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The last week has been a surreal in the world of bitcoin. I think it's safe to say that most people were convinced that the approval of the bitcoin ETFs would bring significant demand for bitcoin with them. However, I don't think anyone thought that the ETFs would be as successful as they have been since their launch last month. While I don't believe that anyone who cares about getting proper exposure to bitcoin should be buying the ETFs (there are much more secure ways to buy bitcoin that enable you to actually hold the asset yourself), it is impossible to ignore the success that they've had at accumulating bitcoin.

UPDATE

Bitcoin ETF Net In Flows + 12.8K #BTC 🚀

New All Time High 704.4K BTC Held in ETFs
New 9 ETFs + 14.3K BTC

Highlights
Blackrock +10K BTC 🤯
Fidelity + 3.3K BTC
GBTC -1.5K BTC

Follow our ETF Tracker for Live Updates pic.twitter.com/THHyeSMdsL

— Thomas | heyapollo.com (@thomas_fahrer) February 14, 2024

As it stands today, in aggregate, the ETFs hold ~704,400 bitcoin. Though, it should be noted that GBTC converted their trust product which already had over 610,000 into an ETF and brought that BUM with them to the broader bitcoin ETF market. GBTC has seen a material outflow due to the fact that FTX's bankruptcy estate decided to liquidate all of their shares to pay back creditors waiting in line to get their money back from the Ponzi scheme led by Sam Bankman-Fried, and the fact that GBTC is objectively a shitty product due to their fees, which are egregiously higher than their competitors.

Over the last week, it seems that the market has weathered the outflows from GBTC and momentum for inflows into the other ETFs, dominated by Blackrock and Fidelity, has reached a breakout pace. Over the last four days inflows have averaged well above 10,000 bitcoin per day. Today, there were more than 14,300 bitcoin that were purchased on the market by ETF issuers. To put this into context, as it stands today, 900 new bitcoin are distributed to the market per day via the block subsidy. That subsidy is set to fall to 450 bitcoin per day in 9,479 blocks. If this pace keeps up (let's assume 10,000 bitcoin per day) ETF issues will be eating up 11.11x the daily issuance leading up to the halving. And, if the demand from ETFs persists, that will double to 22.22x the daily issuance. This stat is even more jarring when you consider the fact that more than 70% of bitcoin is held in addresses that have been dormant for a year or longer.

[

Bitcoin Surges Past $51,775 As ETF Net Inflows Surpass 10,000 Bitcoin Per Day

Bitcoin is back over $51,775 for the first time since early December 2021 and has surpassed a $1 Trillion market.

TFTC – Truth for the CommonerMarty Bent

](https://tftc.io/bitcoin-etf-net-inflows-10-000/)

Now, these type of flows in bitcoin terms will simply not be able to persist. At least not for longer than ~2,000 days. If they did, the ETFs would hold all of the bitcoin on the market. This is simply not going to happen. The demand in dollar terms may persist, but the ETFs won't be pulling 10,000+ bitcoin off the market for too long. The supply and demand dynamics of a finitely scarce asset will come into play and drive up the price to a point where it is impossible to scoop up that much bitcoin. With bitcoin over $52,000 at the time of writing, it is pretty clear that these dynamics are already at play. The question that many are asking is, "At what point does the supply of bitcoin available on OTC desk become so scarce that it affects the price of bitcoin in unprecedented ways?" Creating intraday gap-ups that have not been seen in bitcoin's history?

If this momentum keeps up, I would not be surprised if that day comes sooner than most people think. And if it does come sooner than people think, particularly before the next block subsidy halving coming in April, it could create a very unique market environment for the bitcoin mining industry.

Historically, bitcoin block subsidy halvings have been cleansing event for the mining industry. The subsidy gets cut in half, therefore cutting miners' revenue (sats/terahas/day) in half literally immediately from one block to the next (block 839,999 to block 840,000 in this case), and forcing miners with older machines and electricity costs that are too high post-halving out of the market. The price of bitcoin at the time of previous halving events has been anywhere from 40-60% below the all time highs set in the previous bull market. The price is either dumping or sputtering into halving events. What makes this year's halving particularly interesting is that the price of bitcoin is ripping. As it stand today, the price of bitcoin is only 24.3% below the current all time high of $69,010. And we have a little over two months until the next halving.

This leads me to wonder whether or not this cycle will be different for the mining industry. If price keeps heading up-and-to-the-right, it is totally plausible that the halving event won't be as catastrophic for lower tier miners as it has been in past cycles. One only has to look at a hashprice chart to see that this cycle is already shaping up to be a bit different.

via Braiins

As you can see from the chart above, the hashprice dynamics heading into the halving are drastically different than they were in 2020. In 2020, hashprice was falling along with price into the halving. The two red boxes highlight the overnight dump to $3,500 which cut hashprice by ~40% and the halving, which cut hashprice by 50% from block 629,999 to block 630,000. If you pan over to the far right of the chart, you'll notice that we're in a completely new environment this time around. Hashprice has been making a concerted march off the floor set last Fall and is accelerating upward as the price of bitcoin rises. Yes, hashprice may be lower than it was in 2020, but it is important to understand that this low point is where the market has settled. Miners have adapted their businesses to weather the bear market, locking in the power costs that are as low as possible, and ASICs that enable them to run profitably. The bottom of the hashprice bear market last Fall was $0.059/TH/day and we are currently standing at $0.092/TH/day. If the price keeps running it is not unfathomable that hashprice will be more than double the floor that was set last Fall.

If this is the case, there is a strong case to be made that this halving won't be the market clearing mechanism that it has been in the past. Miners that would have been forced to shut down after past halvings may be able to keep hashing this time around. Now, with that being said, it is important to keep in mind that hashrate and difficulty are currently ripping alongside the price. As it stands right now, we will have another +7.6% difficulty adjustment in ~11 hours.

Bitmain released their S21 series to the market in January, which has introduced a much more efficient fleet to the market. More countries have entered the mining fray. And energy companies have begun to wise up to the opportunity that bitcoin mining provides them to bolster their revenue streams. All of this means that mining is becoming even more competitive by that day, which would naturally force weaker miners out of the market all else held equal.

The question that every miner is asking themself right now is, "Can the price pump protect us from a halving death blow?" We shall see. And a price pump bailout is not something that any miner who fancies themself to be a competent operator should be depending on. However, from a point of pure observation, it is impossible not to wonder if this may be the case. And if it is, what type of psychological effect does that have on the mining industry, the broader public's perception of bitcoin and the overall health of the network? I guess we'll find out.

This is something to pay attention to in the months ahead.

Final thought...

Get your ass to the Bitcoin Takeover in Austin on March 15th if you want to hear from some of the most impressive people bringing about the Bitcoin Standard.

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The Antminer S21, Bitmain's latest iteration in the Antminer series, has been designed to be the most efficient and powerful Bitcoin mining rig to date. Since its announcement at Bitmain's 2023 digital mining summit and the commencement of shipping in January 2023, the mining community has eagerly awaited performance evaluations. This article presents a rigorous performance test of the Antminer S21, building upon the initial review which covered the rig's design and specifications.

Testing Methodology

The performance test was conducted in a temperature-controlled environment, which allowed for the assessment of the Antminer S21's capabilities under various thermal conditions. The temperatures selected for the tests were 10°C, 25°C, and 40°C, with each level sustained for durations of 30 to 60 minutes to ensure accurate and consistent results. The primary metrics of interest were hash rate, power consumption, and efficiency.

Test Results at Varied Temperatures

At the outset of the tests, the Antminer S21 was placed in a 10°C setting. Results demonstrated a hash rate of 200 terahashes per second (TH/s) and a power consumption of 3470 watts, which equates to 17.4 joules per terrahash (J/TH), a figure marginally surpassing the advertised efficiency. It was noted that the power supply unit (PSU) increased its voltage output from the standard 13 volts to 14 volts during this low-temperature operation.

When the temperature was elevated to 25°C, the S21's performance slightly increased to 203 TH/s, although power usage rose to 3620 watts, resulting in an efficiency of 17.9 J/TH. Pushing the temperature further to 40°C, the rig maintained a hash rate of 202 TH/s but experienced increased power consumption at 4000 watts, leading to a reduced efficiency of 19.8 J/TH.

Temperature Regulation and Low Power Mode

The Antminer S21's firmware includes a temperature management feature that comes into play above 40°C, where the device began to underclock to prevent overheating. Post-underclocking, the hash rate dipped to 185 TH/s, with power usage at 3700 watts and an efficiency of 20 J/TH. This adaptive underclocking allows the S21 to operate at temperatures 5°C higher than previous models.

Another noteworthy addition is the low power mode, which the S21 can employ to enhance efficiency. Underclocking the S21 at 16°C and 20°C showed the rig operating at 157 TH/s while achieving efficiencies of 16.1 J/TH and 16.3 J/TH, respectively.

Performance Consistency and Acoustic Levels

Despite slight potential margins for error in power accuracy and GUI hash rate reporting, repeated tests under various environmental conditions yielded consistent findings, affirming the reliability of the S21. It should be mentioned that the S21 is particularly loud, with noise levels outside the temperature-controlled box measured at 80 to 83 decibels, attributable to its high-powered fans.

Conclusion

The Antminer S21 demonstrates robust performance across a spectrum of temperatures, meeting its advertised hash rate while providing opportunities for further efficiency gains through low power mode and hash rate optimization. Its design innovations support enhanced thermal management and future-proofing against the increasing mining difficulty anticipated for the 2024 Bitcoin halving event.

For those considering the purchase of an Antminer S21, the ASIC trading desk is available to assist in securing the best deal on these top-tier miners. Additionally, support for the S21 will be forthcoming from the firmware team, ensuring ongoing improvements and optimizations for users of this mining rig.

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Key Takeaways

This episode of the Bitcoin Frontier podcast from Unchained delves into the misconception that increased energy consumption due to population growth or technological advancements will lead to the depletion of resources or environmental catastrophe. The guest, Andrew Myers, argues that the planet can sustain significant energy growth, and this fear is unfounded.

Challenges in California's Energy Market

Myers highlights the inefficiencies and bureaucratic layers in California's energy market where the end consumer faces inflated retail prices due to mismanagement and regulatory complexities, despite low wholesale costs for power production.

Centralization and Monopolies in Energy Transmission

The discussion brings to light the centralization and monopolistic control over energy transmission lines, which act as gatekeepers, adding substantial time and cost to the process of integrating new power generation assets or loads into the grid.

Bitcoin's Role in Decentralizing Energy Markets

Bitcoin is presented as a parallel solution to the energy industry's centralization problem, similar to how it decentralizes the monetary system. Myers envisions a future where deregulation and decentralization of energy markets, enabled by Bitcoin, will lead to more efficient and responsive systems.

Impact of Bitcoin Mining on Energy Consumption

Bitcoin mining is portrayed as a flexible and responsive consumer of energy that can adapt to real-time market needs, thus contributing to the stability of the grid. It's also seen as a catalyst for innovation and investment in new energy infrastructure.

The Future of Energy Production

The guest predicts that human ingenuity and innovation will lead to increased energy production and consumption without endangering the planet. He suggests that a Bitcoin standard could unlock human potential and lead to an energy-rich and prosperous society.

[

Humanity at a Crossroads

It’s time to come back to reality.

TFTC – Truth for the CommonerMarty Bent

](https://tftc.io/humanity-at-a-crossroads/)

Best Quotes

1. "Whether it stays the same or it increases by ten times, the planet can sustain that level of energy growth and energy production." - Andrew Myers, highlighting the potential for sustainable energy expansion.
2. "The utilities in California have a wholesale cost for power...but for layers of bureaucracy and mismanaged infrastructure, the retail price to the end consumer ends up being so much higher." - Andrew Myers, criticizing the inefficiencies in California's energy sector.
3. "They are the gatekeepers, and they add a year, two years or more to the process of building out new load or new generation." - Andrew Myers, on the monopolistic control of transmission lines.
4. "Bitcoin...brings money and decision-making power back into the hands of entrepreneurs and innovators and investors who can build out that grid of the future." - Andrew Myers, on the transformative potential of Bitcoin in the energy sector.
5. "We will see a growing class of entrepreneurs, investors and everyday people eager to produce and consume more energy to make their dreams a reality." - Andrew Myers, envisioning an energized future driven by Bitcoin adoption.

Conclusion

The podcast episode with Andrew Myers offers an insightful look into the energy industry's challenges and the unique role Bitcoin mining plays in driving toward a decentralized and efficient future. Myers effectively argues that concerns over the planet's ability to sustain higher energy consumption are unfounded and stem from a lack of understanding of the potential for technological advancement and sustainable growth. He also underscores the inefficiencies of centralized energy markets and the bureaucratic hurdles that inflate costs and stifle innovation.

By drawing parallels between the decentralization in the monetary system brought about by Bitcoin and the potential for similar transformations in the energy sector, Myers provides a compelling argument for the use of Bitcoin as a tool for market liberation. His vision for the future is one where energy production flourishes, driven by a class of forward-thinking entrepreneurs and consumers enabled by a Bitcoin standard.

This conversation not only sheds light on the intersection of energy and Bitcoin but also on the broader implications for society's progress towards a more self-sovereign, innovative, and resource-rich future. It serves as a call to action for continued advocacy for deregulation, market reforms, and the embrace of technologies that can reshape the energy landscape for the betterment of all.

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Bitcoin Mining: Facts and Figures

Bitcoin mining is an essential process to the function of the Bitcoin network. Mining involves validating transactions and adding them to the blockchain, a public ledger. Miners compete to produce cryptographic hashes, and the first to produce a hash below the network difficulty target gets to add a new block to the ledger and is rewarded with newly minted bitcoins plus the fees attached to the transactions in the block.

As of the latest data, the Bitcoin network's energy consumption is a subject of debate. The Cambridge Bitcoin Electricity Consumption Index (CBECI) estimates that Bitcoin's annualized total electricity consumption is around 128 terawatt-hours (TWh), which is a fraction of the total global energy consumption. The energy sources for Bitcoin mining vary widely, with some mining operations using renewable energy and others relying on fossil fuels.

Mining hardware has also become more energy-efficient over time, which can reduce the overall energy consumption of the network despite the growing amount of mining activity.

Media Narratives on Bitcoin Mining

The mainstream media's depiction of Bitcoin mining has often been critical, focusing on the environmental impact of the energy consumption associated with mining activities. Articles with headlines suggesting that Bitcoin mining's energy usage is on a trajectory to consume all the world's energy have been proven to be hyperbolic as the predicted scenario did not materialize.

Another common narrative is the assertion that inflation can be beneficial to the majority while being detrimental to the wealthy. However, economic data suggests that inflation tends to disproportionately affect the purchasing power of the working and middle classes, as they spend a larger portion of their income on goods and services whose prices are rising.

Environmental Impact: The Bigger Picture

While much of the focus is placed on Bitcoin's energy usage, it is essential to consider the environmental impact of all forms of energy production. Renewable energy sources, such as wind and solar, also have their environmental trade-offs. For example, the production and disposal of solar panels and wind turbines pose challenges, such as habitat disruption and waste management.

Additionally, the mining of lithium, which is vital for battery production used in many renewable energy storage solutions, has raised concerns about environmental degradation and exploitation in developing countries.

Media Responsibility and Accountability

It is the responsibility of journalists to provide balanced coverage of complex issues. This entails reporting not only on the challenges posed by technologies like Bitcoin mining but also on the potential benefits, such as the role of mining in providing a stable demand for electricity which can support the development of renewable energy infrastructure.

Critics have accused some media outlets of selectively presenting information to support specific narratives. Instances where media outlets have been called out for manipulating images or misrepresenting data to highlight negative aspects of Bitcoin mining have been discussed in various forums.

Conclusion

In conclusion, the topic of Bitcoin mining and its environmental impact is multifaceted. While it is crucial to acknowledge the energy consumption associated with Bitcoin mining, it is equally important to recognize the advancements in energy efficiency and the potential for mining to support renewable energy development. Moreover, a fair comparison with the environmental impacts of other energy-intensive industries and technologies is necessary for informed discourse.

The role of the media is to provide accurate, balanced reporting that allows the public to form their own opinions based on a comprehensive set of facts. In an era where information is rapidly disseminated and often polarized, the need for objective journalism is more critical than ever.

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In this episode of TFTC Marty was joined by Harry Sudock to discuss a variety of topics around Bitcoin, Bitcoin mining, and the broader energy sector, providing valuable insights into the current state and future of these industries.

Public Markets and Bitcoin Ideology

The conversation started with the recent event of Griid (a Bitcoin mining company) going public and how that aligns with Bitcoin's ideology. The public market offers the ability to put shares into many people's hands, which helps decentralize Bitcoin ownership. It also provides access to capital, which is crucial in a capital-intensive business like mining.

Bitcoin Mining's Maturation

The mining industry has matured significantly, with home mining and "citadel mining" becoming more prevalent. There's a focus on integrating mining with other use cases like process heat and establishing it as a key player in the energy sector.

Energy Sector Engagement

Key figures in the energy sector are actively engaging with Bitcoin mining, recognizing its potential to act as a catalyst for change and maturation of the electric system. The flexibility that Bitcoin mining offers is becoming very clear to energy professionals.

Hash Rate and Network Security

Bitcoin's installed hash rate base has reached a level that signifies a strong security model and the increasing utility and value of Bitcoin as a network.

Mining Industry Trends:

There's a significant focus on technology that allows mining in harsh environments (like immersion cooling), increasing efficiency, and making more energy sources viable for mining operations.

ASIC Manufacturers and Competition

The duopoly of ASIC manufacturers (Bitmain and MicroBT) is strong, but there's room for innovation and new entrants in the market. The conversation touched on the potential for commodification and what that could mean for the industry.

Bitcoin Halving and Business Preparedness

As the next Bitcoin halving approaches, miners are focusing on efficiency and cost-consciousness to ensure resilience. The halving is a testament to Bitcoin's predictable monetary policy.

Impact of Bitcoin ETFs

The emergence of Bitcoin ETFs has shifted the market dynamics for companies like MicroStrategy and public mining companies, pushing them to differentiate themselves more as businesses rather than just Bitcoin holding entities.

Geopolitical and Environmental Considerations

The conversation touched on the geopolitical risks surrounding ASIC manufacturing and the need for energy policies that support stable and sustainable power sources, like nuclear energy.

The Role of Venture Capital in Bitcoin:

Marty's and Harry's work at Ten31 focuses on supporting the growth of Bitcoin and its ecosystem by investing in companies that build critical infrastructure and by providing guidance to entrepreneurs in the space.

Sponsors

Best Quotes

"Bitcoin demonetizes the political class and remonetizes the productive class." - Harry

• This quote highlights the underlying ethos of Bitcoin as an empowering tool for the productive members of society and its potential impact on traditional power structures.

"You can't virtue signal your way out of physics." - Harry

• Harry used this quote to emphasize the practical limitations of transitioning to renewable energy sources without considering the actual energy needs and the role that stable sources like nuclear energy play.

"Bitcoin is the longest game we've ever gotten to play." - Harry

• This quote reflects the long-term vision and commitment required to be part of the Bitcoin ecosystem, acknowledging the ongoing journey toward broader adoption and integration into the financial system.

"The future won't build itself." - Harry

• Harry emphasized the proactive effort required from the Bitcoin community to continue building and innovating within the space, ensuring the network's growth and resilience.

"Being a founder or co-founder of an early-stage company can be extremely isolating. And so having some folks in the 'been there, done that' club who can sit alongside you and hold your hand when you're facing the toughest pieces, that's so exciting to me." - Harry

• Harry discusses the value of mentorship and support within the startup community, particularly in the challenging and fast-paced Bitcoin industry.

Conclusion

This podcast episode provided a deep dive into the world of Bitcoin mining and its interaction with the energy sector, as well as the role of venture capital in supporting the growth of the Bitcoin ecosystem. The discussion covered a wide range of topics, from the specifics of mining technology to the broader implications of Bitcoin's monetary policy and the market dynamics influenced by new financial products like ETFs.

The overarching message was clear: the Bitcoin mining industry is at a pivotal stage of growth and professionalization, with a strong focus on energy efficiency, technological innovation, and integration with the energy sector. This growth comes with challenges, including regulatory and geopolitical concerns, but also presents tremendous opportunities for those willing to engage with the complexities of this nascent industry.

As we look to the future, the insights and reflections from this episode offer a roadmap for entrepreneurs, investors, and enthusiasts who are part of the Bitcoin journey. The potential for Bitcoin to reshape our understanding of money and energy is immense, and the continued dedication and innovation from the community will be critical in realizing this vision.

Timestamps

0:00 - Intro
7:26 - Big week for Griid
11:21 - State of the mining industry
15:46 - Industrial adoption
19:43 - Demand response
23:46 - Energy FUD from the parasitic class
31:44 - Future of mining
36:06 - Technical innovation
37:27 - ASIC manufacturers
45:02 - Halvening
51:59 - Political influence and pencil making
58:27 - ETF and stocks
1:02:54 - Ten31 advisor
1:08:56 - Wrapping up

Transcript

00:00:01:26 - 00:00:03:14
Harry
I'm good for, like, 90.

00:00:03:17 - 00:00:26:00
Marty
All right. You going for 90? Now, the freaks know that we have 90 minutes. We're recording. Harry. We were just trying to determine how long it's been since we last sat down here on TFT to have a discussion for for this audience. Obviously, we've had many conversations outside of TFT between now and the last number recorded here.

00:00:26:00 - 00:00:30:05
Harry
But but until it really happen, if the freaks can't hear it.

00:00:30:08 - 00:00:35:06
Marty
I don't know. I don't know. Well, luckily.

00:00:35:09 - 00:00:41:20
Harry
I have a puppy. There's pepper. Pepper here. We can get a little. Oh.

00:00:41:22 - 00:00:44:00
Marty
It's a pepper. You look warm.

00:00:44:03 - 00:00:49:13
Harry
Yeah. Not a winter dog needs a winter outfit. Yeah.

00:00:49:15 - 00:01:11:07
Marty
So a lot has happened. Big week. I mean, maybe we should start there. It's been a big week. Big seven day week, Big, powerful, big last couple of months. Grid getting through the SPAC process. Finally, life in the public markets. We announced last week that you joined 1031 as an advisor and again, a lot has happened since last time we reported.

00:01:11:07 - 00:01:19:01
Marty
And today I guess let's start there. What is the week been like and what was the the build up.

00:01:19:04 - 00:01:58:05
Harry
To the last. Yeah, I mean the, the, you know, it's the, it's the old saying like, you know, there are weeks when a decade happens and decades when when a week happens and you know for us you know, we didn't we didn't start the business expecting to be a public company in 2018. But that's kind of the road that we ended up on for a lot of reasons and, you know, the reasons why we felt that the public market was the right place for us was was really just, you know, around sort of our Bitcoin ideology and goals, which is that being able to put shares into lots of people's hands and make them available

00:01:58:07 - 00:02:22:15
Harry
serves as another vector around getting you know, Bitcoin and hashrate decentralized on an ownership basis. And also it's obviously a high capital intensive business and and where better to do that than in the American public markets? So we're thrilled to be on the other side of the deal. We're thrilled to be Nasdaq listed. And, you know, more than anything on my mind is let's get back to work.

00:02:22:17 - 00:02:24:22
Harry
We've got a business to grow.

00:02:24:25 - 00:02:39:20
Marty
Yeah, yeah, we all do. It's in the it feels like the timing's perfect a few months before that thing to the winds of a potential bull market seem to be blowing in the distance. Getting closer.

00:02:39:22 - 00:02:59:06
Harry
I wake up every day and Bitcoin is more useful than it was the day before. You know, other people are catching on. You know, Pete McCormick and I talked about this a bunch, but like, we're sort of at the you know, the end of the beginning feels like ETF land took us to the end of the beginning or maybe the beginning of the middle.

00:02:59:08 - 00:03:20:18
Harry
And that kind of makes sense, right? Like the Internet 15 years end was at the end of the beginning. The big killer apps hadn't sort of emerged. You know, we weren't on 3 billion smartphones yet, but you know, but all of that was sort of yet to come. And I think, you know, in our Bitcoin journey, we're at a similar point where, you know, it's not niche and early anymore.

00:03:20:21 - 00:03:43:10
Harry
It might be early in terms of price, but it's not early in terms of of mindshare. You know, Bitcoin is a household name and it's a word that everybody recognizes at this point, you know, for good or for bad, they might have their own, you know, positive or negative association with it. But, you know, but we're not a shadowy corner of the Internet anymore, and that's exciting.

00:03:43:13 - 00:04:10:06
Marty
Yeah, it really is. And we just had the Energy and Mining Summit in Nashville and which was hyperfocus on the mining industry, where it is in its maturation phase and where it may be going in the future. And since we have you on in your deep knowledge of the mining sector, particularly here in the United States, I think maybe not to talk about Bitcoin too broadly this, but hone in on Bitcoin mining as an industry.

00:04:10:12 - 00:04:21:00
Marty
What has happened over the last two years since we last spoke, where are we now? Where may, may we be going in the next 2 to 3 years?

00:04:21:02 - 00:04:42:01
Harry
Yeah, I mean the the, the really great part about what's happened in Bitcoin mining is that the business model, the size and the scale, all of those types of dynamics have gone through maybe an even more aggressive maturation process than Bitcoin has. You know, we're seeing, you know, home miners are doing all sorts of new kinds of things.

00:04:42:01 - 00:05:05:03
Harry
We had a panel about, you know, what we call Citadel Mining, which is, you know, everything from one miner in the garage to, you know, one to Steve Barber's hash huts on your property. You know, anything anything that is sort of a homesteading version of mining. And that panel was was fascinating. A ton of discussion around process heat and other sort of integrated use cases.

00:05:05:05 - 00:05:37:04
Harry
You know, we've seen, you know, the senator from Tennessee, both senator from Tennessee, actually have engaged really aggressively on Bitcoin and Bitcoin mining. We had the CEO of TVA at the event giving what I found to be, you know, truly a profound discussion of where he thinks energy is going and immediately understood that the role of a flexible consumer and the role of the miner is really a catalyst for change and towards the maturation of our electric system.

00:05:37:06 - 00:06:01:21
Harry
You know, that's not a static thing, right? We didn't we didn't wake up with the grid that we had 90 years ago. We've been iterating and improving components of that system all along the way. And so seeing the translation layer between some of them, you know, most senior business experts on the energy side rocking Bitcoin, you know, basically at face value now getting him in a room with miners.

00:06:01:21 - 00:06:34:01
Harry
There's a ton of his customers in that room. You know, Grid is one of them, but there are many others. And seeing the clarity that incredible energy professionals are viewing the mining sector with was hugely refreshing. So, you know, all of that is is super, super encouraging. You know, I think the the other macro topic that needs acknowledgment is just that, you know, bitcoin's, you know, installed hash rate base has gotten escape velocity, right?

00:06:34:01 - 00:07:06:02
Harry
The whole Bitcoin network is running, you know, somewhere between 15 and 20 gigawatts. It's running 0 to 500 index a hash. You know, we're probably sniffing 600 at this point. The ability for the network to go up, you know, 10% on a difficulty or a hash rate basis from here. You know the the base that we're building off of is now so large that each of these incremental components of growth, you know, we're just talking really big numbers and that's exciting.

00:07:06:02 - 00:07:32:10
Harry
It means that the security model for Bitcoin is incredibly strong. It means that the value proposition for sound money that can be transacted on a permissionless and censorship resistant basis is stronger than ever. And the level of professionalism that I get to see you know, both within our company but also across our peers is just really high. I'm really I'm really proud to call them, you know, members of the same you know, the same business community.

00:07:32:10 - 00:07:40:05
Harry
So I think all of those things are significantly more mature than they were even the last time we had a conversation on the show.

00:07:40:07 - 00:08:11:03
Marty
Yeah. And it was extremely refreshing. The Energy and Mining Summit, the president, CEO of the TVA coming really I was extremely impressed by him. Kids about specifics of what was said. But I will say that his presentation and his earnest curiosity was refreshing from somebody in a position of that type of power where you'd expect them just to be a politician like figurehead of his business and just read the script.

00:08:11:05 - 00:08:32:28
Marty
Essentially. He was very engaging and again, genuinely curious, which I was extremely encouraged to find. And then another thing, this whole theme that we're talking about here, it's like one of the questions we get at 1031 quite a bit from prospective investors is we're like, Nobody's adopting Bitcoin. Like, when are people going to start spending it at the store?

00:08:32:28 - 00:08:58:02
Marty
When What am I going to be able to go and buy groceries with Bitcoin? And you have to answer that. Yeah. Obviously it's not there that everybody has bitcoin, but I think it's important to realize different types of adoption and the order of operation through which we'll get to bitcoins and state of full success, which is yes, not everybody is able to spend and receive Bitcoin at the grocery store.

00:08:58:02 - 00:09:23:01
Marty
However, on the earlier side of the order of operations is this this mining, the distribution of hash rate, this growth of hash rate and integration with the energy sector and the energy sector, I believe has reached a critical tipping point of adoption that is not recognized by the people who just view Bitcoin adoption as where can I spend it, who's accepting it?

00:09:23:03 - 00:09:45:19
Harry
Yeah, I think, you know, Bitcoin the currency is it's like saying, where can I spend a barrel of oil or where can I spend a T-bill? Right. Like, that's not the metric that I think is meaningful today. I think all of those, you know, transaction based numbers, you know, numbers and graphs like all of that matters over a longer time scale for sure.

00:09:45:21 - 00:10:14:15
Harry
But at the point where we are today, you know, it's about getting Bitcoin onto balance sheets, whether that's household balance sheets or corporate balance sheets or state and government balance sheets. You know, that's the first beachhead that Bitcoin really is is crossing. And I think, you know, we we we got a little bit sort of twisted up in the weeds of it all, you know, earlier on in, you know, in this great shared history of ours.

00:10:14:15 - 00:10:54:27
Harry
But, you know, the ability to spend Bitcoin is not the same as the ability to send Bitcoin. And those are different ideas. And so I think we're climbing the store of value adoption curve incredibly constructively. And so it's it's great for us to be able to see that. And I think you're exactly right. The market penetration that Bitcoin mining, you know, is accomplishing today, you know along the lowest sort of strata of energy cost sources, you know, whether that's here in the U.S. or it's abroad, you know, the penetration at those low cost, high opportunity points is enormous.

00:10:54:29 - 00:11:17:13
Harry
You know, if you're if you're not thinking about where does Bitcoin mining represent value accrual, if you're, you know, an intermittent generator or if you're a steady baseload generator that needs to manage uptime, anybody who cares about power and uptime should be having a conversation with a Bitcoin miner or be thinking about how do I design a rate class that gets Bitcoin miners?

00:11:17:13 - 00:11:45:13
Harry
The prices that they need which are, you know, transparently the bottom of the barrel. But the tradeoff there is that, you know, my father, a lifelong CFO, would always tell me that in any any negotiation you have to pick between price and terms. And I can tell you that on the mining side, we're very firmly in the camp of picking price and taking terms, and that's reared its head in in the demand response adoption that we've represented already.

00:11:45:13 - 00:12:18:10
Harry
You know, we do it in the TVA version of that reality. The folks in ERCOT are doing that, and the folks in every power market in the U.S. that has programs that offer, you know, a demand response, compensation kind of rate, class or tariff, you know, everybody wants that. So, you know, the the really interesting thing is to see the ability to deliver on the technical requirements of an actual demand response program and then the desire to expand those programs to increase reliability and lower costs for the average user.

00:12:18:12 - 00:12:51:02
Marty
Yeah, just digging into this demand response use case in and of itself, you can already see Bitcoin miners beginning to effect change across different sort of power providers across the country. ERCOT obviously here in Texas, very advanced from the pricing signal perspective, there's API's that are connecting to mining firmware, that mining firmware is reading the pricing signals and adjusting hash rate with those pricing signals almost immediately.

00:12:51:02 - 00:13:15:04
Marty
Whereas if you zoom up to the Tier two VA, it's a bit more manual. You get a call from the TVA a day or two before they expect you to turn down during peaks or peaks of demand where they need electricity sent back to the grid and you have somebody go and turn down the operation or do that from a back end software solution.

00:13:15:07 - 00:13:30:16
Marty
You could see they're like, you imagine the TVA's looking at ERCOT. You're like, Oh man, look at all that's this demand response system is with all these pricing signals. Maybe if we could build an API pricing service like that for the miners up here, we could be much more efficient.

00:13:30:18 - 00:13:52:18
Harry
Yeah, efficiency is the name of the game, right? Like these are these are assets that are already bought and paid for. All the transmission lines are bought and paid for, all the substations are bought and paid for. And so now that the CapEx is out the door for all of these electric systems, how do we get to a place where utilization is able to climb even just a few percentage points?

00:13:52:21 - 00:14:15:00
Harry
You know, because at the end of the day, if you think about the you know, I think of sort of the world in terms of a nexus of contracts, there is a contract that your power provider signs with you. The rate payer. I'm sitting in my house like I use Nashville Electric. And, you know, their commitment to me is really around power availability.

00:14:15:00 - 00:14:51:20
Harry
So let's say the system gets super stressed and they've got to import power from meso those megawatt hours are incredibly, incredibly expensive and the price of those megawatt hours would be better, you know, as a as a rebate to their flexible load customers rather than a forced import during the time when things are tightest. And so there's a really compelling economic case around why demand response is accretive, you know, both to the power provider as well as to the individual ratepayers at the household level, as well as to the demand response program participants at the industrial scale level.

00:14:51:20 - 00:15:26:28
Harry
That's a that's found money for everybody involved, right? The power providers lowering their cost. The ratepayer at the household level is raising their uptime and potentially lowering their cost. And the flexible customer is able to lower their costs as well. So it's this incredible, you know, three party positive sum equation that the power providers are able to offer once they've had the introduction of a truly innovative business model, which all the the mining community believes and rightly so, that they represent with this flexible load type of profile.

00:15:27:00 - 00:15:51:20
Harry
And in addition to that, it's better for the generating assets. You don't want to turn those things up and down. You know, as much as you might have to. And so, you know, there's there's this other net benefit over the longer term as you continue into the useful life for some of these plants, which is that operating in an environment with a flexible customer is actually better for all of the hard assets that are being used to generate the electricity in the first place.

00:15:51:20 - 00:16:20:15
Harry
So we're in this in incredible virtuous cycle as as symbiotic partners being the power provider, the bitcoin miner, and then the households and businesses that that power provider serves outside of the flexible customer. So I'm incredibly motivated to keep working on what it means to reinvigorate some of these electric systems in a way that that really benefits the entire kind of, you know, nexus of parties.

00:16:20:17 - 00:16:29:17
Marty
Harry Versus systemic risk to the system. Did you're not here what the Department of Energy in the EIA I have to say last week.

00:16:29:20 - 00:16:56:12
Harry
I understand that that was an interpretation that was floated to the community. I happen to strongly disagree with that interpretation. You know, I think I think that, you know, there's there's sort of a I said this many years ago, but, you know, Bitcoin, you know, demonetized the political class and intact, as is the productive class. And you know, in in keeping with that theme, you know, the the engineers will inherit the earth.

00:16:56:14 - 00:17:15:23
Harry
And so that means the power engineers that work on these systems, the people with their boots on the ground. You know, there's I just found this out. I looked at like, what are some of the highest compensated roles that you could have in America? Because I was just I was just curious. One of the weird ones I don't know about that, that maybe I should have kind of to school for.

00:17:15:26 - 00:17:39:02
Harry
One of them is there's a guy whose job it is or woman whose job is to hang out of a helicopter on, you know, basically a tether with a chainsaw to manage trees on the high voltage lines, super high up in the air. They make like 400 grand a year. And so those are the people who I think we're building, you know, Bitcoin mining for because we make all of those roles easier.

00:17:39:04 - 00:18:06:22
Harry
You know, if that takes an education process in Washington in order to make that value proposition clear, you know, so be it. But I think that, you know, once you once you put the hard data, you know, to these folks, I think the case for Bitcoin is really quite an obvious one. You know, the ideological challenge that we might face is the the sort of baseline assumption, which is that, you know, nobody likes our pet rock.

00:18:06:25 - 00:18:13:16
Harry
And I think we're really facing more of that perspective than any sort of legitimate concern around electric reliability.

00:18:13:18 - 00:18:19:27
Marty
Yeah, Bitcoin has no no value. It's just a Ponzi scheme, a pet rock. If you will. I don't know. Not helping.

00:18:19:29 - 00:18:24:21
Harry
Seems like a lot of market participants who are willing to pay $43,000 a coin right now.

00:18:24:23 - 00:18:49:17
Marty
Yeah, it think they think it's valuable. Their parting dollars to get parting with dollars to get bitcoin. But it is like a we discussed this too on our panel the first day of the summit. But it is like you said, we have this sort of pull between the productive class and the unproductive class. The parasitic class probably more descriptive what they actually are right now.

00:18:49:17 - 00:19:21:12
Marty
And it's not just specific to Bitcoin. I mean, we zoom out and focus on energy more broadly. Like we talked about the example of this wasn't on our panels, the what Bitcoin Did episode, the live episode on day one in Germany, it's like over 20 years they decommissioned, I think 20 gigawatts worth of nuclear power generation more than doubled their overall capacity generation capacity over the first 20 years of the century, but they doubled their capacity with wind and solar predominantly.

00:19:21:19 - 00:19:57:13
Marty
Turns out the sun doesn't shine that much in Germany and the wind doesn't blow as much as they like it to. And so you had a situation in 2002 where nuclear, coal, natural gas were a 86% of the overall generation capacity. Today it's something like 34%. And Germany's got a systemic energy crisis because they don't have reliable power, because they refuse to, for some reason or another, lean into reliable energy sources and say what you will about coal and natural gas and whether or not you think hydrocarbons are here to stay or on the way out.

00:19:57:13 - 00:20:08:14
Marty
I mean, nuclear is a very obvious answer to a lot of these energy stability problems that the governments of the world seem to be neglecting for some reason or another.

00:20:08:15 - 00:20:30:08
Harry
You can't you can't virtue signal your way out of physics, Right? It just you can't. And and, you know, that's that's just you know, for the climate folks out there, like that's the that's the bitter pill. Right. You're not going to you're not going to build enough wind and solar to solve this in any kind of meaningful way.

00:20:30:14 - 00:20:53:20
Harry
And and, you know, the the cohort that drives me kind of the craziest are the ones who are who are staunch climate supporters who believe in the decommissioning of nuclear plants. Right. The these are assets that are fully bought and paid for. They're operating really, really well. They have an incredible safety track record. It's an American technology, nonetheless, that that we were able to innovate on.

00:20:53:22 - 00:21:20:09
Harry
And and, you know, the willing the willing sort of voluntary shut off of of these plants, it's just it's despicable. You know, there's there's really there's really no argument for it. So, you know, the playbook that we expect to see and I'm thrilled to say that the Canadian the Canadian folks have are committing to extending useful life at some of their plants.

00:21:20:12 - 00:21:40:10
Harry
There's folks at OPG who are committed to building a similar ours, and they're going to do that in TVA. That's public knowledge. So, you know, we are seeing, you know, in California, we were able to avoid, you know, the shutdown of their nuke that's in the in the Los Angeles area. You know, so we're we're starting to turn this tide a little bit.

00:21:40:10 - 00:22:02:27
Harry
But, you know, any time you got to turn an aircraft carrier, which is, you know, really the nuclear Regulatory Commission, you know, it's it's a it's a challenge. But but, you know, by gosh, we're going to do it. So I think there is some daylight and some hope on this. But, you know, the the argument that we should shutter nuclear plants is like the single most asinine policy perspective I can think of.

00:22:03:00 - 00:22:14:01
Marty
That's literally suicidal, especially if you're going to virtue signal about transitioning away from hydrocarbons and at the same time decommissioning.

00:22:14:01 - 00:22:39:02
Harry
Which too, to be fair, like we're we're in favor of building a positive sun electric system. For us, that's meant a huge allocation to hydroelectric assets and raising the revenue profile that they're able to offer. It's it's a huge focus on nuclear, which we love. And and, you know, and there's there's really a you can do well and do good at the same time.

00:22:39:09 - 00:22:56:28
Harry
You don't have to you don't have to not have it both ways. But unless you're invest ing in the baseload profile of the electric system, you know you're going to create instability and tail risk that that really will that really will be, you know, significantly detrimental at some point down the road.

00:22:57:00 - 00:23:10:27
Marty
Yes. Oh, God, I'm getting triggered. Just thinking of the the LNG export ban or new contract construction of a new LNG export facility ban that came out a couple of weeks ago.

00:23:10:28 - 00:23:34:11
Harry
It's well and and you know, and let's let's put our let's put our carbon accounting hats on. Right. If you're if you're replacing a coal asset with a natural gas asset, your carbon intensity of that transition and is incredibly positive, it just happens to run on another hydrocarbon, but a much better one from the carbon accounting perspective. So I think, you know, we we need to be very, very realistic about the physics.

00:23:34:16 - 00:23:56:22
Harry
We need to create the demand for these types of flexible load consumers, which means innovating on the contract structure in many of the jurisdictions that are, you know, that are currently not set up to compensate flexible loads as fully as maybe they should be, you know, but these are these are the tough the tough questions and the hard steps that have to be taken.

00:23:56:24 - 00:24:15:00
Harry
And, you know, environmental stewardship and strong business performance are not at odds with each other. We just need, you know, sane, cool engineering heads to come together and design solutions that are that are as future proof as possible and shuttering nuclear reactors is the lowest thing you could possibly do on that list. Yeah.

00:24:15:02 - 00:24:49:10
Marty
Yeah. Very Malthusian when you think about it. But on this trip, I mean, we had this discussion and it was really interesting to see people from different parts of the world come to Nashville to talk about the future of mining and where it may proliferate moving forward. What are your views like? Obviously, the United States, Texas, Tennessee, TVA in Kentucky, other parts, Georgia have really benefited from the Chinese mining exodus that happened a few years ago, two and a half years ago.

00:24:49:10 - 00:25:14:19
Marty
Now, at this point, Rackspace is tight. It seems that Bitcoin in the minds of institutions is now go. You got the black rocks of the world saying it's a good thing. And what I've been able to glean is that there are people in other parts of the world that are looking at Bitcoin mining specifically and saying, All right, it's time for us to develop a strategy, deploy some capital and get some hashrate spending up within our borders.

00:25:14:19 - 00:25:22:17
Marty
How do you see this international competition for hashrate playing out moving forward?

00:25:22:19 - 00:25:42:12
Harry
Yeah, I think, you know, to to win in the mining business, you need to have a structural defensible advantage and that that can come in many forms. I think in America we've got two great structural advantages, one of which are our capital markets, which are the best in the world. The other is that our energy assets are also world class.

00:25:42:15 - 00:26:02:04
Harry
And so what are the two key ingredients to a great mining business as well? Capitalized access to energy and so I think the U.S. has has taken a leadership role on the heels of the China the China ban, you know, several years ago. I don't expect us to slow down, you know, maybe on a percentage share basis we're going to lose ground.

00:26:02:04 - 00:26:23:27
Harry
But I don't think we're going to you know, I don't think we're going to slow whatsoever. You know, I'm very curious to see what's going to happen in some of these, you know, really sort of oil state wealth environments where there's obviously huge amount of capital available to them because they they've made so much money over the past years and they're starting to look down this diversity path for their portfolios.

00:26:24:00 - 00:26:51:07
Harry
And, you know, additionally, they've got access to a huge amount of of incredibly cost effective generation. You know, the US is turning on nuclear reactors and a multi gigawatt solar plant co-located with them. So that's a huge you know, that's a huge opportunity to monetize via the deployment of hashrate. We've seen what Marathon's doing over there. Obviously we've heard the news out of Oman, we've heard the news, you know, in, you know, Dubai and elsewhere.

00:26:51:09 - 00:27:13:27
Harry
So, you know, I think then none of that's to say anything about South America which has been involved in this, both, you know, above board and below board. There's sort of a gray market environment. You know, historically in Venezuela, we're seeing large scaled operators operating out of Paraguay. Now we're seeing the Africa trend that grid loss is really spearheading take root.

00:27:13:27 - 00:27:40:22
Harry
So I think, you know, the exciting part is that the decentralization of mining, you know, that narrative is very strong because there are structural opportunities to monetize energy in each of these regions. There's an opportunity to, you know, to deploy capital in each of these regions. And there's going to be companies and individuals with a very broad range of risk appetite and operating model appetite to deploy across all of this.

00:27:40:22 - 00:27:46:09
Harry
And so, you know, all of it all of it means that, you know, we're probably going to see hash rate go up over time.

00:27:46:11 - 00:28:11:14
Marty
Yeah. Then you combine this with the fact that you have hydro boxes and liquid cooling immersion systems becoming more advanced and you have the ability for the first time at scale to deploy hashrate in areas of the world like the Middle East where it was simply impossible due to the physical environment, the heat, specifically even down here in Texas to some extent, like obviously we have a.

00:28:11:16 - 00:28:12:02
Harry
Does a.

00:28:12:02 - 00:28:34:00
Marty
Lot of hash rate here and a lot of salt, a lot of dust. But the the industry, the picks and shovels, part of the industry building these facilities that allow you to mine in harsh environments has reached a point of maturation as well, where it's really going to open up markets that were previously inaccessible, inaccessible.

00:28:34:02 - 00:28:49:01
Harry
Totally. Yeah. There's there's a technology trend that sits underneath all of this. And, you know, on the one hand, it's the efficiency

00:30:30:28 - 00:30:53:00
Marty
So little audio troubles. They're back at it. What were we're talking about?

00:30:53:00 - 00:31:16:08
Harry
Yes, there's. There's two layers of technical innovation that are happening that I think are going to facilitate broader availability of deployment environments. One of them is that the chips are getting more efficient. And so that just means the units of energy per unit of of hash rate produced over time, you're able to produce, produce more hashes per unit of energy.

00:31:16:10 - 00:31:43:21
Harry
The second is all of the technology that's wrapped around that, which includes things like immersion and things like hydro and, and you know, filtration and all the different tools that are available to a mining operator in order to deploy in a harsher environment makes, you know, more sources of generation and more environments available. It means that there's more, you know, economic viability of places that weren't from an operational perspective, but maybe were from a power cost perspective.

00:31:43:21 - 00:32:03:15
Harry
Historically. So all of this kind of rolls into the idea that I think is is the tailwind that we're all riding, you know, across Bitcoin, which is more decentralization is likely because, you know, more remote operations are viable. But then secondarily, just the gross hash rate securing the network is going to go up as well.

00:32:03:18 - 00:32:37:15
Marty
Yeah, let's let's lean into the ac-dc manufacturers. What are your thoughts on the duopoly, the dominated duopoly by Bitmain? Obviously they've got the S21 series coming to market. They're pricing out of the gate with those machines was very aggressive, many so-called as an attempt to leverage their economies of scale to box potential competitors out of the market. Micro T is it just obviously the second largest player in the market and they have a lot of happy customers.

00:32:37:16 - 00:32:57:04
Marty
How do you see this playing out moving into the future? Is Bitmain just using their economies of scale to box people out as micro bitty, beginning to make inroads with larger customers to be seen? Intel come back to the market. Avalon Do any of these companies have a chance of competing?

00:32:57:07 - 00:33:16:26
Harry
Look, I think I think that we're still early days. I think that, you know, the manufacturing landscape could change dramatically over time. You know, I think right now Bitmain is sort of winning the day, as they have been for the last couple of years. I think MakerBot is doing a great job. The micro units, you know, are awesome.

00:33:16:28 - 00:33:41:16
Harry
They continue to double down on reliability and performance at the cost of some nominal efficiency, which I think has been, you know, a great strategy from them. You know, you've obviously seen riot roll into market with a huge amount of future order. And so I think that, you know, my committee is certainly earning their scale volumes as well.

00:33:41:19 - 00:34:03:16
Harry
You know, do I think the duopoly is going to break in the next year? Not particularly. Do I hope that more competitive players enter the market always right. I always want a more competitive market to be able to look at when I think about, you know, capital allocation and hash allocation. But I think that, you know, right now things are, you know, reasonably healthy and competitive.

00:34:03:18 - 00:34:24:28
Harry
You know, what we're not seeing this cycle is kind of the price blowout that we saw in 2021 with units trading, you know, significantly ahead of kind of, you know, the future revenue profile. So I think, you know, we're certainly healthier than we were a few years ago, but I'd always love to see additional players enter. Yeah.

00:34:25:00 - 00:34:54:29
Marty
Yeah, I would agree there. Yeah, it is crazy how efficient these machines are getting talent and think through my mind like the whole concept of a commodification. Like is that simply a natural catalyst for more competition? When you get to a level where you can make an investment, a capital outlay in building an asset because you're confident that it's not going to make a step function efficiency improvement like the A6 have in the past?

00:34:54:29 - 00:35:01:29
Marty
Or does that simply allow the incumbents to just really dominate the market? Um, yet to be seen.

00:35:01:29 - 00:35:28:14
Harry
But yeah, yeah, I think, you know, the good news is they don't let me program any of the chips but at least at least not yet. And if they do we have real problems. So you know I think I think there's I think there's sort of the mad scientist and deep technical experts that are working on it. You know, I got to spend some time with Scott from from oh, good Lord, I've lost the name of his project.

00:35:28:16 - 00:35:33:14
Harry
But he's doing the open source basic project now.

00:35:33:14 - 00:35:37:06
Marty
Future but future. Not that they're not open source.

00:35:37:08 - 00:36:01:23
Harry
Hold on. I can find this. He Yeah. So he's working on some open source pieces. You know, I don't think transparently that it's that it is any bit ax I apologize. Scott You know, it's just cool to see people working on stuff and tinkering and innovating along this. You know, we aren't at the mature phase for this industry.

00:36:01:23 - 00:36:23:15
Harry
You know, we don't have the you know, we don't have the the, you know, the intel chip or that or the HP. You know, you know, Chip is an intel chip that's in all of those units. But we haven't reached the full commodification layer. We might be at what I view as a long local maximum, which is really sort of the duopoly continuing to innovate.

00:36:23:17 - 00:36:44:27
Harry
But we may see, you know, another really interesting breakthrough from a market dynamics perspective that attracts additional folks who want to build down this development path. You know, but unlike software, you don't get to put a software release out every two weeks. You know, it's really, you know, six, 12, 18 month type of time scale to be able to innovate on hardware.

00:36:45:00 - 00:36:51:16
Harry
And so, you know, I'm very curious to see what emerges, you know, really over the coming decade, if I'm being honest about timeline.

00:36:51:18 - 00:36:55:07
Marty
Yeah, the hash wars are upon us. Who knows?

00:36:55:09 - 00:36:57:14
Harry
This could be always has been.

00:36:57:17 - 00:37:26:01
Marty
They have been since January 3rd, 2009. Then you have just external factors, geopolitical risk. Who knows what happens in Taiwan with TSMC? Can they spin up foundry here in the United States fast enough to deter any systemic political risks that would come if China were to do something there? Then even then, many people are like TSMC is one of the greatest revenue drivers within Taiwan's.

00:37:26:01 - 00:37:50:22
Marty
So to think that China would just come or prevent that company from accruing tax revenues by selling their goods to market is a bit crazy as well. But these are unknowns that that can affect the market. It's crazy to think the range of effects. While we were in Nashville, the weather was affecting Bitcoin rate. Yeah, weather down south produced a -4%.

00:37:50:22 - 00:38:14:24
Marty
Difficulty adjustment 3.9% due to everybody engaging demand response. And that's why I mean, I'm sure I know that you feel this way too. It's just I don't think there's a more exciting industry to be in than Bitcoin mining right now because of all these different variables you have to think about. It's certainly very masochistic as well, but it's never boring.

00:38:14:26 - 00:38:38:17
Harry
And it's honest, right? Like what I love most about mining is that, you know, I can't make my terror hash our, you know, you know, I'm not going to do I'm not going to outsell my, you know, competitor for the next software sales deal and, you know, sell $9 a seat for, you know, you know, for 12 months, you know, because I've got a better, you know, CRM product in market, right?

00:38:38:17 - 00:39:05:03
Harry
Like, no, it's a it's a pure, honest capitalist endeavor to be able to generate hashes more efficiently than the next person. And that's that's a really refreshing environment to build a company into because you can see on a daily basis, if you're doing it the right way, you get a report card, you know, on a very, very frequent basis, which is fun and is very, very motivating.

00:39:05:05 - 00:39:22:05
Harry
So I love that part of it. I agree with you there. You know, there's no sector that, you know, I'd be more excited to be working in. It'll be my five year anniversary at Grid next week. Official start date anniversary. I was wrapping a consulting agreement before I joined, so I really started, you know, three or four months before that.

00:39:22:05 - 00:39:35:13
Harry
But, you know, but, you know, this is what I've chosen to dedicate my life to, to building, you know, within within a proof of work system and really couldn't be couldn't be happier to get to work on this every day.

00:39:35:15 - 00:39:59:11
Marty
Yeah. Got as many wraps. I want to take this on, I guess, since this is a mining focused podcast obviously the having it's about 75 days away which is not that much time. What should miners be doing? What are miners doing to prepare for the having how may it affect mining businesses?

00:39:59:13 - 00:40:30:23
Harry
Well, you know, the the the known effect is that the block subsidy is going to get cut in half. I you know, it's bittersweet, right? Like on the one hand, you know we're going to earn less bitcoin as miners unless fees do something quite dramatic than we did the day before. The having happens or the or the block before the having happens is the case really is, you know, but that's the better that the suite is that bitcoins monetary policy gets proven every four years.

00:40:30:26 - 00:41:10:02
Harry
So every 210,000 blocks. You know the the the Bitcoin Fed meets and agrees on a new issuance decision and that issuance decision happens programmatically. And so being able to watch the monetary policy happen in real time and with and with, you know, near absolute certainty is one of the most high impact pieces of how Bitcoin works. And getting to see it work in real time is is, you know, is a powerful and meaningful thing that, you know, that's my that's my ideological answer.

00:41:10:02 - 00:41:33:19
Harry
But, you know, tactically, I think we've seen a lot of miners across the industry start to roll into higher efficiency machines. I think that's one way to sort of having proof your, you know, your operation is to continue to to invest into the fleets efficiency. Beyond that, you know, we we at least think all the time about, you know, the best way to be prepared for the having is to be cost conscious.

00:41:33:21 - 00:42:07:10
Harry
And that starts with the power cost. It really rolls across everything that business spends money on. And so being, you know, laser focused on downside risk and cost is the best tool, you know, available in conjunction with with, you know, managing the fleets efficiency in order to be resilient across a reduction in potential revenue. Now, the purchasing power under the last epoch was greater from a mining revenue perspective than, you know, the purchasing power in the 12.5 Bitcoin block epoch.

00:42:07:13 - 00:42:46:27
Harry
And so, you know, we may see a similar dynamic play out across the four years after 75 days from now. So, you know, I think there's there's still a lot of, you know, dynamic components of the market. We haven't even gotten into the expected fee revenues that we might see with additional adoption or additional JPEG degeneracy. However, however you however you might however you might think of it, but at the end of the day, block space is scarce and Bitcoin is an incredible asset to move from point A to point B, And so the fees that folks are willing to pay to move their UTX so I think is a place where, you know, a

00:42:46:27 - 00:43:12:11
Harry
huge amount of value is provided by miners securing the movement and the availability of that scarce block space. So, you know, it's a it's a it's a simple topic because the monetary policy is dead simple thanks to Satoshi Knott-craig and and it's also a very complex business operating environment because there's a bunch of moving variables. So it really is a three body problem between fees.

00:43:12:13 - 00:43:28:20
Harry
Bitcoin price and network hash rate. So you're you're you're managing a lot of uncertainty around that period of time. But, you know, we pride ourselves to sort of always be having and so, you know we'll start preparing for the having after this one the moment this one happens.

00:43:28:23 - 00:43:59:08
Marty
Always be having sage advice That is the environment leading up to this having is different than the two that I've been a part of since I've been following Bitcoin because you have this fee pressure from the JPEGs and all that and it's nothing too crazy right now, but it they get crazier. Oh, that a little under a year ago and at times throughout the last year did provide significant revenues to mining operations.

00:43:59:08 - 00:44:40:13
Marty
The price is up 150% since January of last year and it seems like we're hovering in the low forties. The g BTC bleeding seems to be coming to a slow and the ETFs seem to be net buyers of Bitcoin right now potentially into the future. Like is there a situation where fees are pumping, the price is doing really well, they have incomes and you know the situation where it's not as I think cataclysmic is the right word, but it's not a it's not an event that's detrimental to as many operations as it has been in the past.

00:44:40:20 - 00:44:43:27
Marty
Something people should be thinking about.

00:44:43:29 - 00:45:16:04
Harry
Yeah, I mean, look, like we had we basically had to having last time because we saw price go from whatever, 6500 to 3500 a month and a half before that. And then we bounced back up and then we have so, you know, you can, you can kind of get to having economics multiple different ways. And so if you're not built to be resilient across those different cycles, it's going to be challenging regardless of if it means price getting cut in half or block subsidy getting it cut in half, you know, it's kind of all the same, you know, the same net net from the miners perspective.

00:45:16:04 - 00:45:48:06
Harry
So, you know, it's it's going to be dynamic. It's going to be interesting. There's going to be a lot of conversation around it. It's critical to remember that it is beautiful to watch Bitcoin's monetary policy happen algorithmically without you know, without a central, you know, central planner involved. And, you know, and and it's about it's about, you know, survival and putting yourself in a position to be able to thrive, you know, during periods of really constructive mining economics.

00:45:48:09 - 00:45:54:10
Marty
First, having where Bitcoin stock to flow would be higher than gold. I wonder if that's some emetic for red.

00:45:54:10 - 00:45:57:09
Harry
Dot blue dot green dot.

00:45:57:11 - 00:46:00:24
Marty
Is that the is that the ones that they're like oh.

00:46:00:24 - 00:46:03:22
Harry
People plan B it's the plan B dots.

00:46:03:25 - 00:46:06:11
Marty
Yes we're going all the way up to orange.

00:46:06:13 - 00:46:08:11
Harry
And red dot.

00:46:08:13 - 00:46:28:29
Marty
Now it is this something as simple as oh people are like wait a second, Bitcoin is now officially more scarce. Some gold from a supply inflation rate that people are like, Oh man, maybe I should get this is 2024 is an interesting year. Another beautiful thing of the halvings they line up perfectly with U.S. presidential election cycles and this one for now.

00:46:29:05 - 00:46:36:07
Harry
Unless we have a lot of accelerating or decelerating difficulty adjustments, we could fall of whack. But I don't think we are likely to.

00:46:36:09 - 00:47:06:03
Marty
Know that this will be. I mean, we don't like to get political too much on this show, but this seems like it could be a pivotal election for the Bitcoin industry broadly, but specifically the mining industry. It seems like, again, the actions from the EIA last week were dictated down from Elizabeth Warren in a certain capacity, and it seems like this current administration really does not like Bitcoin.

00:47:06:05 - 00:47:27:19
Marty
And I think that's what a lot of people are asking themselves behind closed doors is Dan like, do we need a new administration to just let this industry run then? Do you think back to Trump's first term, if it does turn out to be Trump first byte in which it seems like that is the case? I mean, he wasn't really supportive of Bitcoin either.

00:47:27:19 - 00:47:56:20
Marty
Yet Steve mentioned, as is Treasury secretary, you hated Bitcoin. Trump explicitly said that Bitcoin was a threat to the US dollar reserve system. And so even though we don't like having to deal with the political part of life here in the United States as an industry, I think it is becoming abundantly clear that we do have to play the game to some extent just so that they will leave us alone as much as possible.

00:47:56:22 - 00:48:19:00
Harry
My Yeah, I'm with you. You know, politics is definitely not my bag, but, you know, the the the goal that I have, I'm always happy to engage with anyone and everyone on this stuff, you know? And and all I want to do is, is, you know, tell them, don't ask me the questions. Ask the people we buy the power from.

00:48:19:02 - 00:48:44:02
Harry
What do we do for the community? Are we good? Are we net benefit or you know, are we an asset. I'll never forget the you know, we had a quote from one of the CEOs of the local utility that we, you know, have an operation at. And it was right when inflation was was peaking at 10%. And he called us and he said, you know, when this kind of stuff happens, I'm really left with a couple of choices.

00:48:44:04 - 00:49:12:17
Harry
I can sell bonds raised that I can raise rates, I can lower quality of service, or I can go find a Bitcoin miner to bring to my area. Those are the only ways that he had in his mind to fight inflation. And he said of those four options, he would vastly, vastly prefer option four, where there's a differentiated customer that he can recruit to sell power to.

00:49:12:19 - 00:49:37:25
Harry
And so it's telling stories like that as many times as we need to to make people understand that, you know, we're not parasites that are that are, you know, suckling on the lifeblood of the American electric system in the economy. We're an asset that pays revenue and that generates, you know, flexible, sustainable load that is an asset to every electric system that we enter so long as the contracts are structured the right way.

00:49:38:03 - 00:50:10:05
Harry
And so what that means for us is we just want more flexibility and more credit, both financial and social and political, for the flexibility that we offer. And I don't think that's an unreasonable perspective to take. And we're definitely seeing, you know, a lot of of serious consideration around that value proposition taken up by the technocrats who the actual, you know, generation transmission and delivery services that keep all of our lights on.

00:50:10:07 - 00:50:12:24
Harry
Yeah.

00:50:12:27 - 00:50:18:10
Marty
Sometimes they have to take a step back because it's so obvious to us. It's like, how do you know? Do you want to see this?

00:50:18:10 - 00:50:23:19
Harry
Well, Marty, how do you manufacture a pencil?

00:50:23:21 - 00:50:25:18
Marty
It takes many moving parts.

00:50:25:21 - 00:50:45:28
Harry
No idea. I've no idea. When I go pick up a pencil, I have no idea how that was made. I assume that the vast majority of people I will ever talk to have the same level of understanding of how the manufacturing process for a pencil works that I that that they do with what happens when you turn the light switch on.

00:50:46:00 - 00:51:15:09
Harry
Yeah, right. It's a it's an unknown thing, you know. No, you know I, you know, my, my dad believes that he's reducing, you know, the carbon intensity of our household by turning the thermostat down a degree or two in the summer or in the winter. Right. So like the level of understanding and the level of, of, you know, transparency, you know, he doesn't think that way anymore because I've, you know, locked him in a room and yelled about it long enough.

00:51:15:11 - 00:51:37:29
Harry
But, you know, but these are these are topics that are not taught to us as young people. They're they're topics that are wildly esoteric for the vast majority of people, you know, certainly in America, not on planet Earth, nobody knows what happens or why their light switch works. And so that's the that's the fight that I that I'm excited to take on, which is I don't believe that.

00:51:38:02 - 00:52:04:27
Harry
Look, I didn't go to school for electrical engineering. I went to school for Keynesian economics. And I somehow shook loose of that of that horrible fate. And and so if I can learn how the electric system works, I have no technical background whatsoever. But I read a bunch of books and asked a lot of dumb questions and and arrived at something approximating a level one understanding of how electricity works in America.

00:52:05:00 - 00:52:07:06
Harry
It isn't that hard.

00:52:07:08 - 00:52:29:01
Marty
Now that I seriously been thinking about this reason, like we need in terms of curriculum, like people should know money works and people should know how energy works. Like that should be high school classes mandatory, know how your money works, know how your energy systems work because they are the best base layer of the economy. They're going to go out in the world and try to be productive in.

00:52:29:03 - 00:52:30:07
Marty
And the fact that I.

00:52:30:11 - 00:52:38:13
Harry
I swear I didn't set you up for this, but but Grid's mission statement is to to build a generational company at the intersection of energy and money.

00:52:38:15 - 00:52:39:15
Marty
Yeah.

00:52:39:18 - 00:52:49:12
Harry
It's that's our goal. Our goal is to build a company that sits right on that street corner. Energy going this way, money going that way. Right on the corner is grid and Bitcoin mining.

00:52:49:15 - 00:52:53:17
Marty
Yeah, it's happening. It's going to be a long journey. Not for grid.

00:52:53:18 - 00:52:54:03
Harry
For young man.

00:52:54:03 - 00:52:54:20
Marty
All of us.

00:52:54:20 - 00:52:56:12
Harry
For young men.

00:52:56:14 - 00:53:00:09
Marty
And you see this airline, it's it's not getting any it's not.

00:53:00:09 - 00:53:01:09
Harry
Coming back LeBron to.

00:53:01:09 - 00:53:25:21
Marty
My eyebrows that's true. It's true. Um, one other topic I want to talk about with the emergence of the ETFs, how do you think that affects stocks like MicroStrategy and public mining stocks that have historically been used as a way to get exposure to Bitcoin without direct exposure via public markets?

00:53:25:24 - 00:53:58:15
Harry
I mean, look, I think that I think that we saw we have evidence now, right? We saw the ETF come out and we saw a bunch of those stocks, especially MicroStrategy, go down. I think MicroStrategy was viewed basically as a holding company for Bitcoin. Now they deserve some premium because they're able to lever into some bitcoin. You know, I love I forget who did this analysis on on XCOM, but they basically looked at the you know, the SATs per share that you own if you own, you know, stock in MicroStrategy.

00:53:58:15 - 00:54:22:01
Harry
And that number actually goes up based on the way that that they've issued new stock and bought Bitcoin with it. So I think there's there's some interesting sort of deeper fundamental analysis that's going to go into the decision to own, you know, a stock like MicroStrategy versus a share of of what we'll talk about the bitwise folks we like that be and we like, you know, the ark folks and have relationships across there.

00:54:22:01 - 00:54:43:21
Harry
But I love that they're funding developers out of those management fees. And, you know, I think we've seen you know, we've seen the premium come out of microstrategy's to a large degree and enter, you know, ETF land. I Think the miners are a more interesting case and I just look at them broadly but I think it's an opposite it's an opportunity for differentiation.

00:54:43:28 - 00:55:03:11
Harry
Right. You're taking sort of some of the market data into a different vehicle, but maybe that means there's more room for the market alpha for a differentiated operator to, you know, to really show their chops or many of them to show different chops. You know, there's a lot of different kind of operating models across the different pub codes that are out there.

00:55:03:13 - 00:55:26:23
Harry
But yeah, I mean, it's it's an opportunity to demonstrate differentiation and, you know, attract people to those names or explain to people why, you know, being able to generate revenue in Bitcoin terms and, and do so on a profitable or highly profitable basis is a compelling equity investment. And so maybe they can get looked at more like companies and less like Bitcoin, you know, holding companies.

00:55:26:25 - 00:56:04:20
Marty
Yes, I completely agree. Which is good for the market too. That particularly the differentiation that's going to be necessary to set your self apart in the world of public markets, you under clocking strategies that getting more ingrained with demand response systems, becoming energy providers, maybe getting acquired by an energy provider, becoming part of that stack, people are going to get creative, which should be a forcing function for a more efficient mining industry and a more healthy Bitcoin overall at the end of the day.

00:56:04:22 - 00:56:28:01
Harry
And and a more and a more fulfilled investment community. Right. Like, you know, I think there's a lot of sort of well, as the ETF like bad for bitcoin I'm like I don't know I like when people have access to more choices right at the end of the day, like I don't know somebody's personal situation and maybe the ETF is the most, you know, obvious and greatest thing in the world for them.

00:56:28:04 - 00:56:46:07
Harry
It's not how I would choose to get exposure to Bitcoin, you know, for me, because I can't, you know, engage in and, you know, the self-sovereign component of it. But, you know, but I'm sure there's lots of people out there who that's a much more constructive product and they want the price exposure to Bitcoin and that's really meaningful for them and that's great.

00:56:46:09 - 00:57:06:15
Harry
So I think any time that that, you know, the market's able to make better, more informed and broader choices across, you know, a broader range of vehicles, like I think that's net positive and is in keeping with sort of the the, you know, the libertarian on my shoulder which says that, you know, people deserve more choices and more freedom to choose and that's positive.

00:57:06:15 - 00:57:28:10
Harry
And then ultimately the market over time will will, you know, move away from being a voting machine and moving back towards a weighing machine. And and you know that. And that's where sort of the truth gets to be, you know, litigated which is which is in the market for ideas first in the market for, you know, for financial outcomes second.

00:57:28:13 - 00:57:43:05
Marty
Yeah. Which is a perfect segue way into how well we can end it on, which is the fact that you joined 1031 as an advisor as well. We've been talking behind the scenes for, gosh feels like years now, but it's official.

00:57:43:05 - 00:57:46:12
Harry
It has been years and confirm.

00:57:46:15 - 00:58:09:23
Marty
It's official now. And that is our our goal, our aim, our mission is to go out and find the entrepreneurs that are building out the critical Bitcoin infrastructure that will lead us to a Bitcoin standard, make it easier for people to access Bitcoin, to use Bitcoin to leverage Bitcoin to mine Bitcoin, whatever it may be, and to give the market more options.

00:58:09:23 - 00:58:37:07
Marty
At the end of the day. And we're extremely excited to officially have you on board. And I think the opportunity that lays before us at 1031 specifically is extremely exciting as well. I said mining is the most exciting industry and I truly believe that. But having the luxury of getting a view into every other sector of the Bitcoin economy is extremely rewarding as well.

00:58:37:07 - 00:58:41:22
Marty
And I couldn't be happier to have you on board to advise.

00:58:41:22 - 00:59:08:17
Harry
I couldn't be happier. I couldn't be happier. No, I think, you know, any any time you get to work with a market leader, you take it right. You guys have done have done so much hard work, you know, John. Jonathan Grant You know. O'Dell And you obviously as well as as well as all the LP's, you know, have just done a phenomenal job putting together a really thoughtful and mature, you know, investment platform.

00:59:08:17 - 00:59:34:18
Harry
Obviously, that's skewed significantly towards venture thus far because I think, you know, Bitcoin is still in in venture land where, you know, the biggest companies are being built are yet to be built. They haven't you know, they haven't reached maturation by any stretch, you know, thrilled to obviously be a portfolio company at GRID. But but for me, like what's most exciting is getting to work with it's used to work with founders, right?

00:59:34:18 - 01:00:00:19
Harry
The startup journey is not like any you know, nobody nobody could have told me what it was going to be like on the way in. And we're not done yet by any stretch, obviously. So getting to share, you know, the hard lessons, the good lessons, you know, what did we do right? What did we do wrong from along the way with other founders and being able to kind of take the the you know, the the the long the long, dark night of the soul type of call.

01:00:00:21 - 01:00:21:03
Harry
You know, that's what was really exciting to me because it's really hard. And, you know, being a founder or a co-founder of an early stage company can be extremely isolating. And so having some, you know, folks in the been there done that club who can sit alongside you and hold your hand when when you're facing kind of the toughest pieces.

01:00:21:05 - 01:00:43:28
Harry
That's so, so exciting to me getting to work with you guys on, you know, on fundraising and on and on allocations like all of that kind of stuff is something that, you know, that I'm tremendously passionate about, along with, you know, working directly with founders. So, you know, couldn't couldn't be happier, couldn't be a more symbiotic relationship between Grid and 1031 and between me and 1031.

01:00:43:28 - 01:00:46:03
Harry
So thrilled to be here.

01:00:46:06 - 01:01:13:20
Marty
Yeah, I that's another thing that is really unique about the position that we're in. This is Bitcoiners more broadly, but 1031 specifically, yes, we're a venture fund, the portfolio, the portfolio of companies that we've allocated to. But in your incumbent venture space, it's usually spray and pray across many different verticals, many different subsectors of companies doing wildly different things.

01:01:13:20 - 01:01:52:18
Marty
But with the focus that we have a 1031 on Bitcoin specifically, it enables us to sort of enable the portfolio companies to help each other out where they can and to give that advice obviously very small industry right now. But you have a very large goal and very similar problems. I mean last year to Bear Claw portfolio retreat, I mean the topic of the year was banking relationships and that's something that Bitcoin companies have been targeted, Whether it's explicit or implicit is for for others to determine.

01:01:52:18 - 01:02:13:10
Marty
But wasn't isn't easy. Still, for many companies to get banking or banking relationships in the space and just having a focus and being able to have this cross-pollination of ideas and experiences among portfolio companies is something that I think is unique to what we're doing here.

01:02:13:13 - 01:02:42:11
Harry
And this is catchy, but I'll say it anyway, which is like Bitcoin is a social hack where when I meet other Bitcoiners, I'm like 90% of the way towards friends. When I meet other Bitcoin entrepreneurs, I'm like 97% of the way towards friends. So, you know, being, you know, being able to kind of self-select into a group of people who are convicted enough to be, you know, to be bitcoiners in the first place, but then convicted and asked to build companies around Bitcoin.

01:02:42:13 - 01:03:00:02
Harry
It's just rarefied air, whether you're a portfolio company of 1031 or not. I just think, you know, the founders and employees at Bitcoin companies are a pretty special breed and and it's just it's just the most the most gratifying thing to get to be around those kinds of people all the time.

01:03:00:04 - 01:03:05:11
Marty
You got to be a little crazy. Just get I like crazy. It's a.

01:03:05:13 - 01:03:06:28
Harry
You know. Yeah.

01:03:07:03 - 01:03:12:07
Marty
Oh yeah, yeah. You can tell that is this was this.

01:03:12:07 - 01:03:14:16
Harry
Was a Marty Jones free episode.

01:03:14:19 - 01:03:16:27
Marty
I I've got the white collared shirt on.

01:03:16:28 - 01:03:18:10
Harry
You got the button down on.

01:03:18:12 - 01:03:29:15
Marty
I've got the button down on. I've got two buttons unbuttoned here and a little loose. But that's it. It's Monday morning. It's Monday afternoon now. The morning flew by yesterday.

01:03:29:15 - 01:03:30:07
Harry
Ran away.

01:03:30:10 - 01:03:44:12
Marty
Keeping Marty Jones in the cage for this one. Uh, what haven't we talked about? That's on top of your mind. I think maybe we should cover it. Doesn't have to be mining related. Could be Bitcoin related.

01:03:44:14 - 01:04:14:20
Harry
I mean, I think, you know, I think this is this is a good kind of time to remember that, you know, lower your time preference. Bitcoin comes at you super fast and so cherish these days of like quiet in the markets, you know, you know, it's great to be bouncing between 38 K and 45 K or you know, 42 and 43 like these are these are calm waters that we're in right now and they won't stay calm forever.

01:04:14:22 - 01:04:26:05
Harry
So, you know, cherish the cherish the peace of mind that you got, you know, on these kinds of days. And and, you know, remember that Bitcoin is the longest game we've ever gotten to play.

01:04:26:07 - 01:04:31:00
Marty
Yeah, it gets crazy when the price starts having.

01:04:31:02 - 01:04:33:12
Harry
Focused productivity down, price up.

01:04:33:14 - 01:05:03:26
Marty
Well, anybody out there building a company, humbly stacking sets, just prepare for the distractions. Mentally prepare, especially if you're running a company. Let your employees know that your team. Now things are going to get crazy. You're going to get the pull of distraction, pulling you day in and day out. So we're getting large green candles, large red candles up into the right, buckle down and try to focus.

01:05:03:28 - 01:05:08:15
Harry
Anticipating exactly when.

01:05:08:15 - 01:05:11:27
Marty
It comes, because we got we've got a lot to build.

01:05:12:00 - 01:05:16:13
Harry
We've got a lot to build. Harry future on build itself.

01:05:16:16 - 01:05:19:29
Marty
It's not takes individuals like you.

01:05:20:02 - 01:05:20:25
Harry
And you.

01:05:20:27 - 01:05:36:08
Marty
Many other people out there. We're doing it though. We're winning. Yeah. People working out here in the Commons working hard. You're in Nashville. The park is full partner, not there. But I was on a call with somebody earlier at the park and I saw it was full. We're doing it.

01:05:36:14 - 01:05:54:05
Harry
I went in there. I went in there. I had I had to do a little bit of stuff last night. I got I got to the park at like 8:00 and there were like six cars there and there were like two conference rooms lit up. People were working. Like the state of our network is strong. This is what winning looks like.

01:05:54:08 - 01:06:09:05
Harry
It's Bitcoiners who can't sleep on a Sunday and have to grind on their next, whether it's their next release or their next slide deck prep or whatever. Like they're grinding and our enemies aren't. And so we're going out working.

01:06:09:08 - 01:06:13:05
Marty
The momentum is building. It's going to be a good year.

01:06:13:07 - 01:06:14:17
Harry
Harry. Good year.

01:06:14:20 - 01:06:20:23
Marty
Thank you for joining me. We can't wait two years for the next episode. That is to answer.

01:06:20:25 - 01:06:24:09
Harry
Well, we'll put it on the calendar. Less than two years.

01:06:24:11 - 01:06:28:19
Marty
Yes, less than two years. You heard it here first. That's all we got today for X peace, love.

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Key Takeaways

The podcast episode featured a deep dive into the world of Bitcoin mining with experts Amanda Fabiano from Fabiano Consulting and Ben Gagnon from Bitfarms. Several key takeaways from their discussion include:

• Bitcoin Mining's Importance: Mining is integral to Bitcoin's existence. As Amanda Fabiano stated, "There's no Bitcoin without Bitcoin mining."
• The Halving: There was considerable discussion about the upcoming Bitcoin halving and its impact on miners. Historically, halvings lead to an increase in hash rate and price in the lead-up, followed by a pullback post-halving, creating a tight situation for miners before possibly leading to a bull run.
• Public Miners and Market Access: Public miners now have different dynamics due to their access to capital markets, affecting the cost curve and competition within the mining industry.
• Operational Strategies: There are various strategies within mining, such as hosting, owning infrastructure, and revenue diversification. The right strategy will depend on the market's condition at any given time.
• Profit Maximization: Ben stresses that miners must prioritize profitability and cost-effectiveness due to the competitive nature of the industry.
• ASICs and Infrastructure: The evolution of mining hardware and infrastructure was discussed, including the transition from air-cooled to hydro-cooling systems, which represent a move towards more traditional data center aesthetics.
• Treasury Management: There's a growing need for sophisticated treasury management among miners, especially around the halving events.
• Energy Costs: The conversation often circled back to the importance of energy costs in mining operations, with both guests highlighting its critical role over other factors like machine efficiency.

Best Quotes

1. Amanda Fabiano: "There's no Bitcoin without Bitcoin mining. It's a really interesting part of the ecosystem."
2. Ben Gagnon: "I like to say I'm a profit maximalist as a Bitcoin miner, and every Bitcoin miner needs to be a profit maximalist. It's too cutthroat of an industry to not be focused on cost."
3. Amanda Fabiano: "The cost curve is kind of an interesting thing to talk about because it's no longer are you on the low end, it's are you on the low end and do you have access to capital?"
4. Ben Gagnon: "The valuation of the public company is driven by the hash rate, not actually driven by the financial performance of the company."

Conclusion

The podcast episode provided an enlightening perspective on Bitcoin mining, revealing the complexities and the importance of strategic planning within the industry. The conversation showed that mining is not just about securing the network but also involves navigating economic, technological, and market challenges. The halving event, in particular, stands as a significant milestone that could shape the future landscape of Bitcoin mining, emphasizing the need for miners to be agile, cost-effective, and forward-thinking.

Moreover, the episode touched upon the evolution of mining infrastructure and the potential shift in public miners' strategies in light of accessible capital and the arrival of Bitcoin ETFs. It's clear that the mining sector is dynamic and constantly adapting to the changing tides of the cryptocurrency world.

Listeners are left with a sense of the critical role miners play in the Bitcoin ecosystem and the ingenuity required to stay profitable and competitive. As the industry grows, the conversation around Bitcoin mining will undoubtedly continue to evolve, with energy consumption, operational efficiency, and market dynamics at the forefront of future discussions.

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Key Takeaways

In this emergency podcast episode of TFTC, Marty Bent and Jason Brett discuss a sudden and concerning move by the Energy Information Administration (EIA) under the Department of Energy, which has issued a survey requesting detailed information from the bitcoin mining industry. The survey, which was pushed through quickly and without much notice, has raised alarm due to its extensive data demands, including the longitude and latitude coordinates of mining operations.

Jason Brett, serving as an advisor to the Bitcoin Policy Institute and a seasoned figure in the space, sheds light on the federal landscape surrounding bitcoin policy. He explains the potential legal issues associated with the survey, such as Fourth Amendment violations, and the broader implications for industry regulation.

The conversation touches upon the history of federal interest in bitcoin, starting from President Biden’s executive order on digital assets, which raised environmental concerns about proof of work systems, to Senator Elizabeth Warren’s push for more scrutiny of bitcoin mining’s energy consumption. Brett also discusses the Supreme Court case of West Virginia vs. EPA, which could challenge the EIA's survey as it targets a specific industry based on ESG considerations.

Marty and Jason consider the necessity of solidarity within the bitcoin mining industry to respond to this "attack vector" and suggest that legal representation is essential for those dealing with the survey. They also explore the potential for states to protect their interests against federal overreach and the importance of building grassroots support and lobbying efforts to safeguard bitcoin’s future in the U.S.

Links

Follow Jason on Twitter

Check out the Bitcoin Policy Institute

Sponsors

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Best Quotes

1. "We don't just have to comply. And I think there needs to be some congressional light shed on why was this emergency announced." – Jason Brett_Context: Discussing the need for Congressional intervention to question the EIA's emergency authorization._
2. "This is about a form. And if this is your state and local... this is just a classic case of federal overreach." – Jason Brett_Context: Considering the potential for state governments to challenge the federal government’s intrusive demands on bitcoin miners._
3. "It's not like a friendly visit from your postal service person. This is like coming from a place of investigation." – Jason Brett_Context: Describing the intimidating nature of the EIA's survey and its implications for bitcoin miners._
4. "We're not going to get to your goals in 2050. It's going to destroy the planet, which Elizabeth Warren has said as much in some hearings. We have to stop bitcoin. It's destroying the planet." – Jason Brett_Context: Highlighting the extreme views of some policymakers on bitcoin's environmental impact._
5. "It's literally a physical attack vector that can be pinpointed and attacked." – Marty Bent_Context: Marty Bent explaining why mining has become the focus of regulatory scrutiny._
6. "As bitcoin gets bigger, I think we're going to need that at some point to make it so we don't have these overbearing type actions." – Jason Brett_Context: Discussing the need for a strong, organized bitcoin community to influence policy._
7. "The rent is too damn high. The government is too damn big too. Get out of our life." – Marty Bent Context: Expressing frustration at government overreach and the desire for autonomy.

Conclusion

The podcast episode serves as an urgent call to action for the bitcoin mining community and highlights a critical moment where both legal and grassroots efforts are necessary to counteract potential regulatory overreach. The EIA's emergency survey, which demands extensive and intrusive data from miners, represents a significant threat to the industry's privacy rights and operational freedom. Marty Bent and Jason Brett discuss the need for industry solidarity, legal defense, and political lobbying to ensure that this does not set a precedent for future regulation.

The episode also emphasizes the potential role of state governments in defending their economic interests against federal intrusion, as well as the importance of conveying the human and innovative aspects of bitcoin mining to policymakers. Ultimately, the overarching message is one of resilience and the belief that, despite the challenges, the bitcoin community has the power and resources to overcome these adversarial actions and continue to thrive in the United States.

Timestamps

0:00 - Intro
6:17 - Overview on “emergency” survey
15:03 - Clearly an overt state attack
21:45 - Fighting back
30:21 - Upcoming months
32:30 - Energy industry and policy
39:29 - Failure of ESG
46:31 - Making political progress
52:20 - Federal vs State
58:12 - Wrapping up

Transcript

00:00:02:13 - 00:00:05:23
Marty
And we are live. Jason, Brett, welcome to the show.

00:00:05:25 - 00:00:08:03
Jason
Marty, how you doing? Good to be here.

00:00:08:05 - 00:00:37:04
Marty
Doing well. This is a bit of an emergency podcast we've thrown together in response to the IEA's survey requests for the Bitcoin mining industry. It seems to be driven by the Department of Energy, rushed through rather quickly over the last couple of weeks. Who? Someone is calling me here. Ignore that. Yeah. And it came out of nowhere, it seems.

00:00:37:06 - 00:00:57:10
Marty
And it is forcing the industry, the Bitcoin mining industry, to formulate a response rather quickly. I think before we make any assumptions and just maybe describe what you've been working on on the policy front, your experience and how you're viewing this, the survey, this registry, if you will.

00:00:57:12 - 00:01:27:10
Jason
Yeah, So I'm an advisor to the Bitcoin Policy Institute and I've been in the space for about seven years now. I think in terms of the policy in considering Bitcoin mining, there really has not yet been anything on the federal level regarding agencies doing anything. And the start of the federal policy on Bitcoin in general kicked off with an executive order two years ago.

00:01:27:12 - 00:02:07:28
Jason
Executive order from Biden on digital assets. Part of that was concerns about sustainability. ESG It's important for people to remember President Biden is a it's his top priority right now about concerns about the environment. So part of this looked into the energy use of proof of work systems and they talked in that if you read through the executive order, one of the findings was that maybe the, you know, these agencies, federal agencies, could guide state and local partners on potential alternatives to proof of work, as well as looking at the energy consumption and better understanding it.

00:02:08:01 - 00:02:27:17
Jason
So what you have is you have an executive order two years ago that's saying we need to learn more about Bitcoin mining. We need to understand more. And at that time the Bitcoin Policy Institute responded. We had talked to people in the White House about the program and there was good, good feedback. Trey Cross had been the lead really on that.

00:02:27:17 - 00:03:02:03
Jason
As you know, Troy is really the master of this area. But what you had was and forgive the DC speak for your listeners, but kind of you had what's called a soliloquy, which is where Elizabeth Warren writes a letter saying, I think these agencies should start to look into what Bitcoin miners are doing at the federal level. And, you know, the mining contingent, if you remember Michael Saylor and I think a few other major players went and talked to the, you know, Department of Energy saying, look, this is a little overblown.

00:03:02:03 - 00:03:22:15
Jason
We don't know if this is the right angle. But as we know now, this EIA has now decided on this emergency basis. And I say emergency lightly because you've explored and I've explored, too, these are very well thought out survey questions like, I mean, for an emergency, it's like they put together these these well-thought out questions and thoughts.

00:03:22:17 - 00:03:50:08
Jason
So I think it would have taken at least a few weeks to put together. But now what they call an emergency to look into the amount of energy that Bitcoin mining is used. And they say things like the Bitcoin mining price. So what? And we now know because we saw the EIA put out on its website yesterday, not only information about why they were doing it, which is when I call it a soliloquy, that's the response to saying We hear you, Senator Warren.

00:03:50:08 - 00:04:16:29
Jason
We're doing what you're asking. We're trying to find out all this information about how much energy Bitcoin miners are using. But the other thing that besides that response is they already started giving data of their own analysis of how much energy Bitcoin mining is using. So in a matter of 24 hours, Marty, we've gone from we need to explore in an emergency basis how much energy Bitcoin mining is using to within 24 hours.

00:04:16:29 - 00:04:38:11
Jason
The agency putting up the website, all these numbers and data they've explored saying bitcoin energy is really bad. So at a minimum I think there's well, there's lots of concerns, but the baseline concern is that there's a bit of confirmation bias because they're assuming that it's bad for the environment. So this survey to them might just result in saying, yes, we agree it's bad for the environment.

00:04:38:13 - 00:05:03:20
Jason
The real concern and it's a legal matter has to do something called West Virginia versus EPA. And I say that because that's a really important Supreme Court decision. We've heard president candidate when he was running Vivek Ramaswamy say is probably one of most important court decisions in our time as it relates to Bitcoin, because it specifically prohibits the agency from doing exactly what it's doing.

00:05:03:20 - 00:05:33:29
Jason
So what it means is it can't focus on a particular industry based on like ESG. So it can't just go after an industry saying, we think there's too many problems with the environment of what your industry is doing. And the Supreme Court, highest court in the land in West Virginia versus EPA, you know, West Virginia, one. And basically what that means is the letters that Senator Warren sent encouraging this agency to do this is probably in violation of that finding by the Supreme Court.

00:05:34:01 - 00:06:03:21
Jason
And so people are now being told, as you pointed out, like if you're a Bitcoin miner and you see these letters, it's like under criminal law, if you don't report or whatever. But it's very possible this whole exercise is what the EIA is doing, could could be challenged in court and we could potentially get a stay on what they're doing or it'd be overturned because it was made very clear, again and by the Supreme Court, you know, you can't do this to an industry just on the energy side alone.

00:06:03:24 - 00:06:17:28
Marty
Yeah. And we were talking before we hit record, this is somewhat of an unprecedented attack on a particular industry via emergency authorization authorization that was pushed through is that correct in your mind? Yeah.

00:06:18:00 - 00:06:22:12
Jason
Yeah. I've never seen this at this level happen.

00:06:22:15 - 00:06:55:29
Marty
That and I was talking to Reed Browning from Cathedra. He's a CTO at Cathedral, a mining company, and he was actually ex Department of Energy and he's pretty convinced that this was definitely pushed from above the EIA, from above the Department of Energy, because when you look at when the survey was proposed on January 24th and when it was approved, which is January 26, like something happening that quickly within the U.S. federal government really never happens.

00:06:56:02 - 00:07:05:06
Marty
And so it seems like they've been planning this behind the scenes, just getting their ducks in a row before actually pushing this forward.

00:07:05:08 - 00:07:25:25
Jason
Yeah. I mean, they invoke the emergency basis for them to execute it in the way they're doing it. But again, you look at those surveys and those questions, it's pretty evident that there was some time, considerable time put together. You know, one thing I've been thinking about with this, too, is this would almost be never tolerated in any other industry.

00:07:25:27 - 00:07:46:25
Jason
And sorry for any Detroit Lions fans, but it's kind of like being a Lions fan where you've never won the Super Bowl. We're all kind of, you know, you're a nice guy. I'm a nice guy, But but there's this sense of like, you know, if this was the NRA, this this would be shut down already, Right? If they said we're going to do a survey, figure out how many guns all Americans have, you know, the NRA would be at the White House.

00:07:46:27 - 00:08:21:05
Jason
And I think there's a certain degree of like where we need to start thinking as a as a community, as bitcoiners. You know, we hold a lot more power than we realize. You know, people reach out if we figure out ways of influencing and doing advocacy, you know, we can get this to go well. The only reason that we're even talking about this and that it's likely next week, in my opinion, this is going to start this process of because they said February to June start going around and asking information is there really isn't enough powerful force to kind of stand in their way to stop them from doing it, You know, and that's that's

00:08:21:05 - 00:08:40:23
Jason
the problem with this with new industry and there's this element of we've starting to think about how Bitcoin could change the world and how it might affect things in government. And, you know, a lot of people don't like that. And this is this is an attack vector that I have to say, unfortunately, like this is Elizabeth Warren has executed this one pretty well.

00:08:40:23 - 00:08:47:24
Jason
And unfortunately, it's obvious from this that it's not going away. It's something we have to figure out an answer to.

00:08:47:27 - 00:09:14:24
Marty
And so I want to talk about what we can do it as a response. But first, let's dive into the details of the survey. Is there any Fourth Amendment protection? Because it seems like this is a pretty egregious affront to privacy rights of individuals and corporations. It's literally asking mining companies to go to their electricity providers and have their electricity providers dox information to them about their other customers.

00:09:14:26 - 00:09:23:12
Marty
They're no the overall percentage that the bitcoin miners are using with their overall capacity.

00:09:23:14 - 00:09:48:18
Jason
Yeah, I, I chuckle because you know, we talk about Operation Choke point we've seen that about like the banks trying to cut off like I've been thinking this is like operation pull the plug like let's go to all the electricity providers so who's giving the energy to Bitcoin and then give the government the ability to like, you know, chase them away from from diverting all this energy to this unimportant project?

00:09:48:20 - 00:10:15:11
Jason
The survey that the idea is that it definitely it talks about a commercial crypto asset miner and what that's a tricky one because you said it yourself, individuals or businesses. You know, I have a few Bitcoin miners in my downstairs, right? I mean, do I does that mean that if if I get this survey or it says all need to report, like at what point am I a commercial endeavor?

00:10:15:15 - 00:10:47:02
Jason
Right. And there are EPA rules about pollution that certain industries have to comply with. But this this is likely a Fourth Amendment violation because it's it's probing for information. Right. And it's asking specific, like you say, asking for the electricity providers and the names, the electricity providers and giving just just downright like information about your business that may be a competitive factor that you don't necessarily want to part with.

00:10:47:04 - 00:11:09:00
Jason
So it it crosses it. It's a it's a challenge for anybody. Like for me, I have to think about and say, well, does this apply to me? I mean, I have half a dozen miners downstairs, but like, am I a commercial miner? Do I just need to fill out this form in case? So there's a question of the who who does this apply to?

00:11:09:02 - 00:11:32:04
Jason
Because it's certainly casting a wide net, but it absolutely is a Fourth Amendment violation. Because think about it, what if they what if you're talking about like mining like something or doing something with computers? And they said, we need to know how much energy your computer is using. And like, everybody has to tell you. So it seems hard to believe that it wouldn't violate that that constitutional protection that we have.

00:11:32:06 - 00:11:39:04
Marty
I mean, they literally want the longitude, latitude coordinates of all your operations.

00:11:39:07 - 00:11:58:23
Jason
And, you know, and that's what I'm trying to understand, because we saw that map, right, that showed 56 Bitcoin miners. So it feel like do they already know the coordinates anyway? And they just because because then you run the trouble of then you answer this form and what if you get it wrong and they then hold you in violation because you didn't answer truthfully.

00:11:58:25 - 00:12:26:28
Jason
So we had a latitude and longitude is is pretty, pretty priceless. But but I mean talk about a surveillance state. It's it's we've we've reached this this is we've we've departed from the the the idea of you know, we think the U.S. is against bitcoin mining. You know we know some senators have a problem with it, too. Like this is when we actually see sort of the state at work.

00:12:27:00 - 00:12:50:23
Jason
And I mean, this form, you know, you have to either what, mail it or or fax it back or something. You can't even really it's just clearly they have an operation for it. But I mean, this is I think there's some questions people need to ask that starts with is like, what does this mean? Like when people come and talk to you, you know, should you even talk to them?

00:12:50:23 - 00:13:17:18
Jason
She say, I need a lawyer first, you know, like just don't I think you have to I think it's going to require everybody to get legal representation to answer this form properly to avoid any problems with the law. Later. And that's when you're papering an industry to death, which is unfortunate. But we've never But to be honest, I mean, really, Marty, like I'm I'm saying all this and at the same time, I'm I'm slightly at a loss for words because this is really new territory.

00:13:17:18 - 00:13:30:21
Jason
I just I can't ever. Can you think in your lifetime of an industry being sort of this this collection process is just targeted And I just know I don't think anyone's ever heard of this before, so.

00:13:30:24 - 00:13:50:19
Marty
Not in the United States. But we do have one example of another government doing this throughout Bitcoin's history, and that's Venezuela. They collected all this data and then took all the information and quickly confiscated everybody's miners to mine for themselves. Yeah, it's just something that everybody should be worried about.

00:13:50:21 - 00:14:17:10
Jason
Yeah, And look, we already know the U.S. has confiscated a lot of Bitcoin, like in Mt. Gox. We don't know to the degree that they mined themselves. But I do think that what's critical here is that they're talking about in that memo that we saw today on the EIA website, concerns about, you know, this is what's happening in the United States because China shut off its Bitcoin mining.

00:14:17:10 - 00:14:49:18
Jason
And so, you know, we know it's a growing issue in the U.S. And so there's clear policy reasons behind it. You know that everyone's come to the U.S. now, you know, to mine. And I think that the the real danger here is like once they set up the registry and they've collected this information, what like next steps they're going to take, and that's like you said, there's the confiscation.

00:14:49:18 - 00:15:19:11
Jason
But in this case, is it extra taxes for using the energy? And it's so it's it's the problem. I think that is it's the once you have that registry set up and people just start complying with this just by complying with it, it makes it looks like we think there's a problem. Right. So that's that's why I think that setting up this registry, like what could the next step be?

00:15:19:11 - 00:15:30:20
Jason
I don't think it's confiscating the miners. I think to them it's like shutting it off because they want to decarbonize, you know, the planet. Yeah.

00:15:30:22 - 00:16:04:02
Marty
And it's it's weird, too, because a lot of the information they're projecting to want to understand better is already disclosed by many of the public miners, particularly and even some private miners, particularly those participating in demand response programs. I mean, just two weeks ago, we had a -4% difficulty adjustment because miners were participating in demand response to send electricity back to the grid, making it more stable and creating a more stable pricing environment for residential consumers.

00:16:04:02 - 00:16:24:04
Marty
And yeah, it is an overt attack feels that way. It certainly is that way. If it smells, walks like a duck, sounds like a duck, smells like a duck at the duck. And I guess that's a question. I mean, I wrote my newsletter. I've stayed up pretty late. I was a little tired, a little aggressive in my wording.

00:16:24:04 - 00:16:56:24
Marty
But I think personally, I would say we should not comply, shouldn't fill this out at all. Everybody, like you said, should get legal representation and fight this. And that's because over the last three days now two days, I've been having conversations with different people in the industry. And that's I think we should use this platform to say like it seems like there's a number of people ranging from the largest miners in the country to small private miners that are having these individual conversations.

00:16:56:24 - 00:17:21:23
Marty
And there needs to be some way for everybody to get together and have a coordinated action together in solidarity against this, because I think there could definitely be individual actors who want to be the ones who fight this fight. But I do think there's a need for solidarity across the industry to fight this this particular aggression.

00:17:21:26 - 00:17:43:00
Jason
Yeah, And I think that like that word and I read your newsletter and it could, you know, feel your scent sense of it. And I think you're right. Like when you started to say at first maybe this seemed like a positive thing, right? Like they want to learn more information, but as you look more and understand the purpose of it, it doesn't seem like it's just simply, you know, let's do a fact finding mission.

00:17:43:00 - 00:18:04:13
Jason
And of course, the problem is we don't kind of cooperate then where they can say, well, see, they have all this stuff to hide, even though we're doing things like helping balancing the grid, that the funny thing is think about this for a second. Like, what's your least favorite U.S. agency of of all or most Americans? What would you say that the agency they dislike the most?

00:18:04:15 - 00:18:07:23
Marty
MM The IRS.

00:18:07:25 - 00:18:34:13
Jason
Perfect. So even with the IRS, when you and I file taxes, it's not about this mandatory compliance that if you get if you don't get your taxes perfect, you're going to like go to jail. It's I'm reporting based on what my records are. And then if there's a problem, you can come in and audit me. What I don't understand is if they really genuinely wanted to figure out what this process was of how the energy is used by Bitcoin, miners have it be a self-reporting mechanism.

00:18:34:13 - 00:18:57:15
Jason
You know, just like you report in your taxes. Like I said, no one likes to even do that. But as the miners send in the information, don't send out, you know, this form saying it's mandatory. And if you do anything wrong, it could be a criminal violation. It's and that's where it's something. Unfortunately, everyone has to get used to in this industry is it's treating us like criminals.

00:18:57:15 - 00:19:13:15
Jason
Right. Like it's kind of we have to hit you over the head because you might not fill this out correctly because we don't really trust you in the first place. Plus, you're wasting all this energy instead of just saying, look, file your taxes, you know, maybe not your favorite thing and really won't be your favorite thing if we have to audit you later.

00:19:13:15 - 00:19:32:27
Jason
But you know, you report to us and to me that's at a minimum. It's not great, right? No one like I said, no one likes the IRS. But you at least you report what you your income is. You know, that's always the joke, right? Did you cheat a little bit on your taxes? Whatever, Stuff like that. So if they want to learn all this information, they can pull it.

00:19:32:27 - 00:19:56:05
Jason
Pull that, do it that same way. But this is this is not in that just let's reported in like no criminal violations. If you don't know, just let's start collecting the information because we want to learn more and we want to see, you know, what we might want to do with this information and better understand maybe there's benefits to it and so it just doesn't give give us the benefit of the doubt.

00:19:56:05 - 00:20:19:25
Jason
So at a minimum, I think this the way that some of this is worded needs to be changed. The form itself might be a problem or a violation of the way the form is put together. B The reason I say the legal representation is it's not even even if you had everything right, right. And even if you had, you know, you're minors, you know, you're like and everything the way the form says, you know, if you get something wrong.

00:20:19:27 - 00:20:36:20
Jason
That's why I think everyone needs a lawyer to fill it out if you are going to fill it out. Because what if you get something wrong? It's it's like a bit of a catch 22. And so so there's lots of I think there's room. Luckily, we live in a country where there's room to get lawyers to help us with this.

00:20:36:20 - 00:21:09:22
Jason
We don't just have to comply. And I think there's there needs to be some congressional light shed on why was this emergency announced and that, you know, the biggest problem to me is this price increase that Bitcoin went up in price. And so and their assumption that therefore that, you know, there's going to be more activity. You know it notably doesn't mention that to have having is coming up soon I'd love them to try to evaluate what that might mean to it but here we are and maybe to get the Bitcoin ETF.

00:21:09:22 - 00:21:35:25
Jason
So like Cathie Wood and others involved in this conversation because you have all of Wall Street now benefiting from a spot Bitcoin ETF and this policy looks like it's a bit of a reaction to that. You know like and wouldn't put me it wouldn't put I wouldn't put it past sort of the progressive attitude in this country of the minute something starts to be successful in a capitalistic light, you know, New York, New York, embracing these Bitcoin ETFs, prices burning.

00:21:35:25 - 00:21:55:02
Jason
And of course, it came back a little bit. You know, this is when we start to see that the liberals get really crazy, right? I'm not trying to take sides between like, you know, conservatives and but but that's what they tend to do. They tend to just start go in and use these backdoor mechanisms to get what they want anyway, even if it's really already been decided.

00:21:55:02 - 00:22:17:11
Jason
This is sort of policy. You know, there wasn't like a notice of rule saying, we're thinking about doing this and everyone respond or us respond and treat us like professionals and say this is the kind of information you should be looking at if you're really interested in learning about the energy use of this industry. This is just let's use the mechanism of the state to get what we want and because because they're terrified.

00:22:17:12 - 00:22:24:09
Jason
They're terrified now that there's all these Bitcoin ETFs that that Bitcoin might win and succeed.

00:22:24:11 - 00:22:50:02
Marty
Yeah, you can go back to the congressional point to the is that a way to prevent this from moving forward is if somebody in Congress was like, hey, why was the emergency authorization used? Like, shouldn't this go through Congress, go through a vote first, think, is there a roundabout way where Congress could stand up, say, you should have passed this through us first, like you know, the authority to do this?

00:22:50:04 - 00:23:16:28
Jason
Yeah, it doesn't it doesn't actually have to be a vote of Congress. But every federal agency has oversight from a committee. And right now there's the House Energy and Commerce Committee that would have oversight. So that the chair of that committee, Cathy McMorris Rodgers from the state of Washington, could call a hearing or or request information as to why this was asked for.

00:23:17:00 - 00:23:52:13
Jason
I'm not sure how much of a bitcoiners she is, but I do know she supports some of the broader, you know, concepts of like us being competitive against China. But that's really what you want is you want some chair of a committee who has oversight over this agency to send a letter immediately, send a letter asking questions like, you know, a letter that would say within two weeks, please explain what this is, what resources may be already deployed, you know, questions about it and maybe even say, maybe even in the letter request.

00:23:52:13 - 00:24:07:00
Jason
Please wait on, you know, wait on this hold off like a month until you come before Congress and can really explain what you're going to be going out and doing with all of this information. Yeah.

00:24:07:02 - 00:24:16:05
Marty
So how do you think the next six months plays out, ideally in your mind?

00:24:16:07 - 00:24:51:25
Jason
Ideally, I think that people might take enough exception to this. It might affect the outcome of the elect presidential election. And a lot of this might be reversed because right now this is a symptom of the Biden administration and the overwhelmingly progressive influence from Senator Warren. I think what I hope plays out and what I think you'll see, Marty, is you'll see people come to us in this community because people will realize that this can happen to this one industry.

00:24:51:25 - 00:25:12:18
Jason
It can happen to any industry. And when you look at the amount of information that they're asking for, the degree to which they're doing it, it's a stifling of innovation. So I think that my hope would be in the next six months that they curtail this and that a lot of the large miners have already given information to Senator Elizabeth Warren.

00:25:12:21 - 00:25:41:12
Jason
You know, so maybe leave it at these these are what the large commercial miners are. And I mean, hopefully get something like this shut down to the degree that there's enough pressure right. From Congress to say this is an overreach on administrative level. And I think you're going to have a huge lack of noncompliance. And I don't say that to say people are going to listen to your show and say, know, I'm not going to sign it.

00:25:41:20 - 00:26:04:20
Jason
I think some people just won't. They they'll look at it. They won't be sure how to answer it. Some people may not even be aware they fall into this classification. I mean, there's been no notice, no press, no explanation how to do it. This is not like a friendly visit from, you know, your your postal service person. This is like, you know, coming from a place of investigation.

00:26:04:20 - 00:26:15:16
Jason
So I really have a hard time seeing how they're going to get the results they want if, in fact, they do pull all this stuff between now and June.

00:26:15:18 - 00:26:51:24
Marty
Yeah, and it's funny, the justification is you need to do this to make sure that our grids are secure and our energy systems are secure and everything this administration has done is a complete projection onto the Bitcoin industry specifically. But I wrote it in the newsletter. So if you want to stabilize the grids, make sure that you're building more reliable baseload and spin up the leases on federal lands again, maybe finish the Keystone XL pipeline, maybe take all the red tape off of nuclear power generation.

00:26:51:27 - 00:27:39:02
Marty
There's many other lower hanging fruits that the government could take advantage of instead of attacking a specific industry. And that's that's where I think the signal is, is they have to know this to some extent. And do they really care about Bitcoin's energy use or are they using this, as you mentioned earlier, as an attack vector to hinder Bitcoin's proliferation throughout the economy and its adoption by individuals that could something like this, the survey go out, the data come back, and the government either manipulate the data or present it in a disingenuous way to fearmonger about all the energy that Bitcoin is sucking up.

00:27:39:04 - 00:28:11:13
Jason
Yeah. Or come up with policies for the electricity providers, right? Who like maybe limit the amount of electricity they would be willing to give to this industry. There's there's this is this is where you would say like this the dam has broke. Right. And we're now is this now the era of like Bitcoin mining regulation and what that looks like in the US where there's actual federal regulations around the way you can mine Bitcoin.

00:28:11:15 - 00:28:30:00
Marty
I hope it doesn't get to that point. That's one thing I wonder too, like talking about allies not only within the industry but across industries. I mean, I've seen it up close and personal. I'm very involved with multiple mining operations throughout the country, in the utilities companies that we work with love us because we're able to provide them more revenue.

00:28:30:00 - 00:28:57:10
Marty
They can buy power in bulk passes, lower prices on to residents. That's an but still it's still early in that relationship between the energy sector and the Bitcoin mining sector. But this is something I've been saying at conferences and events over the last few months is like, we really need to get allies in the energy sector and help leverage their lobby to come help us put our case forward.

00:28:57:10 - 00:29:24:09
Marty
Like, Hey, this is actually really good for our energy systems and our companies, our bottom lines and our ability to reinvest in infrastructure. That's that's one thing I'm hopeful will materialize. But now with this this registry for going out there, it seems like the time is and I need to convince those in the energy sector to think we're valuable economic partners to come come help us fight this.

00:29:24:09 - 00:29:32:22
Marty
And as you mentioned, like West Virginia versus the EPA, they've certainly gone through this before. And is that the Chevron deference case as well, or is that separately?

00:29:32:24 - 00:29:34:11
Jason
That's that's the one.

00:29:34:14 - 00:29:35:06
Marty
Yeah.

00:29:35:08 - 00:30:02:00
Jason
So also, you know, if you remember like that, there's things ebb and flow in DC. We're in an election year. There's this one great documentary. I've got to try to find it, but it shows really like the cycles of the way Democrat presidents care about, like ESG, and they show them like putting solar panels on top of the White House and the like.

00:30:02:00 - 00:30:20:12
Jason
As soon as Trump moves in or Bush moves in, they send construction workers on top of the White House and they take hammers. They knock the solar panels down, throw them off the roofs, you know, put them away for four years until the Democrat comes back. So what I guess I'm saying is, I mean, this is it seems a lot right now to us, right, Because this just happened.

00:30:20:12 - 00:30:58:09
Jason
It's like, what does it mean? There's a lot of unknown. It's kind of scary. But you know, within a year, if there's a new administration, like all of us could go away really, really fast. And I think that's to me, like the hope at this point, because this there's just this is this is like epic level of of FUD about Bitcoin energy use and it's likely that this was scrambled in an emergency way because they know that if it's under a new administration, whether it's Trump, Haley or whoever, they're not going to put somebody in charge of an agency and do anything like this to Bitcoin.

00:30:58:12 - 00:31:26:14
Jason
And I hate that Bitcoin has to become partizan that way. But I think for right now that's at least what it will take all of this kind of reporting stuff to go away. It's it's President Biden's and a little unusual that he's really really focused on ESG. And I and I've talked about this on other podcasts before, too, of you know, we hit this real roadblock with this administration because they decided to look at digital assets for the first time.

00:31:26:20 - 00:31:47:19
Jason
You know, we had the huge market growth. Everything bubbled up and we just so happened to come across like a president that isn't just your average Democratic, you know, president who kind of cares about the environment, but has made it his number one priority. And so when you had those that really weren't fans of Bitcoin, you know, say, look, this is well, we know it's not.

00:31:47:19 - 00:32:14:06
Jason
But look, use of energy, it's completely contrary to your objectives. We're not going to get, you know, to your goals in 2050 Bitcoin. It's going to destroy the planet, which, you know, was born. It said as much in some hearings. We have to stop Bitcoin. It's destroying the planet. It was his number one priority as a president. And so I think that that is why you're seeing this today is the last couple of days, this emergency thing go through because it is a priority of President Biden.

00:32:14:09 - 00:32:37:00
Jason
This is his number one priority. And and so that we've they've hit upon the idea of what proof of work is. They feel like it used a lot of energy. And to them, it's like backwards. It's like we're going back to the coal era to the and it doesn't think through all the things that, you know, you've so eloquently talked about with maybe we need to go back to nuclear or anything like that.

00:32:37:03 - 00:33:13:17
Jason
It's just like up here, we go back, we're just taking steps backward when it's an emerging innovation, Right? It's it's a new kind of money. It has so many possible uses, not just on the mining side, but so many uses in society. And it's just so we just kind of hit this really bad. It's bad timing because we just had a president who has been unusually worried about the environment and has been pandering for the most part to a lot of the environmental groups on a lot of these issues, not just Bitcoin, a lot of the, you know, energy industries have been facing this now for the last few years with the ESG narrative.

00:33:13:19 - 00:33:50:22
Marty
Yeah, which is hilarious considering we just have to look over the Atlantic to Europe and I think they went first with this aggressive net zero energy policy and it's been extremely detrimental to their quality of life and the stability of their energy systems. And they rely a lot reliability of their energy systems and again, it is nonsensical in an election year considering that most of his first term has been plagued by high inflation and particularly in the energy sector, which has come down over the last year.

00:33:50:22 - 00:34:13:07
Marty
But there's what's going on in the Middle East. The price of oil could certainly go much higher rather quickly if things escalate there. And it's just weird that they're doubling down on this ESG policy when it's an abject failure. Every everywhere you look that it's been implemented at full scale.

00:34:13:09 - 00:34:26:20
Jason
Absolutely. And there's been a lot of folks who are now talking about reversing the ESG rate, like people are saying, we're going to get rid of this, you know, as soon as this is definitely going to be something that's going to affect, you know, the election.

00:34:26:22 - 00:35:10:02
Marty
Yeah, And that's that's the other weird thing, too, is like obviously, I've been a notorious anti-gay advocate. But I mean, if you look at it, just like off grid miners reducing methane emissions, if you care about ESG, Bitcoin is a perfect vehicle to sort of bring about a more efficient energy system, whether it's offered or all great on grid solves the and yes, the social side of things where it's okay if these miners can come in and create grid stability and create stronger revenue streams for individual utility providers or power plants, I think that allows them to have a stronger balance sheet which will allow them to get more creative.

00:35:10:02 - 00:35:18:21
Marty
The pricing, which typically benefits residential consumers with with lower prices.

00:35:18:24 - 00:35:47:21
Jason
Yeah, absolutely. Yeah. You know, I know that you don't want it necessarily to come to this, but my my vision sort of three or four years out would be we're still going to be able to mine Bitcoin. But the larger commercial enterprises, a Bitcoin think of somebody who shows up from Washington DC in a suit and tie and, you know, puts on a hard hat and you know, is the, you know, Bitcoin mining inspector right?

00:35:47:23 - 00:36:07:06
Jason
And you know, it's going to poke around, you know, look at what you're giving back to the grid, you know, questioning your practices. I don't think we'll get to like it won't be Venezuela. They won't co-opt it. I don't think they'll they'll never shut down something because remember that the same government loves and counts on our tax money.

00:36:07:06 - 00:36:39:21
Jason
Right. So they'll how can we tax Bitcoin? How can we tax these these businesses to bring revenue back to the government? But I think the end game is that at least for the larger Bitcoin miners, this is the sustainable path, no pun intended is I think four or five years from now you might see sort of these inspectors from the the DOE to come out and just poke around like they do any other any other aspect of energy production.

00:36:39:23 - 00:37:01:06
Jason
And I'm not saying that's a good outcome, but I like because I think we'd still be able to to to do Bitcoin mining. I just think we we might be seeing the era of, of, of regulation of Bitcoin mining in some degree or another in this country because, you know, as you said, it's like A.C. but we've just we've moved in this country so far away of just basic freedoms.

00:37:01:06 - 00:37:06:21
Jason
It's hard to imagine that an industry could ever just be left alone entirely.

00:37:06:24 - 00:37:34:21
Marty
Yeah, I've hope we can get back to it. Hopefully Bitcoin succeeds and they don't have all the money they need to to burden us with the pencil pushers and the scrutiny. It's just insane because when you think the innovation, the Bitcoin mining has brought the energy system, it's like palpable, it's tangible, it's very clear in the data. The data is there, it's out.

00:37:34:21 - 00:37:59:19
Marty
That's the most frustrating thing about this is they're asking for data that's already public that they could easily find in public filings by companies like Riot, Marathon, Iris, whatever it may be, stronghold like strongholds doing alone to solve the waste coal problem that exist in Pennsylvania. That should be something that people are cheering on. There's this weird vendetta.

00:37:59:21 - 00:38:19:14
Marty
I think it's because they can't control Bitcoin, the asset or the network. At the end of the day, mining is just the attack vector they've chosen because it's very visible and physical. So it's literally a physical attack vector that can be pinpointed and attacked.

00:38:19:16 - 00:38:45:18
Jason
It's funny that you say that too, like for riot and Marathon and these are others brings bears to mind. Well, this type of activity allows the larger Bitcoin miners to get bigger because you might have a lot of people who are smaller commercial miners who maybe can't afford or don't have to pay for a lawyer to fill out this form or might just be kind of, you know, straight up intimidated by the form to say this is not worth our business.

00:38:45:18 - 00:39:22:25
Jason
If if this is, you know, the US government's asking for all this information, it's turn off the mines and turn off the miners. So it might create a little bit more consolidation, which isn't a good thing, right? We need the decentralization. We need the smaller miners as well as the larger miners. But that's that's part of my fear with this is not just about the the substance of the form, but the manner in which it's being delivered and the business decisions that might come, you know, come up for people saying, well, you know, I'll fill out the form this one time, but I'm getting out of this business because it's, you know, clearly this is

00:39:22:25 - 00:39:42:00
Jason
something that, you know, I don't want to like. Now they're asking who my electrician tricity providers are. So there's this element of I guess it's kind of intimidation, right, that we're just extra burden, extra regulatory burden. You know, why would I want to be involved in this? So it's going to take the true believers to kind of push back.

00:39:42:00 - 00:40:13:03
Jason
And, you know, one thing that's been done in the past was about it was more about like the Bitcoin core developers in turn. Remember, it was like in 2016, but there were these like 50 lawyers in DC that got together and started offering like pro-bono help. So that I mean, that could be something like something I'll think about, like how can we coordinate to help get, you know, pro-bono help for people who are going to be getting these forms so they don't just walk away from the business and also so they can feel protected, you know, if they choose to answer the form.

00:40:13:06 - 00:40:47:27
Marty
Yeah, I guess that dovetails into a broader topic, which is the state know of Bitcoin, the Bitcoin industry's influence over policy, which you touched on in the beginning. But what would you like to see in terms of the industry really getting smart about interacting with the federal government despite whether or not we would like to do it seems that you do have to play ball to a certain degree just to protect your interests and the profitability of your business and the ability to to exist at all in the first place.

00:40:48:00 - 00:40:53:24
Marty
Like, have we made progress in recent years? Is it happening fast enough?

00:40:53:26 - 00:41:17:11
Jason
Yeah, I think we've made progress. Like, I mean, I'll toot the Bitcoin Policy Institute's horn, you know, I'm an adviser to them, but they responded. They engaged with the White House when they were looking at it and some of their report did talk about the benefits of Bitcoin mining. So it's it's not this is just one administrator and and his sort of, dare I say, narrow view of what Bitcoin is and what the way it should be handled.

00:41:17:13 - 00:41:41:11
Jason
But there has been open reception to the possibilities of the benefits for Bitcoin mining. And so I think we need to curate that. My belief for a long time has been we need to create something akin to whether it's the NRA. People don't like that because they feel like it's just this far right or something. Of the AARP, I mentioned the idea of the NRA.

00:41:41:11 - 00:42:12:07
Jason
I'm like the Progressive Bitcoiners podcast and they didn't like that. How are we going to sell that to progressive Democrats? But you call it the AARP. But if you have a group of people, even if they're in a minority and they believe in something strong enough, you need that that grassroots support, which the playing ball part is finding some smart people right in Washington, DC, who are also believers and who know who to speak to in power, who know how.

00:42:12:09 - 00:42:50:20
Jason
Washington, DC works, you know, understanding, you know, who to go talk to, the right people. And if you think about anytime there's an action that the NRA doesn't like, I mean, it's instantly stopped. You know, it's very hard to get any kind of bill right regarding, you know, guns and Second Amendment issues. So the idea of the Fourth Amendment and finding that that narrative to go with the fact that there's all these people out there that believe Bitcoin, that care about it, that maybe you're willing to, you know, like you do with NRA, you know, chip in ten or 15 bucks, you get a magazine.

00:42:50:20 - 00:43:31:09
Jason
But, you know, you have your support, build that up. I think that doesn't exist yet for us. It's it's starting to like BPI is a good start. But remember, it's a51c3 nonprofit. So it doesn't actually, you know, go and try to change policy or change legislation directly with lobbying. So I think as Bitcoin gets bigger and there's like the Bitcoin ETF are growing and other things that, you know, getting a getting a good crew of Bitcoin lobbyists that can organize a grassroots campaign that would already be instead of you and me talking like this, we already be in front of the right officials trying to, you know, get this changed or get this modified or

00:43:31:11 - 00:43:52:06
Jason
to be quite honest, this is already kind of done right. The forms already printed and everything. The idea in DC is you want to try to get something before it's complete. So like, you know, you maybe have the right people in play who like this is sort of the rumblings of what's going to happen and they can run to the White House to sort of say, no, this you should you better not declare an emergency on like Bitcoin mining that's, you know, absurd.

00:43:52:06 - 00:44:12:15
Jason
So I do think that's the kind of juice that that we need to protect Bitcoin. It it it goes very antithetical to the way a lot of people, including myself, believe. Like I've always said, I'll teach anybody how you go talk to your congressman or talk to your, you know, local representative. I don't want to be like an intermediary or a middleman.

00:44:12:17 - 00:44:40:13
Jason
I want it to be peer to peer, you know, But it's one degree or another to have the right messengers and build that grassroots support is going to be necessary to protect kind of the core tenants of what Bitcoin is about. And it's so great the, you know, the rights of property, the right to code. There's so many aspects of this that makes it so much in the American spirit, the American way that, you know, that's what I hope we can find.

00:44:40:13 - 00:45:01:08
Jason
I think that would be a really exciting kind of grassroots movement to get together with. And, you know, I'll say this like some people in Bitcoin I've spoken to before on this and they know I'm a lobbyist and everything. And, you know, they kind of the question always comes up, Marty, and the debate into, well, why do we need you?

00:45:01:08 - 00:45:17:01
Jason
You know, we don't want to lobby. We're just going to do our own thing and just sort of ignore like what DC does. And the problem with that is that there's people in DC to care about what you're doing. And this is like case in point, you know, if you just sort of ignore them, then they come up with all these things and they make up their own stories.

00:45:17:01 - 00:45:37:14
Jason
So you just at some point or another, if enough people decide you have your own storytellers there to kind of protect the turf and as Bitcoin gets bigger, I think we're going to need that at some point to make it so we don't have these overbearing type actions. We're getting there. We're seeing some reactions. You know, BP was on the phone all day yesterday.

00:45:37:14 - 00:45:54:20
Jason
You know, David Zell and that group trying to figure out what to do or not quite there yet, where we have sort of the juice of an NRA or something to kind of just step in and push back. And I think most people in Bitcoin will come around and realizing this is part of the game. We need to just play that for now so.

00:45:54:22 - 00:46:26:21
Marty
We'll know we've made it. When the NBA is synonymous with the National Bitcoin Association and the National Basketball Association. And so that's the goal for is to get there. One last topic to touch on, which I think is important to bring up is states standing up for companies in their borders. Obviously, there's a big federal or state standoff coming going on down here in Texas right now at the border.

00:46:26:21 - 00:46:48:06
Marty
We saw that trend of states asserting their autonomy from the federal government during COVID lockdowns. That seems like something that is becoming more prominent in terms of national. The states standing up and say, now we're going to do our own thing. You see states standing up for their companies in their borders, regards the federal government, or would that be important?

00:46:48:06 - 00:46:50:24
Marty
At the end of the day?

00:46:50:27 - 00:47:12:23
Jason
You know, I think that would be pretty powerful. I mean, when like DeSantis tried to do the whole anti cbdc thing or say, in Florida, we're not going to have a cbdc. I mean, the government prints money at the federal level and it's not really I don't know that the law would be effective, but like talking about Texas and the border and that too, to that point, this is about a form.

00:47:12:23 - 00:47:39:07
Jason
And if this is affecting, you know, your state and local businesses, I mean, this is just a classic case of federal overreach. You'll likely have a lot of state opposition to it. And, you know, the one thought I had when you were sort of sharing that, it's like, you know, with Bitcoin, it's about the consensus. Right. And a lot of times in government when these programs start, it's a lot about like consensus and like, do you get the results?

00:47:39:07 - 00:47:57:25
Jason
So like, you know, you send in, you know, people with the badge, you know, the enforcers and saying here and fill out these forms. But like if enough people don't fill out the forms or don't comply, you know, that's they don't have enough of a consensus. They don't have enough of the information that way. It's possible they just walk away.

00:47:57:25 - 00:48:14:06
Jason
You know, they've already come up with their own conclusions. They already put out yesterday on their website how much Bitcoin energy is using and looks like they have all this data in there, you know, talking about want to do this, you know, very careful data collection practices. The problems with these jokers is it's not like a geological survey.

00:48:14:06 - 00:48:31:29
Jason
You know, there's actual people and businesses that you're exploring and kicking the tires around. And it's a it's a violation of privacy. So absolutely. I mean, if if we're willing to if you sort of start seeing what's happening, the dynamics in Texas right now. Right. But the border is about filling out a form is that state reps just say we're not filling it out.

00:48:32:03 - 00:48:39:10
Jason
You know, our companies won't fill it out for you and create a federal versus state. Yeah. Standoff.

00:48:39:12 - 00:49:04:23
Marty
Wow. This that's what I love to hear. Getting excited is talk. The rent is too damn high, the government is too damn big. Get out of our life. It's. It's funny. I mean, again, it's just, uh. Yeah, this stuff should be expected that Conor has been talking about these hypothetical adversarial situations for a decade and a half now.

00:49:04:26 - 00:49:50:13
Marty
I mean, and it should be expected. It just is disconcerting when you finally have it's like, Oh, God, here we go again. We got a spend bunch of money and get a bunch of lawyers, write a bunch of newsletters, articles, get some data and fight back, spend a bunch of money to do this. And that's the frustrating thing, I think, for a lot of people in this industry, because I think, as you would agree, that the innovation that's happening, whether it's within the mining industry, at the payments layer, at the just sound digital money layer, it's extremely exciting and extremely encouraging for all of humanity to think that a bunch of 70 to 90 year

00:49:50:13 - 00:50:14:23
Marty
old individuals in DC who really don't understand or maybe they do understand, but just don't like Bitcoin from a philosophical and ideological perspective are going to try to throw the baby out of the window because they don't like it and it's just get out of the way. And so it's very frustrating.

00:50:14:25 - 00:50:40:24
Jason
I mean, it's hard to believe we're about to have a potential presidential contest where people in like eight decades of life each like where's the hope? Where's the JFK or whoever you want to call it, right of out of our time. And and I think one thing that probably would be helpful would be to show Washington, DC the faces of like what Bitcoin mining is about, make sure that they're real people, real jobs, real professions.

00:50:40:24 - 00:50:58:12
Jason
I think that's what we need to get to because right now they're they're kind of able to dehumanize it. You know, it's like Bitcoin itself. It doesn't really exist. We don't know what it does, but it waste all this energy, you know, showing stories of people who've made, you know, careers for themselves, you know, hire people, you know, get involved in the industry.

00:50:58:15 - 00:51:30:10
Jason
And they're being responsible about the energy use. Right. Working with grids. You know, there's a there's a powerful story to tell, you know, for the Bitcoin mining community. And I think, you know, if we can figure out a way to tell it correctly, you know, then then that's something that can can push back on this One thing, you know, just like with the, you know, the 51% attack is, you know, realize some of these folks like the environmental groups, this kind of this angle of attack, it's not going to go away.

00:51:30:12 - 00:51:48:27
Jason
It's always going to attack it. Just the way will always be attackers, the Bitcoin network. We just have to make sure the incentives are aligned in such a way where we're able to keep, yeah, the sound money and everything else, you know, dream alive here in the U.S. And I think that it's they picked the wrong country to try to pull this kind of stuff in.

00:51:48:29 - 00:51:52:07
Marty
Yeah, we're going to win, Jason. We're going to win.

00:51:52:09 - 00:51:52:24
Jason
Yeah.

00:51:52:26 - 00:52:11:24
Marty
It's not going to be easy, but nothing worth doing was ever easy. So, look, luckily we have individuals like yourself who understand these problems very intricately can help advise us as we're fighting this. And thank you for hopping on the part. I mean, you did me yesterday. I was like, Can you record tomorrow? I think it's a pretty important sell.

00:52:11:27 - 00:52:15:09
Marty
Thank you for coming around quickly to have this conversation.

00:52:15:11 - 00:52:17:21
Jason
Absolutely. As you're talking to Imani.

00:52:17:23 - 00:52:33:28
Marty
Yeah. I think we'll post this right away at Logan just to get it out there, because the time it's time we're pressed for time. The clock is ticking. We need to really begin coordinating and in fighting back against this, I think we'll win, though.

00:52:34:00 - 00:52:35:02
Jason
Yeah.

00:52:35:04 - 00:52:44:03
Marty
So where can anybody listen to this? Find out more about you, what you're doing, and how you can help.

00:52:44:05 - 00:53:10:23
Jason
Yeah. Demi at my date, my Twitter handles at regulatory. Jason And also reach out to the Bitcoin policy Institute that's at BTC policy and you know we can direct you to sort of your resources as I can definitely share you know start to think about a list of lawyers that I want to put together to maybe get people support any questions at all.

00:53:10:28 - 00:53:30:24
Jason
You know, you want to figure out how to talk to politicians. Maybe I'll work on like sort of like a letter or something you can start to send in. But at the end of the day, like it's it's important to just not just fill out this fact. There's lots of reasons, you know, talk to your business advisors, consultants, lawyers before you just fill out this form because it's already February.

00:53:30:24 - 00:53:38:29
Jason
Right. And they said they're going to start the first week of February. That's Monday, right? That's in three days. So yeah, yeah. Just DM me on Twitter. I'll get back to you.

00:53:39:01 - 00:53:54:09
Marty
Awesome. We'll link to Jason's Twitter, the Bitcoin Policy Institute's Twitter in the notes, so go check those out. And Jason, thank you again. Extremely important work. I'm sure we'll be talking about this again at some point in the next six months.

00:53:54:12 - 00:53:57:12
Jason
Sounds great, honor. Be on your show, Marty Quick then.

00:53:57:15 - 00:54:02:28
Marty
Tell everybody at the Bitcoin Jawn I said, What's up on Monday? Got it. All right. Peace, love freaks. Okay.

Read original post

Earlier today, the Biden Administration announced an emergency data collection initiative targeted at bitcoin mining operations in the US via the US Energy Information Administration, an "independent" sub-agency of the Department of Energy. It seems that the Biden Administration is identifying the electricity usage of the bitcoin mining industry as an emergency that is threatening grid stability throughout the US, as is evidenced by the name of the survey; "Proposed Emergency Survey - Cryptocurrency Mining Facilities". Here is the press release and the official filing from the EIA.

via the EIA

When I read the press release and the filing my initial thought was, "Interesting. Maybe this will turn out to be a net positive for the industry. The EIA has made some pretty naive assumptions and the surveys should conclude that bitcoin miners have provided clear benefits to the grid systems they operate within. Especially those who participate in demand response programs that ensure reliable electricity is available to residential consumers during times of peak demand." But after some thought that initial inclination felt a bit naive. Data from bitcoin miners participating in demand response programs and others taking care of escape methane emissions by mining off-grid using natural gas that would otherwise be flared or stranded and unmaintained has been public for years. There is no need for a forced survey on the industry out of nowhere.

That's when I decided to take a look at the actual survey. Upon review, it proves to be one of the more Orwellian things I've seen come out of this Administration. And that's saying a lot. If you dig into the information that the EIA is requesting, it looks as if the EIA is setting out to create a hyper-detailed registry of mining operations in the United States. Getting as granular as to request specific information about mining fleets and hashrate data. And as with any Dystopian edict put forth by a government gone mad with perceived power, the survey starts out with an overt threat.

Not only does it start with a threat, but it requires that "ALL commercial cryptocurrency mining facilities in the United States" respond. This is utterly insane. Before we opine on the insanity, let's dive into the information the government is expecting the mining industry to fork over.

Miners will be expected to provide information about their companies, where their domiciled, and the addresses of where their operations are located. As well as a point of contact for the EIA.

The companies will also be required to identify whether they are running operations that involve Proof of Stake or Proof of Work consensus mechanisms.

They will then need to tell daddy government how many mining facilities they operate.

After that, they will be expected to disclose the location of their individual operations, including GEOGRAPHIC COORDINATES, and the amount of electricity that was consumed at the facility all together, regardless of whether or not the miner has any control of the electricity that it is not using.

From there they will have to disclose the percentage of the facility's electricity consumption that was used specifically for mining and doxx their electric service provider.

Next up, they will have to somehow come up with the average percentage of all the electricity dedicated to bitcoin mining at different energy suppliers and, again, doxx them.

And last, but certainly not least, miners will be expected to give detailed information about their mining fleets. The EIA wants to know the number of ASICs miners are running at individual facilities, the models of the miners (which will be determined by cross referencing the age of the miner with different model releases), the amount of energy needed to power those mining machines, and the maximum amount of hashrate they produced during the reporting period.

This is one of the most egregious encroachments on privacy and free markets that I have ever seen. It is so egregious that it is hard not to believe that this survey is anything less than a first step that leads down a path toward an all out attack on the mining industry in the United States. This survey serves as a way for the federal government to tag each individual operation within the country. They are going as far as to demand geographic coordinates from companies.

Funnily enough, the only other country to request information like this from the bitcoin mining industry operating in their borders is Venezuela, and they quickly confiscated operations and began mining for themselves once they knew where all of the miners were located. It would be naive to think that a federal government drunk on debt, losing control of the narrative, desperate for a scapegoat, and cognizant of the threat to its power over the money printer posed by bitcoin's success would not resort to similar tactics.

If you are an operator in the bitcoin mining industry in the US it is imperative that you ignore this survey and tell the EIA, the Department of Energy, and the current administration to fuck off. Bitcoin miners are law abiding electricity purchasers who are interacting in mutually beneficial economic contracts with power providers who are trying to optimize their revenue streams so that they can profit more and invest in providing more reliable services to their end customers. The continued attempts to discriminate against the bitcoin mining industry should be seen as nothing less than harassment and unconstitutional.

With that being said, this should be and has been expected for many years. What was once a hypothetical "what happens when the government begins creating a registry of miners?" is now a reality and the reaction from the industry will dictate the fate of bitcoin mining in America. Companies can either succumb to the run-of-the-mill fear tactics employed by the government or stand in solidarity to fight for our inalienable right to not be discriminated against and engage in economic activity with other consenting, supposedly free, companies.

The industry set a good precedent of solidarity last week when a number of companies cosigned many letters in response to FinCEN's proposed rules around the usage of bitcoin privacy tools.

[

Our Response to FinCEN on Proposed Surveillance Rules for Bitcoin

We submitted a legal response to the U.S. Department of the Treasury and FinCEN’s proposed rules that would seriously harm privacy by effectively prohibiting basic bitcoin best practices such as not reusing addresses and collaborative bitcoin transactions.

TFTC – Truth for the CommonerMarty Bent

](https://tftc.io/fincen-surveillance-rules-bitcoin/)

The government only gave us a week's worth of rest before dropping this survey. Well, freaks, it's time to get back on the horse and let the government know that this act of egregious aggression that singles out a particular electricity consumer will not stand. The bitcoin mining industry is doing nothing wrong and it should not have to respond to a survey that is attempting to paint us as bad actors. As I stated earlier, the data is already out there and it is abundantly clear; bitcoin miners are a massive boon to the energy systems of this country both on and off-grid. Entrepreneurial spirit and a drive to make the world a better place while making some money has begun to fix systemic problems that government policy created in the first place.

If the government is truly worried about the robustness of the energy systems in the United States they should get out of the way. All of the subsidies thrown at "renewable energy" have created perverse economic incentives that favor unreliable energy generation over reliable base load. They have actively hindered the proliferation of nuclear energy for decades with layers of red tape that make it almost impossible to build new nuclear reactors. They have prevented us from drilling for oil and gas on federal lands and shut down the construction of pipelines that would increase the accessibility and decrease prices mid-construction. Just last week they issued a mandate to stop the construction of LNG facilities that have allowed the United States to become a net-exporter of energy over the course of the last decade. LNG saved Europe two winters ago after we blew up the Nord Stream 2 pipeline.

The United States federal government is objectively the biggest threat to energy security in America. It isn't bitcoin miners. Don't show them any respect by responding to this survey. They do not deserve it.

Final thought...

I haven't had adrenaline coursing through my vains like this while writing in a long time. It's a great feeling.

Use the code "TFTC" for 15% off

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• GRIID is a uniquely positioned, vertically integrated bitcoin mining and energy infrastructure company and one of the first pure-play bitcoin miners to achieve public listing
• GRIID Chief Strategy Officer Harry Sudock to join Ten31 as Advisor
• Launch of Ten31 Fund III, which has already secured several anchor commitments and strengthens Ten31’s position as the world’s leading bitcoin technology investor
• Launch of Ten31 Tactical Fund, which provides access to individual accredited investors
• Ten31 also announced a grant to independent bitcoin developer calle for bitcoin powered Chaumian ecash

NASHVILLE, January 30, 2024 – Ten31 announced that its portfolio company GRIID Infrastructure has completed its listing on the Nasdaq Global Market stock exchange, representing the first public listing for any bitcoin-focused investment fund’s portfolio company. Ten31 served as GRIID’s exclusive institutional capital partner ahead of its public trading debut, investing in GRIID out of its second institutional venture fund, Low Time Preference Fund II. Ten31 is the world’s leading bitcoin technology investor, having deployed over $100 million through its prior two fund vehicles. Over five years of deploying capital, Ten31 has built an industry-leading portfolio of 36 companies focused on bitcoin and freedom technologies and served as lead investor or exclusive partner in 25 of its investments, including Pre-Seed, Seed, Series A, Series B, and pre-IPO rounds. 

Public Listing Milestone

GRIID’s listing is a notable milestone for the bitcoin mining company, which first announced its intention to go public via a SPAC transaction reported in November 2021. After having successfully navigated a long SEC and regulatory review process, the Nasdaq listing represents not just the first significant liquidity event for any bitcoin-focused venture investor but also the first major equity liquidity event in several years for the greater “crypto” venture landscape, marking a major accomplishment for GRIID, Ten31, and the bitcoin ecosystem as a whole. 

“As a vertically integrated operator, purpose-built for bitcoin mining from day one, GRIID is uniquely positioned to become one of the leading bitcoin mining companies in the world,” said Trey Kelly, Founder and CEO of GRIID. “We believe that listing on Nasdaq will enhance our visibility, liquidity, and broaden our investor base as we continue to strengthen our market position and reinforce our commitment to delivering shareholder value. Ten31’s capital support and strategic guidance were invaluable in helping us reach this milestone. We feel strongly that there is no better partner or investor in the bitcoin space than Ten31, and we look forward to continuing our close partnership.”

Harry Sudock Joining Ten31 as Advisor

In conjunction with GRIID’s Nasdaq listing, Ten31 also announced that Harry Sudock, Chief Strategy Officer at GRIID and a leading voice in bitcoin mining and energy infrastructure, will join Ten31 as an Advisor while maintaining his role at GRIID. “After many years building a bitcoin company, I know firsthand the crucial value of capital partners that both share our understanding of bitcoin and offer proven institutional investment expertise. They embody bitcoin’s proof of work ethos in everything they do,” said Sudock. “I expect GRIID to be the first of many success stories to emerge from the Ten31 portfolio, and I’m excited to help support Ten31 as it invests in the best companies in the rapidly evolving bitcoin ecosystem while serving as a resource to both portfolio companies and their founders.”

Ten31 Building on Its Success with Two New Funds and Continuing Contributions to Open Source Development

Ten31’s major milestone with GRIID coincides with the launch of Ten31’s third institutional fund, Low Time Preference Fund III, which has already secured anchor commitments and established an initial portfolio of investments, as well as the Ten31 Tactical Fund, which provides access to individual accredited investors. As the world’s leading bitcoin technology investor, Ten31 has unmatched reach and expertise across the breadth of the bitcoin ecosystem, driving a leading position in all verticals and all funding stages. Ten31’s investments include leading Strike’s $80 million Series B round in September 2022, leading exclusive Series A rounds for companies such as Coinkite and Upstream Data, as well as leading Pre-Seed and Seed investments in companies such as Mutiny, Primal and Mempool. 

Ten31 has also renewed its commitment to supporting open source development in the bitcoin ecosystem by providing a grant to independent bitcoin developer calle for his work on bitcoin powered Chaumian ecash. Ten31 is the most active investor in open source businesses in the bitcoin ecosystem and is the only investor in the industry which contributes a portion of its management fees to open source development. Ten31 was a founding contributor to OpenSats in 2021 and has supported a variety of open source efforts on a no-strings-attached basis, including making an early grant to Fedimint, a protocol for federated Chaumian ecash. Ten31’s early support of Fedimint, along with contributions from Ten31 Managing Partners Matt Odell and Marty Bent, were instrumental in catalyzing the formation of Ten31 portfolio company Fedi. 

About Ten31

Ten31 is the world’s leading bitcoin technology investor. With a footprint in Nashville and Austin, Ten31 seeks to support the ecosystem's most promising founders and companies, leveraging its deep understanding of bitcoin, extensive experience, and broad reach to create value for its partners. Since the fund's inception, Ten31 has directed more than $100 million in equity to companies focused on bitcoin and freedom technologies. For more information, visit www.ten31.vc/funds. 

About GRIID Infrastructure Inc.

GRIID is a purpose-built bitcoin mining company, founded in 2018, that has operated mining facilities since 2019. GRIID has built long-term power relationships securing affordable, reliable, environmentally responsible power, enabling a vertically integrated self-mining business model with significant growth opportunity. Headquartered in Cincinnati, Ohio, GRIID operates a R&D center in Austin, Texas and a development, deployment and equipment repair center in Rutledge, Tennessee. GRIID currently maintains mining facilities in Watertown, New York; Limestone, Maynardville and Lenoir City, Tennessee. To learn more, please visit www.griid.com.

Contact

ir@ten31.vc

Disclaimer: The information contained herein is provided for informational and discussion purposes only and is not, and may not be relied on in any manner as, legal, tax, or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any fund managed or sponsored by Ten31 or its affiliates (the “Fund”), or an offer or invitation to purchase or acquire assets, shares, partnership interests or other securities or interests in this regard. A private offering of interests in the Fund will only be made pursuant to offering documentation, including the Fund’s subscription documents (the “Offering Documentation”), which will be furnished to qualified investors on a confidential basis at their request for their consideration in connection with such offering. The information contained herein will be qualified in its entirety by reference to the Offering Documentation, which contains additional information about the investment objective, terms and conditions of an investment in any Fund and also contains tax information and risk disclosures that are important to any investment decision. No person has been authorized to make any statement concerning the Fund other than as set forth in the Offering Documentation and any such statements, if made, may not be relied upon. This communication has not been approved or disapproved by the Securities and Exchange Commission or by the securities regulatory authority of any state or of any other jurisdiction, nor have any of the foregoing authorities passed upon or endorsed the merits, accuracy or adequacy of the information contained herein. Any representation to the contrary is a criminal offense.

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Key Takeaways

This Rabbit Hole Recap rip covered a range of topics, from the intersection of the energy sector and bitcoin mining to personal anecdotes and industry updates. Here are some key insights:

• The energy sector's talent is now engaging with bitcoin mining, bringing expertise in securing power deals and infrastructure development.
• The bankruptcy and recovery of mining company Core Scientific highlighted the need for carefully structured power purchase agreements.
• The episode touched on the diversity in mining, from industrial to home and off-grid miners, emphasizing the bullish sentiment in the industry.
• The hosts shared updates on their personal lives, reiterating the value of productivity and community.
• They discussed the importance of financial support for open-source contributors in the bitcoin space.
• The episode covered the launch of bitcoin ETFs, the growth of bitcoin mining companies, and the significance of industry-responsiveness to federal regulations.
• The podcast also highlighted the integration of bitcoin into various sectors in Africa, showcasing the impact of bitcoin beyond just financial transactions.

Best Quotes

1. "There was a good trauma bond that happened as a result, because people had to. If you made it there, you were in it together." – Reflecting on the shared experience of attendees at a summit during a winter storm.
2. "What I was most impressed by was the talent on the power side of the energy sector that was at that summit." – Praising the expertise present at an energy and bitcoin mining event.
3. "It's all happening. People don't realize. Fuck yeah. Bullish as fuck." – Expressing enthusiasm about the progress and potential in bitcoin mining.
4. "Every week we go live on Zapstream, our nostar and bitcoin enabled interactive live chat." – Highlighting their interactive live chat platform.
5. "There's no solutions, only trade-offs." – Discussing the complexities and necessary compromises in technology and privacy.

Sponsors

Conclusion

The podcast episode presented a rich tapestry of discussions on bitcoin mining, industry talent, and the broader impact of bitcoin globally. The hosts' conversations underscored the optimism and growth within the bitcoin mining sector, while also touching on personal growth and community building. They also addressed the importance of supporting open-source development in the bitcoin ecosystem.

The episode served as a reminder of the nuanced and ever-evolving nature of the bitcoin industry, highlighting the varied applications of bitcoin from mining to financial sovereignty in Africa. It concluded with a look at the broader implications of these developments, both for the bitcoin community and for the world at large.

Links

• trezor emails hacked, beware of phishing emails https://www.nobsbitcoin.com/trezor-warns-of-emails-impersonating-trezor-sent-from-a-its-third-party-email-provider/
• ten31 submits legal response to fincen bitcoin surveillance rules alongside 25 bitcoin companies https://ten31.vc/insights/fincen
• working with the best founders in the world https://primal.net/e/note17wsp4huxdcnuvxuflp24fvz6u62s3vvugqt69z9sxqx2urxsw48qvctn6m
• our boy john chats with marty https://youtu.be/zLnLGST_mCs
• etf update, escape from barry’s island https://primal.net/e/note1k0lfcfp0zr5dywn0y5fnn45vuthwu4rqu4r5dw4utm6f33suuhlsudh7qn
• bitwise BITB etf takes first step toward being the only ETF to provide proof of reserves in partnership with hoseki https://x.com/BitwiseInvest/status/1750224060620111912
• adopting bitcoin conference kicks off in cape town south africa https://x.com/BitcoinEkasi/status/1750437418753228837?s=20
• Swan announces they are primarily a mining company after coming out of stealth https://www.prweb.com/releases/swan-bitcoins-mining-arm-comes-out-of-stealth-mode-adding-to-its-institutional-division-302044277.html
• Tether CEO at one of his mining sites https://x.com/paoloardoino/status/1747370394925814264?s=20
• Tether Acquired 8888 BTC Late in Q4, Now Holds 66465 BTC https://www.nobsbitcoin.com/tether-acquired-8888-btc/
• Sparrow Wallet v1.8.2: Improved Transaction Tree Labels & More https://www.nobsbitcoin.com/sparrow-wallet-v1-8-2/
• Hermes: Fedimint-based Lightning Address Server https://www.nobsbitcoin.com/hermes-fedimint-based-lightning-address-server/
• BlueWallet v6.14.6: Improvements & Fixes https://www.nobsbitcoin.com/bluewallet-v6-4-15/
• Whirlpool GUI v0.10.4 & CLI v0.10.17 https://www.nobsbitcoin.com/whirlpool-gui-v0-10-4-cli-v0-10-17/
• Samourai Atomic Swaps Are Now In Public Beta https://www.nobsbitcoin.com/samourai-swaps-0-0-17-beta/
• RoboSats v0.5.4-alpha: Enhancements & Bug Fixes https://www.nobsbitcoin.com/robosats-v0-5-4-alpha/
• Electrum v4.5.2: Bug Fixes https://www.nobsbitcoin.com/electrum-v4-5-2/
• COLDCARD Mk4 v6.2.2X Edge Firmware https://www.nobsbitcoin.com/coldcard-mk4-v6-2-2x/
• Nutband: Experiment with Cashu Over Reticulum Mesh Network Protocol https://www.nobsbitcoin.com/introducing-nutband/
• BDK v1.0.0-alpha.4: Improved KeychainTxOutIndex API & Fixes https://www.nobsbitcoin.com/bdk-v1-0-0-alpha-4/
• LDK v0.0.120: Important Bug Fixes, Full Blinded Paths Support & More https://www.nobsbitcoin.com/ldk-v0-0-120/
• Aqua Wallet v0.1.19: Open-Source Code, Dark Mode & More https://www.nobsbitcoin.com/aqua-wallet-v0-1-19/
• Nix Bitcoin v0.0.102 https://www.nobsbitcoin.com/nix-bitcoin-v0-0-102/
• SeedHammer v1.2.0: Seed-First UI, Engrave Wallet Titles & More https://www.nobsbitcoin.com/seedhammer-v1-2-0/
• Breez SDK Core v0.2.14 https://www.nobsbitcoin.com/breez-sdk-core-v0-2-14/
• Primal Android v0.90.1: Integrated Lightning Wallet https://www.nobsbitcoin.com/primal-android-v0-90-1/
• Unleashed.Chat v0.1.7: API Release & Nostr Mode Improvements https://www.nobsbitcoin.com/unleashed-chat-v0-1-5/
• Stranded: How Bitcoin is Saving Wasted Energy and Expanding Financial Freedom in Africa https://bitcoinmagazine.com/check-your-financial-privilege/stranded-bitcoin-saving-wasted-energy-in-africa

Timestamps

3:49 - Opening riff
6:59 - Starting with boosts?
12:54 - Dashboard has been updated
19:26 - Trezor compromized
23:01 - Ten31 FinCEN response and great founders
34:36 - ETF update
36:51 - Bitwise publishes address
47:46 - Adopting Bitcoin Conf
48:43 - Swan mining
52:43 - Tether acquires 8888 BTC
55:30 - Boosts again!
1:09:14 - Software updates
1:22:19 - Stranded article
1:28:36 - Texas border
1:43:11 - BTFP

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Last week the team at Bitcoin Park in Nashville, Tennessee hosted the Nashville Energy and Mining Summit. As you may be able to tell by the name of the summit, professionals from across the mining and industries congregated to discuss a wide range of topics. I still have a bunch of the discussions from the end of last week ping ponging in my mind, so I figured I'd write down some of the things I took away from the event and share them with you all here. The summits at Bitcoin Park follow Chatham House rules, so I won't be able to attribute any of the takeaways to particular individuals.

Geographic Distribution of Hashrate

After the Chinese Communist Party decided to ban mining within China in the middle of 2021, a material amount of hashrate migrated to the United States. Current estimates state that anywhere from 35-40% of bitcoin's network hashrate is operating in the United States. With a large chunk of that located in the state of Texas. It was funny that the summit was happening last week because there was a polar vortex that devoured the Southern part of the United States, which spike the demand for energy on grid systems and forced miners accounting for gigawatts worth of power to wind down to ensure the grids remained stable. At one point, ~25% of the total network hashrate came offline, with some saying that Texas miners alone sent 2 gigawatts worth of electricity they would have used back to the grid.

25% of bitcoin hashrate is offline!

Down from 525 EH to 395 EH in just few days. Caused by freezing weather in the US - miners turning off to save the grid.

The grid needs the energy for heating households so miners switch off automatically. Demand response at its best🤌 pic.twitter.com/vVTBN8f545

— Braiins (@BraiinsMining) January 17, 2024

This showed up in the difficulty adjustment over the weekend, which came in at -3.9%.

via mempool.space

While it is exciting to see that miners are playing a crucial role to stabilize grids during periods of peak demand, it is not ideal to have this amount of hashrate concentrated in the United States. This shouldn't be surprising considering the fact that Americans, despite the collectivists who make up our federal government, are extremely entrepreneurial, have access to the most mature capital markets in the world, and the most robust energy infrastructure in the world (again, despite what the collectivists have done to destroy these advantages).

Luckily for those of us who worry about geographic hashrate centralization, the discussions during the summit have made me extremely optimistic that hashrate is about to enter another phase of rapid geographic distribution. It is becoming clear that energy rich countries in the Middle East are becoming well aware of the opportunity bitcoin mining presents for them to take advantage of their cheap electricity and stranded energy sources. At the same time, advancements in ASIC water cooling technology have reached the point where it is becoming viable to run mining operations in extremely hot geographies.

On top of this, bitcoin mining is proving to be a great way to bootstrap energy systems in areas across Africa that do not have the correct economic incentives in place to justify build outs. A consistent buyer of first and last resort solves the zero to one problem.

Expect mining activity to pick up in the Middle East, Africa and South America.

Bitcoin ASIC Wars

With Bitmain's aggressive pricing of their s21 series of miners ($14/Th) out of the gate it is clear that the largest bitcoin miner manufacturer in the world is attempting to use its economies of scale to muscle out their competition. It will be interesting to see if the pricing moves are able to suffocate the smaller ASIC manufacturers. I think MicroBT should be safe, but the others are probably sweating. If the s21 series from Bitmain proves to provide the market with durable and reliable hardware, we could see the bitcoin mining hardware market turn into an entrenched duopoly. Though, it is encouraging to see hardware providers catering to home miners like FutureBit seeing a lot of success in the market.

ASIC Firmware

It is becoming abundantly clear that the stock firmware offered by Bitmain and MicroBT is not meeting the demands of the market. Miners located in different environments and in different economic situations demand different outputs from their machines. The ability to tap into the firmware running on the machines is essential to running a mining operation as efficiently as possible to ensure the long-term health and financial viability of a mining fleet. Miners have had to turn to after-market firmware like Braiins OS+ to reap these benefits.

Unfortunately, to even get after-market firmware like Braiins OS+ to the market it takes a Herculean effort for the firmware producers to jailbreak the machine and make it so their firmware is compatible. I think it is very clear that something needs to happen to create a mining firmware standard of sorts to make it as easy as possible for third party firmware producers to bring better products to market. A return to the open source standards set by a project like CGMiner would be a step in the right direction in my opinion.

Alternative Revenue Streams And Consolidation

As the landscape in mining becomes more cut throat due to the sheer amount of competition that is entering the arena (nation states, utilities companies, power plants), the ability for most miners to depend solely on mining revenues is going to falter. It is imperative for any sizable miner to - if they haven't already - begin thinking about incorporating alternative revenue streams into their business plans. Miners engaged in demand response are already doing a good job of this. The profit margin squeeze is coming as low cost energy producers and nation states who can operate at a loss for longer begin to enter the market at scale. I am more convinced than ever that miners will begin to consolidate with large energy producers and utilities companies to drive their costs down to rates that will ensure they remain competitive. Well actually, it will be a mixture of consolidations, energy companies incorporating their own mining operation, and miners acquiring energy assets.

The Energy Professionals Are Here

The Energy and Mining Summit was particularly exciting for me because it was the first mining event I've been to over the last six years that convinced me that top-notch operators and professionals from the energy sector have fully groked bitcoin mining and see an opportunity to leverage their skills and expertise to throw jet fuel on the mining industry. To date, miners have been fighting an uphill battle against their lack of experience with power markets and infrastructure build outs. Even though the mining industry has matured considerably over the last few years, I believe this has been an outcome predominately driven by pure grit, determination, and a deep understanding of an asymmetric opportunity. Even though miners deeply understand the asymmetric opportunity that bitcoin mining presents in the world of electricity price arbitrage, the last five years or so have been a pure baptism by fire in the energy sector. Filled with miners making mistakes when signing power purchase agreements, not understanding the logistics that go into energy infrastructure build outs, and not knowing the nuances of the power generation side of things that can trip them up at some point.

The industry has certainly learned a ton in a short period of time and the overall level of understanding will continue to increase. However, the reinforcements have arrived on the front lines in the form of power and infrastructure professionals who have come to understand the asymmetric opportunity at play and are now focused on using their decades of experience to teach miners the right way of doing things. Structuring power purchase agreements the right way. Aligning incentives with power producers to ensure long-term partnerships materialize. Cutting down the time it takes to build infrastructure and facilities. All of that knowledge is coming to the bitcoin mining arena and I could not be more bullish.

Regulatory Landscape

Despite all of the vitriol toward bitcoin mining and bitcoin more generally coming out of Washington DC, it doesn't seem that miners are that fazed. Again, they understand a massive opportunity and they aren't going to allow some screeching Karens to make them back away from the action. This is the way. There is too much at stake and the collectivists aren't sending their best. The bitcoin mining industry has more data to combat the baseless FUD than ever before and the vibe shift is well under way. I don't think there is any need to cater to those screeching from their pedestals in DC. In fact, I think the numbers are speaking for themself that the benefits bitcoin mining provides companies, grid systems and energy producers are undeniable. One of the largest power providers in the country attended the summit and made it clear that miners are a net benefit to their operations. We have just reached the point where the benefits have piqued the interest of the power providers where they deem it necessary to lean in and begin working more closely with the mining industry to better understand what we need and where we can be the most beneficial to their operations.

There is no stopping an idea whose time has come.

Final thought...

Modernity is filled with hideous aesthetics.

Use the code "TFTC" for 15% off

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Key Takeaways

Core Topics and Themes:

1. Bitcoin Mining and Energy Infrastructure: This rip focused on the convergence of bitcoin mining and energy infrastructure. The discussion highlighted the growing importance of energy knowledge in the bitcoin community and how understanding energy can influence the future of bitcoin mining.
2. Network Consensus and Miner Incentives: The conversation touched on the role miners play in the bitcoin network, with an analogical reference to miners as "slaves" who are well-compensated but must adhere to network consensus.
3. Mining Summit and Industry Growth: The panelists reflected on the success of the mining summit, noting the deep insights shared regarding the mining industry's growth, innovation, and challenges, particularly around network hash rate and energy requirements.
4. Decentralization and Hash Rate Distribution: There was a focus on the geographic distribution of hash rate and how it relates to the resilience and decentralization of the bitcoin network. The panelists expressed cautious optimism about the ongoing efforts to decentralize mining power.
5. Regulatory and Political Dynamics: The episode also touched on the implications of political and regulatory dynamics on bitcoin and mining, including the potential influence of demand response programs and the interplay between miners and government entities.
6. Bitcoin Protocol and Development: A significant portion of the discussion delved into bitcoin protocol development, including the potential activation of new opcodes like OP_CAT, which could enable advanced functionalities such as drive chains and covenants.
7. Consensus and Change Activation: The discussion addressed the complexities of achieving consensus in the bitcoin community and the challenges in activating changes to the bitcoin protocol.

In-Depth Analysis:

• The podcast provided an in-depth analysis of the bitcoin mining landscape, the role of energy infrastructure, and how it intertwines with the broader bitcoin ecosystem.
• It emphasized the critical nature of discussions around bitcoin's future, the necessity of off-the-record conversations, and the importance of maintaining a conservative approach to protocol development.
• The panelists debated the implications of introducing new opcodes like OP_CAT, weighing the potential benefits against the risks of added complexity and potential centralization pressures.
• The conversation about consensus and change activation highlighted the delicate balance between innovation and the need to preserve bitcoin's core values of decentralization and immutability.

Best Quotes

1. "The miners are slaves that get paid very well. They're forced to listen to the network consensus." – Context: This quote encapsulates the paradox of miners being both well-compensated and yet strictly bound by network rules.
2. "One of the coolest parts about the park is it's one of the few places in the world where you can have these hard-hitting, high signal, off-the-record conversations." – Context: This quote reflects the unique value of spaces where candid discussions about bitcoin can take place without the pressures of public discourse.
3. "We need more and more collaboration that happens off the record so people actually feel comfortable talking about the hard topics." – Context: The quote underscores the need for private forums to address challenging issues as bitcoin's influence grows.
4. "As much as I am still kind of worried about the risks, I know for a fact now, after being here the last two days, people know these risks, and they're not just sitting idly on their hands going, 'I hope this works out.'" – Context: This quote highlights the proactive mindset of those in the bitcoin mining industry regarding the various risks they face.
5. "The reality is that people have just been building this out, and the developer mindshare on top of it is absolutely insane." – Context: In reference to the Noster platform, this quote speaks to the momentum and collective effort in the developer community.
6. "I think it's important to bring it up. While I had Shinobi up here, but while we're here, we're talking about mining." – Context: This quote illustrates the interconnectedness of various topics within the bitcoin ecosystem, from mining to protocol development.
7. "I think as bitcoin scales, bitcoin is going to be affected by all sorts of different macro and smaller micro kind of things." – Context: This quote suggests that bitcoin's growth will intersect with many external factors, demanding adaptability and foresight.

Conclusion

This episode of Rabbit Hole Recap provided a rich tapestry of insights into the current state and future trajectory of bitcoin mining and protocol development. The panelists navigated the complexities of the evolving landscape, touching on themes ranging from the significance of energy infrastructure to the intricacies of achieving consensus for protocol upgrades. It highlighted the critical role that private, high-signal discussions play in fostering a deeper understanding and collaborative spirit among stakeholders.

The podcast's overarching message underscored the necessity of balancing innovation with caution, particularly when considering changes to bitcoin's foundational code. It also emphasized the importance of community engagement in determining the direction of bitcoin's development, while acknowledging the inherent difficulties in gauging widespread consensus.

Moving forward, the conversation set the stage for a continued exploration of bitcoin's adaptability in an ever-changing world. It invited listeners to contemplate the delicate interplay between technological advancement and the preservation of bitcoin's core principles. As the ecosystem matures, the insights shared in the podcast are likely to spark further debates and discussions, ultimately contributing to the robustness and longevity of bitcoin.