little bit. I actually think that miners

12:38

get cut out of the equation with drive chains a lot

12:40

faster than they think because it's

12:42

a two way peg. So Bitcoin

12:44

goes in and you buy the

12:47

drive chain Zcash or whatever. And

12:50

then there's a six month period

12:52

to Dpeg to go back to

12:54

Bitcoin. And the reason there's a six

12:56

month period is because the way

12:58

the Dpeg process works you basically have a

13:00

pretty clear shot if you were to do

13:02

it in a couple of blocks for a

13:04

miner to just steal those rewards. But

13:08

I think what you see develop really quickly

13:10

is a third peg which is just OTC

13:13

desks that say leave it there

13:15

and I'm going to pay you out. And

13:17

the miners get cut out of that situation

13:19

aggressively. And I think

13:21

that happens pretty much overnight. You

13:23

have to make an assumption about where the

13:25

side chain peg trades relative to the layer

13:27

1 Bitcoin. We don't know that. And

13:30

I'm not necessarily married to the

13:32

technical construct of the drive chain

13:34

which is the six month pegging

13:37

back and forth and bridging. I guess

13:39

you call it bridging if you're a shitcoiner.

13:41

Peking. Well, pegging

13:43

going on in drive chain land. You prefer

13:46

pegging. Excellent. Thomas prefers pegging.

13:48

Yeah. Almost all the

13:50

time. Against bridging? Yeah. Yeah.

13:53

And the ad you was like a pegging. As you were saying. You

13:55

really see that one. So

14:02

the general view, I hold this without

14:04

having a super strong technical opinion of

14:07

the way that Bit300 and 301 are the proposed

14:10

implementation. I like the

14:12

idea that there's an opportunity for layer

14:15

two scaling to continue to

14:17

incentivize deploying more hashrate onto

14:19

the network. Right now, if lightning adoption picks

14:22

up, it's going to reach a point where

14:24

there's saturation and then the fees should bleed

14:26

over into the layer one. But

14:28

if you see lightning adoption picking up,

14:30

that's not really as much of a

14:33

direct incentive to install hashrate and go

14:35

and build out mining because there's no

14:37

guarantee that those fees will pass through. It

14:40

feels like we're so early, though, to

14:43

care. Because

14:45

most of us are just holding our Bitcoin and already spending it

14:47

right now. Right. Because there's a

14:49

massive incentive to. And so

14:52

we're not really using it as a currency. I

14:54

think that's absolutely a valid response.

14:58

And I didn't used to feel this

15:00

way quite so passionately until

15:02

I had a shitload of hashrate in the middle

15:05

of the West Texas desert. And

15:08

now I do. And now I have a

15:10

really strong opinion about it. I want to pump my bags.

15:13

And I also think it's absolutely true

15:15

that fees need to go

15:17

up in

15:19

order for Bitcoin to work a century

15:22

from now. You need to be material in order

15:24

for Bitcoin to work. No problem. A century

15:26

from now. Right. But we

15:28

should be trying to design the best system that we can. And

15:31

I think these these choices do matter. I

15:34

agree with that. I think I think most

15:36

people would agree with that like premise. It's

15:39

how how do we like get there like 300 301

15:41

to me is just a myriad of systemic problems and

15:49

pushing it through in the way that layer two labs

15:51

wants to because of whatever

15:53

representation they made to their investors on how they're

15:55

going to return capital is

15:58

I don't think like necessarily like they're right

16:00

approach that we should drive into. What

16:03

are these bits? Explain to people. You

16:09

got this one. I'm out of my technical depth. We

16:12

had Paul Sork and

16:14

it was myself and ArbDoubt. This

16:17

is where I just checked out and handed

16:19

it over to ArbDoubt because he's a very

16:22

skilled and talented protocol level engineer. I'm

16:24

not the right person to ask. I

16:27

know that both of them are basically required for

16:30

the deep pegging. Yeah, one

16:32

is it allows the block to

16:34

count to a higher number. It

16:36

basically creates slots for sidechains, merge-mined

16:39

sidechains where effectively,

16:41

a miner can use

16:43

their valid proof of work on the layer one to

16:48

either verify directly or other users can

16:52

verify through the miner transactions on a

16:54

sidechain. It allows

16:56

you to double use proof of work through

17:00

a specific process that is a

17:03

Bitcoin sidechain. There's currently sidechains

17:05

on Bitcoin. Right

17:07

now, there's currently merge mining on Bitcoin, and

17:10

there's merge mining on a bunch of chains

17:12

like Dogecoin and Litecoin are merge-mined where if

17:14

you're mining one, you're mining both and the proof

17:16

of work is valid on both chains. This

17:19

implementation basically in lay person's

17:21

terms, it formalizes that with

17:24

a bit and lays out certain

17:26

preliminary proposals for how that would

17:28

work, I think it's 256 sidechains

17:32

are available to be used. Then

17:34

there's this pegging and deep

17:36

pegging mechanism, bridging, deep de-bridging

17:38

where through an implicit

17:41

trust in miner in a miner-based

17:43

multi-signature scheme, Bitcoin

17:45

can flow off of the layer one

17:48

and then be used in these sidechains.

17:51

In order to bridge back to the Bitcoin

17:53

layer one from this sidechain, there's

17:56

quite a bit of trust that goes into the miners

17:58

with the idea of being. that you're

18:02

trusting the miners because they're earning revenue from

18:04

these side chains. And so it's

18:06

not in the miners best interest to steal from

18:08

you, but technically they can do it. And

18:11

so the criticism of it is, is definitely

18:14

warranted. And some more thought going

18:16

into it is warranted. And there's

18:18

a huge Twitter kerfuffle going on.

18:20

I've seen it. Yeah. Me as

18:23

a Bitcoin user, just, you know, somebody

18:25

who stores Bitcoin sometimes receives it and

18:28

sometimes sends it. But what do these upgrades give

18:30

me? Zcash.

18:34

But I don't want to take cash. It's already failed.

18:36

Yeah. I think the

18:38

answer is it's it

18:41

would potentially offer

18:43

a different method of scaling

18:45

that isn't lightning and would.

18:50

And this is my perspective as a miner. This

18:52

could result in a world where more trends,

18:55

the scaling that occurs on Bitcoin ends

18:57

up paying more fees to the miners on

18:59

layer one. So it makes Bitcoin more resilient

19:01

to an attack. It's

19:04

kind of like a hybrid of base chain and

19:06

lightning. I

19:09

think side chain is a good, a good definition for

19:11

it. What do you think, Marty? I

19:14

think like what are the lower hanging fruits

19:16

that we can go after first? Like number

19:18

one, price appreciating certainly helps. Minor

19:21

revenues denominated dollars. The price is appreciating.

19:23

That means adoption is going out, which

19:25

likely means there's more activity on the

19:27

base chain, which means fees

19:29

are going up within each block.

19:33

Other things like hedging products, like how

19:35

can miners hedge risk and lock in

19:38

revenues without taking on too much hash

19:40

rate risk in the future? What

19:43

are some other revenue lines that miners

19:45

could take that are external to

19:48

our trading? Yeah. Bitcoin

19:50

blockchain that can help their

19:52

businesses survive. Is it all really like

19:54

a red herring in that miners

19:57

don't really care about revenues they care

19:59

about? profitability and whatever you do

20:02

to increase revenues, there will just therefore

20:04

be more miners and profitability will always

20:06

be a challenge. That's

20:09

a great question. I think that's actually

20:11

spot on is that

20:14

if there's a certain amount of installed hash

20:16

rate at a certain point, right now there's

20:19

about 15 gigawatts of installed mining capacity that

20:21

we know of varying degrees of efficiency on

20:23

machines. And so we

20:26

could go to an environment where the

20:30

majority of those miners are breaking even. And

20:34

that mining ecosystem looks, I would say,

20:36

very unhealthy from a resistance to an

20:38

attack perspective. Whereas it's

20:40

that same 15 gigawatts is earning an average of

20:43

50% gross margin, but looks a lot healthier

20:45

because as we saw in the last

20:48

bear market, when the marginal

20:50

miner is not earning money, there's a lot of

20:52

bankruptcies and everyone's breaking even, their

20:54

stock trades at book value or below book

20:56

value and effectively consider that the cost to

20:58

an attack. If you just went and acquired

21:00

all the equity of a miner or it

21:02

was in bankruptcy and you acquired all their

21:04

debt for 30 cents on the dollar, you

21:06

just bought all that hashing power and infrastructure

21:09

for an extreme discount. So the

21:12

metric that I like to look at is overall

21:16

profitability of the network relative to

21:18

the recent high. So we've still

21:20

only seen total installed hash rate

21:22

continue to go up on a

21:24

gigawatts perspective. I think where

21:26

we're at now, 15 gigawatts is an all time

21:28

high. So what you want to

21:30

avoid is receding too much

21:32

from that, where there's all this installed infrastructure

21:34

that's just sitting there, not hashing,

21:37

maybe changing hands to an

21:39

extremely low cost bidder,

21:41

bankruptcy court, something like that. And then

21:44

that effectively becomes fuel stock for

21:46

an attack potentially. It's

21:49

funny, we started with transaction fees

21:52

as the primary lever at

21:55

miners disposal. So just to

21:57

take a quick step back for people that are new to

21:59

mining, On the cost side of

22:01

the equation for miners, everything's denominated in

22:03

dollars. On the revenue side, it's denominated

22:06

in hash price effectively. And

22:08

hash price has a couple of volatility

22:11

risks embedded within it. The biggest, the

22:14

most well known is just the market

22:16

price of Bitcoin fluctuating. The second biggest

22:18

would be difficulty, variance risk and transaction

22:20

fees. We started talking about the one

22:23

that was probably the least impactful.

22:28

One of the biggest ones is the price of Bitcoin, I

22:31

think from mining operations, difficulty, and their pro

22:33

rata expected share of what they can earn

22:36

is probably the biggest one to look at. And when everybody

22:39

is just installing more and more, I mean, do we

22:41

ever see a point where there's gonna be like competitors

22:44

to have a touch to take a rival

22:46

data center offline or something so that

22:48

they could actually just get a boost

22:50

for their expected pro rata share? Yeah,

22:53

that- I don't know. When you

22:55

proposed that, that was actually really interesting. Thomas proposed

22:58

an interesting idea, which is what if all the

23:00

miners got together and everybody just agreed to only

23:02

mine half as much the next day? Then

23:05

everybody would consume half as much electricity and

23:07

the reward would be the same. So it

23:09

really would just- Change the code. You know,

23:11

it would be reducing the

23:14

electricity consumed for mining while the

23:16

revenue stayed the same. And

23:19

if there were more cooperation amongst miners, like

23:21

if we operated like a cartel, then

23:25

just like OPEC does, okay, let's come

23:28

up with a production level so

23:30

that we can control the supply of oil and

23:33

then manipulate the price. If all of the miners

23:35

just said, okay, we all have X amount of

23:37

installed hash rate, well, tomorrow is my day off.

23:39

So, and everybody just rotated

23:41

through the month, then each miner would

23:43

consume less electricity and the revenue that

23:46

they earn would be the same, but their operating

23:48

budget would be lower. If that happened, I'm

23:52

gonna immediately go and buy as many ASICs as

23:54

I want and completely ignore you. See

23:57

that's the thing, it requires cooperation. Cartels

23:59

require cooperation. And just like OPEC, where

24:01

all the OPEC members agree to production quotas,

24:04

but then everyone cheats, you know, that's why

24:06

it doesn't work in a game theory game,

24:08

because the prisoner's dilemma would

24:10

be if one person cheats, they do

24:12

much better. So then everyone's intensifies to

24:14

cheat. Yeah, it's slightly more viable on

24:17

the semiconductor level or mining pool level.

24:19

Right. If you think about like, the

24:22

chip manufacturers running a similar playbook

24:24

and restricting supply hoarding equipment. Right.

24:26

Do you believe that happened in

24:28

2021? It's

24:32

really hard. There's not a lot of, I

24:34

think, great visibility. You have TSMC and Samsung

24:36

being the two biggest, but you have other

24:39

chip manufacturers that are that

24:41

are players, not as significant, but they're

24:43

in the mix. There's some data to show

24:45

that that could have been the case, but

24:47

like, I mean, it was 18 months, there

24:49

was also really good chain issues. It was

24:51

COVID. There were. Yeah, that's true. But

24:54

it was, it was already late. And the

24:56

C for everybody. It was the best period

24:58

in ASIC manufacturer history in terms of, I

25:01

think, gross profit. What did it peak at? $120 in tear hash?

25:05

Yeah, people paid. Yeah, they paid 120 bucks a T. And it was

25:07

Q4 2020 through Q2 of 2022. That

25:15

ASIC prices were north of $40, $50

25:18

in tear hash. Yeah. Well, this brings up

25:20

another important aspect of all this

25:22

is do we reach ASIC commodification? I mean,

25:24

Bitmain came out, they're pricing the 21 series

25:26

of $14 a tear hash. It's the most

25:28

efficient, most high hashing machine that's ever existed.

25:30

They're going to be able to produce what,

25:33

50 to 100,000 a month starting next year.

25:37

So like, how does the

25:40

barrier to entry to getting access to

25:42

ASICs becoming significantly lower, potentially,

25:45

if they keep it at that price? Many

25:47

people think they're trying to box micro BT out

25:49

of the market and they have

25:51

the high scale to do so. So

25:53

what does that do? And

25:56

is it also every time they do produce a

25:58

new more efficient? machine is

26:00

in our fuck all of all that shit we

26:02

bought over the last two years. There's

26:04

no bunk I need to upgrade. Is that depends

26:07

on your cost of electricity? But if you're on

26:09

the high side of the cost

26:11

of production curve, then yeah, you either need

26:13

to upgrade or die. Well,

26:19

this has been particularly, I think

26:21

disruptive with what Marty's talking about,

26:23

because the XP is a 23 joules

26:26

per tera-hash machine. And

26:29

they were selling them north of $20 a

26:31

tera-hash for basically the

26:33

last year through August, roughly.

26:36

And, you know, bear market, similar mining

26:38

conditions, difficulty going up. Um,

26:42

absolutely a bear market for mining during that period. And so

26:44

Bitmain's got the XP out there for $23 a T and

26:47

then they come out and they

26:49

announce the S21, which

26:51

you would expect in their normal playbook. That would

26:53

be the premium product that trades at a premium

26:56

price, maybe call it $28 or

26:58

$30 a T. So a premium to

27:00

where they're selling the XPs and they price it at $14 a

27:02

T. So they

27:04

undercut themselves dramatically and

27:06

they undercut all of the other ASIC

27:08

manufacturers at the same time with the

27:10

most efficient machine heading into the halving.

27:13

So I think Marty's is spot on that. That

27:16

looks like a market share grab

27:19

and potentially an emotional decision targeted at

27:21

micro BT who had been winning more

27:23

market share. Uh, and

27:26

it's disruptive. I don't know how many of those

27:28

S21s have been purchased, but if you model out

27:30

the numbers right now, they look incredible. So it's

27:32

hard to ignore them if you're a serious miner.

27:34

Yeah, especially the Hydra series. It's insane. Yeah. How

27:37

much hash rate you can get out of those

27:39

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N E R G Y.co Go

31:00

back to the fees Sorry

31:03

Because I don't think we finished it. I

31:06

still don't care because I I'm like with you

31:08

Marty. I See

31:12

a couple of things right I can be as a

31:14

simple user That

31:18

the fees are pretty The money that

31:20

can be earned from a blocks pretty high the most

31:22

when it's 300 thousand dollars point seven point seven Bitcoin

31:24

a block And what was it the last halving? It

31:28

was a lot lower yeah, so it was

31:30

about point zero seven two They're

31:33

not just fees like the total Reward

31:36

per block. Is it going up every

31:38

every halving? In

31:40

USD value. Yeah. Yeah. Yeah In

31:42

fact, I know yes generally it is That's

31:45

the signal that's causing more electricity to

31:47

be consumed to mine is the USD values

31:49

increasing generally over time So my view

31:51

is again back to the point. It's that

31:55

It's a hyper competitive market There's

31:58

always there's it seems there's always enough It's the

32:00

profitability that's the issue in a hyper competitive

32:02

market. It's just totally cutthroat. And

32:05

so really the focus is

32:07

on will there be enough in

32:09

fees, like you said, in 100 years time.

32:12

But if Bitcoin isn't being used regularly

32:15

as assessment layer for

32:18

in between, in between whatever institutions, whoever

32:20

in 100 years time, it's probably failed.

32:24

So I don't, it just doesn't feel

32:26

like I come with you. It feels like a

32:29

red herring of a discussion. It feels like no

32:31

offense. I just feel like it's monas. No, it's

32:33

monas moaning because I'm not making enough profit. Right.

32:36

It's the profits, the issues, not the fees. I

32:38

think that's a, it's a totally valid take.

32:40

I actually do. And I welcome the

32:42

debate about it. I'm excited to see that people are

32:44

just debating it and talking

32:47

about it more openly. To

32:50

me, it's just, it's kind of like, okay,

32:52

mechanically, this is how we're expecting this design

32:54

to work, where at some

32:57

point we're expecting some user

32:59

to pay these high fees to keep the

33:01

mining incentive strong. If we can agree that we

33:03

want the mining incentive to be strong in

33:06

the future, and I think most

33:08

people will agree on that, then I just

33:10

want to take the conversation one step further and

33:12

say, okay, well, who are we expecting to pay

33:15

that fee? What will the fees be made

33:17

up of in 50, 60 years time? It's

33:20

a great question. And nobody really knows. I

33:23

would prefer to think

33:25

about solutions and I'm not committed

33:27

to a particular solution at all. I'd

33:29

like to see solutions where everybody can pay a very,

33:32

very small transaction fee and that fee can flow through

33:34

to the layer one miners. I think

33:36

that to me seems really simple and really elegant

33:38

where you keep

33:40

the layer one, no requirements, very low

33:43

by keeping block sizes low. That was

33:45

effectively the reason why the block size

33:47

war was won by the small

33:49

block camp was to keep the requirements for

33:51

running a node pretty minimal. And

33:54

so if we can have that and

33:56

then still transaction fees from the layer two can

33:58

flow through to the, to the grid. self-interested

34:00

miner like me, which

34:02

is what the network is predicated on, is me

34:04

being greedy and self-interested, then to

34:07

me that feels like a more elegant and

34:09

simple design. Then assuming

34:11

that some user down the road is

34:13

going to be willing to pay a very high transaction

34:16

fee to move funds on the layer one. That's

34:19

all. Because I don't think in 50 years the fees

34:21

are going to be made up of a bunch of people sending in

34:23

$1,000, $10,000. I

34:27

said a $10 transaction earlier this week as a

34:29

demo to somebody who'd never downloaded a Bitcoin wallet

34:31

and they're like, how do you actually receive Bitcoin?

34:33

I had them download blue wallet,

34:35

sent them, what did you pay $5? I paid $2 for

34:37

it. I paid $350 the other day.

34:42

I paid $2 for it. The

34:46

point I'm trying to make is what does Bitcoin

34:49

look like at scale? I am in

34:52

agreement with Safedine's positioning

34:55

of Bitcoin at scale as

34:57

the central bank like settlement

34:59

layer where the OPECs of

35:01

the world, the people doing large oil

35:04

trades or large trades of other markets are

35:06

using the base layer to settle those little

35:08

trades and they will pay a fee

35:12

that's commensurate with the trades that

35:14

they're making, which should be profitable

35:16

for miners. Then on top of that, you have all

35:19

these other things that you can do with the

35:21

UTXO, whether it's a DLC, opening a Lightning Channel,

35:24

locking something at a FediMint, something

35:26

like Arc that hasn't even been released yet. I think

35:28

there's just going to be a ton of utility

35:31

that the UTXOs have. You

35:34

just sent the transaction of

35:36

one of the most important transactions, an

35:38

educational transaction where you're explaining this to

35:40

somebody. I would prioritize that as a

35:42

high value Bitcoin transaction and

35:44

that's 20%. Then if

35:47

you look at other basic commerce, if somebody wants

35:49

to settle a tab at Pubkey, it's

35:51

also the same situation, but you also

35:53

have the settlement delay and then the

35:55

knock-on effects from an operation perspective and other

35:57

stuff. The base layer can

35:59

accomplish. all the things that

36:02

we wanted to just in and of itself.

36:04

You accept base chain settlement at Pubkey? No,

36:06

we turned it off actually. We turned it

36:09

off during the ordinal spike just

36:11

because we knew that if there's gonna be a

36:14

two hour block or something, they're

36:17

not gonna stick around, right? They're gonna leave, it's not settled

36:19

yet. Ooh, I hope it comes in. If

36:22

there's a hung transaction or something like that.

36:25

So we shut it off and it's slightly hung.

36:28

It's the only way that it would really work at

36:31

Pubkey. I think that Parker Lewis has

36:33

actually articulated the opposing view to my

36:35

position really well. And I

36:37

acknowledge that there are many worlds

36:39

where he's absolutely right, which is that the

36:42

ability to settle transactions

36:44

so quickly and so cheaply on

36:46

Lightning increases Bitcoin's monetary

36:49

utility so much.

36:51

You combine that with kind of what

36:53

Lynn Alden says in her book, which

36:55

is the reason why fiat money displaced

36:57

gold was because you can

36:59

settle fiat money so much quicker than

37:01

you can settle gold. And so if

37:03

the Lightning network is envisioned to be

37:05

the cheapest and fastest form of the

37:07

best possible money, then that

37:10

drives Bitcoin's monetary utility through

37:12

the roof, hypervacointization is inevitable and

37:14

fees likely never drop below one

37:17

BTC per block in aggregate between

37:19

the subsidy and the fees paid.

37:21

I think that's a really solid

37:23

explanation and is definitely plausible. Let

37:27

me put another point to you and just see if this adds

37:30

to the conversation. Been wrestling

37:32

with something for quite some time now. The

37:34

idea that if we do have hypervacointization, how

37:37

many people on this planet could realistically be

37:39

self sovereign on the base chain? What

37:43

is the actual number? Right now, I

37:45

mean, in the tens of

37:47

millions. Tens of millions, right. So

37:49

with global hypervacointization, if it happens, if it

37:51

becomes true, it's global money. Probably more than

37:53

that, but hundreds of millions. We're not gonna

37:55

have 8 billion people on

37:58

the base chain. In

38:01

the current state, probably not, but there

38:03

are proposals out there to create sort

38:05

of partial ownership of an individual UTXO,

38:07

which would enable that. But

38:10

that's something that's not here yet. And that's the way

38:12

Bitcoin scaled. And in

38:14

the past, as you reach these limits, the

38:16

fees go berserk. The network

38:18

either slows down or something happens. And

38:21

then people are like, all right,

38:23

here's where the pain point is. How are we going

38:25

to solve this? And it's not until you reach those

38:27

points until these things materialize. And then add another point

38:29

to this. When

38:32

I made my, any of my

38:34

documentaries in places under high inflation, particularly

38:37

recently in Lebanon, that people

38:40

have no disposable income for Bitcoin. And you get some people come

38:42

back and say, yeah, but what if it's even a dollar a

38:44

month? They just don't have a can of Coke they

38:46

normally have or a beer and they just buy just a dollar of Bitcoin.

38:49

That's going to help them say, OK, cool. So how are they buying

38:51

that dollar of Bitcoin? Because they're probably not buying on the base chain.

38:54

If they are, they're probably not going to

38:56

be holding their own keys. They'll leave it on an exchange.

38:59

And so my question really is, is can

39:02

everyone be truly self sovereign with Bitcoin

39:04

in the way it is? And

39:06

if they're not, then what are the answers to

39:08

that? And what are the are we going to end

39:11

up building bank like

39:13

multi multi institution,

39:15

custody sort of

39:17

multi institution, custody solutions? And therefore we can have

39:19

a bunch of those around the world and they're

39:21

going to be the settlement. They're going

39:23

to be sitting with each other. Well, you could have

39:25

an idea that's been in my head that's not fully

39:27

fleshed out is that pools actually become

39:30

banks and

39:32

the ability to control and move blocks

39:36

and potentially in

39:38

conjunction with lightning channels or side chains

39:40

or whatever it might be, the pool

39:44

becomes effectively the most

39:46

incentivized market

39:48

participant to be trusted with your settlement

39:51

where they have

39:53

a check and balance naturally where if the

39:55

pool starts messing around, they'll lose their users,

39:58

their hash rate becomes less valuable. The

40:00

layer two revenues become less valuable and there's so

40:02

much just kind of overlapping

40:05

incentive alignment there where the pool as

40:07

the bank Allowing

40:09

it still it's a trusted

40:11

relationship But it's it's kind of the

40:13

same trust that we have right now

40:16

with a layer one where we trust the minor to be economically

40:18

rational and pursue profit maximization

40:22

With a long-term incentive timeline, you know miners

40:24

are making two three four year Bitcoin denominated

40:26

investments and so they have the the

40:29

longest duration least liquid Bitcoin position

40:31

of any participant a World

40:33

where they become more intimately involved in

40:36

financial services It's

40:38

something that so back like you were

40:40

saying is the base chain the central bank

40:42

and these custody solutions are banks themselves They're

40:45

all settling with each other about these users

40:47

You'll be going on a grading accounts and

40:49

they can be buying Bitcoin on it. But

40:51

really it's they're not self-sovereign They don't own

40:53

a UTXO Right. Yeah, that

40:56

is like the not your keys. Not

40:58

your Bitcoin is obviously a very important

41:00

narrative for Bitcoin, but ultimately It

41:03

will die as a narrative And

41:05

potentially yeah, not for everybody But I

41:07

mean this goes back to I

41:10

mean what you just described is essentially a free banking

41:12

system built on Bitcoin Which is something that how Finney

41:14

talked about in December of 2010? Yeah

41:17

on Bitcoin talk org and I think comparing that

41:19

to the incumbent system that we're trying to get

41:21

away from While in

41:23

its current state, which is Arguably

41:27

not going to be the state into perpetuity Where

41:30

not everybody on earth is going to be able

41:32

to own a UTXO Maybe we

41:34

get something where you have partial ownership

41:36

of the UTXO and you do have a key that

41:39

grants you access to that But let's run with the

41:41

assumption that doesn't happen this free

41:43

banking system that can emerge Where

41:46

you have pools of Bitcoin? Managed

41:49

by different actors different private actors throughout

41:51

the global economy Maybe they're running a

41:53

Fetty Minton or something like that and

41:55

you just have this more robust

41:58

permissionless competition for a free banking banking

42:00

system. And at the end of the day, as long

42:02

as the 21 million supply

42:04

cap is protected,

42:07

mining sufficiently distributed, that is

42:09

a future that is

42:12

materially better than the one that we live in.

42:14

Yeah, the world that we've been free baking system.

42:17

It's wild to read about it. You can kind

42:19

of see it. The

42:22

some of the the

42:25

hypothetical scenarios that would play out in scenarios

42:27

like this, they already played out in history

42:29

when they had free banking, where

42:32

banks would issue their own currency and it'd be backed

42:34

by their liabilities. And there is somebody

42:36

was talking about the other day, I can't remember where they

42:39

were talking about tether

42:42

redeeming USDC as

42:45

an attack. So tether was buying

42:47

up USDC and then redeeming it to

42:50

circle. So reducing the outstanding flow

42:52

of USDC that circle had,

42:54

which is how circle earns money, because they

42:56

invest that in treasuries. And

42:58

so they were actively buying all

43:00

the USDC and reducing the AUM

43:03

of USDC. And so weakening

43:07

their competitor. And I think

43:09

it was Nick Carter, he brought up that

43:12

this attack is actually how free

43:14

banks used to attack each other, where they

43:16

would buy up the notes of a competing

43:18

bank, and then go and redeem all of

43:21

the notes and try and force a run

43:23

on the bank where their liabilities could

43:25

meet their outstanding deposits. Tether USD,

43:28

a hypothetical is that why? No,

43:30

no, that no, it's USDC has

43:32

been free falling. 21

43:34

billion, doing a redeem attack against USDC. Hello. Wow.

43:41

Free banking era is this is where

43:43

all these stories come from. Nick read

43:45

a whole article of this. Yeah, he

43:47

did. Yeah. But a free banking structure

43:49

on top of Bitcoin sounds pretty cool.

43:53

The risk is of some kind of

43:55

rag or rehypothecating what

43:57

they have on there if somebody doesn't

43:59

have You could have visibility, right?

44:02

Theoretically, if we

44:05

have an uptick in sort of sophistication

44:07

and competency of users, they would require

44:10

one of those entities to have proof of reserves

44:12

and be a little bit more transparent of what

44:14

they have. And proof of liability.

44:17

And then, which is hard to

44:19

prove. Yeah, yeah, yeah. The multi-institution model,

44:21

which you described, I think that also

44:24

creates a unique social incentive model where

44:26

if each individual institution within

44:28

a multi-seat quorum has their own reputation

44:31

and their own business line, you

44:34

can make the argument that the likelihood of cooperation

44:38

with somebody who wants to rug people

44:41

leveraging that multi-institution quorum

44:45

is decreased significantly because the other

44:47

institution in that quorum

44:49

has their own reputation, their own business

44:51

lines, and they don't want to ruin

44:53

their reputation by collaborating with somebody else

44:55

in the quorum to rug all their

44:57

users. Because it would take multiple individuals

44:59

within multiple different institutions. It's like they're

45:02

unlikely to agree. Yeah, we're going to

45:04

rug all our users. Yeah. Yes,

45:07

well, if those users are miners too,

45:10

then they're rugging themselves in

45:12

a lot of ways. This sunk capex

45:15

of mining, I think is a really powerful

45:17

incentive. And I think it's where Ethereum really

45:20

made a mistake was by

45:23

allowing the security capital of

45:26

your network to be not

45:29

only liquid, meaning

45:31

unstake and sell, which it was

45:34

disabled for a while. I'm not sure if it's enabled now, but

45:36

you can unstake your security capital and

45:38

sell it in two seconds. And

45:41

then they create this liquid staking derivative, which

45:43

is like a WMD, a weapon of

45:46

mass destruction, or security collateral, where

45:48

you can go and say, I'm going to secure the

45:50

network with my ETH, and I'm going to get a

45:52

token back that is the same value as my security

45:54

capital. You can go use that to

45:56

go short Ethereum, then you have your staking, you're

45:59

securing the network, you also have no

46:01

economic risk if the price of Ethereum

46:03

goes down because you're shorted, and

46:05

there's no collateral mismatch on the short. The

46:09

illiquidity of security collateral,

46:11

the transformers, the containers, the ASICs

46:13

themselves, the PDUs, the network equipment,

46:16

all of that stuff that goes

46:18

into the ground and can't go

46:20

anywhere, and is purpose-built for Bitcoin

46:22

mining, that's what makes the security

46:24

incentive so strong, is that it's

46:26

illiquid. In

46:29

Ethereum, they made it liquid and effectively

46:32

destroyed their security incentive. In Bitcoin,

46:34

it's so illiquid that you

46:37

could build other forms of validation on

46:39

top of it. That would

46:41

be the layer two hypothesis.

46:44

This illiquidity security collateral can be

46:46

trusted to perform other forms of

46:48

settlement. And

46:51

if you had this free banking system

46:53

on top, which was lots of, hopefully,

46:57

hundreds of thousands of different

46:59

solutions, that would be your

47:01

settlement. They'll be settling

47:03

every day between each other. That would

47:05

be your fees. Yeah,

47:08

I mean, I think that's one way to think about it,

47:10

is that the institutions that

47:12

have the most sunk capex,

47:14

illiquid security collateral into Bitcoin

47:17

could potentially win the market of

47:20

who is the most trusted party

47:22

to move individuals off of a

47:24

fully sovereign Bitcoin experience. Where enlightening,

47:26

like you say, you're not a sovereign

47:28

individual. If you're not on the layer one, you've got to

47:30

move back to the layer one. Somebody's

47:32

going to win the battle for user trust there. It

47:36

will probably be whoever

47:38

offers the best monetary utility.

47:41

So that's a settlement and

47:43

lowest cost. However, like

47:45

you need to ask. Jim,

47:53

I do like this idea of pools emerging

47:56

as the banking institutions of

47:58

the future. talked about this quite

48:01

a bit, but it's always intuitively made

48:03

sense to me, particularly when we're in

48:05

this transitionary period, that Bitcoin exchanges need

48:07

exposure to mining via forward contract or

48:09

something. If they want to be

48:11

able to provide liquidity to their end users, essentially

48:14

just have access to Bitcoin to broker a

48:16

trade at some point in the future.

48:18

And I don't know if that exact trajectory of

48:20

how mining and sort of the

48:23

financial product aspect of

48:26

Bitcoin interact with end users

48:28

materialize it, but that something intuitively in my

48:30

mind says there has to be

48:32

this connection between the mining world and the financial

48:34

product world on a Bitcoin

48:36

standard. Yeah, I still haven't really fully

48:39

conceptualized it, but it just seems

48:41

like that should be a

48:44

ticket that's in the race. It's like, okay, if

48:46

we're going to, like you say, Peter,

48:48

if we're moving individuals off of

48:50

self sovereignty on the layer one, who

48:53

are they going to go to on the layer two and

48:56

hash rate and pools as banks,

48:58

as trusted parties where you're already

49:00

trusting them to a certain

49:02

extent for fast confirmations to settle transactions.

49:05

So you sort of extend that trust and you put more

49:08

incentive on good behavior

49:10

from them. And I think there's something there for

49:12

sure. Yeah. I

49:15

mean, look, I think about it a lot because I

49:17

keep hearing people say, like, you're key's not your Bitcoin, be

49:19

self-sovereign. I keep thinking, well, most people are not going

49:21

to be able to be. So like,

49:23

why aren't we talking about that? I

49:26

think there is a world I was

49:28

tongue in cheek when I said like an ETF, but I

49:30

do think that there's a world where this

49:32

materializes and Bitcoin is

49:35

incredibly valuable. But

49:38

a lot of the other like promise and

49:40

utility and like hope that I think early

49:42

Bitcoiners had is kind

49:44

of negated by that. And

49:47

it seems like we're at an inflection point for that

49:49

right now with the ETFs, with

49:52

sort of the financialization

49:55

of mining powerhouses at

49:57

multiple levels, not just. the

50:00

mining operators themselves, but mining pools,

50:04

ASIC manufacturers, others. This

50:07

is becoming more of a

50:10

financialized asset

50:12

class. Absolutely. Yeah. And

50:15

I think that with that comes a lot

50:17

of shifting power dynamics. Like if

50:19

you look at how the S1 was

50:21

written from BlackRock, there are certain things

50:23

that if you read it from the

50:25

point of view where you have some

50:27

knowledge of how Bitcoin core development

50:31

processes have taken place over the last however many

50:33

years, it certainly

50:35

has some language that is problematic

50:41

in certain parts. Like what?

50:43

The determination of what the one through Bitcoin is,

50:46

sort of coordination with mining pools,

50:49

coordination with miners. Is

50:51

that not just a disclosure risk? No,

50:56

I forget exactly where it was in the

50:58

S1. I don't believe it was in the

51:00

disclosures. I think it was actually in describing

51:02

the underlying assets, right? And how they define

51:04

what Bitcoin is. So how would that

51:06

play out? A lot of malleability. Do you think Coinbase went

51:08

through them and be like, hey, we really messed this

51:10

up the first time it happened. You should work out

51:13

for this. How would that play out? Would

51:15

it be a contentious fork where? I

51:18

don't think they're going to be paying out Bitcoin cash dividends.

51:21

You know, GBTC did. They

51:25

might just scoop those going forward. But

51:27

they could also be moving to, I don't

51:29

know, there's lots of fun and other things

51:32

that have been out there talking about sustainable

51:34

Bitcoin, green Bitcoin, bifurcating

51:37

the network and trying

51:39

to consolidate more, know

51:42

your miner, know your

51:44

customer objectives. And

51:47

that's playing out in other areas simultaneously.

51:50

The FinCEN language is

51:52

concerning. There are other proposed

51:55

bills that have been out there that I know, you know,

51:58

Bitcoin Policy Institute and others have served. of

52:00

like, you know, sprung into action to sort

52:03

of wrap their heads around and provide an alternative view.

52:06

This week's going to be interesting. There's lots of politicians here

52:10

in Texas for lots of fundraisers. I

52:14

think one important thing to

52:16

note, this particular point in

52:18

the conversation is we should

52:21

all thank Satoshi for the aggressive supply schedule that

52:23

he laid out when he launched

52:25

Bitcoin. For us, the majority of

52:27

coins are held in self

52:29

custody. And to your point, there

52:31

certainly is a possible future in which

52:35

Thomas described materializing. And

52:38

I think as Bitcoiners want to preserve

52:41

the sanctity of the sovereignty of

52:44

the network, it's really all right.

52:47

Most of the Bitcoin is held in self custody.

52:50

That's sort of like a defense line that we have,

52:52

like moving forward to ensure that the financial

52:54

system that develops and builds on top of

52:57

the base layer is done

52:59

what many would deem to be the right way,

53:01

which is respecting some of

53:03

these sovereign ideals that Bitcoin strives for.

53:07

Just dozens of like grumpy billionaires at

53:09

conferences. Yes. Bitcoin

53:11

division failed. I

53:16

think I heard you before say, say before

53:19

Marty, a while back that we should just

53:21

ignore politicians. Just forget about them. I think

53:23

it's much more productive. I think do not

53:25

see any benefit in some of the work

53:28

that's been done by Bitcoin policy institute. I

53:33

certainly don't. Education's good. And

53:36

I do think if we can

53:38

get a good message across, I think messaging is important.

53:40

I think getting these

53:43

messages to politicians who have significant

53:45

sway is important. But at

53:48

the end of the day, I also

53:50

think it's a losing effort to depend

53:52

on like voting these rights through. Rights

53:55

aren't voted on. They're taken and defended.

53:57

I think. earlier

54:00

today I think Peter put out a

54:02

piece sort of

54:04

you know positing whether or not the BSA the

54:06

Bank Secrecy Act should be challenged as on the

54:08

constitutional like a hundred years later how old does

54:11

it be 1970 1970 I thought

54:15

WTF happened in 1970 there we

54:17

go okay I

54:19

thought it was more like a depression thing but

54:21

don't you think that the sailors take on that

54:23

is what's just a

54:25

is worthy well he

54:27

says that you know sure

54:29

the time goes

54:31

on individuals may be presented with

54:34

the choice that they have to leave the jurisdiction

54:36

that they call home or that they've called home

54:38

forever in order to retain

54:40

their right to hold and use Bitcoin

54:42

freely and that that will play

54:44

out over time and there's

54:47

nothing that we can do to stop it it's gonna happen

54:49

but as far as staying

54:52

and fighting for your jurisdiction I think Texas

54:54

is a great example like this it's not

54:56

a coincidence that there's a ton of Bitcoiners

54:58

in Texas now and in making

55:00

itself a hospitable

55:03

place to live and do business in

55:05

the Bitcoin industry Texas has now attracted

55:08

a ton of industry participants here and

55:10

in turn those industry participants

55:12

are funding politicians

55:14

funding lobbying putting

55:16

amendments into the state Constitution you know Pierre

55:19

has done a great job here Parker's done

55:21

a great job here and they've made it

55:23

sort of a haven for Bitcoiners personally like

55:26

I'm extremely thankful that there's a place like

55:28

Texas in the United States where

55:30

you can come as a Bitcoiner and have

55:32

a Bitcoin business and not feel like a

55:34

fucking criminal like you I

55:37

feel like a criminal in other states my

55:39

bank and financial institutions treat me like a

55:41

criminal in other states in the US and

55:43

they don't do it here we have a

55:46

whole country back home which does that yeah

55:49

we we lack the benefit of a

55:52

federal system we have no optionality it's

55:54

it's in our country or out of

55:56

our country yeah and we

55:58

have no competition on on the

56:01

stupidity of these laws. I've

56:04

had three bank accounts closed. We also, what

56:06

happens in Nigel Farage is there's bank account

56:08

closed. We have massive

56:10

censorship. We

56:13

have libel tourism, people globally using the

56:15

UK as a place to censor

56:18

people. I

56:21

envy it so much. It's funny

56:23

that we're having this discussion because this was

56:25

all predicted. Like this is all plays into

56:27

the end theory. Like the jurisdictional arbitrage has

56:30

been talked about for well over a decade. And

56:32

we're just living through the middle of it. For

56:34

sure. I think you actually don't

56:36

need to do much lobbying. So I sort

56:38

of agree with you. You can't ignore them,

56:41

but I have this epic tinfoil hat theory,

56:43

which is that politicians haven't realized yet that

56:45

the best way to receive a bribe is

56:48

actually in Bitcoin and not in cash. And

56:51

slowly- Bob Menendez. Yeah, Menendez.

56:53

Boom, Jersey caught with a safe full of gold and

56:56

a bunch of cash. And he goes, brainwalls solves that

56:58

problem, Bob. And that's a big aha

57:00

moment. And so as more

57:02

young people get elected to political

57:04

office and get bribed and are

57:06

corrupt, which is probably the most

57:08

consistent part of human history is

57:10

politicians getting bribed. They're

57:13

going to be bribed in Bitcoin and they're going

57:15

to be inherently lobbying for Bitcoin

57:17

related things because their bags are, their bribe

57:19

bags are gonna be in Bitcoin. And so

57:21

it actually solves itself. I

57:23

think it solves itself that way. And then from the other end too.

57:27

I agree. I do think the

57:30

concept of a soft landing has talked a lot about

57:32

Yellen, Powell, people

57:34

at that part of the power structure here in

57:37

the United States. I do

57:39

think if this wave of institutional adoption

57:41

really is coming and

57:44

it materializes in pension funds and

57:47

retirement funds and endowments and

57:49

Bitcoin rips and is

57:52

the asset that actually creates that soft landing

57:54

for these pensions, it closes the gap for

57:57

a lot of these underfunded unfunded. liabilities.

58:01

That's going to be an

58:03

instance where the pensioners, whose

58:06

pensions were previously underfunded,

58:09

got that problem solved via Bitcoin. They're

58:11

simply not going to allow the

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unchained.com. Well

1:00:55

the state, I mean we had Steve McClurg in earlier, we

1:00:58

were talking about the state could solve their 30 trillion, three

1:01:00

trillion dollar debt problem that they've proven they can

1:01:02

print as much money as they want when they

1:01:05

want. Why not print a

1:01:07

trillion dollars and buy Bitcoin? Selling your

1:01:09

hands for 10 years. They don't even

1:01:11

need to, they just need to come

1:01:13

out and say Bitfinex we're not giving your coins back we're going

1:01:15

to hold them on our balance sheet for

1:01:18

two decades at least. I mean how

1:01:20

many Bitcoin has the U.S. government had

1:01:22

and auctioned off? A lot.

1:01:24

I mean how many from the Silk Road? I

1:01:28

thought Silk Road was like 300,000 wasn't it?

1:01:30

Yeah it was six digits I think. Yeah.

1:01:32

Mostly what Tim Draper and Cumberland bought it.

1:01:34

It was blocks of 26,000. Yeah.

1:01:37

I told Tim Draper three of those Bitcoin were mine.

1:01:40

I want them back. But I

1:01:42

mean you can always rely on the government to

1:01:44

just be an idiot with managing its finances. Like

1:01:46

what did Trump want to do when rates were

1:01:48

at 1-2%? He

1:01:51

wanted to refinance all the U.S. debt

1:01:53

into 10 years and long dated bonds. Basically like

1:01:55

oh rates are low we have all this money

1:01:57

let's lock in the low rates for 10 years.

1:02:00

years, like everybody was refinancing their

1:02:02

mortgage at the all time low

1:02:04

rates. And of course, everyone

1:02:06

said, oh, Trump wants to do it. We're

1:02:09

not going to do it. We hate Trump. That's a bad idea. And

1:02:12

now all the debt is rolling off and

1:02:14

rates are now 5%. And so we owe 5% on

1:02:17

all that debt instead of locking it in for 10 years at one or

1:02:19

2%. And it's just fiscal

1:02:22

incompetence, just like auctioning off

1:02:24

Bitcoins that you see from criminals, you know, just

1:02:26

hold it to an option. Janet Yellen

1:02:28

in the world. What was Janet Yellen? I think

1:02:30

she was just issuing like one and two year

1:02:32

notes. Yeah. One and two year notes. Do you

1:02:35

think she ordered animal style at In-N-Out at

1:02:38

the PR campaign? I think that was 100% staged

1:02:42

to just like take some of the, take

1:02:44

some of the wind What

1:02:46

is that? Janet Yellen in

1:02:49

and out. It's a fantastic picture. I

1:02:51

didn't see this at all. Oh, before her

1:02:53

meeting with Xi Jinping, she went to In-N-Out Burger.

1:02:56

Maybe. And it's just her. And the reason I

1:02:58

take it stage is because it's literally just her.

1:03:01

And there's a guy in the back. Are

1:03:03

you trying to find this? There's

1:03:05

a guy in the back. Where in San Francisco? Yeah.

1:03:08

Yeah. And then she went like straight

1:03:10

to the airport and there's the like,

1:03:12

you know, handshaking with Xi Jinping. But

1:03:16

if you can, if you can zero

1:03:18

in the guy by the fries, he

1:03:20

knows like that was like a dogecoin

1:03:22

trader. They did an outburger

1:03:24

who was just like, that's Janet. Is

1:03:28

it definitely her? Because it's her head. Maybe

1:03:31

not. But as far as the internet's concerned,

1:03:34

this is the reality we live in. I

1:03:37

did like how they cleaned up San Francisco in a couple

1:03:39

of days. Yeah, that was wild. It

1:03:42

can happen quickly. If they want to. Yeah.

1:03:46

It's honestly mind blowing.

1:03:48

Our friends who live there and they're just outraged.

1:03:52

As they should be. Yeah. Well,

1:03:54

the taxes are working now. Where

1:03:56

did they ship all the? That's what I

1:03:58

want to know. Can I take that

1:04:01

for a while? Where did they go? Under Bloomberg,

1:04:03

I think there was a, in New York, there

1:04:05

was like a campaign that was like one way

1:04:07

tickets to the Poconos in Pennsylvania. Don't do that

1:04:09

to the Poconos. I think it's a nice amount.

1:04:12

There's got to be a video of where

1:04:14

they all went. Yeah, be marched down. Massive

1:04:16

homeless Jubilee sponsored by Newsom. I want

1:04:18

to see it. It took them all down to

1:04:20

LA. I mean, The Rock.

1:04:23

The Rock. Yeah, put them all there. Like

1:04:26

a zombie apocalypse. Throw a

1:04:28

load of fentanyl on the island. There's

1:04:30

one bundle of fentanyl hidden somewhere in

1:04:32

the island. Just

1:04:35

walk across that bridge. Apparently that was the first

1:04:37

thing they discussed. They were like, gee,

1:04:39

just like, please stop sending fentanyl over. It's destroying us. He's

1:04:42

like, all right, we'll work on it. Why clean it up?

1:04:44

Leave it. Be like, look at

1:04:46

this. This is terrible. Or maybe it's like, don't follow

1:04:48

him anymore. All right, we're on to this. We know

1:04:50

how to clean it up now, obviously. Stop

1:04:53

your game. I think that

1:04:56

Chinese entities

1:04:59

are contributing, donating, influencing

1:05:01

the outcome of the

1:05:04

US presidential election. And if Gavin Newsom

1:05:06

went there first, right? I think like six months ago, he made a

1:05:08

trade. Was that

1:05:10

a fundraising trip? I mean, we

1:05:12

have, I don't know if it's like direct campaign

1:05:14

financing, but

1:05:17

I mean, the Biden, and the Biden

1:05:20

was directly involved with some Chinese

1:05:23

business deals, like indirect maybe. Yeah.

1:05:26

So anyone who doesn't take money off? Actually,

1:05:33

that's another topic. I mean, we're

1:05:35

getting a little off the rails here. Is that what

1:05:37

you want? No, not the laptop. But

1:05:39

like all these mainstream media articles about like Chinese

1:05:41

miners in America, which I think there's a lot

1:05:43

of. I think a

1:05:45

lot of hash rate came back on in China, though.

1:05:48

I think that there was like a, I would be

1:05:50

curious at both of your opinion about this. I don't

1:05:52

know if we've gotten into this before, but it's coming

1:05:54

on here, too. Chinese Ashrae is coming on. A lot

1:05:56

of it's moved here, but I think I think there

1:05:58

was. sort of just

1:06:01

like a crackdown and then like increased

1:06:03

oversight and certain miners with certain connections

1:06:05

were probably allowed to plug back in

1:06:07

in China. If you look at the

1:06:09

chart of Antpool hash rate,

1:06:12

which is all the bitmain

1:06:15

adjacent hash power, it's

1:06:17

literally gone parabolic. I

1:06:19

think they went from 30 or 40 exahash to 130 over the last

1:06:21

six or seven months. It's

1:06:27

a big country. You know, those are little ASICs. I know

1:06:29

for a fact they're plugging in a lot in North America.

1:06:31

Yeah. All over the place. So that's the question.

1:06:34

Is it a bad thing? Is it against

1:06:36

our national security interests?

1:06:39

Minor on miners, sabotage. I think

1:06:43

we probably see it at some point in the next couple

1:06:45

of years. I think difficulty

1:06:47

is one of the easiest things to have

1:06:50

a direct influence on if you're

1:06:52

a mining operation. Walk through

1:06:54

that. Well, if they just

1:06:56

sabotage somebody else's large data center or

1:06:58

access to power or something like that.

1:07:00

Well, blowing up the subnotation. Yeah. Yeah.

1:07:02

Right. Like, and if you're able to

1:07:05

say, I can take however many gigahertz

1:07:09

off the network instantaneously and my

1:07:12

rigs are going to keep running

1:07:14

on a 10 minute basis, you're

1:07:16

clipping, that's the block

1:07:18

withholding attack. You familiar with this

1:07:20

attack? It's a crazy

1:07:23

attack where basically

1:07:26

if a pool, either pool

1:07:28

or firmware can conduct,

1:07:31

it's most easily conducted by

1:07:33

firmware, where basically if

1:07:35

somebody has control of your firmware, they can

1:07:37

write a script in it where if

1:07:40

you find a valid block, it

1:07:43

actually withholds the

1:07:45

valid block from the network. And

1:07:48

so you

1:07:51

can steal block, it's impossible to steal it.

1:07:54

And there's no way to actually get the bitcoins.

1:07:56

But if you have enough hash rate that's compromised

1:07:59

where you're withholding. holding valid blocks

1:08:01

from other miners, then theoretically, every

1:08:03

remaining pool is earning slightly more

1:08:05

Bitcoin. And I know

1:08:07

for a fact, this attack has happened and

1:08:10

happens on an ongoing basis, certain firmware providers.

1:08:14

We have seen a lot more firmware

1:08:16

comes to the market in the last couple months, which is

1:08:18

nice. I think more competition in that

1:08:20

space is great. Luxor, Cathedral, brains

1:08:23

with a big update. It's a big

1:08:25

update. It's about time. And SD card

1:08:27

to download that firmware anymore. Competing

1:08:32

against whom? What do you

1:08:34

mean? He didn't mention. I

1:08:38

think that's how it's found. Now

1:08:40

I want to know. There's

1:08:44

a pretty centralized market as far as

1:08:46

ASIC manufacturing. And it's not just the hardware.

1:08:49

It's the software as well, what it

1:08:51

ships with, right? Not all miners are

1:08:53

as sophisticated when it comes to diving

1:08:56

into the nuances of the software that's

1:08:58

on their equipment and potential. There's good

1:09:00

firmware there. Bixbit is

1:09:02

a new entrant into firmware. Fantastic. They

1:09:04

make micro BT firmware. And

1:09:07

good experience. The manufacturers don't make it easy for

1:09:10

people outside of their businesses to make

1:09:12

this firmware. That's the interesting part that

1:09:15

I don't understand is if you look

1:09:17

at a market like Texas, Texas has

1:09:20

2.4 gigawatts of mining power

1:09:22

online. So it's approximately one sixth of all

1:09:25

mining power. And every

1:09:27

single miner in Texas is

1:09:29

curtailing some percentage of the year, at least

1:09:31

the on grid ones. The electricity market is

1:09:34

insanely volatile. They're responding to price.

1:09:36

That's why the grid really likes the mining community.

1:09:38

That's why the politicians like it here. The

1:09:41

stock firmware that you get from

1:09:43

ASIC manufacturers still does not facilitate

1:09:46

curtailment. They have

1:09:48

to use a third party firmware provider. And

1:09:51

this third party firmware providers don't

1:09:53

have an easy avenue to actually build the

1:09:55

firmware that they're providing the market. Why

1:09:58

do they make it so difficult? Basically,

1:10:01

you have to make a model specific

1:10:04

by each one. What's

1:10:07

their incentive to make it difficult? People

1:10:09

are going to buy them anyway. They don't want to

1:10:11

spend the money on the research to do it.

1:10:13

I don't have a good answer. It doesn't really

1:10:15

make sense. You would think that they would want

1:10:18

to delight their customers by not

1:10:20

forcing them to then go and pay an aftermarket

1:10:23

vendor for custom firmware. Is

1:10:25

it they've got so much control over the market? They

1:10:27

can park it. I don't care. Or

1:10:31

maybe they could say, we actually released stock

1:10:33

firmware that has these bonus features and you

1:10:35

can pay us that fee. The

1:10:37

way I see it right now is the mining

1:10:39

community is paying between 1% and 2%

1:10:42

of their block reward revenue to third

1:10:44

party firmware developers. The

1:10:47

ASIC manufacturers would be in the best position to

1:10:50

get that revenue because they're the ones who programmed the firmware in

1:10:52

the first place. They're just leaving money on the table. If

1:10:56

you assume good faith, they

1:10:59

stand to gain a fair amount by making

1:11:01

this stuff much more transparent and open to

1:11:03

the customers. There's

1:11:07

other areas too. Voltage drive-through

1:11:09

is a big...it's a hot topic in ERCOT

1:11:11

right now. Basically, when

1:11:14

you're operating a power grid,

1:11:16

if the voltage changes suddenly

1:11:18

on the system, different

1:11:20

types of devices on a power

1:11:22

grid have varying degrees of voltage

1:11:25

drive-through, which means solar

1:11:29

generator, wind generator, natural gas plant,

1:11:31

industrial user, Bitcoin miner. The

1:11:35

voltage drops suddenly on the system and each one

1:11:37

of those different power grid users

1:11:39

or participants respond differently to the

1:11:42

voltage drop. The way that

1:11:45

a lot of this mining equipment is manufactured,

1:11:47

the resistance to a drop in voltage is

1:11:50

below the standards that good

1:11:52

power grid operating standards

1:11:54

are set to. That's

1:11:57

something we've been working on a lot in Texas. go

1:12:00

and ask the ASIC manufacturers to make a

1:12:02

power supply that has more resistance

1:12:04

to voltage changes so that it doesn't

1:12:06

undermine the stability of the power grid.

1:12:10

Right now it's not a major issue. There hasn't been

1:12:12

any incident, but it's hard to

1:12:14

get them to do common

1:12:16

sense stuff. Yeah, but it's like small

1:12:18

things like that, historically in the ASIC

1:12:20

manufacturing world are just like, how

1:12:23

are you doing with power supply units? Like they vary

1:12:25

from model to model. And it

1:12:27

creates a massive headache for an operator.

1:12:30

It's a crazy industry. It

1:12:32

just sounds like that you need a domestic

1:12:35

manufacturer of ASICs. I know there's

1:12:38

been some work there, but I'm surprised with

1:12:40

the money that can be made in this

1:12:43

that no one's got there yet. The upfront

1:12:45

capital is pretty immense. For the

1:12:47

research. The laundry space,

1:12:49

the chips. It's a

1:12:51

lot. It's a multi-year commitment. It's

1:12:53

eight to nine figures of capital.

1:12:56

You're basically risking Bitcoin, the

1:12:59

price of Bitcoin by doing that. Competing

1:13:01

against at least two foundries that have

1:13:03

just a, such an immense

1:13:06

insurmountable like advantage in terms of a

1:13:08

head start. Like TSMC is extraordinarily good

1:13:10

at what they do. And,

1:13:13

you know, Main and MicroBT

1:13:16

are making really good devices for a long

1:13:18

time. Like catching up to that is not

1:13:20

a guarantee even with unlimited funds. But this

1:13:22

isn't a team's TSMC?

1:13:26

Yeah, it's not an issue with that. And this is an issue

1:13:28

with Bitmain and... Well, it's

1:13:30

where they source our chips. It's the reliability

1:13:32

of the semiconductors themselves. But is the work

1:13:34

required on the chip or is it required

1:13:36

in the device as its manufacturer? The power

1:13:38

supply is where the voltage ride-through needs

1:13:41

to change. And then the firmware

1:13:43

is also technically not where

1:13:45

the hashboard lives. So that's, I

1:13:48

think both of those problems could be solved. But

1:13:51

I think what it boils down to really, Thomas is

1:13:53

saying, you know, there's these entrants

1:13:55

who have an entrenched advantage. They're

1:13:58

well capitalized. They've allocated... allocated

1:14:01

ASIC capacity years in advance.

1:14:04

It's really capital intensive and hard to catch up with them.

1:14:07

The way that they do business is much

1:14:10

more kind of Eastern style versus Western style

1:14:12

where it feels like

1:14:14

they're operating on a short timeframe as

1:14:16

a business. They're just thinking, we want to make

1:14:18

as much money as we can in one to

1:14:20

three years. And we're not really worried about winning

1:14:22

customer relationships for five years or 10 years or

1:14:25

whatever it might be. And I don't know if

1:14:27

that reflects their view about the price of Bitcoin

1:14:29

or maybe they're just want to make a quick

1:14:31

buck and there's no lasting equity value in their

1:14:34

business. But Western style

1:14:36

company, like a company like L.O.

1:14:38

Bean, it's like a 50 year

1:14:40

company. They sell your shirt that's going to last

1:14:42

15 years and they know you'll come back because

1:14:45

it's a great shirt. They're really thinking like long

1:14:47

run, we're going to win this guy for life.

1:14:50

And that's the opposite end of the spectrum. Western

1:14:53

style business thinking. We need an AC

1:14:55

manufacturer who thinks more like

1:14:57

that. I think MicroBT does think

1:15:00

a little bit more long term. We've had

1:15:02

good experiences with them. I mean, they're machines,

1:15:04

they're tanks. Yeah, they're good machines. You

1:15:07

may not be able to handle too much

1:15:09

heat, but some of them, if they're in

1:15:11

a good climate,

1:15:14

they're tanks. I mean, and

1:15:16

that's because Dr. Zhang designed

1:15:18

the AK47 of the mining industry up to this point, which

1:15:20

is the S9. That's

1:15:24

when it started. And the

1:15:26

M30, although they've started to

1:15:28

do some stuff with decreasing

1:15:31

the number of chips in their miners

1:15:33

and running them at higher frequency and voltage so

1:15:35

they have less thermal headroom. They're

1:15:39

not. They're succumbing to

1:15:41

the playbook of less gribulous

1:15:43

AC manufacturers, unfortunately. Are

1:15:46

you worried about the halving? How you plan

1:15:48

to blow? No, not at all. Never thought about

1:15:50

it. That's

1:15:53

a lie. You're a damn liar. Yeah,

1:15:56

if the price gets cut in half. Yeah, every

1:15:58

miner is. It won't work out like that. that

1:16:00

with a good. Oh, yeah. But

1:16:02

but but then a whole bunch of mind of the

1:16:04

golf line, right? Yeah. And what that will level back.

1:16:06

It depends where hash prices heading into

1:16:09

it. I think the right thing to look

1:16:11

at is where we call it the Bitcoin

1:16:13

opportunity value. So you do convert hash

1:16:16

price into a dollars per megawatt hour

1:16:18

value. So you can compare that against

1:16:20

everyone's electricity costs. So right now, it's

1:16:22

like $95 a megawatt

1:16:24

hour. If the having were

1:16:26

to happen today, there probably wouldn't

1:16:29

be much hash power that came offline, everyone would

1:16:31

just get their revenue cut in half. And then

1:16:33

there'd be attrition that occurred over

1:16:35

the month that followed. Let's say

1:16:37

that the Bitcoin opportunity value was

1:16:41

$65 a megawatt hour, and the

1:16:43

having occurred. So that would drop

1:16:46

the Bitcoin mining revenue expressed in dollars per megawatt

1:16:48

hour to $32.50 for the majority of miners, that

1:16:50

would probably

1:16:53

knock off like 40% of the network, I

1:16:55

think. I think you look

1:16:57

at what would happen in Texas, like everyone in

1:16:59

Texas is heading into the having and

1:17:02

basically not walking in their power contracts.

1:17:04

So prediction would be next

1:17:06

summer, there's going to be far less Texas

1:17:08

based miners who are earning electricity

1:17:10

optimization revenue, like Riot,

1:17:13

Iris, shout out Iris, sponsor the pod.

1:17:17

They earned a ton of electricity

1:17:19

trading and optimization

1:17:21

revenues this summer because it's one of the

1:17:23

hottest summers in Texas history with two

1:17:26

months in the top five

1:17:28

power prices of Texas history. And

1:17:31

so the way that you do that is

1:17:33

you lock in a power contract. And then

1:17:35

when prices rise above the opportunity cost of

1:17:37

my Bitcoin, you shut down and you

1:17:41

earn the difference. The

1:17:44

having is in April, Texas summer is

1:17:48

in June. So if,

1:17:50

let's say that Bitcoin mining revenue

1:17:52

drops to 35 or

1:17:54

$40 a megawatt hour after the having

1:17:56

hedge prices right now are 55 to $60.

1:18:00

So if you hedge for the summer, you'd

1:18:02

be locking in a loss. And so a

1:18:04

lot of miners are not

1:18:06

doing that or are waiting with if market

1:18:09

conditions were what they are today, they would

1:18:11

not do that. And so

1:18:13

the way that it'll work is that miners

1:18:15

will be just responding to real time

1:18:17

electricity prices, which means that the Texas

1:18:19

hash rate would, their uptime would reduce

1:18:21

from say 90 to 95% down

1:18:25

to based on this year's numbers, something like

1:18:27

65 to 70%. So

1:18:30

the difficulty adjustment would come not from

1:18:32

miners actually going offline, but from the

1:18:34

miners who are remaining online, their uptime

1:18:36

just going down by 25%. So

1:18:39

how will that impact the grid? It

1:18:42

won't impact the grid at all. So there won't be a

1:18:44

scenario where you have the miners because

1:18:47

we have a strong narrative now

1:18:49

is like minor grid integration. Yeah,

1:18:51

it would arguably, I mean, depends

1:18:53

on what narrative you want. If

1:18:55

you want the narrative that Bitcoin

1:18:57

miners are mostly consuming stranded renewable

1:19:00

power and excess renewables, dropping the

1:19:02

break even means that

1:19:04

that's happening more. Because

1:19:06

when there's not a

1:19:08

lot of renewables generating, the cost of power

1:19:10

is the highest in Texas, like the highest

1:19:12

hour of

1:19:16

electricity pricing in the last year was

1:19:18

seven to eight o'clock.

1:19:21

So when the wind goes down before the overnight wind picks

1:19:23

up, there's no renewables during

1:19:26

the month of August, I think that it averaged $1,000 to make

1:19:28

an hour or something crazy like

1:19:30

that. And so, you

1:19:33

know, that if you

1:19:35

expect that trend to continue, then the

1:19:37

miners will only be profitable if they're

1:19:39

consuming all the renewable hours. So 9am

1:19:42

to 4pm and then probably 10pm to

1:19:44

5am. That's

1:19:47

when the wind picks up the solar is obviously during the day. I

1:19:50

think Pierre has written a bot that

1:19:52

takes a screenshot of the air con

1:19:54

energy generation at 7pm every day. Power

1:19:56

is spiking because it's on my dad.

1:20:00

It's true, man. I mean, you watch it,

1:20:02

it's like a clock and right

1:20:04

now in peak solar generation, there's

1:20:07

15 or 16,000 megawatts of solar

1:20:10

in ERCOT. And so when the sun

1:20:13

goes down, you're losing a tremendous amount

1:20:15

of generation over an hour and a

1:20:17

half, two hour period. And so it

1:20:21

has to get made up somewhere. So the

1:20:24

price shoots up and all the flexible loads,

1:20:26

miners shut off. Anybody else who's sensitive to

1:20:28

price shuts off. Net gas spins up. Natural

1:20:31

gas plants spin up. Peaker plants spin up.

1:20:34

And it creates

1:20:36

a real challenge for these grid operators.

1:20:38

All the batteries deploy. It's wild

1:20:41

and happens every day. It

1:20:43

is wild. Should we

1:20:46

talk about some positive stuff before we finish off? What

1:20:48

was everyone's insight, by the way? You were coming up

1:20:50

with this. Well, yeah, but like to talk about this

1:20:52

stuff. Therapy

1:20:55

for miners. Therapy for miners. Therapy.

1:20:58

I find mining so interesting, but I

1:21:00

don't know. It's the most fascinating and

1:21:02

masochistic industry on the face of the

1:21:04

planet. I just don't know how

1:21:06

you cope. Because

1:21:08

it's fucking so hyper competitive. And

1:21:11

then imagine you're in a grid

1:21:13

where the power price, you're

1:21:16

either mining for free and

1:21:18

the cost of power is zero or the

1:21:21

wind isn't blowing and your entire operation is

1:21:23

shut off. So you literally, in

1:21:25

addition to the volatility of Bitcoin, now you the

1:21:27

first thing you check when you wake up is

1:21:30

price of Bitcoin. The second thing you check is

1:21:32

the weather forecast. You're praying for the wind to

1:21:34

blow one day so that you can mine again.

1:21:37

Would you like a thought of mining or running a bar? I

1:21:40

would say like media or

1:21:42

like content generation or probably the triple threat there.

1:21:44

Media content is easy. I don't know about you.

1:21:46

I think that bit is easy. Media

1:21:50

is fun. Media is fun. I'm

1:21:52

very good at it. For every one of you,

1:21:54

there's a hundred failures. Crushing.

1:21:58

Crushing industries. Wouldn't

1:22:00

say their failures. I think they're, um, they're

1:22:02

just early in starting.

1:22:04

They're, they're, uh, low audience media

1:22:06

brands. They're podcasting for their

1:22:08

mom. They're like, they're like, they're

1:22:10

the home miners of content. They're

1:22:14

all important. Mining's

1:22:17

mining's harder than hospitality. I

1:22:19

think mining is like just soul crashing,

1:22:21

but which do you lose more sleepover? Um, probably

1:22:26

hospitality. Cause

1:22:30

you're staying up later and drinking more. There

1:22:33

is that. That is another thing I've

1:22:35

noticed. No, no. The weekends. Huh? Uh,

1:22:37

weekends now I'm like Friday, Saturday night, I'm going

1:22:40

to bed at like two 30. No, I'm, I'm

1:22:42

flipped. I'm really only a pub key Tuesday, Wednesday,

1:22:44

Thursday. Um, I keep the

1:22:46

weekends pretty protected. I got little kids and stuff.

1:22:48

Um, but

1:22:50

it's usually like the Bitcoin programming on Thursdays

1:22:52

that ends up being the late, the late

1:22:55

one for me. So then it's

1:22:57

like going into the weekend, like recovery zone.

1:22:59

I've been working the door the last few

1:23:01

weeks with the doorman. Yeah. Because there's been

1:23:03

too many incidents on the door. So

1:23:05

like trying to figure out what it is. What underage

1:23:07

kids, uh, it's not underage kids,

1:23:09

but what we have is like between 18, 18

1:23:12

year olds and 21 year olds coming in. They

1:23:15

don't spend much money and they tend

1:23:17

to be the ones who, if there is a fight, they're

1:23:19

the ones that are, yeah, they're the ones starting it. And

1:23:22

then, uh, after, would it

1:23:24

be okay if they were, if they

1:23:26

had like robust haves, you

1:23:28

can look, you can start a fight for two,

1:23:30

for two siders. What the fuck? It's

1:23:33

not even worth that. And then we had an issue where

1:23:35

it, uh, we close the doors

1:23:37

at one or our licenses. We can't let him one in

1:23:39

after one, but we can stay open until three. Does he

1:23:41

get people coming up after one? I'm trying to get in

1:23:44

here like, no, the licenses we can't. And then they're banging

1:23:46

on the doors. And then sometimes when we open the door

1:23:48

to let somebody out, they're people trying to charge in. It's

1:23:50

fucking weird. Cause I, what are you, what are you doing?

1:23:52

We're obviously going to throw you out, but people are so

1:23:54

wasted. Do you know what drunk people with us? It's a

1:23:57

challenge. Yeah. Yeah. So I've been working on the day.

1:23:59

I've been working. door. I did a doorman job at

1:24:01

a bar down the shore. I thought I was gonna do

1:24:03

that one summer. I

1:24:08

did it one night. I was like, I'm gonna figure out

1:24:10

another job. All right. What do you

1:24:15

bullish on? Then we, uh, we can all go out. What

1:24:17

am I bullish on? Yeah. Uh, I

1:24:20

mean, Texas mining quite bullish.

1:24:23

Dallas maxi as well. You love Dallas for

1:24:25

worth. For I like Fort Worth. This is

1:24:27

my first time in Fort Worth. Dallas. We

1:24:29

were talking about Dallas in the city of hate. Why

1:24:31

do you hate Dallas? I know. I don't

1:24:34

hate Dallas. That's their nickname. That's their official

1:24:36

name. Hate the city of hate. You will

1:24:38

write. Fuck the Cowboys. Yeah. I mean, but

1:24:41

I'm not like that hardcore. Like

1:24:43

I hate city Dallas. I didn't

1:24:45

make up the nickname. The name

1:24:47

came from early, the early sixties.

1:24:49

It was one of the most

1:24:52

extremist like political situations in the

1:24:54

country, which led to even before

1:24:56

JFK's assassination, they like spit on

1:24:58

Lyndon Johnson's wife after like a

1:25:00

political fundraiser or something. You, you're British

1:25:02

on Texas. Uh,

1:25:05

yeah, I think, I think, I think, you

1:25:07

know, what Jamie was saying earlier about the

1:25:09

political makeup here and sort

1:25:12

of the cultural ideal ideology

1:25:14

is quite a

1:25:18

good fit for, for Bitcoin industry. And

1:25:21

I think that it will be for a little, a

1:25:23

little while. I do

1:25:25

think that there have been times that Texas has

1:25:27

been told to knock it off by the federal

1:25:29

government. And we'll see if like some of the

1:25:32

FinCEN stuff or you know, other

1:25:34

regulation, uh, at the federal level

1:25:36

is going to, uh, run

1:25:39

into conflict with some of

1:25:41

the things that like the mining industry would like

1:25:43

to see into here in Texas. And you know,

1:25:46

if the protections at the state level are going to win out.

1:25:49

Um, but for now, I think

1:25:51

it's important. I'm excited for this conference. I'm

1:25:53

excited to, um, uh, see what some of

1:25:55

the politicians have to say as they're, as

1:25:58

they're begging for nickels and dimes. for their

1:26:00

campaigns. What

1:26:02

are you bullish on? I'm bullish on

1:26:04

Texas. There you go. You know, I

1:26:07

went all in on this place and

1:26:09

I'm from Texas, so I guess I

1:26:11

came back all in, but I was

1:26:14

born here, then I grew up in New

1:26:17

York and I also owned a business in Washington

1:26:19

state. And you

1:26:21

know, you just never really felt like those

1:26:23

states were on your team. And

1:26:26

you come here, you're doing a brand new

1:26:28

thing. It is

1:26:30

a totally unique electricity market participant.

1:26:35

Bitcoin mining, how fast it is, how

1:26:37

price sensitive and responsive it is. I

1:26:40

like to say it's an economically perfect

1:26:42

consumer of electricity and electrical grids.

1:26:44

I've never seen anything like it. They

1:26:46

let 2000 megawatts of Bitcoin mining load

1:26:48

get onto this grid, which is a

1:26:50

substantial amount first.

1:26:53

And then, okay, let's

1:26:56

regulate this now. And the

1:26:58

regulation isn't, you're bad people. I'm

1:27:00

Elizabeth Warren, you're all going to

1:27:02

jail and thanks for financing Hamas. It's,

1:27:04

all right, how does your business work?

1:27:07

What makes you successful? What kind

1:27:10

of regulation can we put in place where

1:27:12

the grid wins and you guys win? They

1:27:14

set up a task force, the ERCOT large

1:27:17

flexible load task force. They've got working groups.

1:27:20

The grid comes out and visits our site in the

1:27:22

middle of the desert, like four of them. They pile

1:27:24

in a car and they come out and visit, spend

1:27:26

three hours asking questions. It is

1:27:28

really like a refreshing regulatory approach. And

1:27:31

this is not just with

1:27:33

us. I mean, this was wind

1:27:35

power and solar power before, let

1:27:38

it grow, regulate it afterwards. And it's

1:27:40

not owner's regulation, it's let's make it

1:27:42

work. Space travel, same thing,

1:27:44

Lyndon B. Johnson Space Center as where

1:27:47

NASA got started, because

1:27:49

they let it happen here. And then Spindle Top.

1:27:51

They spit on his wife. Oil, drilling

1:27:54

for oil and coming up with a

1:27:56

good framework for drilling for oil and

1:27:58

gas. discovery of

1:28:00

spindle top. And the

1:28:02

regulatory framework for drilling oil in this state

1:28:04

has made it the sixth largest economy in

1:28:07

the whole world as a state

1:28:09

like this is the pro

1:28:11

business free market good regulatory environment

1:28:14

where it's not onerous

1:28:16

and they sort of ask questions. They're curious. It's

1:28:19

wonderful. Feels great to be a Bitcoiner in Texas.

1:28:21

God bless Texas. A

1:28:24

young child growing up in New York, you said

1:28:26

I was born in Houston,

1:28:28

Texas. But did you feel

1:28:30

like an expat like something was missing

1:28:32

when you were in

1:28:35

the mean streets of Connecticut? Yeah, I

1:28:37

did. I was gonna pull back. But I did love that.

1:28:41

I felt like a little piece of my heart was

1:28:43

missing. And then I came back to Texas and now

1:28:45

my heart is full again. That's great. Love it,

1:28:48

Marty. I'll

1:28:50

echo bullish on Texas. I'll go to

1:28:52

a different route though. I mean, Texas,

1:28:54

we're talking about not your keys, not

1:28:56

your coins. Texas really took that to

1:28:58

heart with gold. They have their gold

1:29:00

bulling Kyle Bass convinced the state

1:29:03

treasurer to go get their gold from New

1:29:05

York and bring it to Texas and it

1:29:07

sits in a vault. I love that move.

1:29:09

Austin has such empowerment. So there's like an

1:29:11

intuitive understanding of we don't want third parties controlling

1:29:13

Texas money. And I think they

1:29:15

can easily see the value of Bitcoin and

1:29:17

the value of profit provides and that's not

1:29:20

your keys, not your coin sense. And

1:29:22

I think taxes are going to protect

1:29:24

Bitcoin. I think others things are too. I think that

1:29:27

is Wyoming. One thing I'm very bullish

1:29:29

on Wyoming, Tennessee, Kentucky, Oklahoma, North

1:29:32

Dakota. I think bullish

1:29:34

is probably not the right word, but I'm excited to

1:29:36

see this juris fictional arbitrage

1:29:38

between states here in the United States

1:29:41

play out because I'm not

1:29:43

a big black flag guy. I'm not going

1:29:45

to another country. I'm not leaving the United

1:29:48

States. Like I think we can solve it

1:29:50

here. It's just letting this federal system that

1:29:52

the founding fathers put us

1:29:54

into letting that play out and that

1:29:57

competition heat up. What can? Well,

1:30:00

I'm I'm always every time I go home

1:30:02

from Texas. I get home. I'm like fuck

1:30:04

this place. We've got problems I still bullish

1:30:06

on Bedford though Wicked well,

1:30:08

thanks everyone Danny you want to say anything? No,

1:30:11

all right. Should we go and drink some beer

1:30:13

a bit later? That sounds nice. Yes, do it.

1:30:15

All right. Thanks everyone Thank you. Thank you All

1:30:21

right, would you make it out you enjoy that that's

1:30:23

pretty cool show, you know Mining was something when I

1:30:25

first got into Bitcoin properly six years ago. I didn't

1:30:27

really pay that much attention to I didn't really understand

1:30:30

it It was just like this thing nerds did to

1:30:32

secure the network But have I got more

1:30:34

into Bitcoin and as the industry is innovated

1:30:37

and grown and we've now got these industrial

1:30:39

scale miners We've got everything with integration with

1:30:41

grids The flaring of methane

1:30:43

to drive mining there's so much happening. You

1:30:45

can't help but pay attention to it It's

1:30:48

so interesting. So to get three legends like

1:30:50

Thomas Marty and James together to talk about this was

1:30:52

an absolute pleasure I hope you enjoyed it If

1:30:54

you do got any questions about this or anything else

1:30:56

do get in touch emails Hello at what Bitcoin did

1:30:58

calm we are deep into

1:31:00

December now the years come into an end. It's been

1:31:02

a crazy year We've done so much. I

1:31:04

am looking forward to having a break I am

1:31:07

looking forward to spending some time with the kids over Christmas, but

1:31:09

we've got so much happening next year It's gonna be

1:31:11

it's gonna come around quick. We're gonna be in

1:31:14

New York and Nashville in January We've

1:31:16

got our event in April. I'm somewhere in March. I

1:31:18

think I'm in the Austin in March I can't remember

1:31:20

I can't I can't actually keep up with everything but

1:31:22

there's loads happening Keep an eye on your Twitter keep

1:31:24

listening here. You'll find out anyway. Hope you

1:31:26

enjoyed the show and I'll see you on Wednesday