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Key Takeaways

The episode of The Tucker Carlson Encounter featuring Xi Van Fleet offers a stark comparison between the Cultural Revolution in China and recent socio-political events in the United States. Xi Van Fleet's unique perspective as a survivor of the Cultural Revolution provides a chilling account of how overnight, her world was engulfed in a campaign fueled by propaganda, social division, and violence, which ultimately aimed to consolidate Mao Zedong's power. She draws parallels between the public humiliations and struggle sessions of her childhood and the recent public shaming and cancel culture phenomena in the U.S.

The podcast delves into the depth of the destruction during the Cultural Revolution, from the shutting down of schools to the dismantling of the criminal justice system. It also touches on the indoctrination of the youth, who became the Red Guards, and the subsequent infighting that led to even greater violence. Xi Van Fleet recounts her own experiences of being sent to the countryside for reeducation through labor, highlighting the stark reality of communism in practice.

Furthermore, Van Fleet sees similarities in the changes in language and thought policing, as well as in the rise of identity politics. She observes how the division of society into "red" and "black" classes in China mirrors the use of race in America to sow discord. The narrative that unfolded in China under Mao is, in her view, being echoed in the U.S. through critical race theory and diversity and inclusion initiatives, which she fears could lead to an erosion of American values and society.

Best Quotes

1. "I was so impressed. As Americans are the nicest people, they try to be nice and not hurt people's feelings. And now we know, right during the process, and we were taught, you can't say vision impaired. Now it's something different. And now, you know what? What's the correct way to call those people blind? Blind. Yeah, according to Stanford. Now, that is the correct way. So that just remind me of the cultural revolution, that there's only one correct way of thinking, of talking."
   • Context: Xi Van Fleet draws a connection between the changing language norms in America and the enforced language regulations during the Cultural Revolution.
2. "This is indeed the American version of the Chinese communist Cultural Revolution."
   • Context: Van Fleet's statement during a school board meeting, where she likens the push for critical race theory in schools to the indoctrination techniques used by Mao.
3. "The only way for us to win the war is to get our school back, get our university back, and of course, media, because those are the institutions that shaping people's mind. And they are all in the hands of Marxists."
   • Context: Van Fleet emphasizes the importance of reclaiming educational and media institutions from Marxist ideologies to protect and preserve American society.

Conclusion

Xi Van Fleet's testimony on the podcast serves as a somber reminder of the dangers of ideological extremism and the destructive power of mass movements weaponized by political leaders. Her comparison of the Cultural Revolution with current events in the United States is a cautionary tale about the importance of preserving free thought, speech, and a shared historical understanding.

The episode also sheds light on the often-overlooked impact of language and identity politics on social cohesion and the potential they have to divide and conquer societies. Van Fleet's insights provide a wake-up call to the American public to recognize the patterns of the past and to actively engage in safeguarding democratic values and institutions. The overarching message is clear: the cost of ignorance and apathy can be the very fabric of society, and as Van Fleet asserts, it is incumbent upon every individual to understand, engage, and fight for the principles they believe in.

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Key Takeaways

The episode delves into the intricate relationship between money and society, particularly focusing on Nigeria's economic and cultural landscape. The guest, Econ Bro, an Austrian economist from Nigeria, shares his journey from studying standard economic theories to embracing Austrian economics, which emphasizes the importance of sound money and free markets.

Inflation emerges as a central theme, illustrating how the debasement of currency can lead to societal decay. Econ Bro explains that as the Naira depreciates, the cost of living soars, and wages stagnate, leading to increased crime rates, from theft to more heinous acts driven by desperation and the loss of societal values.

The podcast also touches upon Nigeria's monetary history, which has seen a transition from commodity monies like cowries and manilas to the introduction of the British shillings and pence, and eventually the establishment of the Nigerian Central Bank and the Naira.

Despite cultural respect for authority, Econ Bro reveals a glimmer of hope in the rise of interest in Austrian economics among Nigerian youth. He shares his mission to educate the masses, particularly targeting the younger generation, about sound money principles and how Bitcoin could offer a way to subvert the current system and restore economic stability.

Best Quotes

1. "When the money starts to lose its value, you start to want more of it because it doesn't last in your hands." Context: This quote encapsulates the vicious cycle of inflation where as the currency's purchasing power erodes, individuals scramble to accumulate more money, leading to avarice and potentially unethical behavior.
2. "It's not only destroying commodity quality, it's not only making things more expensive, it is literally turning the people into monsters." Context: Econ Bro describes the profound and destructive impact of fiat currency on society, leading to the erosion of moral values and the rise of criminal activities.
3. "Money is actually a commodity. Money emerged out of being a commodity." Context: Reflecting on his journey into Austrian economics, Econ Bro shares his realization that money is not a separate entity, but a market good that historically emerged from commodities, challenging the conventional understanding taught in universities.
4. "No matter what party wins in Nigeria, the socialists win." Context: Highlighting the narrow political and economic spectrum in Nigeria, Econ Bro laments the lack of true free-market advocacy, which results in persistent government intervention regardless of the ruling party.
5. "I believe Nigerians would be open to these ideas, and I've seen it happen." Context: Despite the challenges, Econ Bro expresses optimism about the receptiveness of Nigerians, especially the youth, to the principles of sound money and Austrian economics.

Conclusion

The episode serves as a profound exploration of the intrinsic link between a nation's money and its social fabric. Through Econ Bro's insights, listeners are presented with a narrative that emphasizes the crucial role sound money plays in maintaining societal order and fostering prosperity.

As Nigeria grapples with the consequences of a devalued currency, there's an undercurrent of hope spurred by the slow yet steady awakening of the populace to the possibilities of Bitcoin and Austrian economics. With education and advocacy, there is a chance for a paradigm shift that might not only stabilize the Nigerian economy but also rejuvenate its cultural ethos.

Econ Bro's reflections offer a stark reminder that the quest for sound money is not just an economic endeavor but a moral imperative with the potential to uplift or devastate human lives. The overarching message is clear: to secure a brighter future, a reformation of money is imperative, and the time to act is now.

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Key Takeaways

John Arnold's journey from a traditional finance background to a Bitcoin advocate provides a narrative of transformation and adaptation. After an early interest in gold due to the financial crisis and the influence of Ron Paul, Arnold's skepticism towards Bitcoin was akin to many gold bugs' initial stance. However, his deep dive into Bitcoin during the 2020 pandemic led to a pivotal shift in understanding, propelling him down the rabbit hole.

His transition from working at a hedge fund to joining Ten31, a venture fund focused exclusively on Bitcoin companies, underscores a growing realization that Bitcoin provides a unique investment opportunity distinct from the broader "crypto" landscape. Arnold's insights into the lack of capital flow into Bitcoin-specific ventures, as opposed to the general crypto market, suggest an overlooked niche with significant potential.

The podcast delves into the complexities of fiat and Bitcoin investment strategies, highlighting the distinction between traditional venture capital and the emerging Bitcoin venture space. Arnold's explanation of the "fantasy game" played by hedge funds, where trading is often detached from actual company fundamentals, contrasts sharply with his approach at Ten31, which is grounded in long-term value creation inherent in Bitcoin's ecosystem.

Arnold's discussion about bitcoin's superior monetary characteristics and its potential to become the world's reserve currency reflects a broader thesis that Bitcoin's adoption will have profound implications for all industries. He argues that Bitcoin's properties will inevitably lead to a convergence of monetary goods towards it, prompting a paradigm shift in economics and business practices.

Best Quotes

1. "After two weeks of actual intense study, it all clicked for me. And so from there, I was just down the rabbit hole."
2. "There's a whole game on top of a game on top of a game in trading in the hedge fund world."
3. "If bitcoin becomes the global reserve currency and essentially the apex predator of money that we expect it to be, existing industries that currently have nothing to do with bitcoin will have to reckon with that reality and adopt tools and services to utilize it."
4. "It's one of the most powerful asset managers in the world. The head of one of the most powerful asset managers in the world, someone who's like on par with Jamie Dimon in terms of influence. And suddenly now he's not on board. He's not on the same talk track, and neither is Fidelity, neither is Franklin Templeton and all the other major institutions that have gotten on board and are marketing these things like crazy now."

Conclusion

The podcast episode with John Arnold offers an insider's perspective on the evolution of investment strategy from traditional finance to the growing sector of Bitcoin-focused ventures. Arnold's insights illuminate the contrast between the speculative, often detached-from-reality approach of hedge funds and the principled, long-term investment thesis of Bitcoin companies that aim to capitalize on the burgeoning potential of Bitcoin.

Arnold's conviction in Bitcoin as the ultimate money and its inevitable global adoption shapes his investment approach at Ten31, where the goal is to identify and support ventures that will play pivotal roles in the Bitcoin ecosystem. The episode underscores the importance of understanding the nuanced and often unappreciated aspects of Bitcoin's impact on the future of finance and industry.

As we look to the future, the episode prompts listeners to consider the potential of Bitcoin not just as an asset but as a transformative force that could redefine the very fabric of economic interactions. Arnold's insights serve as both a reflection and a forward-looking analysis that challenges the status quo of investment strategy and points towards a future where Bitcoin is integrated into every facet of our economic lives.

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The podcast episode features Dennis, a key figure in the intersection of Bitcoin and politics, discussing various topics including the growth and challenges of a local football club, the potential and real-world implications of Bitcoin, and the intricate dance with political entities.

The conversation dives into an exploration of political dynamics and the power play at local levels, raising questions about the motivations behind governmental decisions.

The core of the episode delves into Dennis’s work with the Satoshi Action Fund, an organization advocating for Bitcoin-friendly policies. Dennis recounts how his understanding of Bitcoin evolved from its early days of Silk Road purchases to recognizing its transformative potential. The podcast touches on the strategic approach the Satoshi Action Fund employs, targeting state-level legislation to shield Bitcoin from unfavorable regulation. The conversation underscores the significance of protecting self-custody, mining, and the right to operate nodes, as well as advocating for tax exemptions on small Bitcoin transactions.

The episode also discusses the broader financial implications of Bitcoin's integration into society, such as the potential for state pensions to invest in Bitcoin ETFs, contributing to mainstream adoption.

Best Quotes

1. "We're not asking for special privileges. We're not asking for tax breaks. We're just saying, we just want bitcoin to be treated the same as everything else. We want bitcoin to be protected, and we want bitcoin mining to be protected just like every other industry." - Dennis on the legislative approach of the Satoshi Action Fund.
2. "Bitcoin might be outside politics, bitcoin might be outside government, but you are not... They can still enact laws that go after us as individuals and that limit our access to bitcoin." - Dennis on the importance of engaging with politics for Bitcoin advocacy.
3. "We are doing the same exact thing [as the founding fathers]. We want to make sure that you are able to access bitcoin and that you're able to partake in the bitcoin future and that there's nothing that government can do to stop that." - Dennis on the mission of the Satoshi Action Fund, likening it to the intentions behind the US Constitution.
4. "Imagine if we had $10 million, what we could do. We could radically change the course of history for the USA and for bitcoiners in the USA." - Dennis on the potential impact of the Satoshi Action Fund with more resources.
5. "We're setting foundational policy across the country. It's not just a once in a lifetime opportunity. It's a once in probably humanity opportunity to set this type of policy." - Dennis on the historical significance of Satoshi Action's work.

Conclusion

The podcast episode with Dennis offers a multifaceted glimpse into how Bitcoin advocacy is being shaped at the grassroots and legislative levels. Through personal anecdotes, insights into local politics, and strategic maneuvers in the legal domain, Dennis paints a picture of the ongoing efforts to secure a favorable future for Bitcoin.

The dialogue underscores both the triumphs and hurdles in advocating for Bitcoin-friendly regulations, showcasing the dedication and nuanced understanding necessary to navigate the complex landscape of politics and public perception.

As the episode concludes, the message is clear: Engaging with the political process is not just beneficial but essential to safeguard the rights of Bitcoin users and ensure the digital currency's thriving existence. The work of Satoshi Action is emblematic of a proactive and informed approach to advocacy, one that could indeed alter the trajectory of Bitcoin's role in society for generations to come.

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In the realm of Bitcoin and its burgeoning ecosystem, the podcast episode featuring David King, an entrepreneur and Silicon Valley veteran with a profound understanding of technological evolution, delves into the intricate relationship between technology and the internet of value. David, also known as Curious DK, brings his wealth of experience to the table, discussing how Bitcoin transcends its digital gold narrative to become a foundational layer for innovation and a catalyst for a new era of internet functionality.

The conversation begins with David's backstory, highlighting the formative years of his interaction with early computing and the internet, setting the stage for his later involvement with companies like Google and his engagement with the nascent Bitcoin technology. He reflects on the limitations of viewing Bitcoin solely as an asset, emphasizing the significance of its technological and social underpinnings, which enable a decentralized and permissionless financial system.

As the discussion unfolds, the podcast navigates through David's insights into the evolution of the internet from centralized platforms to the potential of decentralized, open-source systems like Bitcoin and Nostr. David articulates his belief in the transformative power of digital scarcity and how it can reshape our interaction with information, media, and communication.

The episode also touches upon the concept of micro payments and the "value for value" model, exploring how these could revolutionize content consumption and creator compensation by integrating digital scarcity into everyday internet experiences. David's vision of a future where micro payments are ubiquitous reflects the potential for a more equitable and diverse digital landscape.

Lastly, the podcast delves into the architecture and implications of Nostr, a decentralized communication protocol that operates independently of centralized data stores, facilitating uncensorable speech and competition among relays. This discussion offers a glimpse into the untapped possibilities that Nostr presents for creating novel applications and experiences on the web.

Best Quotes

1. "My whole kind of life and career has been watching and participating and figuring out what's next on the internet. And I think it's just like an endlessly fascinating open set of kind of questions and answers you can be playing with." - David King, reflecting on his lifelong intrigue with internet technology.
2. "The story of technology is these unintended positive side effects that happen when you get one thing really working well." - David King, on the ripple effects of technological successes such as Google.
3. "I always love to play with new tools that people are building and try to give feedback or share my perspective on what I like about it, what doesn't make sense to me, where I'm getting confused, where I'm stuck." - David King, discussing his approach to engaging with and fostering technological innovation.
4. "It's an inevitability that the internet is going to get all information, communication, and media coupled with digital scarcity. But the actual path to get there is still to be invented, really." - David King, on the future of digital scarcity and its integration into internet services.
5. "I think the decentralized, the open source, everybody gets to be creative and have exactly what they want is to me what feels like radically new." - David King, expressing his excitement for the potential of open-source technology to empower individual creativity.

Conclusion

The podcast episode with David King is a testament to the ever-evolving landscape of Bitcoin and related technologies. From its roots as a mere digital asset to its current status as a bedrock for future innovations, Bitcoin's journey aligns with the broader story of the internet's growth. David's insights underscore the transformative potential of digital scarcity and decentralized systems like Nostr to redefine how we interact with information and value online.

The discussion encapsulates the nuanced perspectives of digital evolution, from the importance of open-source development to the challenges of establishing new paradigms of micro payments and value exchange. As we reflect on the overarching message of the episode, it becomes evident that we stand on the precipice of a new digital epoch—one where the true essence of wealth extends beyond numbers to the legacy we build through perseverance, aspiration, and innovation.

The episode leaves us with food for thought on the future of technology and its implications for society. As we continue to navigate the information superhighway, the importance of embracing curiosity, exploration, and the willingness to push boundaries becomes increasingly clear. The potential for a more open and resilient digital infrastructure is within our reach, with Bitcoin and Nostr leading the charge in this global adoption wave.

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The Stephan Livera podcast episode featuring Brian Morgenstern paints a vivid picture of the current tension between bitcoin mining and regulatory scrutiny under the guise of an "emergency" by the U.S. Energy Information Administration (EIA). Brian, head of public policy at Riot Platforms, brings his extensive experience in government and law to dissect the issue.

A key insight from the discussion is that bitcoin policy doesn't fall neatly along party lines. While current Republican leadership might appear more bitcoin-friendly and Democrats seem less so, the reality is more nuanced and generational. Support and skepticism for bitcoin exist across the political spectrum, often influenced by views on financial inclusion and energy consumption.

The EIA has issued an "emergency" survey to bitcoin mining companies, requesting detailed information about their operations. Brian argues that the justifications provided (e.g., grid stability, energy prices, CO2 emissions) are flimsy and that the real motive is to potentially limit or eliminate bitcoin mining in the U.S., inspired by the agenda of figures like Senator Elizabeth Warren. The survey's invasive nature could expose companies to targeted attacks from activists and set a dangerous precedent for government overreach.

Riot Platforms and others are pushing back against the EIA's actions, encouraging companies to consult legal counsel before responding to the survey, and considering joining potential legal actions to challenge the request. Transparency is important, but not when it compromises competitive advantage and privacy.

Best Quotes

1. "You could see in all the available data that when the weather got colder, the miners were curtailing... We were one of the first arrows in the quiver for ensuring that the grid was stable." – Brian Morgenstern on the fallacy of the EIA's grid stability concern.
2. "They want to collect copies of their electric bills and they're looking to publish as much information as they can. And this is pretty invasive. And in my opinion, it's really singling out the industry in a way that hasn't been done before, and it's dangerous." – Brian on the EIA's overreach.
3. "They say they are doing this because they're concerned about stability during times of peak demand... But when you look at each one, you find out it's a house of cards and it just crumbles." – Brian challenging the EIA's purported reasons for the survey.
4. "This survey is not just a survey. This is not a game of checkers. It's a game of chess. They're trying to hand you the rope that they want to use to hang you later." – Brian on the ulterior motives behind the EIA's request.
5. "We don't have enough generation yet. We need more power to serve the economy of the future... We can't start going down the path of telling certain people, you're not allowed to use electricity." – Brian on the broader implications for energy policy and freedom.

Conclusion

The podcast episode delves into a complex and pressing issue for the bitcoin mining industry—the EIA's controversial survey and its potential ramifications. Brian Morgenstern's insights and anecdotes reveal a broader struggle for autonomy and fairness in the face of political and ideological pressures. The conversation sheds light on the need for vigilance and collective action against policies that could stifle innovation and control in the emerging digital asset space. The overarching message is clear: the bitcoin community must stand united and vocal to protect its interests and the inherent values of decentralization and privacy.

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Key Takeaways

Grant Williams, a finance legend with nearly four decades of experience, shared his journey through various financial crises and how those formative years have shaped his conservative attitude towards risk. Having witnessed the Japanese equity bubble, Black Monday, the dot-com bubble, and the Asian financial crisis, he emphasizes the importance of learning from each downturn and the significance of stepping aside when risk profiles seem unfavorable.

Grant discussed how responses to financial crises have evolved over time. While initial reactions might focus on personal survival in the markets, with experience comes a broader understanding of government and central bank interventions. These interventions have historically involved providing liquidity and cutting interest rates, but he questions the sustainability of these practices, especially with rising inflation and the recent PPI numbers suggesting a delay in anticipated rate cuts.

The conversation also touched upon the role of gold and why central banks, particularly in Asia and developing markets, value it as a reserve asset. The pivotal moment came when the US Treasury froze Russian central bank assets, prompting a global reassessment of reserve policies and increased gold purchases by central banks as a hedge against vulnerability from holding US dollars.

The discussion veered towards bitcoin's similarities to gold as a hard money alternative. Grant acknowledged the principles behind bitcoin but maintained his preference for gold due to its longstanding track record. He also expressed concerns about bitcoin's potential challenges from government interventions.

Grant provided a historical performance comparison between gold and equities, highlighting that gold has outperformed the S&P 500 since 2000 on an annualized basis. He cautioned against viewing gold purely as an investment for price appreciation and instead recommended considering it as a store of value and liquidity reserve.

Best Quotes

1. On Central Banks and Gold:
   "Sooner or later the rubber is going to meet the road... all the time you want to FOMO Nvidia and all these crazy things, it's absolutely fine as long as you realize that there will be a very bad day."
2. On Government and Money:
   "Every single central bank in the world had to completely rethink its reserve policy... You cannot afford to take the chance that at some point you're going to disagree about either some policy, some war, something, find yourself on the wrong side and have your reserves frozen."
3. On Bitcoin as an Alternative:
   "The principles are very much the same [as gold], and so having an alternative has never been more important in my book."
4. On Asset Performance:
   "If you bought gold in 2000, it has returned 660% to date... It's just a way to hold your reserve in something that will maintain its purchasing power, and you can exchange for assets that you want to hold more."

Conclusion

Grant Williams' insights reflect a nuanced understanding of financial markets, shaped by years of witnessing and navigating through recurring crises. His emphasis on risk management, the evolving roles of gold and bitcoin, and the broader implications of government policies on the financial system offer listeners a multifaceted perspective on investing and asset preservation.

The conversation underscores a cautious approach towards market euphoria and the importance of recognizing the fundamental shifts occurring in global reserve policies and asset valuations. As Grant eloquently puts it, preparing for the "very bad day" involves a delicate dance on the edge of the razor, where understanding the underlying risks becomes paramount.

Ultimately, the podcast serves as a reminder that while the financial markets may offer opportunities for growth, they also demand a deep respect for the forces that drive them, and a thoughtful approach to preserving the wealth one has accumulated.

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Key Takeaways

The Bitcoin Frontier podcast episode featuring Sue Ennis and Asher Genoot from Hut 8 was a deep dive into the intricacies of running a successful bitcoin mining business. It provided a candid look at the industry's challenges and the strategic thinking required to stay ahead.

Sue's journey into the bitcoin space was catalyzed by her dissatisfaction with traditional financial systems and a poignant realization in the Amazon of bitcoin's potential for financial inclusion. Asher, a serial entrepreneur, was driven by macro trends including the growing relevance of digital currency, improvements in semiconductor technology, and the energy transition, particularly in the context of renewables and bitcoin mining.

A core topic of the episode was the importance of disciplined capital allocation rather than chasing vanity metrics like exahash headlines. The hosts discussed the diverse business model of Hut 8, which includes a significant bitcoin treasury and ventures into other areas such as High-Performance Computing (HPC) to maximize the value of their electrons.

The upcoming bitcoin halving was also a point of discussion, with Hut 8 taking a conservative approach to ensure they have a robust balance sheet to capitalize on potential market opportunities that may arise from industry distress.

Lastly, the conversation touched upon the evolution of the bitcoin mining industry, from a focus on machine acquisition to a more nuanced understanding of energy trading and grid balancing, especially in volatile markets like Texas.

Best Quotes

1. "If we play our cards right and we really build this business, we're gonna get a lot more people that come and attack us... And that comes with an incredibly disciplined approach to investing." - Asher
2. "Are you in the business of just mining bitcoin, or are you in the business of maximizing electrons?" - Asher
3. "The end game for mining is miners scavenging and decentralizing across the world for extremely low cost and wasted energy." - Podcast Narration

Conclusion

The episode offered invaluable insights into the mindset and strategies employed by one of the largest bitcoin mining companies. Hut 8's detailed approach to business, underpinned by a strong balance sheet and diversified operations, sets it apart in an industry often characterized by rapid, and sometimes unsustainable, growth. Their ability to navigate the complexities of energy markets, regulatory changes, and the impending bitcoin halving demonstrates a mature outlook on the future of bitcoin mining.

The overarching message is clear: success in bitcoin mining requires more than just accumulating machines and chasing hash rate. It demands a disciplined investment strategy, a robust understanding of energy dynamics, and a focus on shareholder value. Hut 8's story is a testament to the evolving nature of the bitcoin mining industry and serves as a blueprint for future growth that balances ambition with prudence. As the sector continues to mature, it will be interesting to watch how Hut 8 and other companies adapt to the ever-changing landscape of bitcoin mining.

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Key Takeaways

The episode features guest Dennis Porter, co-founder and CEO of the Satoshi Action Fund. The organization works to influence political figures in Washington, D.C., promoting a positive orientation towards Bitcoin. Porter outlines the importance of states in the U.S. as a defense against federal overreach and as incubators of policy innovation that can ultimately influence federal legislation.

A key topic discussed is the challenge Bitcoin companies face with banking services and the potential role states can play in creating favorable banking regulations to attract the Bitcoin industry. Porter also delves into the strategic approach to promote Bitcoin at the state level, drawing parallels with the successful legalization of the cannabis industry.

The discussion navigates through the dynamics of states asserting their rights against federal policies, the importance of state-level actions in protecting Bitcoin-related activities, and the potential of state pensions investing in Bitcoin ETFs to secure their financial future.

Best Quotes

1. "Bitcoin is good for creating jobs, local investment, and can be a big part of grid stability and reducing emissions." - Dennis Porter
2. "We want to make sure that Americans have access to Bitcoin, they can self custody Bitcoin, they can mine Bitcoin, they can run a node." - Dennis Porter
3. "Bitcoin has sort of filled my life with an immense amount of purpose and has driven me to do things that I didn't think I would do." - Dennis Porter
4. "If you just put value into Bitcoin, you put not just your money, your time, and your energy into it... it returns it back to you." - Dennis Porter, referencing a conversation with Peter McCormack

Conclusion

The episode encapsulates the ongoing struggle for Bitcoin acceptance within the United States, juxtaposed with the government's encroaching financial policies. Dennis Porter's insights reveal the Satoshi Action Fund's efforts to champion Bitcoin at the state level, providing a bulwark against federal overreach and fostering an environment where Bitcoin can thrive.

The parallels drawn between the cannabis industry's growth and the potential for Bitcoin's acceptance at the state level demonstrate a strategic path forward. Additionally, the discussion on state pensions investing in Bitcoin ETFs highlights the potential of Bitcoin to solve broader financial issues, such as underfunded pensions.

This comprehensive exploration of Bitcoin's intersection with state policy, banking, and investment offers a nuanced perspective on the digital currency's future in the United States. The overarching message is one of advocacy, education, and strategic action, with potential implications for the continued integration of Bitcoin into mainstream finance and governance.

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Key Takeaways

In the podcast episode, Macro Alf and Peter McCormack engage in a wide-ranging discussion that touches upon various aspects of macroeconomics and its relationship with Bitcoin. The conversation starts with a light-hearted banter about personal moods being tied to asset prices, with Alf humorously noting that his mood is affected by the butchering of Italian cuisine rather than asset prices.

The discussion then takes a deeper dive into the current state of macroeconomics. Alf reflects on his time working in a bank from 2015 to 2019, describing it as a boring period for macro until the pandemic hit. The pandemic-induced fiscal stimulus, according to Alf, has shifted the political perspective on its use. The fiscal stimulus led to perceived growth but also strong inflation, creating a more volatile macro environment with implications for future policymaking.

Alf points out that inflation, often perceived as transitory, has implications on inflation expectations and bond markets, which in turn affect the cost of financing and capital allocation. The conversation shifts to the role of fiscal deficits in creating inflation and how government deficits inject resources into the private sector, affecting the spendable amount of money in the economy.

Peter raises concerns about the growing U.S. debt and the potential for future inflation spikes. Alf explains that inflation is always a monetary phenomenon and highlights the role of credit creation by banks and fiscal spending in generating inflation. The discussion also touches upon the structure of the global monetary system, the dominance of the U.S. dollar, and the importance of U.S. treasuries as a liquid investment for countries around the world.

The conversation transitions to the topic of whether the current system is sustainable and the possibility of an implosion. Alf believes that an implosion is inevitable due to systemic design, but the timeline is uncertain. He also discusses the potential for Bitcoin as an alternative reserve asset and how it has performed as an investment over the past decade.

Best Quotes

1. "Our happiness is a derivative of the Bitcoin price." – Peter
2. "If you want to have a playbook, you should look at the last implosion of a global reserve currency... But nobody knows. To be honest, if somebody tells you they know, probably bullshit." – Alf
3. "Bitcoin is an interesting asset to own in a portfolio because it provides you with that convexity. And at the same time, its price performance has been quite, well, exponential, one should say, over the last ten years." – Alf

Conclusion

The podcast episode with Alf and Peter offers deep insights into the intersection of macroeconomics and Bitcoin. The discussion reveals the complexity of the current economic landscape, characterized by increased fiscal stimulus, inflation concerns, and the dominance of the U.S. dollar in the global monetary system. Alf and Peter also explore the potential for Bitcoin to act as an alternative asset amidst this volatility. The overarching message of the episode is the inevitability of change within the financial system, with the acknowledgment that the timeline for such a shift remains unknown. Future discussions could delve into the specifics of how individual countries, like China, are navigating this macroeconomic environment and the role of emerging technologies like AI in shaping the global economy. The conversation concludes on a note that emphasizes the importance of prudent investment strategies that balance wealth preservation with the potential for exponential growth, as exemplified by Bitcoin's performance.

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Key Takeaways

In this insightful episode, Preston Pysh dives deep into the intricacies of Bitcoin, exploring its potential to be the money of the future, its technical underpinnings, and the future of bitcoin mining. The guest, Bob Burnett, a former CTO at Gateway, shares his journey from the heady days of PC innovation to his transformative encounter with Bitcoin in 2017. This transition from tech executive to Bitcoin enthusiast showcases a blend of technical prowess and a newfound purpose in the realm of Bitcoin.

The conversation shifts to Bob's background with Gateway, highlighting the risks and innovations involved in hardware production, such as their pioneering partnership with Nvidia.

The podcast then takes a turn into the world of Bitcoin mining, discussing the evolution from GPU to ASIC technology, and the importance of self-sovereignty in mining operations. Bob discusses his pursuit of developing a new ASIC. This pursuit is not only technically challenging but requires substantial capital, highlighting the barriers to entry in the ASIC market.

Further, Bob outlines the importance of random number generation in various sectors, revealing his new venture, Caos, which aims to use Bitcoin mining hardware to generate verifiable randomness. This not only diversifies the use of mining hardware but also lays down a challenge to narratives that could result in regulatory scrutiny based on energy usage.

The podcast wraps up with a discussion on the economics of Bitcoin mining, particularly the shift from block rewards to transaction fees as a primary source of miner revenue. This shift points towards a future where mining operations might need to engage in derivatives markets to hedge against the inherent revenue variability.

Best Quotes

1. "Building Bitcoin to be money for a thousand years requires taking a several decade view or a couple century view of things." - This quote underscores the necessity of a forward-looking approach to design a system that is both durable and resistant to vulnerabilities.
2. "I believe in self-sovereignty. As a miner, I have something I call the 'miner stack'... if you want to truly be a miner and you want to deliver to the world Bitcoin and block space, then unless you control all pieces of that, at least to some degree, you're not self-sovereign." - This quote reflects the ethos of independence and control in the Bitcoin mining industry, emphasizing the importance of owning the means of production to maintain autonomy.
3. "We need [ASIC development]... It's very important that we get this landscape such that those things can't happen. Because when you look in a short term window... it becomes highly likely that [vulnerabilities] happens." - Here, Bob Burnett expresses the urgency for diversification in the ASIC market to prevent centralization and the risks it poses to Bitcoin's future.
4. "We are on the cusp of a massive change in the fee structure. I believe fees will be face-meltingly high in the next epoch and beyond." - This prediction suggests a future where the dynamics of Bitcoin mining and transaction fees could dramatically shift, impacting users and miners alike.
5. "Block space in and of itself is a commodity. Bitcoin mining companies today... produce bitcoin. That flips maybe in as soon as five years... to where what we're producing is not bitcoin. We're producing block space." - Bob Burnett reveals a paradigm shift in how we view the output of Bitcoin mining operations, transitioning from a focus on generating bitcoins to providing the valuable real estate of block space.

Conclusion

This episode provides a profound analysis of Bitcoin's trajectory, the intricacies of mining technology, and the economic implications of Bitcoin's evolving structure. The discussion with our accomplished Bob offers a blend of historical context, technical insights, and future-oriented perspectives that paint a vivid picture of Bitcoin's place in the world.

The overarching message is clear: the Bitcoin ecosystem is at a critical juncture, with the potential for exponential growth and the need for strategic innovation. The implications for miners, investors, and the broader community are significant, prompting discussions on sustainability, scalability, and the balance between decentralization and efficiency.

In essence, this podcast episode serves as a call to action for thoughtful engagement with Bitcoin's future, encouraging listeners to consider the long-term implications of their decisions and to contribute to an ecosystem that is resilient, equitable, and primed for enduring success.

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Key Takeaways

The latest episode of the podcast brought to light the pressing issue of bitcoin mining regulation, focusing on the scrutiny it faces from regulators in both the European Union (EU) and the United States (US). The guests, human rights defenders Lyudmyla Kozlovska and Bota Jardemalie, shared their personal experiences and the critical role bitcoin plays as a life-saving tool for activists living under authoritarian regimes.

The conversation delved into the potential proof of work ban in the EU and its implications. Luda, the founder of Open Dialogue Foundation, a nonpartisan human rights organization, highlighted the vital importance of bitcoin as a financial tool when traditional banking services are weaponized by authoritarian states. This has led to severe consequences, including the torture and imprisonment of activists.

Bota, also a human rights defender and lawyer, emphasized the negative perceptions of bitcoin mining, painting it as both an environmental threat and a security risk. They discussed the European Securities and Markets Authority (ESMA) efforts to develop sustainability indicators for crypto assets, which could lead to a de facto ban on proof of work by discouraging investment in assets deemed unsustainable.

The guests also touched on similar concerns in the US, where the Energy Information Administration is collecting data on crypto miners' energy usage, potentially leading to biased reports and unjust regulatory action. Marty, the host, expressed concern over the misguided narrative that bitcoin is primarily used for nefarious purposes, countering that it is a tool for freedom and economic empowerment.

Lyuda and Bota called for collective action to change the narrative and educate regulators about the positive impact of bitcoin, especially for those defending human rights. They stressed the importance of presenting personal testimonials to EU and US officials and the need for community support to continue their advocacy work.

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Best Quotes

1. "For us, bitcoin is something death and life tool saving life too, while, for example, we don't have privileges like most of people living in democratic countries." - Lyuda
2. "We, as the end users of bitcoin, we realize that it's absolutely necessary to defend bitcoin and specifically proof of work in the European Union." - Bota
3. "It's particularly interesting that right now, Europe particularly, and even the US, to a certain extent, have began using bias and discriminating against bitcoin mining at a time when both our energy systems are relatively weak." - Marty
4. "If you enjoy financial freedom, if you enjoy any kind of freedom, that means that someone did this job centuries or maybe years ago, and we right now doing the same in our countries and European Union and the US." - Lyuda
5. "Rights aren't granted. They're taken and defended." - Marty
6. "We believe in bitcoin, we believe in its power and we believe that the civil society around the world should adopt it." - Bota

Conclusion

The discussion underscored the urgency with which the bitcoin community must come together to protect the core principles that make bitcoin a powerful tool for human rights. The potential regulations targeting proof of work and peer-to-peer transactions pose a significant threat not just to the cryptocurrency industry but to the very essence of financial freedom that bitcoin represents.

The personal stories shared by Lyuda and Bota serve as a stark reminder that for many around the world, bitcoin is more than a financial asset; it's a lifeline. The overarching message of the episode is a call to action for bitcoin users, miners, and advocates to unite in educating and influencing policymakers. The episode concludes with a sense of cautious optimism, a belief that through collective effort and strategic activism, the freedoms that bitcoin facilitates can be preserved and expanded for the benefit of all.

Timestamps

0:00 - Intro
8:00 - EU attacks on Bitcoin
18:58 - Abuse of KYC/AML
25:10 - Confronting regulators about their consequences
37:45 - Timeline on preventing EU action
41:15 - What can be done
47:52 - What does the success of Bitcoin look like
50:11 - What it’s like when they come for you
52:50 - The laws are more draconian and less effective
58:04 - Narrative war
1:02:31 - Complacency
1:07:39 - Dealing with the stress
1:12:55 - Wrapping up

Transcript

00:00:02:05 - 00:00:05:05
Marty
Botha and Luda. Welcome to the show.

00:00:05:07 - 00:00:07:18
Lyuda
Hello. Hello, everyone. Thank you.

00:00:07:24 - 00:00:38:05
Marty
Witness Thank you for coming on. It's been nice getting to know you too over the last month or so, I guess a little. We met in Nashville at the Energy and Mining Summit, which was really cool event and it was really cool to have you there, considering what you guys are working on in the EU. And I guess the topic of today is regulators both in the EU and now the U.S. really focusing on Bitcoin mining as something that needs to be taken care of.

00:00:38:05 - 00:01:00:21
Marty
And you two are on the front lines in the EU to make sure that there isn't a proof of work ban throughout the European Union, which is on the table right now. So I guess I can just start with what is going on in the European Union. Why have they honed in on proof of work and what could happen if nothing is done in the next few months?

00:01:00:24 - 00:01:32:05
Lyuda
Yeah, allow me maybe to start a bit. Also introducing myself why we together with water and other activists, are doing this work. So first of all, I'm human defender. I am the president and founder of Open Dialog Foundation. This is a human rights organization, international nonpartisan and nonprofit organization. And we became a victim, a target of attack, coordinated attack of a three ton regime back in 2008 in the course of our human rights work on international level.

00:01:32:08 - 00:02:11:23
Lyuda
So we had all protection like political protection, even President Macron of Germany, parliaments of France, Belgium, Germany and many others supported us. And with all of this protection, we were not able to be protected financially. So regimes were able to weaponize our banking data, basically depriving them the right to have financial services in the heart of Europe. And this is the reason why we discovered and use Bitcoin as a tool to resist against transnational repression when authoritarian regimes abuse, financial action, task force recommendations and the group you all financial data to prosecute your donors and recipients of the funds.

00:02:11:26 - 00:02:35:26
Lyuda
As a consequence, our volunteers and our human rights defenders in the authoritarian states were tortured, disappeared or were in prison for many years. So for us, Bitcoin is something death and life tool saving life tool. Well, for example, we don't have privileges like most of people living in democratic countries. And this is a reason why we educate regulators.

00:02:35:29 - 00:03:08:04
Lyuda
This is the reason why we defend proof of work which actually can guarantee us as a human right defenders financially excluded people the use of financial tool as a payment and this fundraising instrument and this is the reason why also my colleague both time when you are the activist of a building to change coalition, we bring this topic hearing all the time questions why you use Bitcoin, why you use this instrument if it's associated with the energy and actually security threats, it can harm environment.

00:03:08:04 - 00:03:19:26
Lyuda
It's actually dangerous for our energy security. And I think what I will mention actually what exactly we address right now.

00:03:19:28 - 00:03:55:16
Bota
Yeah. Thank you, Linda. Yeah, I'm a human rights defender and a lawyer, and we've been working together with Luke Muir for many, many years, for almost 15 years. And right now is one of the issues that we are working is this is what we call Bitcoin advocacy. So we is the end users of Bitcoin. We realize that that's absolutely necessary to defend Bitcoin and specifically proof of work in the European Union started with the European Union.

00:03:55:16 - 00:04:25:17
Bota
But I would go to the US after. So what you'd already mentioned when we were bombarded with this questions how you use technologies that is bad for the environment, that is energy wasting. And so we started looking where this information is coming from, what's happening at the EU level. And we realize that there are two kind of major attack on Bitcoin consensus mechanism of on proof of work right?

00:04:25:19 - 00:04:56:08
Bota
First of all, this is perceived by the regulator, by the European Commission, by the European Securities and Markets Authority, by the European Central Bank as energy based in mechanisms that is dangerous for the European Energy security and as well as there is an attack, that it's extremely dangerous technology for the environment, that it has a very high carbon footprint.

00:04:56:13 - 00:05:23:13
Bota
So it's bad for the environment. And when we say that this is something that is ban of bit of proof of work is on the table in the European Union, everyone seeing that there will be some kind of views that they would specifically specific language that proof of work is banned since January one. Right. But no, it's not how it works.

00:05:23:18 - 00:06:04:06
Bota
The way how it works is that right now, the so-called ESMA Esma is the European Securities and Markets Authority is developing sustainability indicators. So this sustainability indicators for all cryptocurrencies activities and specifically for Bitcoin consensus mechanism. And so as they will be deciding, they will develop a standard. It's what crypto assets, so-called sustainable. So good for the environment or not, at least not bad for the environment.

00:06:04:08 - 00:06:37:29
Bota
And what kind of crypto assets are not good, not sustainable. And the problem is that if we look at the narrative that exist, it's everywhere level, all the European Union, we see that there's very, very negative perception of the Bitcoin mining. And I would say there's a student this a really discriminatory treatment in the bias that exist. Is it the institutions?

00:06:38:02 - 00:07:22:24
Bota
Because this is something that they are not doing the research asking why, you know, voters, that this is how it's used, etc.. No, they are already specifically created this bias in the information, the sources that they're using. They are something that would have concerns. This is something that is not, you know, peer reviewed literature right now. It's usually something that is some newspaper articles or research reports that were specifically focused on negative externalities of Bitcoin.

00:07:22:26 - 00:08:10:06
Bota
And of course, we worry about this very much. We know that the deadline is coming. It's the 1st of January 2021 or 25, sorry, that European Parliament is expecting a proposal from the European Commission. And so they want to know what kind of group activities consider it to be sustainable and what is not. And if it's something is not sustainable, you have to remember that means that this basically that it's something that they all the institutions, specifically European Central Bank, will create a disincentive to invest into that particular asset.

00:08:10:08 - 00:08:44:29
Bota
And that's why it's very dangerous. And we see that the similar trend is happening in the US right now. And this really in parallel because you, you, you probably know that is the EU Energy Information Administration already started collecting information from crypto miners about their energy use and they have specific deadlines by which the information be collected. That's in by the end of July 2024.

00:08:45:02 - 00:09:12:05
Bota
And after that, the Energy Information Administration will start publishing its reports. Right. But we already see that there is a certain bias even in the way how they are started to question in the industry about the energy use. So we can see that the developments is happening on both sides of the pot.

00:09:12:07 - 00:09:38:29
Marty
Yeah, it feels like the wall, not the walls, are caving in, but it feels like the pressure is certainly on. And as you too mentioned, there's a ton of bias, a ton of discrimination. It's really disheartening as somebody I've been involved in the mining industry for six years now here in the United States, and it's abundantly clear to me, utilities providers, energy producers, that Bitcoin is additive to their operations.

00:09:38:29 - 00:10:19:10
Marty
Bitcoin is just driven by pure economics. Is there Bitcoin mining to take advantage of wasted, stranded energy sources to make these energy systems more efficient to the point where it's enabling producers and utilities companies to reinvest, to build out more reliable infrastructure? And it's particularly interesting that right now Europe particularly, and even the U.S. to a certain extent, have began using bias and discriminating against Bitcoin mining at a time when both our energy systems are relatively weak to where they were only a decade or two ago.

00:10:19:10 - 00:10:47:11
Marty
I mean, specifically in Europe, Germany being the prime example of a country that completely destroyed its energy system over the last 20 years and can use all the help it could get. And if action isn't taken in the next few months, they will completely block out a source of energy efficiency in Bitcoin mining that could really help them make their grid systems more stable.

00:10:47:11 - 00:11:21:23
Marty
It's really insane. And then on top of that, again, bringing bias and discrimination to it like we see outside of mining this bitcoin in general. The line here in the United States as I'm sure it is in Europe as well, is that bitcoin's only used by criminals, drug users, money launderers. And as you to explain earlier and have shown through your work with human rights activists, like no, it's actually enabling human rights activists to evade despotic governments.

00:11:21:26 - 00:11:40:20
Marty
And in fact the KYC, AML regulations that you want to thrust on everybody using a non-custodial wallet put them in danger because the despotic governments use these this information from KYC, AML policies to target dissidents.

00:11:40:23 - 00:12:31:10
Lyuda
Yeah, exactly. And I would like to say that with the perspective of what's happening, Wolf, in the US, in you, if you compare this two countries in the US, you at least have voices and very active miners, Bitcoin miners and Bitcoin community who educates regulators. But again, even with this work, when we been last two weeks in the Senate and Congress and also we met with State Department with Financial action task forces, we conducted over 27 meetings in person during this all our advocacy mission in DC the first time heard how anti-money laundering regulation, how Financial Action Task Force's recommendation abused by dictators, how banking data weaponized not only in authoritarian states domestically, but how

00:12:31:10 - 00:13:10:10
Lyuda
they actually can be all exposed in democracies. And we conducted the first round table for our CRYPTOASSETS, where we testified about this unfortunate experience and the consequences of this regulation from one side, but from other sites. We provided recommendations and tools we used to resist, again, this transnational repressions, authoritarian regimes, when basically email, emails and safety regulation is used as a transnational tool against the opposition and everyone around us and civil society and human rights activists, even abroad, not only domestically.

00:13:10:13 - 00:13:38:25
Lyuda
So we see actually positive attitude. And so, for example, we were asked, okay, guys, what you want? And we said, we want to have neutral language to listen to Bitcoin and proof of work and actually beautiful transactions, privacy instruments like mixers, because we have no other tools. And we got response, okay, we need to then to have this dialog.

00:13:38:26 - 00:14:01:18
Lyuda
So if you go to to bring to the miners, for example, who will testify along with you how it operates, will you will you help us to understand it? And I think this is a kind of key, key moment when we can bring voices from one side as end users, those who use this technology. We are not perceived as lobbyists and we are not lobbyists.

00:14:01:18 - 00:14:23:03
Lyuda
We just defend our human rights and Bitcoin Bitcoin for us human rights because we don't have other instruments. And for many of us it's a question of life and death. We don't have this privilege to choose. And I'm actually paying today with these credit cards or these credit cards. We just don't have credit cards. These are our reality and this is how we live.

00:14:23:05 - 00:14:50:15
Lyuda
So these perspective change narratives and we need to remember that right now narratives are shaping our lives and shaping decision making process of politicians, and we need to have voices. So Bitcoiners from all over the world, because EU is going to approach regulation to mining in a global way as a G7 countries. So once it's adopted in you, they want to use and waterless methodology.

00:14:50:15 - 00:15:20:14
Lyuda
Talk to other G7 countries and we don't want to allow any democracy to use in a regulatory language negative association labeling towards to Bitcoin or proof of work of peer to peer transactions or any privacy instruments because it affects our life entirely. Imagine for us the only instrument we have to protect political prisoners, victims of tortures. It's actually to have support of democracies, democratic governments.

00:15:20:16 - 00:15:45:01
Lyuda
And this these democratic governments labeled the only instrument we have how to deliver humanitarian aid, how to support families of political prisoners as illicit activity, as a threat to national security, energy security, Environmental Council. That means that all three China is you immediately going to use this against everyone who is using this instrument to receive our help. We don't want it.

00:15:45:01 - 00:16:11:29
Lyuda
We don't want it to allow even to happen. And this is the reason why we educate and this is the reason why we try to bring as much as possible awareness, how and why we use Bitcoin as a tool for human rights and humanitarian needs. And when we asked by regulators, okay, so for example, they said, you know, we can shun because criminals are using Bitcoin as the instrument.

00:16:11:29 - 00:16:38:02
Lyuda
And of course every technology can be used by better actors and good doctors. But we as the good doctors, we should have a legal way how to use it. You should not punish us because some criminals using these instruments or provide us the instruments to operate in authoritarian states where most of people financially excluded for political reasons and they have no answer what to provide us.

00:16:38:05 - 00:17:08:26
Lyuda
And this is a reason why we think it's really important to educate right now when there is huge speed to weather this kind of, you know, this wish to show results quickly, especially before elections in Europe, when the main demand from the society to deal with energy crisis and environmental crisis. And we don't want proof of work and Bitcoin mining be in general just a scapegoat where it's easy to punish this technology because there is no waste in defense.

00:17:08:29 - 00:17:12:24
Lyuda
We should not allow this.

00:17:12:27 - 00:17:15:22
Marty
No further join Japan.

00:17:15:27 - 00:18:10:23
Bota
No, I just, you know, basically covered all ground. But I just want to say that how we present it to the regulator, right, when we see that this this instrument is used by terrorist and money. Money wondrous. Right. But we as activists will been accused in money laundering in the in being members of extremist terrorists are organizations in being a threat to national security by the regimes where we defend human rights and just kind of an example, once we walked into a meeting with people from the commission that were drafting the anti-money laundering regulations and we wanted to discuss this problem of abuses, of this of this language, that that is an instrument of money

00:18:10:25 - 00:18:36:09
Bota
and financing of terrorism. First thing we ask, we ask them, Have you ever met a real terrorist or a man? You wonder in their kind of. No, of course not. You know, in our line of business, we don't really meet them. And we said, I'm a man. You wonder and accuse of being mining wanderer and member of an extremist organization.

00:18:36:17 - 00:19:24:20
Bota
You there is a threat to national security and money laundering as well. We had with us a person from the Valley Foundation and we said that at that time they were was they were our foreign agents, terrorists and money launderers. And so we had active news from all over the world in one room, and we all were labeled by dictators, by authoritarian regimes, that we are those criminals, but we are normal people and we actually defend human rights and we work with the institutions and we explain what kind of the new whistle blowers about the crimes committed by many regimes.

00:19:24:23 - 00:19:57:15
Bota
So when you Liebowitz acknowledges that there's an instrument for money launderers, you you really create this bias. It's exactly how this authoritarian regimes create bias against us. And this is something that we want to fight against. And we have our examples We can explain to the regulator what what is happening. But at the same time, we need people from the industry explaining this side of the story, saying that, you know, this is a regulation, this is how they work.

00:19:57:17 - 00:20:36:01
Bota
And if there is an article about this person that is person is committed some crimes, even if it's not proven, it just a pure, a pure, a piece of, you know, fake news. Right. They still going to take your bank account away because of the existing regulations. So what we need to do, we need to have people from the regulated industry and people like us to show the consequences or to the regulators the consequences of their actions, how people like us get financially excluded.

00:20:36:04 - 00:21:05:09
Marty
And the really disheartening thing about all of this is the two tiered system that exists. I mean, the amount of money laundering that happens and is facilitated via the U.S. dollar far exceeds anything that Bitcoin does on a day to day, year to year basis or is done historically. And then these same regulators that are really close with the banking and financial industry specifically let these banks get away with murder.

00:21:05:11 - 00:21:42:04
Marty
I think sometimes quite literally, but figuratively mainly. I mean, we had Jp morgan settle out of court with the U.S. Virgin Islands. They made a $75 million fine so that they wouldn't have to go to court and have discovery around the fact that Jp morgan was banking Jeffrey Epstein as he was laundering money for sex trafficking operation, obviously, famously, which HSBC in the Mexican drug cartels, they had teller windows that had slots where briefcases full of cash could be pushed through by by the drug cartels.

00:21:42:04 - 00:22:13:01
Marty
They paid a small fine for that. And yet here comes Bitcoin, which isn't facilitating a lot of this. Yes, as you mentioned, both criminals can certainly use it, but it's a technology. They drink, water they use to fake security as well. We don't throw these things, make them illegal because terrorists are using them. And it's what I toil with personally and like, are these regulators, is that lazy that they're willing to bring a sledgehammer and smash anything that can be used by a criminal?

00:22:13:03 - 00:22:41:20
Marty
Or are they more nefarious where they recognize the freedom that Bitcoin enables? And they don't like that freedom because it doesn't allow them to exert control that they would otherwise like to have. And that's where I see the sort of crossroads that we're at right now. It could be a Bitcoin here. It is one of the most freedom enabling technologies that humanity's ever come into contact with, and that really scares governments that that like control.

00:22:41:24 - 00:22:54:11
Marty
And it's convincing them that, hey, you're going to have to be comfortable giving up control because freedom is more important than you controlling everybody's everyday life and what they do with their money.

00:22:54:13 - 00:23:18:08
Lyuda
I think we still have hope anyways because I mean, we have concrete results, right? For the last two years of our advocacy for Bitcoin in order to protect it as a payment and fundraising instrument, we succeed to do so in EU and European Union. So we have an upcoming regulation actually recognition that CRYPTOASSETS can be used as a fundraising instrument and actually payment instruments.

00:23:18:11 - 00:23:47:19
Lyuda
We hopefully would have also provisions to defend and protect financial data of both financial institutions and cryptoasset services providers. And we also have a provision about abuse of anti-money laundering regulation, a mechanism especially disinformation, to financially exclude people. So specific categories refugees, civil society, organization even mentioned in a regulation. But it's not enough. And unfortunately, G7 countries were not happy about our achievements.

00:23:47:19 - 00:24:14:29
Lyuda
And this is the reason why we came to us two weeks ago to speak. We saw 27 representative self-regulatory bodies, both Senate's Financial Action Task Force, a State Department and Congress, because the US acting from one side that they create domestic legislation right now is the process of reform of anti-monopoly regulation and actually shaping crypto regulation in the US.

00:24:15:05 - 00:24:45:06
Lyuda
But it's not true. Whenever U.S. decides to ship we in regulatory way domestically, it's affect affects entire world. And when G7 countries, U.S. demand, for example, where they say that's okay, we have to look into peer to peer transactions now self-hosted wallets as a something what is threat to financial integrity. It's affect, of course, other democracies. And we afraid that our achievements here in EU will be questioned.

00:24:45:06 - 00:25:08:16
Lyuda
So we need to gain to defense of course, of wallet. We need to defend mixers as a privacy tools and do these above work. And we cannot ignore it because, for example, yesterday in Davos and we have discussion with some bitcoiners and they said you can just simply not comply. I cannot not comply because I get protection from you.

00:25:08:16 - 00:25:37:07
Lyuda
And for example, my life would be literally under threat if I would not get protected from the attack since 2008 by three authoritarian regimes. And I'm really grateful for being protected. But from other side, I protect another people, political prisoners and all of us. We need to have both support of democracies and we need to be able to use Bitcoin as a peer to peer transactions, as a decentralized mechanism built on proof of work mechanism.

00:25:37:09 - 00:26:24:18
Lyuda
So we need to provide security for developers of privacy instruments and also for miners if we don't succeed to do those things, this means that we lose our the only instrument. And luckily we have seen support from those regulators and legislators who approve human rights. Of course, you always have bad actors in every sphere, but how we succeed to have this changes how we succeed, to have a different national inter-parliamentary platforms, provisions that reflect See yourself Bitcoin and Stablecoins for human rights and humanitarian purposes in the regulations for 57 Member States more nor for America, Europe and Asia, actually, thanks to these people.

00:26:24:20 - 00:26:50:08
Lyuda
So there are people and legislators who listen in us. But the problem is we need to remove voices. We need them to educate, make face to face meetings where they cannot direct questions. They will never risk it to us, even online or publicly. But they need to be able to to get this information. It's an effort, but it's a safe effort because you cannot do this activity in authoritarian states.

00:26:50:10 - 00:27:19:18
Lyuda
Remind yourself what's happened in Kazakhstan back in January 2022, when most of miners were just cut off of Internet. You know why it happened? It's actually was the days when authorities of Kazakhstan employed Russian troops and domestically troops to shoot peaceful protesters. They not only should freedoms, they should real people. They killed Bitcoin mining in Kazakhstan and they killed their citizens who were protesting for freedoms.

00:27:19:20 - 00:27:46:03
Lyuda
So the same we do right now. We have two transactions in Kazakhstan on the fault of fighting against to be transactions and everything around Salesforce. It was everything actually around any kind of financial freedoms in the most sophisticated action regime, able to lift sanctions from Russian banks in this country of in the US. And this is all happening and we ask questions to us regulators.

00:27:46:03 - 00:27:52:09
Lyuda
Okay you want to have effective mechanism still was to Russia to circumvent sanctions, then change.

00:27:52:09 - 00:27:52:23
Bota
Travel.

00:27:52:24 - 00:28:34:06
Lyuda
Rule change assumption that you treat equally financial situations of third countries, authoritarian state and actually democracies. Did you transfer intelligence, financial intelligence, knowledge from democracy to authoritarian states, which is not used against actually criminals and organized groups or terrorists? Kazakhstan recognized Taliban as a legitimate government, but it's used against civil society in opposition. It takes 3 to 5 minutes to block bank account of opposition or civil society members whose fundraising for actually, you know, supportive of families of political prisoners.

00:28:34:06 - 00:28:59:07
Lyuda
And because our reality and these arguments, the change perspective of those politicians who meet us and those who support human rights because normally they want to support us, but they don't know how and they don't know what is the role of Bitcoin because you would not read it in the media. Where you do will see that media would write about abuse of anti-money laundering, counter-terrorism regulation.

00:28:59:09 - 00:29:26:01
Lyuda
Have you seen, for example, maybe publications, how, for example, activists were deprived or immigrants deprived the right to have financial services immediately In democracies? There is no this kind of information, and this is the reason why it's so important to work for the UN. Both achievements which we have and we have a lot of achievements right now. We just no capacity to go and continue this work and this is the reason why we came to Bitcoin.

00:29:26:01 - 00:29:47:11
Lyuda
I say let us guys do it together because you are the same activist as us because Satoshi Nakamoto was the same freedom activist as us. He created and gave us this tool. But it's nothing for granted. You have to defend it. It's a basic human rights, and human rights are dying if they are not defended. And we saw it's many, many times.

00:29:47:14 - 00:30:25:27
Marty
That's a very good point. Rights aren't granted. They're taken to defend it. And as it stands today with Bitcoin, we have to we have Bitcoin. We're using it in a peer to peer fashion. We're mining pretty efficiently and in many areas and we have to defend the right to do these things. And with that in mind, I know there is a pressing timeline here, so let's dive into the particulars of what is in front of the European Parliament as it pertains to proof of work, how long we have to convince lawmakers in the EU not to do this and what will happen if it does or does not pass.

00:30:25:29 - 00:30:54:10
Bota
Yeah, we have to work on several fronts, right? This is not just the European Parliament and in the European Parliament we actually going to have elections in the summer of this year. So when the new European Parliament comes and starts working in September, we have to be already fully ready and we have to work by then with all European institutions.

00:30:54:17 - 00:31:36:12
Bota
It means that ESMA it means the European Commission means with the European Central Bank. We have to work on those biases. We have to have the meetings. We really have to participate in the process of developing this sustainability indicators that ESMA is doing. We have to demand to meet with them, visit together with a Bitcoin mining community and with the experts on our side and address this issue, address this bias, and really explain to them our position and currently they all exist in research.

00:31:36:17 - 00:32:09:06
Bota
You know, right now when, when you say something that that bitcoin mining is actually can be helpful for the adoption of the renewable it's actually facilitated adoption of these renewable this is something that nobody knows about it in the EU and we have to come with miners from all over the world. We really need to bring miners in from Africa and demonstrate how they work there very successfully.

00:32:09:08 - 00:32:40:14
Bota
And they not only facility IT adoption of renewables, they actually provide people with work there. They create electricity for the communities that otherwise would have not had electricity. And this issue is extremely important for the European Union. And we also have to work at the level of the member states. Don't forget, the European Union's is a is it 27 countries, Red has 27 countries members, but we don't have to work with all of them.

00:32:40:14 - 00:33:17:03
Bota
But there are five key countries that really affect the both the energy policy and the environmental policy. And we have to work with the regulators there and we have to work with the parliaments there. So this is the best time to start. We really should have started two years ago. But, you know, we just hope that everyone understands that the issue is quite pressing and we have to jump into it.

00:33:17:06 - 00:33:41:23
Marty
And so what can anybody listening to this do to help you guys? And so as we talk about particularly this show, a lot of people that listen to the show are completely disenchanted from politics, whether it's here in the U.S. or the EU, myself included, to a certain extent, like I have this presupposition that the governments have too much control.

00:33:41:24 - 00:34:08:09
Marty
They like that control and they're not going to give it up. But you to have been doing a good job over the last week, you see me that again, these rights need to be defended. And we have seen here in the United States when the government tries to overstepped its bounds and infringe on bitcoiners rights to to use Bitcoin in particular ways that we have submitted comments to FinCEN, the Treasury basically saying, hey, this is way out of line.

00:34:08:09 - 00:34:31:01
Marty
They have reacted positively. And I know the answer to this because we discussed it last week. But I think for anybody who didn't hear that conversation, be valuable for them to hear it now, do you have confidence that if action is taken to educate the EU politicians that proof of work could be saved in the EU?

00:34:31:03 - 00:34:56:27
Lyuda
Yeah, I think we have all actually chances that we can protect for proof of work and the way how we do it through submissions, through face to face meetings. So what kind of submission, for example, we've done to FinCEN, we collected testimonials of all human rights defenders and basically met with the Treasurer, met with State Department and explain them.

00:34:56:27 - 00:35:26:09
Lyuda
Of course you can have some ground to say that this instrument can be used by criminals, but please take into consideration that enormous amount of people financially excluded in most of countries is a very tiny state. We have no other tools and we need to have mutual land which talks to technology and we provide it's all set of recommendations, including actually travel, rule reform and other things, which are what you mentioned during our discussion.

00:35:26:09 - 00:35:52:02
Lyuda
What has to be changed. This is the first things. The second thing we want to do the same what we've done, for example, providing our testimonials of Bitcoin and miners and Bitcoin miners for humanity, for human rights defenders and Bitcoin miners to EU institutions. We need do the same in the US. So the also know who are and what is exactly social impact of bitcoin mining.

00:35:52:02 - 00:36:17:20
Lyuda
Why it's important because we have no they don't see difference between proof of stake and proof of work. This is something with not enough to be said just in podcast, but it has to be written in the language and dependable for regulators, which we afterwards could refer as a personal testimonial. So witness the statements of those who actually and users of Bitcoin, those who benefit from proof of work.

00:36:17:22 - 00:36:46:16
Lyuda
And these testimonials. Everyone who is listening to this podcast from where no matter where you are from, please reach us out and we will help you to shape these testimonials in a framework understandable for regulators. And it will one more step to defend human rights and the proof of work actually in institutions. And it's doable. It's absolutely doable because we heard many times business voices of miners.

00:36:46:16 - 00:37:10:03
Lyuda
We ready to hear them. So we have this view. We are very positive on this. Of course, it doesn't matter that there are no better actors. There are better actress because this false narrative exist. Someone created them. Right? But if we don't try to combine them, we will not dismiss them. They will be the only one in this area.

00:37:10:06 - 00:37:35:03
Lyuda
And the third thing, we need to have capacity. We need is a non-governmental organization, a nonprofit organization to have support, any kind of support, volunteers, financial support, whatever. We are happy to cooperate and be a platform for voices as we always been for 15 years to EU and U.S. regulators and defend the only tool we have for financial freedom right now.

00:37:35:05 - 00:38:05:18
Bota
Yeah, and I just would like to add that we hear it a lot, that there's nothing can be done. We don't trust politicians. You know, politicians are cruel, Politics is dirty. And for us, it's very frustrating to to to hear is that in in the US and in the European Union because we believe this is you have all the instruments you really have to get engage into activism.

00:38:05:20 - 00:38:43:16
Bota
And you know, there are certain forms of activism and for some reason, for a lot of people it creates kind of created some kind of negative connotation. But it's something that this is how you can directly affect the policies. If you are quiet, why you you should think that the government should act in your best interest. You have to show that you are a citizen, you are a voter, you have a position, you organize yourself and you bring all this issues to the table of the regulators.

00:38:43:18 - 00:39:13:12
Bota
And we really we have activists dying to have that literally dying, right? We just had this horrible tragedy with Navalny in Russia, dying in prison, but being killed in prison. And we have activists, opposition politicians in prisons all over the world just to have and they are all fighting to have the right to kind of influence the policies of their countries.

00:39:13:14 - 00:39:44:03
Bota
And you have that right. It's already right given to you by the Constitution and existing laws. And for some reason you prefer to ignore it and just not do much. Please, guys, wake up. We have a chance. We have a really serious fighting chance. And we have to defend this technology, this technology that it's not only technologies that bring in money to you, but this is technologies that saves lives.

00:39:44:06 - 00:39:52:04
Bota
And that's why we're willing to fight. We have the skin in the game. So we want you to join our fight.

00:39:52:06 - 00:40:12:11
Marty
And what is your hope in the long run that Bitcoin succeeds? Let's say we're successful at defending proof of work, at defending the right to hold your own keys and to transact as privately as possible. What does the world look like in your mind on the other side of successes against encroachments from the state?

00:40:12:14 - 00:40:37:17
Lyuda
My success it no one's personal financial data would not be able to use to torture people to kidnap the one day I would not be wake up like I was wake up in 2018 by Botha saying that your brother was taken as a hostage because of weaponization of my. And you've been in data by three regimes. I hope it'll never, ever happen to anyone.

00:40:37:19 - 00:41:07:23
Lyuda
And we would be able to manage our financial freedoms. We would have decentralized financial tool. I hope that people will understand that money, responsibility. It's also knowledge that you should eliminate around yourself and financial literacy. And this is something your responsibility, not someone has to do it. If you enjoy financial freedom, if you enjoy any kind of freedom, that means that someone did this job centuries or maybe years ago.

00:41:07:23 - 00:41:19:19
Lyuda
And we right now doing the same in our countries and European Union and the US. It's a safe countries for us, and Bitcoin is the only instrument for us and that's why we defend it here.

00:41:19:21 - 00:41:48:20
Bota
Well, yeah, and we will be able I for me with this instrument and this is something that Bitcoin will will mainstream, right. Which is very important for us because then it will become an instrument for the civil society. And so as a civil society, we will be able to raise financing to finance position in the countries where the banking system and basically create sort of is I should provide this as well.

00:41:48:27 - 00:42:13:17
Bota
They're just instruments of law enforcement, all those countries. Right. And they spy on people rather than being neutral institutions. So we believe that we believe in in Bitcoin, we believe in its power and we believe the civil society around the world should adopt it.

00:42:13:19 - 00:42:26:22
Marty
Let's dive into that example of the government using your banking information not to kidnap your brother. But what like just to give an example of how this happened, what happened.

00:42:26:24 - 00:43:04:13
Bota
A concrete example is that I live in Belgium. I have political asylum in Kazakhstan because of the work I was doing defending political prisoners and politically persecuted people and victims of torture. They were constantly attacking. Musee tried to extradite me twice from Belgium. It didn't work, so they tried to kidnap me from Belgium and three people were actually sentenced in Belgium, two Germans and one Russian, thanks to the Belgium Federal police.

00:43:04:15 - 00:43:26:01
Bota
But it didn't work. So what what the government of Kazakhstan did they send a request is that it's called the Mutual Legal assistance request request for the information. And they got my banking data in banking data. What is like think about what you have on your bank statement. You have all the information and you have all your contacts, basically.

00:43:26:03 - 00:44:02:07
Bota
Right. And They really can figure out who is your doctor, where you go, where you stay. If you travel, this is in and they can figure out you, even your family contacts, because because of their transfers. Right. And they looked at my bank account and they realized that that the way how they they realize that I have a weak point and this is my family in Kazakhstan and my brothers and my older brother my parents lived there at that time and my older brother.

00:44:02:10 - 00:44:42:28
Bota
And one day they just came, arrested my brother and accuse him and my new wandering, which is was absolutely baseless. And then they they said that we will we're going to release you if you make your sister to go back to Kazakhstan. And my brother refused and he was tortured for two months and all the now it's only because of interference of the Western politicians, the members of the European Parliament, members of the Senate and Congress are in the end of the day, my brother was released and he managed to leave the country.

00:44:43:01 - 00:44:52:07
Bota
But basically that's that's how it works. That's how the abuse of anti-money laundering regulation is happening.

00:44:52:10 - 00:45:13:21
Marty
And it's insane. I'm sorry, had to go through that, number one. But it's just insane to me. And this is probably why I don't like engaging in politics. It's because everything that the government does, I'm a big free markets, anti-government. I think the government makes everything worse. They print money and throw it at things that don't make sense.

00:45:13:21 - 00:45:53:29
Marty
They write these draconian laws as it pertains to KYC, AML, like since 1971. I believe in the Bank Secrecy Act here in the United States, I think is the core of a lot of these problems that exist in the world of data collection for financial transactions stems from that law. Everything since then, it's just gotten worse. And despite the fact that all the KYC, AML Regulation, all the travel rule regulation, the in a hyper digitalized world has only gotten more and more stringent their ability to actually stop crime and money laundering has gotten worse and worse.

00:45:53:29 - 00:46:26:02
Marty
I think something like 0.1 percent of global money laundering is prevented by KYC, AML regulations and compliance, actually catching people that are laundering money. It's completely ineffective. And as you just explained, like collecting this and holding it in securely and holding it in a way where despotic, authoritarian governments can request that information at a moment's notice. And you have to deliver it due to the information sharing that comes with complying with the travel rule.

00:46:26:07 - 00:46:54:19
Marty
You can you just put a lot of people in harm's way. And there's this obsession with personal identifying information collection that the governments have that is completely counterproductive to the goals that they're claiming they want to achieve, which is reducing financial harm. And they're actually increasing physical harm by trying to reduce the financial crimes, which it's just like, All right, guys, this obviously isn't working.

00:46:54:23 - 00:47:17:06
Marty
You have to figure out a better way, become better police and investigators to stop actual crime. You don't throw the baby out with the bathwater and just do a wide swath mass surveillance of everybody and put everybody at risk. Like, that's the point we're getting to. And despite the failure of these policies to actually stop, the crimes are claiming they want to stop.

00:47:17:06 - 00:47:26:10
Marty
They keep doubling, tripling, quadrupling down to the point where they want a digital I.D., which is just gonna make things much worse.

00:47:26:13 - 00:48:01:00
Bota
It's coming. It's coming as digital IDs, currency BTC is coming. It was actually you will be surprised how it's very much welcome and embraced by authoritarian countries, which gives you a little bit information how it's going to be misused. And again, unless we see something, unless we resist, unless we limit the ability of the government to implement those policies, nothing will change.

00:48:01:02 - 00:48:26:17
Bota
Sorry, Martin. No, this is why if it's you can hate the government as much as you want, but this is the existing evil, right? It's necessary. Evil. Yeah. And it's easy to hate it when you you enjoy certain security, right? You enjoy protection of the of the your property rights. But in the world of countries, people don't enjoy that.

00:48:26:19 - 00:48:37:01
Bota
They don't have this privilege. So you are lucky and you have all of the privileges. You should use them to defend your rights.

00:48:37:03 - 00:49:02:03
Lyuda
Yeah, exactly. You cannot do safely even this kind of discussion in the threatening states. We just all will be killed or will be paid in prison or will be tortured or sentenced for many years. You know, our families will be taken as hostages. The difference between authoritarian states and democracies, no matter how we love them or not to hate them, that we have tools and we can operate safely like relative safety.

00:49:02:03 - 00:49:29:04
Lyuda
Of course there is always certain anyways backfire, but anyways, it's a I can conduct advocacy and have this open dialog with regulators and legislators can criticize them saying that guys, your regulation is killing me. Please help me. Please actually introduce my recommendations. And they doing it while for example, in the three Italian states I would not even able to share a post on Facebook or like this kind of information.

00:49:29:12 - 00:49:52:09
Lyuda
This is enough to basically eliminate me and this is the reality. So it's about our choice just to complain or just to take this power what you have because because you are citizens of you, because you are citizens of us, Canada and other democracies, and actually say, Hi guys, you represent my interests and I'm not angry with you.

00:49:52:11 - 00:50:05:28
Lyuda
Actually, I want to use Bitcoin as a legitimate instrument. You don't understand what is proof of work, what is P2P transactions, what is social good for? Listen to me and they will listen to you. And this is your power.

00:50:06:00 - 00:50:36:25
Marty
And going back to what you said earlier about narrative being very powerful, that's one thing I think Bitcoiners have gotten wise on, particularly in the last 5 to 6 years, is you got to tell better stories. It's very important in this information battle that we're in because at the end of the day, this is really what we're engaged in, is an information warfare for the hearts and minds of the individuals who will either step up to defend their rights or let the government and the regulators run over them.

00:50:36:27 - 00:51:16:22
Marty
And that's why I think the act of the activism that you two are engaged is extremely powerful because it's somewhat of an ironclad narrative. Like Bitcoin literally saves lives and protects people from authoritarian governments. And I think that's something as an industry, we've gotten better at, but really need to perfect this narrative to the masses, which is an optimistic future, a future of abundance, a future of equality of opportunity, equality of access, equality of being able to attain a monetary good that is not debased will preserve your purchasing power over time.

00:51:16:22 - 00:51:41:21
Marty
There's very good optimistic lines that we can run with that that paint a very optimistic future with Bitcoin at the center of it, whether it's the open source network, the scarce money supply or the integration of the mining industry with the energy sector making it more robust so more people can have access to more reliable, cheaper energy. I think they're.

00:51:41:24 - 00:51:42:22
Lyuda
Exactly.

00:51:42:24 - 00:52:12:16
Bota
Exactly. And just one little thing I would like to add. It's please, please don't paint all the politicians with one black paint. You know, it's not only people that really, truly believe in human rights, that truly believe in financial freedom, that truly believe in economic freedom, that try to limit the like in fighting against, you know, kind of growing interference of the state.

00:52:12:18 - 00:52:34:18
Bota
You have to find them and you have to help those people because you kind of you are a power that feeds them. You have to have all the data that we need on our side. We just really have to bring that this data to the right people, and that will be their weapon and they will be fighting for us as well.

00:52:34:20 - 00:52:46:21
Marty
Yeah, we can't have Alex of years. The Dutch central bank minion in his terribly written paper for the Dutch economist or whatever it's called.

00:52:46:23 - 00:52:46:28
Bota
It's.

00:52:46:29 - 00:53:21:00
Lyuda
You know we need to have changes in one of the most I would say like books organization Interpol. So we signification which unites all ministries of interiors of the world. Of course, most of the Ministry of Interior of the world does have to be Italian. But nevertheless, we fight for reform. And actually, again, I would say that abuses of this important police instrument instrument, worse things to actually open doors from the anti-money laundering counter-terrorism regulations.

00:53:21:00 - 00:53:45:03
Lyuda
So this is the first stage how all politically motivated accusations happening on this basis. And then the police institution, US banking data is easily given to it or to handful of dictators. So we succeed to do reform of this institution. So we strongly believe that we can do changes altered the everyone was laughing at us saying, oh, you girls, you going to change this?

00:53:45:03 - 00:54:11:18
Lyuda
You see in this room only like, you know, privileged to ministries from all of this dictatorship, do we think they will listen to you. But we luckily had voices and support of legislators, democratic countries who, as what I said, really believe in human rights. And we did it. We did it. It's fucked. So right now you have clear procedure how to defend your rights, not be in this black box.

00:54:11:18 - 00:54:33:19
Lyuda
And even if you became a victim of abuse of Interpol, you have clear procedures how to remove yourself from there and even to demand compensation. We have to do the same with abuses of anti money immigration. We have to do the same with protecting labeling Bitcoin with any kind of war on these false accusations.

00:54:33:21 - 00:55:09:29
Marty
Yeah, maybe these politicians that I'm talking about about that want to do not bad things necessarily, but want more control. Maybe they depend on the complacency of the average Joe of the common man to just sit there like, oh, it's fine to be like, hey, if they're not going to do anything, we're going to take these rights. I think that's a big problem we have here in the West, specifically the United States is the populace here has become a bit complacent, literally felt a bit dumber, complacent, resting on our laurels, that just a lot of people to sit by and get pushed around and they'll complain on social media but really don't do anything.

00:55:10:03 - 00:55:16:28
Marty
At the end of the day, that's one of the biggest killers of freedom is apathy. Complacency.

00:55:17:01 - 00:55:23:19
Bota
Yes. And as a person who was once on the Interpol most wanted list.

00:55:23:22 - 00:55:27:29
Marty
That he take pride in that that's pretty bad ass.

00:55:28:01 - 00:55:52:18
Bota
I confirm everything with you that just said and but it happens to many of us because this is you know, people don't realize how is it Interpol works? Is the bulletin board right. And any authoritarian regime with dictatorship can just put your name and voila, you're wanted by everyone. It was the kind of institutions that was easily, easily abused.

00:55:52:21 - 00:55:58:06
Bota
But we changed the narrative. And so we can do the same with Bitcoin even more.

00:55:58:10 - 00:56:26:07
Lyuda
You complain about democracies, right? So I've had this case, one or three countries which actually abuse my rights and again, abuse anti-money laundering, counter-terrorism regulation. It was Poland and, you know, Poland is a member of European Union. Right. It gets really strongly to the side of authoritarian regimes is seen the contrary right now. But in like six years they were classified to me as a threat to national security.

00:56:26:10 - 00:57:01:06
Lyuda
I'm not joking. Like special services of Poland classified me as a threat to national security with no ground, and I was banned to enter EU for two weeks until the moment when parliaments of Germany, Belgium, France and many other institutions President Macron, president of Germany, stand on and my rights. Also former Prime minister of Belgium. And they granted me well, I'm a threat to national security in Poland, national interest in their countries, and we succeed to change not do we succeed to actually is false.

00:57:01:06 - 00:57:29:07
Lyuda
How authoritarian regimes or democracies which started to abuse their power, able to manipulate, you know, the threat national security accusations towards two critical or critical critics, critical people like me. And we change it. So now everyone who is treated in the same way, like me, they have a number of protection tools, they have remedies, and they can easily defend their rights.

00:57:29:10 - 00:57:56:00
Lyuda
And I not only defend defended rights of myself, I actually, together with my team, established a mechanism which was adopted and supported by many human rights legislators and regulators in the EU. So it's again, one more example, but everything is doable and we have a lot of tools in our heads, but we need not just to complain in social media, we need to come to meet with them and say, This is my proposals, this is my argumentation.

00:57:56:03 - 00:58:06:27
Lyuda
And if you are, stick with argumentation, you go to defend your position. We prove it so many times and we happy to do it to actually defend Bitcoin.

00:58:06:29 - 00:58:50:23
Bota
Unfortunately, we cannot do all of those things without help. We need we need the community behind us and we really need people to get engaged because to do this type of changes, you need a lot a lot of participations from basically not only from activists. That part, you know, we know how to speak with activist and activists, ready to fight, but we need help from Bitcoin miners, from industry experts that will come and meet with the regulators, meet with the politicians and be willing to provide their testimonies.

00:58:50:23 - 00:58:53:18
Bota
And then we can do a lot of things.

00:58:53:20 - 00:59:04:00
Marty
Yeah, you guys are pretty badass. Interpol's most wanted is fighting back against all these governments, and.

00:59:04:01 - 00:59:11:02
Bota
That's why I was removed from the database when Interpol realized that was politically motivated.

00:59:11:05 - 00:59:18:11
Lyuda
And I'm also not a threat to national security anymore. I'm not classified anymore. And they let us apologize.

00:59:18:13 - 00:59:39:09
Marty
Because I have a lot of stories to tell. This is going to be it's going to be fun decades from now. When we look back, Bitcoin is succeeded. We've we've rolled out a lot of the evil in the world and it was hey, yeah, I was I was on the Interpol most wanted list. I can't say that here in America, they have not come anywhere close to that list.

00:59:39:12 - 01:00:02:00
Marty
It's pretty badass, you guys. I mean, it's pretty heavy. Everything you're working on, putting yourself in the crosshairs of a lot of very powerful governments around the world. How what keeps you going? How does the stress how do you not succumb to the stress of all the things you do?

01:00:02:02 - 01:00:31:25
Bota
Sometimes it can be extremely, extremely difficult. Especially, you know, it's it's not the difficult part is not dealing with the democratic regulators or members of the parliament. Difficult part for me, the most difficult part when we work on the cases of torture, that probably the most difficult, emotionally draining and we have a lot of unfortunately, we have a lot of experience of working in those cases.

01:00:31:27 - 01:00:57:22
Bota
And, you know, sometimes we need even professional help like ceremonies because it it's it's very hard. You you know, it takes time for a person to start talking for a victim of torture. And you have to go with him through it step by step, step by step to kind of to get all this information on paper. It's it's extremely painful.

01:00:57:22 - 01:01:37:04
Bota
And then that haunts you for a long time. But I think we we do it because we really you kind of you feel this internal gratification. You understand why it's important to you see how you change your life. You see how you change your life not only of that person, but that person's family members. We have a job as a support that that is very important from, you know, our community activities.

01:01:37:07 - 01:01:57:15
Bota
You know, we never work on any issue, so we always have a group of people coalition. So we work on this Bitcoin advocacy issue as a coalition, but on other subjects we work as different coalitions as well. So that helps kind of a network.

01:01:57:18 - 01:02:28:00
Lyuda
Yeah, exactly. In my case, I used to have experience as a teenager how it's so important that there are people defending ready to come in to defend your family member who is taken as a hostage because of not agreeing to, for example, corrupt deals or for criticizing the government. And we see this light in the tunnel. And someone said, yeah, no worries, you can actually meet your brother in the hospital he's back from being taken hostage.

01:02:28:00 - 01:02:55:22
Lyuda
And I think the most difficult for all of this case is when our relative suffers. And I wanted to be seen that time, this kind of hope just to other people who needed help and actually to provide this help. So I think this is something no matter what's happened with me, I tried to actually to overcome it. It's easier when it's something happened with me, actually, because I also this myself from my case.

01:02:55:24 - 01:03:22:12
Lyuda
It's not easy. It's just like easier when your relatives are taken as a hostage. I think what I will agree with me that you can actually, as a person responsible for your activity, overcome difficulties, you know, what kind of mechanism you have, but you feel completely powerless sometimes when your family members, your close people are taken as a hostage and you need to release you need to do all efforts because I think the most difficult.

01:03:22:14 - 01:03:55:11
Marty
Yeah, yeah. Again I can't imagine that. I mean, being an American, not having to really put myself out there to that extent. I mean, yes, I have a podcast and a newsletter and website where we do talk bad about the government, their policies and all that. And I luckily, despite whether or not I believe America is as free as it maybe should be, I do have the ability to do this without having to worry about any of that.

01:03:55:11 - 01:04:15:23
Marty
So it is something that I and certainly many other Americans definitely take for granted. And it's really grounding to speak with you to learn more about your experiences, because it is insane that people have to go through this on a daily basis all throughout the world.

01:04:15:25 - 01:04:39:28
Lyuda
Yes. And most of the countries are authoritarian. So what are you doing? Actually, I would not say that. It's absolutely you know, it's important work because you you criticize, you see, you have a right to criticize and you exercising your rights. Now, do one step more, actually try to extract from those who represent your interests, even if you don't like them, that they follow actually your recommendations and you can do it.

01:04:40:02 - 01:04:57:25
Lyuda
You have all instruments in your hands and we are happy to actually assist and be this platform, say who is actually pro human rights because we work for them, for them for over 15 years and we happy to do it both in us and you. And I'm sure that we can do beautiful things together.

01:04:57:27 - 01:04:59:13
Marty
I agree we're going to win.

01:04:59:15 - 01:05:01:28
Lyuda
But we have to. We don't have other chance.

01:05:02:00 - 01:05:17:11
Marty
We have to work. And with that mind, is there anything we didn't touch on that we should touch on Before we wrap up? Any information you think is pertinent, then anybody listening to this has access to any calls to action.

01:05:17:14 - 01:05:38:03
Lyuda
I mean, call to action. Support us. And remember, guys, everyone who is developing more and more access to both freedom to financial freedom tools for such people, like we love you, really, we love you and we want you to actually support it as much as possible. Bring your technologies. We need to litigate as much as possible people. We want to define proof of work.

01:05:38:06 - 01:05:44:01
Lyuda
We know how to do it. Let us do it together. Give us your testimonials, give us your support, and let's do it together.

01:05:44:04 - 01:06:00:03
Bota
And when you see that Bitcoin is an instrument of freedom, remember us. It is an instrument of freedom. And really we need you your help to defend this instrument. Yeah.

01:06:00:05 - 01:06:34:04
Marty
Let's do it for we're going to link to both your profile is in the show notes, link to your website and get active freaks, whether it's in the EU, the global audience, and EU freaks listening to this, right? Yes. Let's get active. Yes. And here in the United States, send your submissions and pushback. Yeah. I think that FinCEN the FinCEN comments that went through last month are yet to be determined whether or not they convinced the government to to back off of what the Treasury would like to do.

01:06:34:04 - 01:06:45:22
Marty
But we shall see. I think it was very powerful. Let's keep doing it, engage where it makes sense and just bring. That's the thing. We have the data on our side. We have the truth on our side.

01:06:45:24 - 01:06:48:13
Bota
Yeah, Yeah. We need to bring that data.

01:06:48:15 - 01:06:49:11
Marty
Yes.

01:06:49:14 - 01:07:08:09
Lyuda
So and one last thing. If you are in my day and if you are BTC Prague conference, reach us out. We are happy to meet you guys in life and I think more people from us has to come to you because otherwise we have limited capacity to come to us. So we would love to meet you in person and get the testimonies.

01:07:08:09 - 01:07:21:02
Lyuda
We will do meetings. Last time we did it in Prague. Also meetings in the Parliament. We will try to organize things also this time. So we would love to reach out.

01:07:21:04 - 01:07:25:03
Marty
Let's go. All right, Berta, Ludo, thank you for your time.

01:07:25:03 - 01:07:27:28
Lyuda
Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

01:07:27:28 - 01:07:31:01
Marty
Keep crushing at peace and love for speaking.

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Key Takeaways

The allure of centrally controlled systems can be traced back to two fundamental beliefs about humanity. Some see central control as a means to exercise their own will over others, stemming from grifter and manipulative tendencies. Others, however, believe that humanity's inherent nature is flawed or evil, necessitating external control to maintain order and virtue. This dichotomy underscores the broader debate on the role of governance and the nature of human beings.

Central to this discussion is the concept of property rights—a social construct essential for the advancement of civilization. The idea of property rights, though subjectively crafted, is objectively necessary for creating tight feedback loops, ensuring price discovery, and fostering non-violent dispute resolution. The adoption of private property is seen as a societal agreement to respect individual ownership and to disincentivize unproductive behavior such as theft.

The free market, viewed as a decentralized planning system, maximizes the efficiency of individual decision-making. By allowing people to act based on their unique knowledge and circumstances, free markets encourage adaptation and innovation. This system's effectiveness relies heavily on the protection of private property rights, viewed as the technological foundation for peace, economic prosperity, and freedom.

The podcast episode challenges the socialist premise that humans are fundamentally evil and require control. Instead, it promotes the notion that most people are inherently pro-social and that society should focus on empowering individuals rather than constraining them through centralized systems. This perspective also criticizes the intellectual arrogance that leads some to believe they can plan and control society for the greater good.

Best Quotes

1. "Property rights don't have to be absolute... They can be a tool invented for a purpose. And that purpose is we would like to live in a stellar empire instead of in grass huts."
2. "The strength to save your people lies within your people themselves. Trust them. Empower them. Don't control them."
3. "The tragedy of socialism is not that it is populated by stupid people, but that it incentivizes smart people to do stupid things."
4. "Civilization exists at all because human beings are a social animal. And the vast majority of us are pro-social."

Conclusion

This podcast episode delves into the philosophical underpinnings of societal organization, challenging the rationale behind centralized control and socialism. It posits that humanity, at its core, is pro-social, and that the key to a thriving civilization lies in respecting and protecting private property rights. The conversation illuminates the importance of freedom and decentralized decision-making as mechanisms for ensuring societal adaptability and innovation.

The episode concludes that the most profound societal change comes from technological advancements that redistribute power, such as bitcoin's potential to decentralize financial control. The overarching message is an affirmation of the human spirit's capacity for self-organization and cooperation, suggesting that the future lies in systems that empower individuals rather than constrain them.

As society continues to grapple with the balance between freedom and control, the insights from this episode offer valuable perspective, inviting further discussion on how best to harness humanity's pro-social nature for collective advancement.

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Key Takeaways

The Stephan Livera podcast episode featuring Ben Carman from Mutiny Wallet delves into a rich discussion on Bitcoin's protocol development, its challenges, and the future of Bitcoin wallets. The conversation highlights the ongoing struggle between scaling Bitcoin and maintaining its decentralized ethos.

One of the core challenges identified is scaling Bitcoin effectively. Despite the success of the Lightning Network, it's clear that Lightning alone isn't the silver bullet for scaling; it is part of an incremental solution. The need for additional measures like soft forks to facilitate scaling has sparked a divide within the community, leading to a social consensus problem that overshadows technical issues.

Another significant point is the social dynamics within the Bitcoin community, which can be categorized into four groups: ossificationists, conservatives, progressives, and those with a more permissive attitude towards upgrades that may facilitate altcoins. This taxonomy reflects the varied philosophies regarding Bitcoin's development path.

The discussion also touched upon the importance of covenants and soft forks in improving Bitcoin's scalability and user experience. Ben Carman leans towards the view that covenants, particularly those enhancing the Lightning Network, offer promising avenues for scaling Bitcoin ownership and transactions.

Layer two solutions (L2s) are also debated, with the consensus being that true L2s should enable unilateral exits without relying on trusted intermediaries. However, the definition of what constitutes an L2 is expanding as the ecosystem evolves.

Mutiny Wallet, the project Ben Carman is working on, represents an attempt to create a new hybrid era for Bitcoin wallets. It aims to combine the best aspects of self-custodial wallets with features from federated models like Fedimint, providing a seamless experience for both novice and advanced users.

Best Quotes

1. "A lot of our challenges are almost more social than technical. We need to come to a social consensus of what's the next move."
2. "If Bitcoin is worth like a trillion dollars tomorrow, soft forks probably aren't happening anymore. It's just like being able to activate things just comes that much harder the bigger the system gets."
3. "We're trying to make self-custody easier and cheaper and more scalable for end users. If we stop soft-forking today, frankly, most users won't be able to use self-custodial Bitcoin."
4. "Lightning is kind of beautiful where it's a truly peer-to-peer network... It's not like service providers to function the network, which is a really different model than a lot of the other L2s."
5. "We're just fine. And the outlook is good. Lightning is not going to die tomorrow kind of thing that a lot of people are saying, and inscriptions aren't going to kill Bitcoin."

Conclusion

The podcast episode with Ben Carman provides a comprehensive look into the current state and future of Bitcoin, particularly focusing on the technical and social challenges the ecosystem faces. The need for soft forks and covenants, alongside the development of layer two solutions like the Lightning Network, are critical for enabling greater scalability and user adoption.

The nuanced conversation also sheds light on the diverse opinions within the Bitcoin community regarding protocol upgrades and the underlying philosophies that drive these viewpoints. The episode concludes with optimism, despite the challenges ahead, highlighting the resilience of the Bitcoin network and the continuous efforts to improve it.

Mutiny Wallet emerges as an innovative solution striving to offer a bridge between the ease of use provided by custodial services and the security and autonomy of self-custody. As the ecosystem evolves, it will be interesting to see how these developments shape the future of Bitcoin and its potential to onboard billions of users while maintaining its core tenets.

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Key Takeaways

The conversation revolves around the dynamic and rapidly evolving world of Bitcoin mining, with a particular focus on its intersection with the energy industry, especially in Houston, which is rapidly becoming a hub for Bitcoin energy operations.

The discussion kicked off with excitement about the third year of the Empower event, which is set to showcase improvements and a more technical focus in its presentations. Comparing different types of presentations, the hosts highlighted the need for visual aids and in-depth economic explanations to enhance the audience's understanding of Bitcoin and natural gas economics.

The episode then shifted to a recap of the recent Nashville mining summit, where the integration of Bitcoin mining into energy grids for resilience was a key topic. The involvement of a Tennessee senator and the head of TVA in these dialogues was noted as a significant indicator of how far the industry has come.

The conversation took a personal turn as the guest shared his recent move to Giga Energy, taking on the role of Vice President of Business Development. He expressed enthusiasm for the company's projects, including mitigating flare gas in Latin America and venturing into the Middle East, where energy infrastructure is becoming increasingly prominent.

The episode also touched upon the emergence of Bitcoin ETFs, their impact on the market, and how they can lend additional legitimacy to Bitcoin as an asset class. The ETF's introduction might shape investment strategies and create discipline among Bitcoin miners to provide better returns than the ETF.

Lastly, the podcast addressed the growth of the Bitcoin mining industry, with hash rate doubling in 2023 and significant international expansion. The role of government in countries like Venezuela and El Salvador in promoting Bitcoin mining was noted, as well as the potential for the Middle East to become a significant player in the space.

Best Quotes

1. "Bitcoin is energy, man. Why would you not have a place in [Houston]?" - This quote encapsulates the link between Bitcoin and energy, emphasizing Houston's emerging status as a key location for Bitcoin mining operations.
2. "Bitcoin mining is an economic free market solution to enable oil and gas to be much more resilient going forward." - Here, the guest discusses how Bitcoin mining offers a market-driven answer to the challenges faced by the oil and gas industry, particularly with regards to flare gas.
3. "I'm very bullish on basically all the international [Bitcoin mining projects]. I think this cycle is going to be a big one." - The guest expresses optimism about the global growth of Bitcoin mining and the potential for the current business cycle.

Conclusion

This episode reflects a broader narrative of the Bitcoin mining industry's growth and maturity, particularly in how it intersects with the traditional energy sector. From discussions about the technical and economic aspects of the industry to the strategic positioning of mining operations, the episode paints a picture of a vibrant and evolving landscape.

The introduction of Bitcoin ETFs marks a significant milestone, potentially altering investment strategies and bringing in traditional capital. The international expansion of mining operations, especially in energy-rich regions like the Middle East and Latin America, points to a global recognition of Bitcoin mining's potential.

As the industry continues to grow, the conversation also touches on the need for grit, technical skills, and a willingness to adapt and innovate. This sentiment is echoed in the excitement for upcoming events like Empower and the anticipation of further consolidation and diversification within the industry.

Overall, the episode encapsulates a sense of optimism and forward momentum for Bitcoin mining, with an acknowledgment of the challenges and opportunities that lie ahead. It offers a glimpse into the future while grounding the discussion in the practicalities of the present, making it a valuable resource for anyone interested in the intersection of Bitcoin, energy, and technology.

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Key Takeaways

The podcast episode delves into the complexities and nuances surrounding Bitcoin’s development, specifically focusing on the ongoing debates about implementing changes to the protocol. A significant portion of the discussion revolves around potential attack vectors and the motivations behind them, distinguishing between malicious attacks and constructive criticism aimed at strengthening the network. The conversation highlights the dichotomy between those who view Bitcoin purely as a robust form of money and others who see potential in expanding its functionalities.

One of the prominent topics is the debate over the implementation of BIP-119 (CheckTemplateVerify or CTV), a proposal for covenants in Bitcoin scripting introduced by developer Jeremy Rubin. The podcast sheds light on the technical aspects of CTV, the proposed benefits of better scaling and efficient use of block space, and the controversy that has arisen within the Bitcoin community regarding its adoption. It also touches upon the broader cultural shifts within Bitcoin, from a conservative approach to development to a more experimental attitude that some fear may not fully grasp the potential consequences.

The discussion also ventures into the concept of sovereignty within the Bitcoin network, exploring whether true self-sovereignty is feasible on second-layer solutions like the Lightning Network without direct control of a UTXO. The episode underscores the challenges faced by Bitcoin developers, such as litigation risks and the difficulty of reaching consensus in a decentralized ecosystem.

Best Quotes

1. "If we are not trying to find the ways that [Bitcoin] can break, that it can fall apart or fall out of sync, then what are we even doing here?"
2. "The important thing is you take in information and views and then kind of either reaffirm your position or establish a new one."
3. "Without controlling that UTXO yourself... there is a shift in how that trust model works."

Conclusion

The podcast episode provides a deep dive into the ongoing debates and challenges facing the Bitcoin community as it grapples with proposed changes to the network. The conversation reveals a community at a crossroads, caught between a desire to maintain Bitcoin’s core principles and the push to innovate and scale. The episode uncovers the tension between the need for rigorous testing and the fear of stifling progress, as well as the personal and collective challenges developers face when proposing changes.

Overall, the overarching message is one of cautious optimism, paired with a recognition of the need for continued dialogue, education, and community engagement to navigate the future of Bitcoin development. As the ecosystem evolves, the podcast suggests that striking a balance between innovation and preservation will be crucial to ensuring Bitcoin’s long-term success and accessibility.

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Key Takeaways

This TFTC episode dives deep into the intersection of Bitcoin, energy markets, and the financial mechanisms that tie them together. Marty and his guest Jamie McAvity, Founder and CEO of Cornmint, explore the rapid growth and evolution of Bitcoin mining, the technical and economic hurdles for older individuals engaging with Bitcoin, and the importance of self-custody. They also touch upon the impact of Chinese miners on the American grid and mining industry, highlighting the technical, legal, and operational aspects involved.

The discussion shifts to the dynamics of the Texas electricity market, illustrating the complexities of power purchase agreements, demand response programs, and the role of Bitcoin miners as price-responsive, base-load consumers. Jamie provides an in-depth analysis of the energy market distortions caused by subsidies for renewable energy, drawing parallels with the situation in Germany and emphasizing the potential benefits of nuclear power. The conversation also speculates on the future interplay between Bitcoin's price, mining difficulty, and the block reward halving's effect on the industry.

Lastly, Jamie introduces the concept of Bitcoin-denominated finance for power generation, suggesting that aligning the economic incentives of energy producers and Bitcoin miners could lead to more efficient and resilient energy markets. This idea presents a vision for a future where Bitcoin not only acts as a bridge between the energy sector and finance but also drives a more sophisticated and responsive energy grid.

Links

Follow Jamie on Twitter

Sponsors

Best Quotes

1. "Bitcoiners underestimate is the technical hurdle of not so much learning bitcoin and setting up a bitcoin wallet. But the fear that an older person thinks with regard to anything about a computer." - Discussing the challenges older generations face when adopting Bitcoin.
2. "It's like that meme where the dude drags all his files to the trash can and his computer just evaporates in front of him." - Jamie humorously illustrates the fear older individuals have with technology.
3. "We might hit 50k during this episode... We are over a trillion-dollar market cap, officially, which is exciting." - The excitement over Bitcoin's surging price and market cap during the recording.
4. "I think that one thing that bitcoiners underestimate is the passive allocation machine of American public markets." - Jamie on how the financial industry is driving Bitcoin adoption.
5. "The single largest non-state buyer of electricity in the entire world is a software algorithm – the Bitcoin network." - Jamie explaining the significance of Bitcoin in the global energy market.
6. "Bitcoin denominated finance for power generation becomes a thing? I don't think it's that crazy." - Jamie's optimistic prediction for the future of energy financing through Bitcoin.

Conclusion

This TFTC rip offers a rich and nuanced discussion on Bitcoin's growing role in the energy sector and the broader financial landscape. It paints a picture of an industry at the cusp of transformative change, driven by technological innovation, market dynamics, and the pioneering spirit of Bitcoiners. Jamie's insights provide a compelling argument for the convergence of Bitcoin mining and energy production, suggesting a future where these two critical industries support and enhance each other, leading to more efficient markets and a move towards a more decentralized and resilient energy grid. The episode leaves listeners with a sense of cautious optimism about Bitcoin's potential to reshape not just finance, but also our approach to energy consumption and production.

Timestamps

0:00 - Intro
7:38 - 50k and Ready Player One
13:16 - Assertions of Chinese grid attack
23:06 - Working with the wind tax credit issue
36:44 - Renewable grid drawbacks and risks
44:17 - The right mix of energy sources
47:53 - Germany decommissioning and energy politics
1:00:23 - Bitcoiners running nuclear
1:06:11 - Halving
1:11:52 - ASIC innovation
1:31:04 - Mining fees
1:34:28 - BitMEX
1:38:07 - Gamestop
1:40:41 - Cormint
1:47:01 - Energy/finance integration
1:52:25 - Wrapping up

00:00:01:12 - 00:00:03:17
Marty
Like, check. One, two, one, two. Jamie we're live.

00:00:03:17 - 00:00:04:16
Jamie
Microphone check.

00:00:06:05 - 00:00:08:04
Marty
Jamie conversing with our Jamie Logan.

00:00:09:09 - 00:00:13:19
Jamie
Great. Great to be here. Thank you for having me.

00:00:13:21 - 00:00:14:24
Marty
It's a long time coming.

00:00:15:18 - 00:00:23:19
Jamie
It is a long time. I've been wondering and I've been wondering when am I going to get on the show? But we had a good riff on the Peter McCormack Show.

00:00:23:24 - 00:00:29:21
Marty
That was a great conversation. I was with Thomas over the weekend. Yeah, we were reminiscing on that conversation was great. Free flowing.

00:00:30:11 - 00:00:31:22
Jamie
God bless Pupkin.

00:00:32:13 - 00:00:39:12
Marty
God bless public. God bless America. God bless bitcoin. You might had 50 k during this episode, during this recording.

00:00:39:25 - 00:00:47:09
Jamie
Yeah. Well, we've we are over $1,000,000,000,000 market cap officially which is exciting.

00:00:47:22 - 00:00:48:11
Marty
One t.

00:00:48:29 - 00:00:54:07
Jamie
One t deleting zero as they say or adding adding adding a zero adding zero.

00:00:54:11 - 00:00:54:26
Marty
Yes.

00:00:55:09 - 00:00:55:20
Jamie
Right.

00:00:55:29 - 00:00:58:00
Marty
It's pretty crazy. It's happening rather quickly.

00:00:58:15 - 00:01:09:18
Jamie
It is. Yeah. The I think maybe we we all may have underestimated the the passive allocation machine of American public markets.

00:01:10:21 - 00:01:11:29
Marty
Did you underestimate it yourself?

00:01:13:03 - 00:01:57:15
Jamie
I did not. I did not. I, I deal with I have a lot of older friends, and I think that one thing that Bitcoiners underestimate is the technical hurdle of not so much learning Bitcoin and and setting up a bitcoin wallet. But the fear of that an older person thinks with regard to anything about a computer. I mean, how many how many kids, you know, friends that have to help their parents with their email every time they come home, you know, or get asked to solve a remedial or computer issue.

00:01:57:15 - 00:02:11:11
Jamie
And the one characteristic of it is the on the uncertainty that they have around what happens if I click this button? There's like this fear that if I click this button, my whole emails, I get this.

00:02:11:15 - 00:02:17:05
Marty
It's like that meme where the dude drags off his files to the trashcan and his computer just evaporates in front of him.

00:02:18:22 - 00:02:22:15
Jamie
Yeah, Yeah, exactly. That's a real technical hurdle.

00:02:22:15 - 00:02:37:04
Marty
And how many how many of these elder of our elders do you know that when you go to help them with their email, they have their password on a Post-it note Right on there. Right. Right on their screen? Yes. Think of Bitcoin. It's like, Oh, yeah, here's my private key. It's right.

00:02:37:04 - 00:02:42:16
Jamie
Here. Like the villain Nolan Sorento in Ready Player one.

00:02:42:24 - 00:02:45:01
Marty
I watched that Thursday night.

00:02:45:10 - 00:02:52:15
Jamie
And his password is Boss Man 69, and it's written on a Post-it note right next to the.

00:02:53:00 - 00:02:56:27
Marty
I didn't get through the whole the whole movie, but I watched, like, the first half before falling asleep.

00:02:57:10 - 00:03:02:24
Jamie
Oh, yeah. You probably missed the the part I'm referencing where they, they hack his.

00:03:02:25 - 00:03:04:24
Marty
I seen it before I was rewatching it. Okay.

00:03:05:08 - 00:03:06:24
Jamie
I've seen it like 25 times. Yeah.

00:03:07:10 - 00:03:11:05
Marty
It's very Bitcoin esque. Yeah.

00:03:11:21 - 00:03:40:25
Jamie
Prescient. There's a, a scene when they're doing an opening montage describing the success of this VR platform and there's a there's a currency, a digitally native currency within the world. And that I forget what the news clip says, but it's some kind of milestone that the the market capitalization of the in-game currency has exceeded a, you know, create crazy value.

00:03:41:04 - 00:03:41:10
Jamie
Yeah.

00:03:41:20 - 00:03:50:16
Marty
Yeah yeah. The the winnings for that a tournament and ready player one if you get all the keys. Trillion dollars in stock.

00:03:50:19 - 00:03:52:09
Jamie
Yeah half a half trillion.

00:03:52:20 - 00:03:53:11
Marty
Half a trillion.

00:03:53:12 - 00:04:06:18
Jamie
Yeah. Because he says I've seen it a lot. He says a half a million and a half a trillion dollars. Yeah. Which it's 20, 35. That's way low.

00:04:07:28 - 00:04:09:14
Marty
Considering all the inflation that we're going to.

00:04:10:00 - 00:04:26:22
Jamie
Yeah. Yeah. I mean, it's going to be like $50 trillion if it were realistic. Yeah, but the movie is based on a book that I think is 15 years old before MTG growth really, really started accelerating and compounding.

00:04:26:25 - 00:04:34:18
Marty
Yeah. Do you think that's why the price is popping right now? Because people are looking out at the world and they go, they're going to the shit ton more money, or is it simply flows?

00:04:35:22 - 00:04:58:11
Jamie
I think it's flows. I think that China I've been hearing a lot about the China situation. Uh, you know, the Chinese stock market is cratering. They're so indebted and their economy is stalling. Uh, and so the, the China print is coming. It's big. Yeah.

00:04:58:24 - 00:05:07:17
Marty
And people are successfully escaping yuan and Chinese stock markets in the Bitcoin despite the fact that China does not like Bitcoin.

00:05:07:26 - 00:05:34:28
Jamie
Yeah, there's, uh, probably a lot of that is flowing through the Texas electricity market through hosting contracts. I think that is a loophole that works is if you buy an asset in China, send it anywhere else and run it and then pay a services contract in renminbi, you know, you're effectively circumventing the capital control.

00:05:35:11 - 00:05:35:22
Marty
Yes.

00:05:36:06 - 00:05:38:10
Jamie
And acquiring Bitcoin and acquiring Bitcoin. Yeah.

00:05:38:12 - 00:06:02:17
Marty
On the back end, let's talk about this because it's a big, big theme in the space right now. I think everybody in the mining industry knows there's a bunch of Chinese that are either hosting with American companies or mining themselves. The media is beginning to portray this as a systemic risk to the American economy potentially, but more specifically the American grid system.

00:06:02:17 - 00:06:04:06
Marty
Ah, the Chinese attacking our grids.

00:06:04:27 - 00:06:37:27
Jamie
That media, you know, they are just they have such a wonderful imagination, aren't they? Yeah, it's there's no there's no grid attack. I mean, we know some of these firms personally. We know their leadership, their leadership is American. They're extremely sensitive to political risk. They're just they're terrified. These are people who were were or are citizens of China under that quasi authoritarian regime.

00:06:38:14 - 00:07:17:05
Jamie
They're very inherently scared and skeptical of government. And so they are doing everything they can to be compliant. The one thing I would say that is the most interesting and probably the least enduring component of this phenomenon with with Chinese owned A-6 being operated at American operated facilities, just for starters, the high voltage infrastructure that's connected to the power grid is owned and operated by an American firm.

00:07:17:26 - 00:07:45:22
Jamie
And then you are prohibited under Texas law to own and operate high voltage infrastructure in a Chinese controlled entity. So that's it's called the Lonestar Infrastructure Act. So that on its face is illegal for anything like that. So there's no Chinese nationals who have the ability to destroy the power grid. They also would would not want to because that's their Bitcoin printing capital control circumventing machine.

00:07:47:25 - 00:08:24:17
Jamie
The one thing that's strange about their behavior is they do not perform economic curtailment as a profit. Maximizing miner like like other equipment. Clients are bitcoin mining company. We are a profit maximizing entity. We are never attempting to consume electricity that exceeds the dollar per megawatt hour equivalent of our bitcoin mine for any period. And so last year, just by the numbers, we're running 30 ish joules per hour hash fleet.

00:08:26:12 - 00:08:56:17
Jamie
That meant that in the west zone of ERCOT, we were online 90% of the year and we were offline 10% of the year. And it's not exactly perfect because we are avoided some of the coincident, the four coincident peaks to reduce transmission costs. So it wasn't always economically perfect, but it's a rough estimate of how many hours of the year, 90% of the hours of the year you could profitably convert electricity in the Texas wholesale market into Bitcoin 10% of the hours of the year.

00:08:56:17 - 00:09:26:14
Jamie
You couldn't. The peer group of other miners within Texas is not economic actually perfect. They are willing to overpay for power just to convert that into Bitcoin, which is really kind of a unique market dynamic. It is. It is not an economically rational market because the desire to circumvent capital controls and save in Bitcoin creates a premium, a slight premium on power.

00:09:27:18 - 00:09:34:29
Jamie
I do think it's going to go away because it doesn't make any sense. But yeah, that's one kind of interesting phenomenon.

00:09:35:12 - 00:09:51:18
Marty
So why would does it have to do with the capital controls? The reason for them doing this? Because they're afraid that if they were to sell that electricity for dollars and then have to convert it to Bitcoin and run into some problems trying to convert that.

00:09:51:18 - 00:10:27:23
Jamie
I think it comes from a bunch of potential factors. You know, the default hosting agreement template is a 95% uptime agreement. And so, um, there's some economic imperfection in that. That means that the the miner who is hosted is, is paying more for electricity than they should and and the host is leaving money on the table. You know what in our view looks like a perfect hosting agreement is one that is constantly optimizing between the two and sharing the revenue between the host and the miner.

00:10:27:23 - 00:11:00:16
Jamie
You know, there's not much the Chinese guys who are sort of watching loads in the West, real time settlement in ERCOT, but their host is. And if the contract restructured in such a way that the host would optimize between the two and always just settle the difference in Bitcoin, then that would be the economically perfect outcome, but that the industry has not progressed to having a creative profit maximizing hosting agreement and it does add some complexity.

00:11:00:16 - 00:11:19:05
Jamie
It adds some trust. There's some fidelity on doing settlement reconciliation for an ERCOT bill, which is is an additional incremental overhead for the accounting departments. So I, I'm confident it's going to change, but the current state of it is not optimized.

00:11:20:01 - 00:11:56:29
Marty
But it's become more optimized. Over the last five years, it seems like there's been this progression of miners making mistakes around the power purchase agreements, learning from those mistakes, getting better. PPA is now with ERCOT and miners becoming more immersed within the man response programs we've had a bit of trial and error over the last three years specifically with that and people are getting smarter and it seems like slowly but surely over time the industry is going through this iterative process of figuring out what is the ideal situation from locking down the power to setting up the hosting agreement to then doing that profit share on top of that.

00:11:57:07 - 00:12:09:29
Jamie
Yeah, definitely. And there's been attrition of less efficient operators and we had a major Texas operator compute North.

00:12:11:29 - 00:12:12:27
Marty
Just talking about them.

00:12:13:13 - 00:12:58:19
Jamie
Lose their business to their lender and it was being operated by U.S. BTC for a while, who bought it, who partnered with the lender I think to attempt to recover some of the assets. And now that portfolio has transitioned to marathon. So Marathon acquired the compute North built assets. Celsius is another one Celsius. Actually, I am good friends with the guy who was running the Celsius fleet and they were actually good from an energy management perspective, but they had a critical flaw in their capital market structure, obviously.

00:12:58:29 - 00:13:01:20
Marty
And the business model, the other part of their business wasn't.

00:13:02:14 - 00:13:42:09
Jamie
Yeah, I mean, that's what I mean. You know, they were running an ongoing fraud and had an asset and liability duration mismatch. So they, um, yeah, not necessarily an inefficient operator from the mining perspective, but a fraud. Yeah. So it's, it's getting better. It's getting better. And I just I tweeted yesterday, you know, that the addition of a base load consumer to that is never contributing to peak demand periods on the grid is literally the ideal consumer that you can add for the health of a power market.

00:13:42:09 - 00:14:32:00
Jamie
In a power grid, there's no better consumer. It's the inverse of a retail consumer, which around the steady state most of the year, the ERCOT power grid demands between 40 and 50,000 megawatts of power. And last summer, record hot summer peak demand was 83,000 megawatts plus or minus a little bit. So you're talking about a2x response from the generation fleet on the grid to be able to serve those customers and the more bitcoin mining base load that is building coming online here, the stronger a signal it sends to the generation community to invest here and commit to power generation resources.

00:14:32:16 - 00:14:54:27
Jamie
And then that Bitcoin mine load is completely gone during the peak. So you get this great signal to the generator community, Hey, come and build a power plant here. Uh, build your solar farms, build your wind farms, builds your natural gas plants, and then that demand is there 90% of the year. If it's economically perfect and it's gone, the 10% of the year when the residential community needs it.

00:14:55:14 - 00:15:16:13
Marty
Do you see a scenario where we build generation capacity to, let's say, like 100 gigawatts, like far beyond whatever peak demand would be in the middle of summer or middle winter, If we get bad winter storms here and Bitcoin miners just soak up the excess capacity in perpetuity. That is maybe my naive brain. That's like what I think should happen.

00:15:16:15 - 00:15:35:06
Jamie
No, I think you're thinking about it from like a very first principles. It may be a naive analysis, but it's first principles and it's correct. It is absolutely correct that especially with the market distorting price signal of the renewable energy production tax credit.

00:15:35:06 - 00:15:36:22
Marty
I wrote about this over the weekend, you.

00:15:36:22 - 00:16:09:00
Jamie
Know, it's just like you can underwrite. So a wind farm. Here's an example. A wind farm has a capacity factor of about 30 to 35% of its nameplate output per year. What that means is you build a one megawatt wind turbine, you will get 35% of the year of wind. That is sufficient to create generation for that. So there's 8760 hours in a year.

00:16:09:10 - 00:16:36:19
Jamie
You get about a third of that. So call it a little less than 3000 megawatts per year. 3000 megawatt hours per year of generation will come from that wind farm. That one megawatt wind turbine costs $1 million to build a rough, rough estimate. The production tax credit will give you around $30 a megawatt hour for every megawatt hour that you generate.

00:16:36:29 - 00:17:02:20
Jamie
So that's 3000 megawatt. And the production tax credit last ten years when you build. So it's 3000 megawatt hours per year times ten years, 30,000 megawatt hours times $30 a megawatt hour In production tax credit, it's $1,000,000. Exactly. So you could literally make $0 from selling energy and you will pay for.

00:17:02:28 - 00:17:03:07
Marty
About.

00:17:03:07 - 00:17:36:28
Jamie
Even the wind turbine. Yeah. And that is what is happening. This is why we have 10% of the year. There's negative negatively priced power in ERCOT and even though wind farms are not generating any revenue from selling energy, they're still building them because the federal government is effectively subsidizing this power. I mean, Corman's Bitcoin mine is a decommissioned wind farm that decommissioned in its 12th year of operation because once the production tax credits ended, they were never making money.

00:17:36:28 - 00:17:40:24
Jamie
So they had no no use for they were losing money.

00:17:41:10 - 00:17:56:10
Marty
And I want to dive deeper into this topic before we do that. Like why was Corman positioned to come take this asset and make a profitable? What do you do that makes us now profitable?

00:17:56:18 - 00:18:26:04
Jamie
Yeah, well I mean it's we're effectively the inverse of the market distorted price signal from renewable energy. We are there to consume power when there is no demand from the grid and then we are shutting off. All right. Our behavior is as close to economic perfect, economically perfect as possible. And that's the business is attempting to be as economically perfect in consumption of power as we can be.

00:18:26:11 - 00:18:59:28
Jamie
And the big barrier to entry for a mining startup, if at least if you want to play on grid and and wholesale, I mean, you know you know, off grid better than anybody. So you know, the constraints there are generator finance and all of that stuff for on grid it's a substation and interconnection and the interconnection queue in Texas is 2 to 4 years depending on where you're trying to go online and long lead time items on a high voltage grid.

00:18:59:28 - 00:19:38:06
Jamie
Interconnected substation are one year at best, four years at worse. And you're talking about making somewhere between five and $20 million of CapEx before you even mine a Bitcoin. So you're waiting 1 to 4 years and making 5 to $20 million of CapEx to be able to mine Bitcoin. It's extremely if you're a startup company that's and most investors who invest in a Bitcoin mining startup, they would like to participate in the price appreciation of Bitcoin.

00:19:38:06 - 00:20:11:25
Jamie
And if you do not deliver that, they get they're not pleased with you as a fiduciary of their capital. So you've got to convince someone to give you enough equity at a valuation that still makes sense for you or to give you an infrastructure loan to go and build a substation to make that happen. We were in in that phase of our business, we began our operations in upstate New York and we concluded not a great place to be and to do anything related to Bitcoin, much less be a Bitcoin miner.

00:20:12:20 - 00:20:50:19
Jamie
And we did a nationwide search of the best place to do it. We identified West Texas, and then we found a wind farm owner who was very motivated to sell their assets because they were actively losing money on it. And we proved that we could develop the infrastructure to do this. And we had a team who who was going to figure out ways to innovate in this industry, and we convince them to sell us their substation and transmission line from their wind farm as an equity round in our business.

00:20:50:29 - 00:21:02:07
Jamie
So we actually took a substation and a transmission line in-kind as an equity contribution to the company, and that was a game changer. I mean, that was that the reason why we exist today?

00:21:02:19 - 00:21:05:11
Marty
And that's a very creative way of doing a deal.

00:21:05:24 - 00:21:42:03
Jamie
Right? Creative. We had to convince people and and the deal had so much hair on it that it was there was virtually no other use for it. We had to renegotiate three ground leases. It joint ownership of the transmission line, a an electricity supply agreement with the utility and a cooperative transmission studies with ERCOT. We basically had to do six or seven transactions successfully in order to do this so that the previous owner realized how daunting it was for someone to buy this asset and how much hair there was on the deal.

00:21:42:13 - 00:22:09:14
Jamie
And we were able to negotiate favorable terms that were effectively like, Look, this is going to be really hard to do and we'll pay you some money for just the option to let us try. So we paid them $1,000,000 at the close of the deal. And then upon the successful completion of these six or seven agreements, the transaction became structured as a little bit more in cash and mostly equity in the company.

00:22:09:14 - 00:22:29:22
Jamie
So there the second largest investor in our company, and I believe that we will deliver them a great return over the long run on this wind farm that was effectively junk. And they turn they have a chance to turn trash into treasure through this company.

00:22:29:28 - 00:22:56:25
Marty
Well, that's why it's creative in two ways. Number one, just the pure structuring of the deal. Basically acquire these assets in a smart way, in a capital efficient way that allows you to operate very profitably and get a payback on your initial investment quicker than you otherwise would have. And and to now that they're the second largest equity holder in your company, you have to imagine I imagine you probably know you definitely know better than I do.

00:22:56:25 - 00:23:11:15
Marty
But if they're building wind farms, you understand the economic issues that these type of projects have now that they're investor and seeing what you guys are doing, I'm like, Oh shit, this is a solution to this massive problem that exists. Is that happening?

00:23:12:23 - 00:24:03:13
Jamie
It's happening. It's happening gradually and across the spectrum of large institutional power market firms. You've got a huge range of Bitcoin acceptance and Bitcoin bullishness and orange Pilling. I'm surprised at how low it seems to be to me now, especially because bitcoin mining loads can really add a lot of value to generation fleets. One of the biggest problems in generation fleets is the forward power market in ERCOT right now is trading about $55 a megawatt hour for the next year.

00:24:04:07 - 00:24:32:15
Jamie
It goes down a little bit. The further that you go out and gas is natural gas is very cheap. Natural gas, power plant power plants have a healthy operating margin. If they can secure a long term gas supply that's cheap and run it through a natural gas plant. Obviously wind and solar have no input fuel. So it's it's even a stronger value prop for them because they have no sensitivity to a fuel input cost.

00:24:34:04 - 00:25:08:17
Jamie
The big boogeyman in the power market is that the volatility distribution of power prices in ERCOT is so large right now and it's growing because you have if you're a generator in this grid, you're absorbing power prices that go down to -24. The chance to get power prices that go up to positive 5000 per megawatt hour. And if you are a gas plant and you say, okay, I'm going to hedge a year of power because sure, it's going to be -20, it's going to be 5000.

00:25:08:21 - 00:25:33:27
Jamie
I just want to lock that in and sell for $55. You it's very hard for you to structure what's called a unit contingent hedge, which means as long as my power plant is operating normally and it doesn't have a catastrophic maintenance issue, then you buyer of this offtake agreement from me, you will get your power. But if something happens to my plant, you're not going to get your power.

00:25:36:05 - 00:25:58:29
Jamie
From what I understand, the buyers are more and more reluctant to do unit contingent deals. Deals that only deliver the power when the power plant is is operational and what that looks like basically is if something happens with the power plant during the summer when it's the hottest, you're more likely to have maintenance issues when you're running your plant really hard and it's very, very hot.

00:26:01:04 - 00:26:42:08
Jamie
If you sell that hedge and your power plant goes offline, you're short power, your short power to the market and that opens you up to catastrophic risk as a company. If you put a Bitcoin mining load there, even with crappy equipment and you can put s19, there are signs there and then you have you don't need to hedge because you're you're selling electricity to the Bitcoin protocol at, you know, let's say the worst machines on the market is the M 30 S it makes about $85 megawatt hour.

00:26:42:16 - 00:27:02:17
Jamie
The best machine is yes, 21 You're making close just under $200 a megawatt hour. You've got a PPA with the Bitcoin network. It's a variable price PPA and it's volatile, but you've got to PPA with the bitcoin network and you have a computing fleet that can power down 95% of its load in 3 seconds in response to prices.

00:27:02:17 - 00:27:26:07
Jamie
So you would be able to keep your generation fleet running if your generator goes down, you just optimize the bitcoin load against the real time market. You already have that behavior there, but you then are gaining a call option where if your generation fleet is running and power prices go up, then you can deliver that power back to the grid and make make a lot of money there.

00:27:26:21 - 00:28:12:20
Jamie
And so this is a it's a very appealing proposition from the perspective of a of a power market operator, power generation operation fleet. It's just that they're they're not there. I think that some of the bankruptcies, especially some of the early movers, the more open minded Bitcoin believers in the power industry, they invested in some of these firms that had very bad outcomes in 2022 and that scared and scared people off because there's just a ton of career risk for the junior guy at X, Y, Z, Energy Co who's I, We're going to go Bitcoin, we're going to do this or do A series B and we're going to sell a PPA to these guys

00:28:12:20 - 00:28:21:29
Jamie
and this optimization deal. And next thing you know, you're in a bankruptcy court for two years and you're CEO and your legal team are like, This guy's a joker. And yeah, that's.

00:28:22:23 - 00:28:23:22
Marty
We're not touching this.

00:28:24:10 - 00:28:48:28
Jamie
We're not touching this. It's going to have to be built bottom up. It's going to have to be built by, in my opinion, by Bitcoin firms who already have Bitcoin risk, like we're wearing Bitcoin risk every single place in our business. There's no incremental risk to us to go into power generation other than the operating risks of the power generation, which are numerous and could easily destroy our company.

00:28:48:28 - 00:28:50:24
Marty
At that point. And for a penny in for a pound.

00:28:50:26 - 00:29:05:22
Jamie
That's right. There's well, we're not adding an incremental, uh, existential risk or career risk. It's already risk that we're wearing and we know we're going to consume power. And that's the most consistent part of our businesses. We will consume power.

00:29:06:15 - 00:29:18:10
Marty
And then bringing this back to the renewable energy credits, particularly focusing on reliable hydrocarbon and nuclear to nuclear doesn't they're not able to take.

00:29:18:19 - 00:29:19:05
Jamie
They are now.

00:29:19:05 - 00:29:20:26
Marty
They are now. Okay, now they're. That's good.

00:29:20:27 - 00:29:22:18
Jamie
Biden Biden threw him a bone.

00:29:22:20 - 00:29:45:28
Marty
Okay, That's good. It's good to hear that. But honing in on natural gas in coal facilities that aren't able to reap the benefits of these credits, that's the threat I wrote over the weekend. I was at an event in Palm Beach on Saturday, and there was a panel talking about the quote unquote, climate crisis and energy markets. And this is the question I brought up.

00:29:46:07 - 00:30:14:19
Marty
Knowing what we've seen in the Bitcoin mining industry is the renewable energy credits have created such a distortion in the pricing mechanism of the market that it is impossible to spin up new reliable generation. Not impossible, but very hard because you have these the material amount of times with negative pricing that really eats into the economic models of these reliable generation sources.

00:30:15:05 - 00:30:50:00
Marty
And then it's just a if you're not going to decommission these reliable sources of your mandate, you just decommission them by distorting pricing mechanisms. And that's happening as well, where you have reliable sources that are up and running when they have to decommission themselves because they're not economically viable and I think it is imperative that the reliable generation sources that do not have the benefit of the recs that are out there really figure out a Bitcoin strategy because that is the only way that they're going to stay viable as long as these credits exist.

00:30:51:01 - 00:31:22:07
Jamie
Absolutely. Yeah. And I wrote a in response to the the winter storm that we had here from Polar Vortex in January, I wrote a big tweet thread about this, which is that, I mean, if you look at what's happening here, so Texas is the second fastest or the fastest, I believe it is the fastest as of this year, the fastest growing renewable energy grid in America.

00:31:22:16 - 00:31:47:17
Jamie
By volume. It's the number one wind state. It's going to be the number one solar state and west zone. A lot of this is going in in west Texas. West zone is 92% renewable installation by nameplate capacity. So this is like the grid of the future over there in West Texas, which is somewhat ironic given that it's, you know, a major hydrocarbon economy, but it is effectively the grid of the future over there.

00:31:47:17 - 00:32:10:05
Jamie
So if you want to see what these utopian grid of the future ideas look like with all intermittent renewables, you just go look at West Texas and you can see what happens. There's some some system reliability issues because there's not as much inertia and rotating mass on the grid as when you have a bunch of coal plants and nuclear plants and combined cycle plants.

00:32:10:16 - 00:32:44:03
Jamie
So you have a generation fleet that's more sensitive to a voltage issue somewhere else on the grid, meaning you could have cascading trips of multiple generators and then they trip off multiple loads and you could have blackouts with these largely renewable grids. You also have higher prices. On average, you have lower prices for 90% of the year. But the remaining 10% of the year is actually pushing prices up with the same gas prices that we had two or three years ago.

00:32:44:16 - 00:33:12:20
Jamie
You know, if you exclude the Ukraine invasion when gas went to $10, the same natural gas, just to be clear, you have this of roughly the same gas price environment. The forward curve of power is twice as expensive and it's all coming from the shoulder. Our volatility when there's no solar and the wind hasn't picked up yet. And so people are paying more for power and they get a less reliable transmission grid.

00:33:12:28 - 00:33:39:06
Jamie
So it is like this the the fastest growing renewable energy grids. I don't think the people who live in them understand that we are voluntarily degrading our standard of energy availability from a very first world standard to closer to a second world standard. And at the same time, we are paying more for a less reliable product. And that's just facts.

00:33:39:06 - 00:34:03:09
Jamie
I mean, you know, it would be great if we could transition to a a future where we harness the power of the sun via wind speeds and and photovoltaic energy generation to power our species. But this transition right now, if you look at the early stages of it's like this is people are making a bad trade here. They're paying more for a worse product.

00:34:03:22 - 00:34:19:27
Jamie
And at the same time, the federal government is going further and further into debt to to effectively subsidize this D reliability D reliability rising process of the power grid.

00:34:20:06 - 00:34:41:10
Marty
Well, and going back to like the voltage synchronization and I learned Steve Koonin was at this event, he was explaining this over the weekend where basically with the natural gas plant a plant, a coal plant within the turbines, they can synchronize like the push and pull through the transmission lines where that does not exist for wind and solar, which is right, enters.

00:34:42:01 - 00:34:46:28
Marty
It introduces this destabilizing effect that can lead to these rolling blackouts, correct?

00:34:47:03 - 00:35:29:21
Jamie
Right. Yeah, it's called voltage, right through effectively, um, gas and anything that has a turbine that has this rotating mass that is being used to generate electricity, any turbine mechanism, the more rotating mass and inertia you have on, on a power grid, the right way to think about it is like it's like pressure in your tires. You're just it's you hit a little bump in the there and you don't feel it, uh, with inverter based renewables, wind and solar, you lose that inertia and you lose.

00:35:29:21 - 00:35:54:19
Jamie
It's like your tire becomes slightly deflated, so you're going to feel a bit more shock. And that just to continue the busted AC analogy, if it works or not, it's like you hit a bump that's big enough and the bump actually hits your hubcap and hits it hits your ear, your wheel axle, or, you know, whatever the appropriate automotive part is and it dents it and it knocks your your car's alignment off.

00:35:54:19 - 00:36:27:23
Jamie
In this case, it's you have a one system, one piece of the system trips and the sensitivity of the other pieces of the system will then trip in response to that and they can solve it. The solution is that the utilities need to upgrade different hubs, you know, different big substations are connection points within the system with shock absorbing equipment, and that then gets added into the transmission charges that consumers pay the next year.

00:36:27:23 - 00:36:40:00
Jamie
And so you have to have beefier transmission infrastructure to be able to absorb of these shocks. And that's another way that costs go up. It's just not not energy costs, it's transmission costs in that case. Yeah.

00:36:40:22 - 00:36:49:19
Marty
So in your mind, what is the ideal mix of these unreliable generation sources and reliable generation sources?

00:36:51:19 - 00:37:24:25
Jamie
I see both sides where if you can get the cost of solar and batteries and wind low enough and subsidies, push that demand to drive innovation in that and you upgrade the grid, you do end up having a lower cost of electricity because you're not relying on fuels. So you can see that it is utopian. It's far it's extremely difficult to understand if you have a constrained economic view.

00:37:25:09 - 00:37:47:18
Jamie
So just as an example, right now, because of the amount of solar that's currently installed in West Texas and the amount that is coming in West Texas. And so if for, say, West Texas is the grid of the future, let's look what this market looks like. There's nobody will buy a power purchase agreement from a solar plant in West Texas.

00:37:48:07 - 00:38:16:28
Jamie
And so you can't get that project financed anymore. So we're we're at we're hitting a wall in terms of the willingness of financial market counterparties and lenders to purchase this power for a term that is sufficient to underwrite the lender on it. So that means someone's got to put equity to to build a solar plant and no one's going to do that because you're just giving up a cash return for a fixed return.

00:38:17:21 - 00:38:46:00
Jamie
It just doesn't make sense to do that. And through that and a number of other constraints, including grid volatility, battery economic viability, and we can spend 30 minutes just talking about this. It's really hard to see how we get there without having a centrally planned economy that's extremely inefficient for a while. It's already somewhat inefficient. We have this distorting signal production tax credits.

00:38:46:07 - 00:39:13:06
Jamie
It's hard to see how we get there using our market economy. I think they should give nuclear a $50 production tax credit. They should give nuclear a $50 production tax credit. The government should subsidize the storage and and removal of nuclear waste. And we can decarbonize our grid since that's what a good percentage of the American people want and vote for by building nuclear plants.

00:39:13:06 - 00:39:39:21
Jamie
And there's so much innovation with vision. You have small modular reactors, molten salt reactors, you have really good vision technologies that are much safer than, you know, the historical fission reactors that have melted down a few times in other places. And France, for all the things that they that they may not be the best at, like winning wars or whatnot.

00:39:41:11 - 00:40:08:09
Jamie
They are great at nuclear, they have a great nuclear industry. They don't have a history of accidents. And the French government subsidizes the removal and storage of nuclear waste. And now they're one of the best performing European economies. In response to the the shortage of gas and having to import all this LNG and having those pipelines cut off from Russia.

00:40:08:16 - 00:40:32:02
Jamie
The French economy from an electricity standpoint, is doing great because they rely on nuclear. And if you look at that, at the carbon footprint of the French power grid versus the German power grid, now that Germany has decommissioned its new plants, it's relying on tons of wind and tons of solar and then lost its access to natural gas.

00:40:32:16 - 00:40:34:18
Jamie
They're burning wood pellets over there. They're burning wood.

00:40:34:18 - 00:40:41:29
Marty
Pellets. They're cutting down forests in North Carolina, and we're shipping over wood pellets so that they can power their economy in Germany.

00:40:42:00 - 00:41:06:03
Jamie
Exactly. And and they're paying more for power. And they're they're emitting more carbon than they were before. And it's extremely ironic that the German Green Party is so dumb and they did suffer a bunch of defeat in recent elections. So the German people are waking up, they're waking up, they're picking up on this being just really bad, illogical policy.

00:41:06:03 - 00:41:16:14
Marty
But they're losing major incumbent industry that's been around for well over a century. BASF is moving out. Some manufacturers are moving out. They like it's too expensive. I can't do it here anymore.

00:41:16:24 - 00:41:21:20
Jamie
And that should be scary for the world. Historically, a weak German economy has not led to good things.

00:41:23:22 - 00:42:00:15
Marty
It is insane how we've gotten to this point because that's I wrote the piece in the Bitcoin Times Energy edition and I focused on Germany and it is insane what they did over the first two decades of the century. Like in 2002, their overall generation capacity was 115 gigawatts, 84% of it was nuclear or coal, nat gas. Since then, they've expanded their generation capacity by more than two X to 240 gigawatts, and the percentage of those re reliable sources of overall generation capacity is 34%.

00:42:01:03 - 00:42:05:29
Marty
They decommissioned 20 more than 20 gigawatts of nuclear power. That was over that time.

00:42:06:04 - 00:42:08:02
Jamie
I mean, it's a real head scratcher.

00:42:08:19 - 00:42:29:17
Marty
And that's really the question there because like you think you more than double capacity. People look at that like, oh, that's awesome. Whatever that same time period, the amount of terawatt produced in 2002 versus 2021, which is when I ran the analysis too, fell by 2%.

00:42:29:17 - 00:42:29:27
Jamie
Yeah.

00:42:30:13 - 00:42:35:23
Marty
And went from 53 terawatt hours a year to 51 point something.

00:42:36:00 - 00:42:36:09
Jamie
Right.

00:42:36:16 - 00:43:02:21
Marty
And then the price of electricity for your average three person German household went up 187%. Yeah. Over that time period. And I think that is the perfect case study that anybody in the world deploying an energy policy needs to look at and say get I get everybody wants to decarbonize. I personally don't think that is what we should be doing.

00:43:02:21 - 00:43:23:16
Marty
I don't think I think the carbon the story is just that a hysteria, fear mongering campaign. I think we should be as efficient as possible, as clean as possible. But I don't think we should write these sources off just because they produce carbon emissions. But putting that aside, just looking at what Germany did, it's like we have the playbook here.

00:43:23:16 - 00:43:24:14
Marty
It does not end well.

00:43:26:18 - 00:44:10:20
Jamie
100%. Yeah, and I mean, we talked earlier about wind capacity factor is 30% of the year roughly. That's the number of megawatt hours you get for every one megawatt of installed wind. Solar is even worse. It's it's about 20%, 15 to 20%, depending on how strong the photovoltaics are. And so, yeah, you can double or triple the installed capacity of renewable generators, but because they're not generating when necessarily when there's peak demand, because they don't have the ability to ramp up production in response to peak demand and it.

00:44:10:20 - 00:44:23:04
Marty
Should be common sense like when, when is peak demand come, when is really hot, why is it really part of the reason is the wind is blowing. And the other end of the spectrum is when it's really cold. And why is it really cold is because the clouds are blocking the sun.

00:44:23:18 - 00:44:57:05
Jamie
It's right. Yeah. And and I mean wind in particular is really quite a I've gone as far as to say that wind power is poised for an electrical grid. Maybe a little extreme. If there's enough batteries, it would be okay. But if you look at a wind production, it is it peaks in the middle of the night when no one is using it and it declines to its lowest output level at the the hottest part of the day.

00:44:57:18 - 00:45:28:24
Jamie
And every record power price day we had in ERCOT last summer was a low wind day. People don't even look at load as the the driving factor for peak pricing. They look at a metric called net load, which is load minus renewables. And so you could have a really hot day and and a ton of demand on the system.

00:45:29:03 - 00:45:52:22
Jamie
But if the wind is blowing, you're going to be okay. You know, in the solar there's going to be generating and if the wind is blowing, you'll be okay. If there's no wind, it could not even be necessarily that hot of a day. And you'll have 5000 megawatt hour pricing. And it's the the the the electricity consumption peak every day of the summer happens.

00:45:52:22 - 00:46:20:16
Jamie
At the same time it is between four and 5 p.m.. That is always when demand is peaking as the sun's been going ripping away for a long period the day it finally starts to decline and now it is like it's following a clock. 5 p.m. power demand starts to drop off as it starts to cool down because the sun is less intense and that used to be the highest price point of the day.

00:46:20:16 - 00:46:47:21
Jamie
You know, it makes sense. That's the hottest. That's when power demand is the highest that should be the highest price. The demand for it, the good is highest. So that would be when the price is high. And power, of course, it's extremely temporally sensitive. It's a different price every 5 minutes in ERCOT Now because of the prevalence of solar, the actual price peak has shifted out by over 2 hours.

00:46:47:28 - 00:47:26:00
Jamie
So it's no longer 4 to 5 p.m., it's now 7:08 p.m.. 7 to 10 p.m. is where you have peak pricing because the sun has gone down and almost every day like a clock, 7 to 10 this past August, a little bit of June summer, July and September, the prices were at administrative caps of $5,000. So through this price distorting and market distorting signal of production tax credit, we've actually shifted the the peak price of power out to a vector that is no longer consistent where there's peak demand and ideal.

00:47:28:02 - 00:47:30:04
Jamie
Not not ideal, not ideal.

00:47:30:06 - 00:47:50:09
Marty
So how do you square that? I think Korn meant you guys are using wind West Texas is the the future of energy grids everywhere. Is this just an anomalous awkward period where figure out how to use this or is this simply pure central planning corruption that needs to be fixed?

00:47:51:26 - 00:48:30:00
Jamie
I see both sides and I love renewable energy. My business is economically viable and profitable because of this price distortion and we are following the price signals that are centrally planning overlords are are telling us to follow and we our load being where it is is contributing to the demand to build more these projects. And so you know in a way this cheap energy is creating a flourishing economic environment for the Bitcoin community in West Texas is it's what's happening there right now, which is kind of cool.

00:48:30:16 - 00:49:25:11
Jamie
And I also think another really unique thing about it is that Bitcoin ers are the only people who are and not the only people, but they're consistently among the ranks, people who regularly tell the truth about power markets. Like everything else that Bitcoiners touch, they rabidly devour the available information. They learn entirely new disciplines and they become extremely educated on the all of the contributing factors to whatever situation is going on, whether it's, you know, distributed systems engineering, the history of money, you know, the history of various schools of economic thought cryptography, chip fabrication, chip manufacturing, silicon, all of this, all of these disciplines, bitcoiners, they learn about them.

00:49:25:17 - 00:49:45:18
Jamie
They start sharing their reactions to these ideas and how they interplay with Bitcoin. And then you you listen to a Bitcoin or talk about one of those things that guys one of the probably the smartest people in the world on that particular thing. And now we see all these bitcoiners who are really smart about power. They're just going in and trying to tell the truth.

00:49:47:03 - 00:50:07:27
Jamie
Cormac does not necessarily have a dog in the fight. We're taking advantage of the current distorted market. We're consuming lots of cheap power. We're profitably converting it into Bitcoin and I would say a second derivative of, yes, we don't have a dog in the fight. We're not going to tell you we want this generation type over that generation type.

00:50:07:27 - 00:50:40:25
Jamie
All we want is cheap generation. We want the cheap as possible generation. As a second derivative of that, we become stakeholders in wherever we are situated. Jurisdiction. Ali and I like I have enormous exposure. Every employee in my company, every executive has enormous exposure to the reliability of the Texas grid, the cost of the Texas grid and the overall well-being of our electricity marketplace as an orderly and function place functioning place to do business.

00:50:41:06 - 00:51:09:29
Jamie
And so you get this second derivative where educated, open minded and unbiased bitcoiners come in and tell the truth about this stuff. And I, I really don't think it's a coincidence that every Bitcoin here resoundingly says the same exact thing. We have to nuclearized the entire economy. And it's almost like the opposite of a politician where there is no NIMBY, there's there's none of that.

00:51:09:29 - 00:51:38:10
Jamie
It's just unadulterated truth. And if you contrast that with a politician, you have this this rabid voter base who's hysterical about carbon and they're, you know, paving themselves to roads and throwing paint on throwing oil on paintings and being hysterical. They're single issue voters on climate. It is what it is, right or wrong. True or not, it is what it is.

00:51:39:18 - 00:52:10:21
Jamie
Getting elected requires pandering to those voters. And you can see that in the Venn diagram of I'm doing something about decarbonizing the economy and ideal policy in terms of going to going to get me reelected. Nuclear is not in the middle of that Venn diagram because nuclear pisses people off. People don't want nuke plants in their backyard. They're not educated about nuclear safety and the improvements in the industry.

00:52:10:29 - 00:52:35:19
Jamie
And so building a bunch of dumb wind turbines, building too many wind turbines and solar panels that create a massive distortion in power markets, raise prices and reduce reliability. That ends up being the Venn diagram place where you can appear to be doing something. It's going to be enough for four years to get reelected, and you're not actually a long term stakeholder in what you're doing.

00:52:35:19 - 00:52:48:16
Jamie
It's really bad politics and I don't know how it's going to change. I don't know who's going to be the nuclear renaissance man. Nobody listens to Bitcoiners anyways, So it's.

00:52:48:29 - 00:52:59:03
Marty
I should start. I think we just need to start buying these assets. That's happening too. I've seen it. It's one of my you U.S. people are buying coal plants. People are buying that gas generation.

00:52:59:11 - 00:53:03:01
Jamie
Yeah, because they're building new plants. One of my long term goals.

00:53:03:08 - 00:53:08:15
Marty
Yeah. It's a virtuous goal to strive for. Thank you for striving for it.

00:53:08:16 - 00:53:17:02
Jamie
It's hard. I mean, they don't make it easy. Yeah. Every engineering decision in a nuke plant gets ten x the scrutiny of of a solar plant.

00:53:17:12 - 00:53:40:28
Marty
Well, that's. I spoke with somebody who runs a nuclear power plant in Nebraska a couple of weeks ago, and they have this exact problem overbuilding wind specifically. And they want, I think, 20% of the year. The nuke plant has negative pricing. And they just said that because that's the other thing where the pricing corruption do, the subsidies comes in is nuke plants.

00:53:40:28 - 00:53:57:08
Marty
You can't just spin them up and down. Yeah, you have to keep them on, you know, And so these plants have to eat that negative pricing when it comes. And it's becoming longer periods of time throughout the year as these subsidies incentivize all this unreliable generation.

00:53:57:24 - 00:54:11:23
Jamie
Yeah, it's it's really it is a truly distorting price signal because it is actively disincentivizing the type of generation that the grid needs to at least maintain reliability or improve it.

00:54:12:00 - 00:54:23:16
Marty
Bitcoin fixes this. Just fucking put 100 megawatts of a mining operation behind the meter, right? Give the finger to the wind farms. When the negative pricing comes, say, hey, we're producing revenue anyway.

00:54:23:27 - 00:54:30:00
Jamie
Definitely. Yeah. It it fits so well with reliable generation and avoiding negative prices.

00:54:30:08 - 00:54:30:15
Marty
Yeah.

00:54:30:29 - 00:54:33:27
Jamie
Especially like the crappier rigs.

00:54:34:06 - 00:54:54:13
Marty
Yeah. And luckily it does seem like the bitcoin mining industry is becoming more smart about this, particularly behind the meter. To date it's been a lot of front of the meter, um, basically getting electricity from a substation that's connected to transmission line. I think a lot of people in the industry are like, how do we get closer to the source?

00:54:54:13 - 00:55:00:14
Marty
Let's go to the Wright Power facility and get to the point before it even goes through the transmission light.

00:55:01:07 - 00:55:34:18
Jamie
Yeah, you do avoid a bunch of transmission costs. If you do that in ERCOT, you can get a nodal price instead of a zonal price. And nodal prices tend to be lower than zonal prices because the every every power generation facility in ERCOT has a node. It has its own pricing point on the grid. And every load on ERCOT has they don't have a specific nodal location.

00:55:34:26 - 00:56:02:06
Jamie
It gets blended into what's called the load zone. And inside of the load zone, all transmission charges to route power to different users throughout the grid are basically aggregated and then averaged and split across all consumers. So in the West Zone right now, because there's a lot of Bitcoin miners popping up, there's a lot of renewable generators popping up and things are growing and moving pretty fast out there.

00:56:02:19 - 00:56:31:00
Jamie
The trends, the transmission cost to serve loads that are isolated specifically in the far west of Texas are really really high. And so those costs then get subsidized across the entire load zone because what they don't want, and it does make sense, is they don't want a particular load in a very remote corner corner of the grid. They have to pay ten times the cost of every other load in the in the grid for generators.

00:56:31:06 - 00:56:49:12
Jamie
They're willing to to do that. And they want to incentivize generation to go in the right places on the grid. But for load, there's very little tolerance for a particular electrical load to pay a drastically higher price, higher price. And so the cost to serve that load is set by the market and by the generators, and that's averaged across everybody else.

00:56:51:06 - 00:57:17:11
Jamie
And as a result, the the additional transmission charges to those loads that are in very remote places, they end up driving up the average price everywhere else. If you are behind the meter next to your own generator, you don't you avoid all those charges. And in the summertime, when the entire generation fleet is ripping, these transmission charges are relatively low.

00:57:17:11 - 00:57:45:00
Jamie
It's called congestion or basis. But as soon as the weather cools down and the system has much less load on it, so starting in October and basically going through May, the basis has been averaging over $10 a megawatt hour. So you're paying a four penny higher during those outside months. So if you co-locate with a generator and just do a direct agreement with them, you get that generator pricing.

00:57:45:00 - 00:58:12:28
Jamie
And it is a huge event. It's a it's another reason why the energy community should move close to the Bitcoin community because the same thing could happen to them. Like if you have a a power generation node that's in the middle of 25 wind farms, you're going to get the lowest prices on the grid for your power because you're producing in a place where there is no user, there aren't not very many users of the power feeds.

00:58:12:29 - 00:58:19:24
Jamie
Bring in a bitcoin mining load. You're like, Oh cool, I'm out of that now. I got my own. Come on, little guy here. And he just takes all the power I give him.

00:58:20:00 - 00:58:30:15
Marty
And it seems like bitcoin adoption is picking up, the price is going up. That's another thing heading into the having which is less than 10,000 blocks away after this weekend.

00:58:30:24 - 00:58:31:15
Jamie
Don't remind me.

00:58:33:13 - 00:58:46:16
Marty
But it is an interesting dynamic heading into the having if this price appreciation continues. Yeah, so it seems like a very unique dynamic that hasn't existed in a pre having market today.

00:58:46:17 - 00:58:52:16
Jamie
We've got rapidly rising difficulty. We've got rapidly rising price. Yeah.

00:58:52:29 - 00:58:58:09
Marty
What 50 day 50 K congratulations. Let's go or a 50 K.

00:58:58:16 - 00:59:01:24
Jamie
So we haven't been above 50,000 since I think.

00:59:01:27 - 00:59:02:05
Marty
20.

00:59:02:05 - 00:59:06:00
Jamie
One April of 2022. Or was it 22.

00:59:06:00 - 00:59:11:04
Marty
I think it was like I think now because yeah, we peaked in November 21.

00:59:11:07 - 00:59:24:04
Jamie
We peaked at and just below 70 in November and then we stayed around So it might have been between. Yeah, it's been a while. Yeah. Welcome back, boys. Let's go. Cool.

00:59:24:10 - 00:59:30:07
Marty
Yeah. Exciting prices for everybody, as you said. Hash rates absolutely screaming right now. Yeah.

00:59:30:25 - 00:59:37:16
Jamie
And fees. We've had a couple of periods where fees have been surprisingly high, too. So it's spending. Yeah, it's been a wild time.

00:59:37:28 - 00:59:41:24
Marty
Yeah. So what what are you worried about heading into the havoc?

00:59:42:02 - 01:00:03:01
Jamie
I think the thing I'm most interested to see is what kind of difficulty adjustment happens. Um, after the having Seems like there's a huge range of predictions. And did you ever read the COIN metrics report called the Signal and the nonce?

01:00:03:20 - 01:00:04:15
Marty
Yeah, the cream. Right.

01:00:04:15 - 01:00:17:23
Jamie
That I, I think so, but I'm not 100% sure. But effectively what they did was they used nonce patterns in the, you know, the machines that make up the majority of.

01:00:18:00 - 01:00:24:10
Marty
Yeah, you can essentially the reverse engineer which machine is producing which nonce.

01:00:24:19 - 01:00:25:05
Jamie
Exactly.

01:00:25:14 - 01:00:34:01
Marty
And so you can get a use the chain data to get a landscape of the inventory of machines that are being used exactly in point in time.

01:00:34:05 - 01:01:10:29
Jamie
And so you look at that report, it was released at the end of 2022. I'm not sure when the dataset they used was, but as of the end of 2022, 60 of the network was um, s19 and thirties or, or lower efficiency machines. So right around 30 to 35 joules per T and just looking at the break evens of that equipment and where we are today, I think as the next difficulty adjustment is projected to be 9%.

01:01:11:15 - 01:01:13:23
Jamie
Yes, yes. Yeah.

01:01:14:06 - 01:01:21:22
Marty
And I look at look up the estimate, the hash rate of all that space above 600, it'll.

01:01:21:22 - 01:01:41:29
Jamie
Be above 600 with that adjustment and uh, the, the break even now Bitcoin rip and so this information may be stale, but let's say that after this 10% difficulty adjustment and given the fact that we just probably rallied 10% over the last six or seven days, the break evens there are in the high seventies, mid to high seventies.

01:01:43:06 - 01:01:45:00
Marty
696, 91 six.

01:01:45:00 - 01:01:45:13
Jamie
92.

01:01:45:15 - 01:01:49:06
Marty
For our estimate. So yeah, take that with a small grain of salt.

01:01:49:08 - 01:02:10:03
Jamie
Right. So you have break evens in the mid-to-high seventies right now and you know having are going to bring that to the having is going to bring that to $37 in megawatt hour 37 or $39 megawatt hour. Not a lot of people who have power costs set it below all in power costs that are below $37 a megawatt hour.

01:02:10:16 - 01:02:13:08
Marty
3.7 cents a kilowatt hour right out there.

01:02:13:21 - 01:02:48:24
Jamie
And so I'm a big believer that we're going to have adjustments, going to have material downside difficulty adjustments in April and May and in previous cycles, ones that I've been seeing a bunch thrown around is the number of days it takes it has taken historically post having for hashrate to recover to its previous value immediately prior to the having and it's been the the last two halvings were between 30 and 70 days that hashrate fully recovered.

01:02:49:05 - 01:03:21:29
Jamie
But now we have so much of the hash rate is in ERCOT and so we have April 20th having projection date of May, and then we immediately start the Texas summer where last summer during a Bitcoin bull market and a little bit of an upward upward momentum market difficulty barely adjusted at all through the entirety of the June 15th through September 15th period.

01:03:22:04 - 01:03:24:28
Marty
As miners were participating in demand response.

01:03:25:09 - 01:03:51:07
Jamie
Yeah, because there was it was active curtailment and and there is demand response, which was curtailing miners. And it was a pretty hot summer everywhere. So that was every northern hemisphere grid. And the ERCOT obviously being the biggest one with a very, very hot high electricity price summer. So I think we could see that hashrate does not fully recover until fall October.

01:03:51:14 - 01:04:07:15
Jamie
Yeah, October would be my prediction for when hash rate is going to recover to its previous level from before. The having with the caveat that if Bitcoin just goes on an absolute heater throughout the rest of the year all, all bets are off.

01:04:07:15 - 01:04:14:03
Marty
Yeah we run the like if Sam samples we run to 100 K before the having happens. That helps a lot of things.

01:04:14:08 - 01:04:15:03
Jamie
That would be wild.

01:04:15:13 - 01:04:34:03
Marty
But then you have this dynamic to two dynamics at play where the sweaty ones are coming to market. It seems like Bitmain's going to be able to produce a lot of them. Yeah, I'm ten a month out between 50 and 100,000 per month. Most efficient, highest hashing machines that we've ever seen. They have a hydro unit which is even.

01:04:34:03 - 01:04:34:16
Jamie
More.

01:04:35:02 - 01:04:37:06
Marty
Efficient, higher hashing.

01:04:37:18 - 01:04:39:24
Jamie
Which even are a lot of people buying those hydros.

01:04:39:26 - 01:04:40:20
Marty
I'm not sure. Yeah.

01:04:40:22 - 01:04:42:24
Jamie
I mean, you know, I'm sorry to interrupt.

01:04:42:24 - 01:04:55:01
Marty
You know, I'm not sure, but we have that dynamic coming and it seems like they're already being plugged in, which I would imagine a lot of the hashrate growth that we've seen over the last few weeks is anyone's getting plugged in and they have a log.

01:04:55:01 - 01:04:55:23
Jamie
Of 20 ones.

01:04:55:29 - 01:05:07:21
Marty
Then you have this confluence of events where the international markets seem to be seeing what's going on here in Texas and begin to get into the hash hash rates, if you will.

01:05:08:09 - 01:05:35:22
Jamie
Yeah, for sure. The other thing, but the S21 is the research that's coming out on them is they're very thermally sensitive so that that hash rate will also be restricted in light of their during the summer. Yeah. Yeah. So it's it could all come online and then there could be a big adjustment from lower uptime. All of those S nineties and M thirties going offline a lot of curtailment for power optimization.

01:05:36:16 - 01:05:37:09
Jamie
It's going to be interesting.

01:05:37:16 - 01:05:43:02
Marty
A lot of them will be in low power mode throughout the summer. Oh yeah. Which they made easy with this, this model.

01:05:43:22 - 01:05:44:07
Jamie
Oh they did.

01:05:44:15 - 01:05:45:00
Marty
Yes.

01:05:45:06 - 01:05:51:00
Jamie
Okay. So you it's you don't need as much the third party firmwares.

01:05:51:21 - 01:06:03:06
Marty
Now you probably would benefit from it because you can probably get more modular with what you want to do But they do have stuck power mode, high power mode and low power mode.

01:06:03:08 - 01:06:07:06
Jamie
Do they have a curtailment, uh, function? That's. That's good.

01:06:07:13 - 01:06:08:03
Marty
I doubt it.

01:06:08:24 - 01:06:15:06
Jamie
I'm not sure. It's wild, man. Yeah, And is there any other industry where the the manufacturer of a good.

01:06:15:10 - 01:06:16:08
Marty
Case us such.

01:06:16:08 - 01:06:21:08
Jamie
Distinct customer base that regularly mistreats them and there's very little consequence.

01:06:21:12 - 01:06:28:00
Marty
So there's only two really. One, maybe we can call it a duopoly, but it's trending towards a monopoly.

01:06:28:01 - 01:06:33:07
Jamie
Right. Um, I have heard good things about uh, or down.

01:06:35:22 - 01:06:36:09
Marty
Were done.

01:06:36:13 - 01:06:38:12
Jamie
Or a been is a.

01:06:38:13 - 01:06:45:24
Marty
It's the ones that did the, the they basically have there is like a North American Bitcoin conference. Um, release it.

01:06:46:16 - 01:07:29:24
Jamie
I would, I don't remember seeing them there but I'm sure that they did um marathon disclosed a a seed investment in them early on and um, they're now releasing their first ASICs uh, and they're good and they are, they have the functionality that a Texas based Bitcoin miner would care about. They can under clock, they can overclock, they curtail really quickly and the you don't need to use third party firmware it's all built right into the the miner firmware, the stock firmware and it's great tool kit.

01:07:30:16 - 01:07:52:12
Marty
Yeah. So let's dive into this a little more for anybody who may be ignorant to this dynamic in the mining industry, which is you have these machines, you get them from the manufacturer or the manufacturer has a firmware that basically runs the machines. But miners, particularly in ERCOT, need to do more of their machines, particularly if they want to participate in demand response.

01:07:52:21 - 01:08:14:04
Marty
Mainly they need to be able to turn down very quickly, which the stock firmware does not enable. So you have to go to third party firmware services that essentially jailbreak the firmware on your basic, inject their own firmware that can then communicate with the pricing API to to do all this in an efficient manner.

01:08:16:03 - 01:08:45:05
Jamie
Yeah. And uh, the, the core features that you would want, well, take a step back, you sort of have two main categories of functionality. You have performance, meaning how many watts can I run through my chip and, and the more watts that I run through my chip, I may lose efficiency a little bit, but I'm going to get more Bitcoin out of it because I'm going to be submitting more valid shares to a pool.

01:08:45:05 - 01:09:17:09
Jamie
I'm going to be attempting more solutions at a successfully mined block. Then you have a separate functionality, which is the ability to respond to either a signal which is called a base point or a frequency based point from the grid operator, which will say, Hey, I need you to set your machine to this, and you have to respond to that quickly, or you're responding to a free market power price input or the ERCOT pricing API prices every 5 minutes.

01:09:17:18 - 01:09:50:00
Jamie
You respond to that data and then you power down the miner or continue mining based on that that price input. So neither of those functionalities comes out of the box with the existing manufacturers that you would know. And so like you said, this third party firmware is effectively jailbreak the that the miner and they allow a and non manufacturer firmware to run on top of it.

01:09:50:00 - 01:10:20:10
Jamie
And these farmers are great and they're they're way better and on the overclocking and under clocking side it's not really surprising that the basic manufacturers aren't thinking like this because they're not really mining that much. Maybe because they don't focus as much on cooling, but cooling is so important. It is the name of the game. This is why immersion in hydro y immersion is sort of dominating now in terms of performance and hydro is the next level of it.

01:10:21:02 - 01:10:49:14
Jamie
Immersion is your miners are submerged in an oil bath and it becomes a fluid dynamics equation instead of an aerodynamics equations. They're just constantly pumping oil that is colder than the chips through the miners because the oil is coating 100% of the surface area of the chips instead of air, which is not hitting anywhere near 100% of the chips, you're able to dissipate more heat off of the chip into the fluid.

01:10:49:23 - 01:11:37:25
Jamie
And the fluid is exhausted outside of the tub that the miners are sitting in. And it's put through some kind of radiator dry, cooler heat exchanger type of thing. And it's a constant loop. You have a big plumbing equation, you have a big fluid dynamics equation, and that helps you draw more heat off the chips. The reason why that's important is because the ideal operating temperature of a chip is 60 degrees Celsius plus or minus, and then the you can run a ton of wattage through a chip way more than it's standard operating spec as long as the chip stays at 60 C, it's not going to cause any harm to it.

01:11:37:25 - 01:12:01:29
Jamie
So these things are incredibly robust and there's no other reason why the manufacturers maybe aren't that clued into this or they don't care is because there's no other computing industry that treats a computer like a Corvette, you know, where they're just like, dump the fuel in, Let's go. We want to get as many horsepower out of this thing as possible and as many RPMs as possible, because it's a vanity engine.

01:12:02:10 - 01:12:30:28
Jamie
Bitcoin mining is effectively like that because each incremental watt of electricity you push through gets you an incremental quantity of SATs or fractions of said in the case of Watt. And so you have this this big thermal optimization. What that ends up looking like in Texas, if you have a good cooling system, is you're able to overclock your machines sometimes as much as 20 or 30% in the winter when the ambient temperature is cold enough.

01:12:31:08 - 01:12:58:17
Jamie
And in the summertime you're actually you actually have to do the opposite. Like we're out in the West Texas desert, it gets well above 100 degrees almost every day. And so that's the thermal, the cooling capacity. Thermally speaking of our cooling system, which is normally very good at dissipating heat, it actually is reduced because the containers are hotter.

01:12:58:28 - 01:13:31:24
Jamie
The air outside that you're using to cool the fluid is hotter, everything is hotter. And so you have to reduce the amount of wattage that you're pushing through the machine in order to target that 60 degrees Celsius temperature. And so what this company or Dean has done really well, from what we understand, we haven't tested them out, but we've talked to enough smart guys who we trust that have tested them is they allow you to tune the minor voltage and frequency up, which gets you a different wattage draw from the stock setting.

01:13:31:24 - 01:13:56:16
Jamie
You can go way down. And when you do that, drastically improve the efficiency of the machine. You can also go way up and you decrease the efficiency of the machine. And the reason why that's important is because if power is if the cost of electricity is zero, you want to push as many watts through your mining machine as humanly possible because you don't particularly care if your machine goes from 28 joules.

01:13:56:16 - 01:14:23:02
Jamie
A tear has your efficiency to 36 joules. Tear ash, you don't really care because the input cost of that power is zero. And you know, in Texas we have 10% of the year that's negative pricing. We have zero in our pricing for electricity all the time. So these these 14 guys have made a minor that is very well fit for an electricity market like Texas that has a lot of zero pricing and has a lot of very high pricing, you can get paid a lot to curtail.

01:14:24:02 - 01:14:35:13
Jamie
And so it has this is like the what the minor firmware of the future should look like. And by the way, firma is expensive. You pay 1 to 2% of your revenue for firmware. So it's a huge cost savings to buy from them.

01:14:37:12 - 01:14:44:29
Marty
And how big of a splash they're going to make in the market Hack how many machines can they produce?

01:14:44:29 - 01:14:48:15
Jamie
Yeah, I mean, it's starting an AC company is really tricky because.

01:14:48:18 - 01:15:20:19
Marty
That's the thing I worry about most is extremely capital intensive, takes a long amount of time and that time, well, that's maybe we're hitting an inflection point with the time aspect is not as, uh, it's not as important as it was in the past where you have these large jumps from seven nanometer to five nanometer, three nanometer. We're literally reaching physical limits on these chips that you're likely not going to have the step function improvement in the leadership level that has existed in the past.

01:15:20:19 - 01:15:34:07
Marty
So the concept of asset commodification has been talked a lot in the mining community over the last five years. If we're getting close to that point, maybe the barrier to entry for a new ac-dc manufacturers is a bit lower.

01:15:35:04 - 01:16:05:29
Jamie
I do agree with that. I still think that there's really it's very hard. Yeah. Um, simply because from the perspective of an operator, we probably are picking the machine that we're going to run six months out from when we, when we run it or when we even buy it. Um, so you're thinking about what's the form factor of this machine?

01:16:06:11 - 01:16:34:12
Jamie
Um, what's the availability of this machine from a pricing perspective, and is it, is it going to function the way that I believe, you know, there have been historically, even with Bitmain, the S17 had a failure rate bad epoxy, bad epoxy, the heatsinks were falling off. You had a massive failure rate on that. So there's even risk with with the existing manufacturers then what was that one that kind of looked like Mountain Dew.

01:16:35:13 - 01:16:36:03
Marty
New miner.

01:16:36:03 - 01:16:43:06
Jamie
Or something? Yeah, new miner that had a 50% failure rate and people who bought those.

01:16:43:26 - 01:16:46:16
Marty
Were actually go back drag events. Yeah. Down the.

01:16:46:16 - 01:17:17:28
Jamie
Line drag. So there's a huge risk in buying the first batch of ASICs from a brand new manufacturer and yeah, if you're designing for a particular basic it's you have to really commit to it. And so as a premise it should be traded at a discount to a bitmain or a micro team. You know, even MakerBot trades at a slight discount to bitmain still after and it's been around for five years.

01:17:18:11 - 01:17:36:14
Jamie
And so if you're going to be a new A6 manufacturer, you probably need to price at a 25% discount to the market in order to compensate your customers for taking a risk on a new batch. And then that gets better and better and better as time goes on. But it's so it's one part asset commodification and reaching the state of the art in the chip industry.

01:17:36:14 - 01:17:47:22
Jamie
And then that's the other part, consumer mindset and consumer psychology of taking that risk. So it's not a risk to be taken lightly. If you're a miner, you could literally lose your whole business.

01:17:47:22 - 01:18:12:13
Marty
Yeah. Now that's the other thing, leaning into like Asia commodification and we've talked about this on Peter's podcast, but it's worth repeating, like even within Bitmain alone, like the PSA is like, right with the power supply units that literally you to plug your machine into a wall like they're not uniform across every model. Right? And that blows my mind.

01:18:12:13 - 01:18:24:24
Marty
It's like, how have we not gotten to a point where it's like, you can get an order and expect a certain PSU, right? Even between like different model, different XP batches have different pieces.

01:18:24:24 - 01:18:36:07
Jamie
Remember when they made one version of the J Pro like two inches longer than the previous one? Yeah. And it caught everyone off guard. Yeah.

01:18:36:09 - 01:18:38:22
Marty
Fucked up all their heat circulation, right?

01:18:38:22 - 01:18:44:21
Jamie
I mean, if you're running immersion, two inches is a lot. Yeah, that's, you know, you design an immersion tank.

01:18:45:27 - 01:18:47:20
Marty
Based off the form factor specs.

01:18:47:20 - 01:18:57:09
Jamie
Exactly. Because you need to have uniform flow rate and flow distribution of the fluid through, all of the miners and so little changes to the form factor.

01:18:57:12 - 01:18:58:16
Marty
Fuck up the physics.

01:18:58:16 - 01:19:05:22
Jamie
It could totally screw up. It could screw up your entire cooling system. Yeah. If you're trying to be extremely efficient with fluid.

01:19:05:22 - 01:19:12:11
Marty
We're so early like that, it's like because we were and you weren't where you were in Nashville. But no, we're.

01:19:12:11 - 01:19:16:08
Jamie
You know, I didn't wear one we were talking to. I'll be there for a Bitcoin conference.

01:19:16:08 - 01:19:35:25
Marty
So there was, um, at the Energy and Mining Summit Nashville last month. There was incumbent data center guys that are getting into Bitcoin mining that was like their one like piece of feedback was like, I can't believe that none of this is uniform yet. Like this is such slapstick.

01:19:36:05 - 01:19:36:12
Jamie
Right.

01:19:36:15 - 01:19:39:29
Marty
Activity. The fact that you guys put up with any of this is the same. Um.

01:19:40:27 - 01:19:49:16
Jamie
I know it's, uh, bitcoin miners are just rabid risk on consumers. Yeah.

01:19:50:03 - 01:19:53:18
Marty
It is the wow. It's like digital wild getting. Yeah, to an extent.

01:19:54:12 - 01:20:45:28
Jamie
Plus, you really don't have much recourse. You know, it's no, it's a Chinese vendor and they send you something. You got to plug it in no matter what. You've got it. You've got two a year and the first three months are critical in a rising difficulty environment. And it's yeah, I mean, an American manufacturer would be great. Yes, I could, I should talk to some folks about this and it, it almost got off the ground, but it didn't a cooperative an American based asec cooperative, where a couple of really good chip guys got together and started a nonprofit cooperative where you put a little bit in for the IP and and the tape out and

01:20:45:28 - 01:21:14:07
Jamie
all of that just to get the process rolling. And then everybody got a machine at cost. So you just you bought the fab time, the foundry time, you got paid back in six and and you look what happened with the intel. I think it, it was a first iteration of that with a reputable chip manufacturer and that was that did not work out well for the firms who participate in that.

01:21:14:19 - 01:21:40:28
Jamie
Now, history has been really unkind to people. Take incremental risk in Bitcoin mining, whether it's incremental financial risk, um, like us taking on USD debt, getting into anything upstream in manufacturing, the A6, trying a brand new ac-dc manufacturer, buying their equipment for the first time, control boards, even power supplies. You know.

01:21:40:28 - 01:21:43:03
Marty
It's building your own data centers.

01:21:43:29 - 01:22:06:02
Jamie
That risk I think you need to take I think you need to take the risk of building your own data centers. And I think you need to take the risk of getting as close to the wholesale market of electricity generation on power side as those risks are. You can control them really well. They do require investment, but you can control them much better.

01:22:06:15 - 01:22:06:24
Marty
Yeah.

01:22:08:00 - 01:22:16:09
Jamie
Because think about it, if you rely on a third party equipment vendor for your data center infrastructure, that's also a risk.

01:22:16:17 - 01:22:17:00
Marty
Yes.

01:22:17:03 - 01:22:17:21
Jamie
As we know.

01:22:18:02 - 01:22:41:19
Marty
They have to weigh the rest of the time because I go back to this name of the game, I think again, the whole industry has been going through this iterative process, and that's one thing that encourages me this cycle. It seems that the industry is getting smarter about when they purchased the basics and where they are in terms of infrastructure build out with those buys because you want to buy those 86, get them delivered and plug them in immediately.

01:22:41:20 - 01:22:45:06
Marty
Immediately. Yeah. Which last cycle was not happening.

01:22:46:09 - 01:22:48:28
Jamie
Right. And it's still happening today.

01:22:49:01 - 01:22:57:24
Marty
Yeah. Rackspace is. Yeah. Scarcer Than bitcoin it seems right now. Is it. It was for a while. Right now I.

01:22:58:03 - 01:22:59:11
Jamie
Am not in the market so I don't.

01:22:59:11 - 01:23:01:07
Marty
Know. I think the market is responding but.

01:23:01:16 - 01:23:02:20
Jamie
Yeah we don't have as.

01:23:02:21 - 01:23:11:21
Marty
The time in 2122 where after the Chinese migration people like, yeah, we'll take your assets, we'll plug it in and how they got ship and know where to plug.

01:23:11:21 - 01:23:26:04
Jamie
Them in. Yeah I know that. Yeah they the Ac-dc manufacturers were doing a lot of hosting deals, trying to get xrp's plugged in. We host one of the coolest things about our company, so we have no customers.

01:23:27:08 - 01:23:29:00
Marty
It's a lot less stress.

01:23:29:04 - 01:23:45:10
Jamie
My last business we had lot of customers and my two business partners in that company, they both love. They love that about this business. Technically, we do have a customer. It's an algorithm. It's our customers. They distributed.

01:23:45:19 - 01:23:46:01
Marty
Hash car.

01:23:46:02 - 01:23:51:19
Jamie
SHA256 Yeah, it's it's a distributed computer algorithm.

01:23:52:00 - 01:23:56:16
Marty
That's technically that's customer of the Bitcoin network looking to transact or is it your customers?

01:23:58:13 - 01:24:26:19
Jamie
They are, but also just the, the Bitcoin code. Yeah, that, that's where the vast majority of our revenue comes from is the distribution schedule of the original algorithm. Yeah. And then there are some incremental people doing God's work and paying me fees, uh, paying us fees. And yeah, I mean, I, you know, this is I'm the king of controversy on this topic because I like fees, but.

01:24:26:25 - 01:24:27:10
Marty
I like fees.

01:24:27:10 - 01:25:10:25
Jamie
So I, I'm very indiscriminate about fees. I want anybody who wants to pay me fees to be able to do so. One of the things I think is that's going to be the coolest development over the next ten years is if if we assume that fee markets are going to materialize and become, um, the majority of contribution to mining revenue versus the way they are now where the subsidy is, I mean, in this block era, I think averaged 1 to 20 subsidy versus fees, maybe maybe 1 to 17 when we have it's going to be 1 to 10.

01:25:11:20 - 01:25:50:22
Jamie
Then we have in 2028, it's going to be 1 to 5. If fees continue to grow, you could see an entire block epic to be parity between fees and subsidy. In the end, you know, the 1.6 block reward error, 1.5 and change whatever it's going to be in 2028 to 2032. But what should happen or what I predict will happen that's going to be really interesting is the block times are going to be much slower during periods of peak demand that that phenomenon is going to accelerate like in the Texas summer block.

01:25:50:22 - 01:26:13:14
Jamie
Times are much they they don't grow at as consistent over rate as they do during the non summer months in Texas. And you're actually going to see that more intraday where like let's say it'll be an afternoon period block times will start to slow as all the miners begin curtailing. That will have a reflexive effect where the fee market.

01:26:14:03 - 01:26:14:20
Marty
Jumps up.

01:26:14:23 - 01:26:34:22
Jamie
Starts to jump up, and then you'll see this inverse correlation between LNP's and fee markets, where the fees could rise up so much that it actually pushes the LNP of electricity to become attractive to mine. So all this hashrate will come online in response, the rising fee market. So you have this like crazy interplay between pay.

01:26:34:22 - 01:26:37:16
Marty
You imagine over time sort of like this, but it'll eventually get to like this.

01:26:38:11 - 01:26:51:18
Jamie
Yeah, it will eventually become very efficient. But it's I think you could start to see a long term trend where off peak electricity has materially faster times over a period of entire year than on peak electricity.

01:26:51:18 - 01:27:02:22
Marty
What was once the, the BitMEX payout fee spike will turn into. Yeah. Energy price volatility and curtailment. Yeah. This sea spike.

01:27:02:22 - 01:27:08:02
Jamie
Elegant intersection of fees and lamps.

01:27:08:07 - 01:27:14:00
Marty
Yeah. For those who are unaware like BitMEX, they would do what every Monday morning at 9 a.m. they do payouts or something like that?

01:27:14:00 - 01:27:15:13
Jamie
I believe that's correct.

01:27:15:25 - 01:27:21:23
Marty
And you could visibly see it on the changes they got. Fees are up, right? Max is paying out all their users.

01:27:22:21 - 01:27:34:25
Jamie
Yeah. Uh, I was thinking about that, uh, how far we've come since the that March 2020 BitMEX flash crash.

01:27:35:07 - 01:27:35:25
Marty
What does happen?

01:27:36:00 - 01:27:36:27
Jamie
Uh, yeah.

01:27:37:12 - 01:27:38:13
Marty
Turn the engines off.

01:27:39:19 - 01:28:10:01
Jamie
Crazy to think that that Arthur that Bitcoin almost a bitmex was the dominant exchange in terms of liquidity in March of 2020 and they only accepted Bitcoin as collateral and and blocks were full fees were through the roof. Bitcoin crashed over 50% in like a couple of hours overnight. It was trading eight, it was trading 8000 on whatever that period.

01:28:10:25 - 01:28:24:21
Jamie
Yes, right around there it's trading 8000 and within a few hours it was trading 3300. And so nobody could get additional collateral into BitMEX because the blocks were so full and the fees were so high.

01:28:24:22 - 01:28:25:24
Marty
Some of them were cheap out.

01:28:26:00 - 01:28:48:09
Jamie
And all of the collateral that was on there, which was supporting Bitcoin long positions, like if you wanted to buy Bitcoin on BitMEX during that time, you could only post Bitcoin as margin collateral. So your margin collateral was was crashing in value. Nobody could get additional margin call margin collateral in there. So everyone was getting liquidated. Uh, and then Arthur just pulled the plug.

01:28:49:25 - 01:28:51:27
Jamie
There was definitely a meeting after they were like, All right.

01:28:51:27 - 01:28:52:24
Marty
Guys, as.

01:28:53:04 - 01:28:54:12
Jamie
You were, you guys are done?

01:28:55:04 - 01:28:55:25
Marty
Yeah Yeah.

01:28:56:07 - 01:28:58:29
Jamie
You have to have a US dollar.

01:28:59:13 - 01:29:12:04
Marty
I mean, I know people who are running funds that were said, yeah, trading X, right? And they didn't put a high enough fee on their transaction and cannot meet their, their collateral call.

01:29:12:14 - 01:29:17:08
Jamie
That was probably the sickest the sickest buying opportunity in the hit in the history of Bitcoin.

01:29:17:08 - 01:29:17:21
Marty
Yes.

01:29:18:15 - 01:29:27:21
Jamie
In terms of what was going on in the backdrop from a macro economic perspective, money printing and all of that.

01:29:28:02 - 01:29:29:12
Marty
Anything up to a having.

01:29:29:22 - 01:29:37:04
Jamie
Into having you. Exactly into a having and you got an opportunity to buy bitcoin at 3500 bucks coin one.

01:29:37:05 - 01:30:02:05
Marty
Was I was so Parker and I recorded a podcast with Kyle Bass from him capital literally 5 p.m. before all of this happened. And I think the last question, as Parker said, what's going to happen with Bitcoin? He was like, I don't know just make sure you have your coins in Self-custody Yeah, thank God for Santucci. Let's say about that.

01:30:02:05 - 01:30:07:16
Marty
I was like smash buying trout that I was like, Oh shit, 5000, 3500. Like.

01:30:08:08 - 01:30:13:14
Jamie
Yeah, I bought a bunch of too. Yeah, it was good. And then people got stimulus.

01:30:13:23 - 01:30:14:02
Marty
Yeah.

01:30:14:09 - 01:30:17:10
Jamie
So everybody could roll their stimulus into Bitcoin. Yeah.

01:30:18:03 - 01:30:18:23
Marty
It's crazy time.

01:30:19:14 - 01:30:32:15
Jamie
It was. And then a year later meme stock. Uh, with, uh, deep, deep fucking value value.

01:30:33:05 - 01:30:36:14
Marty
AMC GameStop. Did you watch the money at.

01:30:37:06 - 01:30:38:03
Jamie
No. Is that the.

01:30:38:13 - 01:30:40:24
Marty
The movie on it? It's pretty good.

01:30:41:12 - 01:30:52:26
Jamie
That was one of the funniest, most fun times of my life. I remember every day just getting up and just like seeing the moves in the markets and the memes flying around on Twitter.

01:30:53:01 - 01:31:02:29
Marty
The the meme culture around that time, I think I don't want to say it peaked. Maybe we can get to that level again, but that is the last all time high. I mean, culture is around there.

01:31:03:05 - 01:31:05:20
Jamie
I love I'm a big meme culture guy.

01:31:05:23 - 01:31:08:13
Marty
Same. It's a it's good for the soul.

01:31:08:28 - 01:31:09:14
Jamie
It is.

01:31:09:21 - 01:31:22:25
Marty
And it's actually we laugh about it, but I do think it is one of the most potent tools we have to take away power from. These people probably do not deserve it. You need to ridicule these people. Memes are the most effective way ridiculing these people.

01:31:23:06 - 01:31:39:17
Jamie
They definitely are. Yeah. And there's nothing that ridicules them more than cryptocurrencies. Based on memes of dogs speaking broken English that are worth tens of billions of dollars.

01:31:40:18 - 01:31:42:12
Marty
This bank. Uh.

01:31:43:01 - 01:31:54:19
Jamie
No, I don't think bank is worth ten. Doge is worth ten buck doge. Yeah. Yeah. I mean there's there's three dog coins that are worth more than $1,000,000,000.

01:31:57:19 - 01:31:58:29
Marty
Bitcoin's worth more than a trillion.

01:31:58:29 - 01:32:03:19
Jamie
Now Bitcoin is worth more than a trillion. And guess what? Even our little dog coins are.

01:32:03:19 - 01:32:04:16
Marty
Worth more than a billion.

01:32:04:16 - 01:32:05:25
Jamie
They're worth more than a billion.

01:32:07:00 - 01:32:13:00
Marty
Where do you think this all goes? You optimistic? Cautiously optimistic. Everything. Bitcoin mining.

01:32:13:18 - 01:32:15:23
Jamie
Yeah. I'm this. I'm so optimistic.

01:32:16:06 - 01:32:16:15
Marty
Yeah.

01:32:17:01 - 01:32:17:22
Jamie
I'm blinded.

01:32:18:06 - 01:32:44:07
Marty
I, I have this long running belief that's becoming more hardened by the day that are in order of operations to the success of Bitcoin in the front of the order operations lies in the hands of the mining industry, convincing the energy sector like I do this right, I become extremely more hardened in that belief and more optimistic as time goes on, even though there's still a disconnect and not everybody gets it.

01:32:44:07 - 01:33:01:06
Marty
I think people like paving the way and others in the energy sector are beginning to have the lightbulb go off is creating the environment where it can really have this escape velocity. Terms of the acceptance of Bitcoin outside of this bubble that we've been in.

01:33:02:05 - 01:33:11:22
Jamie
Definitely, yeah. I mean, so we launched our our flagship financial product last year, which is are our Bitcoin denominated bond.

01:33:11:25 - 01:33:12:08
Marty
Yes.

01:33:12:18 - 01:33:38:25
Jamie
And we raised just under a thousand Bitcoin. It was a rate D uh, five or six C offering, which is an an SEC registered offering for accredited investors only. The only way you can do lending products with retail is if they're callable and if you have a call. And that's how your, um, that's how you have an asset and liability duration mismatch like Celsius and blockfi had.

01:33:39:06 - 01:33:57:23
Jamie
But so we launched this product the Bitcoin liked it a lot. We did it on pretty good terms. It was a venture debt. So you got a bunch of warrants in our company and you get a 10% yield on Bitcoin and you're at the top of our capital stack your first lien over all the assets of the company.

01:33:58:09 - 01:34:27:07
Jamie
Um, and you know, the way to think about this is we're taking this Bitcoin, we're turning it into the machines that create Bitcoin and, and that, you know, it's a, it's a very secure form of commodity production finance. It's like borrowing barrels of oil to go and build an oil drilling site and to pay your, your leases and and get your drill rig all set up.

01:34:27:17 - 01:34:55:10
Jamie
And so there's nothing like it in commodity production finance because obviously oil has is not transportable. There's tremendous storage costs. There's there's gravity differentials between different types of it's not a fungible commodity. Uh, and natural gas, same thing doesn't work. You could do it with gold. I'm surprised it never existed in gold, but you know, it is what it is.

01:34:55:13 - 01:34:57:02
Marty
Because of pretty high storage costs.

01:34:57:04 - 01:35:19:12
Jamie
See it? High storage costs, too. Absolutely. But Bitcoin is it's a monetary commodity. It's it's instantly transportable. It's fungible. Uh, you know, there's zero friction in it. And so it is this is a perfect method of commodity production, finance and where I'm going with this shell of my companies.

01:35:19:25 - 01:35:23:05
Marty
Yes, I'm happy you brought it up, because that's what I want to end with. Is this.

01:35:23:06 - 01:35:54:16
Jamie
Okay, good. But here's here's our kind of big thesis on it. And I tell these people and they so like, All right, cool, buddy is like we said before, Cormann has no customers. Our customer is distributed algorithm, distributed software platform, and occasionally it is individuals who want to pay fees. It's 5% individuals, one of individuals and firms paying fees, 95% a software algorithm.

01:35:55:09 - 01:36:06:07
Jamie
That software algorithm is the single largest non-state buyer of electricity in the entire world and growing at at 15 gigawatts.

01:36:06:16 - 01:36:08:07
Marty
Approaching 700 x slash.

01:36:08:21 - 01:36:42:10
Jamie
999 95% uptime times 16 gigawatts. It's the single largest buyer and most consistent buyer of electricity in the entire world. Bitcoin denominated finance power plants together. If you're converting energy into Bitcoin's bitcoin should be the financing instrument for power plants. And you get those two things together. Now, admittedly, right now it's there's obvious reasons why this is not happening.

01:36:43:07 - 01:37:08:00
Jamie
The having is one of them because a power plant amortization schedule, meaning you invest X in CapEx, expect to get your CapEx back in Y years. Y years is about ten years. And you're going to have, depending if you time the cycles perfectly, you're going to have to having during that ten year period, you might even have three if you screw it up, I think.

01:37:08:12 - 01:37:34:09
Jamie
Uh, and so if you take a bunch of Bitcoin and use it to buy a power plant and then plug in miners and go through the whole cycle there, during that period, you're going to your Bitcoin denominated revenue is going to go down pretty, pretty materially per unit of hash rate during that time period. And so it becomes hard to align the amortization schedules of the power plant with the mining operation.

01:37:35:04 - 01:38:06:11
Jamie
Dogecoin has no having. So it's actually you could probably find its power plant with Dogecoin Dogecoin's denominated debt for it stood show. But obviously the doge market cap is immaterial and it's a it's a significantly worse store value than bitcoin because it has perpetual issuance. There are no halvings. But what's really cool about bitcoin is that in that world where the fee pressure and the fees rise to be more than the subsidy, it mitigates the effect of the having successively.

01:38:06:11 - 01:38:24:29
Jamie
And so I think my big prediction in the next decade is people will start to use a little bit of Bitcoin in their cap stack. You know, it would be crazy to not have a power plant, a Bitcoin mine, a little bit of Bitcoin denominated, a little bit of usdc equity, a little bit of USD debt, like that's what the right cap structure looks like.

01:38:25:08 - 01:38:52:18
Jamie
Then you have an indiscriminate buyer of energy. You can sell that energy back to the grid anytime you want. If Bitcoin flies around and there's a bunch of volatility, your bitcoin denominated financing piece protects you from that and the revenues in a period where your bitcoin mining revenue goes down expressed in dollars per megawatt hour, your opportunity to optimize power and sell it back to the grid goes up.

01:38:53:06 - 01:39:22:04
Jamie
The more that the Bitcoin breakeven goes lower and lower, the more that you would be curtailing your Bitcoin mining load and selling the power back to the grid. So the interaction of these markets where you have a flexible generation stack and a and a flexible Bitcoin mining stack that also has that fee pressure dynamic with block times getting slower, it is all of like it fits together so elegantly and I'm a big that's my big prediction.

01:39:22:04 - 01:39:26:22
Jamie
That's my crazy prediction is Bitcoin denominated finance for power generation becomes the thing.

01:39:26:22 - 01:39:27:27
Marty
I don't think it's that crazy.

01:39:28:07 - 01:39:28:27
Jamie
Yeah I know.

01:39:28:29 - 01:39:29:22
Marty
You're good idea.

01:39:29:22 - 01:39:32:26
Jamie
You're on the the absolute fringe of.

01:39:33:01 - 01:39:55:13
Marty
This is how we get to a type one civilization and you need these Yeah you need these types of and again going back to like the first order of operations in the energy sector being so important think that's the big question is like how do you go from like a dollar reserve system to a Bitcoin reserve system? And like this is part of that process where you basically team up, right?

01:39:55:21 - 01:40:09:01
Marty
You have two of the most important tools that humanity, money and energy team up. And then from there you can disconnect from the dollar system and begin to have the Bitcoin standard materialize.

01:40:09:08 - 01:40:57:13
Jamie
Here you have a little microgrid. Yeah. Where you have a little a community that's organized around a power plant, a bitcoin mine and and short range transmission infrastructure and you just how you have economically perfect consumption of energy, you have incentives for demand response there. I do think some of the cool things that are happening with residential demand response are are another interesting step in this direction because right now Texas has started to do this a little bit, but it's it's blown up a couple of times where residential consumers can could participate more directly in demand response and you know actively turn off their AC when power prices get high and it would reduce their

01:40:57:13 - 01:41:29:14
Jamie
power bill dramatically. Um that but getting the largest consumer largest and most indiscriminate consumer of peak power the residential consumer to be more price sensitive also is a going to be an interesting restoration of free market like real price discriminate free market consumption because right now it's you know you just get your power pass through by your retail electric provider.

01:41:29:26 - 01:41:53:01
Jamie
There's not a lot of sensitivity to when you've consumed. It's just a big blended rate that gets distributed out amongst everybody. And that's the reason why the average residential consumer in America pays 16.5%, 16.5 cents a kilowatt hour for power, and the wholesale market is 4 to $0.05, and they're overpaying by a factor of three for their power because there's no price sensitivity on that.

01:41:53:19 - 01:41:57:22
Jamie
I think that's also a cool development that that plays really nicely with Bitcoin.

01:41:59:20 - 01:42:00:19
Marty
In terms of.

01:42:01:04 - 01:42:39:13
Jamie
In terms of the the way the let's say, the coincidence of supply, demand and price sensitivity all happening in electricity markets right now. Right now you have a lot of dumb electricity market participants, not dumb, but not sophisticated, not savvy. Now you have smart home technology and and that like a tech enabled digitally native power grid where the whole home can respond quickly.

01:42:39:28 - 01:43:09:09
Jamie
You know, you're not like honey, you run out to the breaker in the garage and so, you know, open the breaker. It's like, no, the this all the systems are connected to a price feed. And the price feed is ingesting the real time wholesale market electricity cost. And if you are a person who doesn't want to pay a $400 power bill in the summer, you just say, you know, I'm willing to sweat a little bit from 4 to 6 p.m. and that's family sauna time now.

01:43:09:12 - 01:43:25:06
Jamie
Yeah, we make we make a thing of it or we have a like a cold plunge or cold pool in the backyard and we have family pool time from 4 to 6 p.m.. Instead of ripping the APS, the AC at the absolute peak of transmission charges and electricity prices on the power grid.

01:43:25:16 - 01:43:37:09
Marty
That makes sense. Yeah, that would help obviously service demand in other areas. I'm sure up bitcoin plays into this like the bitcoin miners less incentivized.

01:43:37:10 - 01:44:13:06
Jamie
Because the bitcoin miners are already the the inverse of the residential consumer. Yeah. And so what it looks like is you have a power grid that's like it's a bit more reasonably sized. It actually works better with intermittent resource and battery. So in the world that the Inflation Reduction Act gets renewed again and then again and the government endlessly subsidizes the, the development of renewable resources and batteries and they insist that that's the direction that the species go, at least in North America, for our energy needs.

01:44:13:19 - 01:44:40:26
Jamie
Then you start to have okay of Bitcoin mining, which is price sensitive, inverse of residential peak demand. You have residential demand response and participation there with a direct and sensitive, a direct incentive for price sensitive electricity. Consumers reduce during the peaks. And so the way it manifests is you don't have a 40,000 megawatt differential between steady state electricity demand on the grid and peak demand.

01:44:40:26 - 01:44:45:09
Jamie
You have a much narrower thing and you have more perfect electricity markets. Is the way that that kind of.

01:44:46:03 - 01:44:49:18
Marty
That's the goal. Yeah you're late to your call.

01:44:50:06 - 01:44:51:01
Jamie
But I am I.

01:44:51:07 - 01:44:54:17
Marty
Yeah but I think this is a good place to have No that's.

01:44:54:17 - 01:44:54:24
Jamie
Okay.

01:44:54:28 - 01:44:55:27
Marty
Very optimistic.

01:44:56:03 - 01:44:56:24
Jamie
This is a great chat.

01:44:57:06 - 01:45:09:01
Marty
It's always a great chat. I'm happy we're able to obviously record it with Peter, but on this show able to record it for those. Jimmy I go way back to New York. We were both we're both New York refugees living in Texas now.

01:45:09:02 - 01:45:09:15
Jamie
Yeah.

01:45:10:14 - 01:45:12:01
Marty
Your hair was much shorter back then.

01:45:12:08 - 01:45:12:18
Jamie
Yeah.

01:45:13:10 - 01:45:14:09
Marty
And you didn't have a beard.

01:45:14:27 - 01:45:20:26
Jamie
I was envious of you. And when you moved to Texas all those years ago, I mean, save some for me.

01:45:21:09 - 01:45:27:10
Marty
Oh, you came and got yours. You came and got yours. Janie, that is certainly clear. Yeah.

01:45:28:06 - 01:45:30:12
Jamie
Oh, yeah. Thank you very much for having me. Well.

01:45:30:25 - 01:45:34:09
Marty
Thank you for coming around to do this much more. Also, you got to come to Austin more. I know you're West Texas.

01:45:35:01 - 01:45:37:15
Jamie
I may actually be getting a place here.

01:45:37:15 - 01:45:40:26
Marty
Yeah, get a place here. Yeah, I'm hang out here because I think.

01:45:42:02 - 01:45:43:19
Jamie
The way West Texas is great.

01:45:43:19 - 01:45:45:10
Marty
Though. That doesn't sound that great.

01:45:45:13 - 01:46:00:15
Jamie
I mean, isolation has its benefits. That's true. It's a big, wide open landscape. There's a lot of liberty now here. It feels like there's a lot more rules here than in West Texas.

01:46:01:17 - 01:46:04:18
Marty
Yes, a lot less rules compared to New York City, though.

01:46:04:27 - 01:46:05:16
Jamie
That is true.

01:46:05:17 - 01:46:06:19
Marty
Which is the tradeoff that I'm.

01:46:06:19 - 01:46:17:13
Jamie
Willing to make. Fair enough. Good trade. Good trade. But West Texas is some real freedom out there. Yeah, let's agree to do this. Maybe you'll come west a little bit more often and I'll come east for more.

01:46:17:13 - 01:46:19:23
Marty
We can make that agreement. I need to get up. Done.

01:46:19:23 - 01:46:21:11
Jamie
Sox's done deal. That's a deal.

01:46:21:22 - 01:46:24:13
Marty
That's a deal. We're going to have another deal. Peace and love for you.

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Key Takeaways

Macrovoices Episode 414 explored a range of critical topics impacting global finance and macroeconomics. Louis Vincent Gave, co-founder of Gavekal, returned as this week's guest, providing a far-reaching analysis of current economic trends and their potential future implications.

1. China's Role in the Global Economy: Gave emphasized the significance of China's strategic maneuvers in various sectors, notably the electric vehicle (EV) market and its broader implications on global industries. He argued that China's dominance in the EV supply chain could challenge Western economies and policymakers, who have been pushing for an electric future, inadvertently promoting Chinese products.
2. The Electric Vehicle Implosion: Gave discussed the EV market's challenges, including the oversaturation of EV producers, high repair costs, and battery issues, leading to potential price wars and margin compression. This situation may induce Western countries to reconsider their aggressive EV adoption strategies.
3. Commodity Markets Outlook: Despite the potential setbacks in the EV industry, Gave remained bullish on commodities, particularly metals like copper and nickel. He attributes this optimism to the growing demand for commodities from emerging markets outside of China, where a burgeoning middle class is driving consumption.
4. The Nuclear Renaissance: Townsend highlighted the advancements in nuclear energy, particularly in China, and the potential implications for global energy independence. He suggested that China's aggressive investment in nuclear technology could position it as an energy powerhouse with significant geopolitical leverage.
5. Equity and Market Analysis: The episode provided an in-depth look at the S&P 500's breakout above 5000, the concentration of gains within a select few tech stocks, and the divergence between the performance of large-cap indices and broader market indicators like the Russell 2000 and market breadth metrics.
6. Implications of Market Concentration: Gave and Townsend discussed the narrow focus of market gains, likening it to the tech bubble of 1999. They cautioned that such concentration could indicate an unhealthy market and potential future corrections.

[

Broken Energy | Lyn Alden & Erik Townsend

Macro Voices, a financial podcast, aired a special long-form episode featuring bestselling author Lyn Alden. The episode delved into the topic of “broken energy” and the significant risks posed by current energy systems to society.

TFTC – Truth for the CommonerStaff

](https://tftc.io/broken-energy/)

Best Quotes

1. "The only wealth is man" – Louis Vincent Gave, reflecting on the importance of human capital in economic growth and innovation, particularly in the context of China's aggressive investment in education and technology sectors.
2. "Economic activity is energy transformed" – Louis Vincent Gave, emphasizing the fundamental role of energy in driving economic activity and progress, and the strategic advantage of having access to cheap and reliable energy sources.
3. "We don't have oil, but we have ideas" – Louis Vincent Gave, recounting France's historical approach to overcoming its lack of natural oil reserves by investing in nuclear energy, highlighting the importance of innovation in national energy strategies.
4. "If you weren't in the Max Seven, you were actually having a pretty dismal year" – Louis Vincent Gave, on the market dynamics of 2023, where a small group of tech stocks drove the majority of market gains, leaving other sectors behind.
5. "I always get so much out of these conversations, and it's a great pleasure to catch up once again" – Louis Vincent Gave, expressing appreciation for the discourse and insights gained from the Macrovoices podcast discussions.

Conclusion

The episode concluded with a reflection on the importance of understanding the nuanced shifts within the global economy. The discussion with Louis Vincent Gave highlighted the potential shifts in geopolitical power as China asserts itself through technological advancements in nuclear energy and the EV market. These developments could reshape global trade, energy independence, and economic stability.

The conversation also pointed to the risks and opportunities present in a market heavily concentrated in a few tech giants. While such concentration can lead to short-term gains, it may not be sustainable in the long run and could result in significant corrections.

Ultimately, the episode underscored the need for forward-thinking strategies and innovation in addressing energy needs and economic growth. It called on Western economies to recognize and respond to the challenges posed by China's strategic advancements. As the world continues to grapple with these complex issues, the insights from Macrovoices remain a valuable resource for sophisticated investors and finance professionals.

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Key Takeaways

In this fascinating episode of the Tom Nelson Podcast, the rise of citizen journalism and its impact on democratizing information was discussed with guest Jeff Reynolds, senior investigative researcher for Restoration of America. Reynolds, who has written a book on dark money in politics, delves into the science and ideology behind the climate movement.

Reynolds became a cataclysmic climate change skeptic after years of scientific fascination, leading him to question the catastrophic claims made by climate change proponents. His skepticism grew as he found that questions about climate change were often met with ad hominem attacks rather than substantive answers. This spurred him to dig deeper into climate science, focusing on the lack of debate and logical fallacies present in the discourse.

The discussion between Tom and Jeff also touched on the "culture of lying" surrounding the theory of man-made global warming, which Reynolds believes became especially prominent following Michael Mann's hockey stick graph. Reynolds' report, "How the Left's Global Warming Ideology Wrecked Science," criticizes the shift from empirical data to computer modeling and interpretation in climate science, which he argues has led to data manipulation and exaggerated predictions of doom.

Reynolds highlights the media's role in perpetuating a fear-based narrative around climate science and points out the financial interests behind climate reporting, including the influence of nonprofits and billionaires.

The discussion also covers the Michael Mann trial and the implications of various scientific revelations on the credibility of climate science. Reynolds expresses concern over the judicial process and the potential bias of a DC jury in assessing the facts of the trial.

Throughout the conversation, Reynolds emphasizes the need for critical thinking and questioning in the face of overwhelming and often one-sided climate messaging.

[

Evaluation of Historical Global Temperature Data: It’s Fake

The concept of measuring a singular “global temperature” is inherently complex due to the natural vast temperature variations across different geographical locations. To derive an accurate average global temperature, extensive data from a multitude of locations is required.

TFTC – Truth for the CommonerStaff

](https://tftc.io/historical-global-temperature-data-evaluation/)

Best Quotes

1. "The biggest lie in American climate journalism is that reporters cover climate science as a science." - Holman Jenkins (quoted by Jeff Reynolds)This quote underscores the concern that climate journalism has veered away from objective scientific reporting and towards advocacy and fear-mongering.
2. "A culture of lying has metastasized around the theory of man-made global warming since its emergence as a prominent political movement in the 1990s." - Jeff ReynoldsReynolds criticizes the spread of misinformation and the lack of honest discourse in the climate debate.
3. "The longer the earth goes without proving the theory, the more wild-eyed the predictions of doom get, and the more its adherents resemble members of a cult." - Jeff ReynoldsHere, Reynolds suggests that as the dire predictions of climate change fail to materialize, the rhetoric becomes more extreme and disconnected from empirical evidence.
4. "It's the democratization of information." - Jeff Reynolds on citizen journalismReynolds celebrates the role of citizen journalism in providing access to diverse viewpoints and information that might otherwise be suppressed or overlooked.

Conclusion

The discussion between Tom Nelson and Jeff Reynolds offers a critical and insightful look into the climate change debate, emphasizing the importance of skepticism, the examination of evidence, and the recognition of bias in media reporting. Reynolds' perspective challenges the mainstream narrative of climate change and suggests that there is a concerted effort to manipulate data and public perception for political ends. While the podcast presents a nuanced view that may not align with all listeners' beliefs, it encourages a deeper engagement with the facts and a more rigorous analysis of the claims made by climate change advocates. The conversation with Reynolds is a potent reminder of the need for continued dialogue and critical examination in the pursuit of truth, particularly in fields as impactful and contentious as climate science.

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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.