Blocktime
Your go-to Bitcoin podcast hosted by Pierre Rochard, VP of Research at Riot. Tune in weekly for thought-provoking discussions, exclusive interviews, and a deep dive into the disruptive power of Bitcoin.
Instagram:https://bit.ly/BlocktimeIG
Facebook: https://bit.ly/BlocktimeFB
X: https://twitter.com/BlocktimebyRiot
YouTube: https://www.youtube.com/@RiotPlatforms/podcasts
Blocktime
Episode 40: Riot's Halving Party at PubKey - Exclusive with Pierre Rochard and Jason Les
Join us for Episode 40, an exclusive with Pierre Rochard and CEO of Riot, Jason Les at Riot's Halving Party on 4/19 with PubKey. Don't miss the Q&A from the audience at the end.
Follow Blocktime on Twitter: https://twitter.com/BlocktimebyRiot
Follow Blocktime on YouTube: https://www.youtube.com/@RiotPlatforms/podcasts
Thank you, thomas, for hosting us and for hosting this important conversation around Bitcoin, bitcoin halving, bitcoin mining and Riot. So I'm Pierre Rochard, I'm the Vice President of Research at Riot, and here with me is Jason Liss, our CEO at Riot Platforms. So thanks for joining us, jason. Thanks for having me.
Speaker 2:Wow, thank you, Great audience. I was actually just thinking. I think the first time we met in person was essentially the last time I was in New York in 2018 for Consensus. So it started. You and I started back then, and here we are continuing the story six years later.
Speaker 1:That's right. Shout out to Mike Dudas, formerly of the Block, who organized the conference where we met. I remember speaking about Bitcoin maximalism and then meeting the Riot team afterwards.
Speaker 2:It was a very compelling story.
Speaker 1:It's amazing what happens in New York City. It really is the financial capital of the world, but the energy capital of the world is Texas, and this week there was tremendous news about really cementing Texas's position as the energy capital of the world. So walk us through what happened, what does energization mean and what is Corsicana Sure?
Speaker 2:So, to give everyone some background, riot owns and operates a Bitcoin mining facility in Rockdale, texas. It has a total 700 megawatts of capacity. As far as we are aware, that is the biggest Bitcoin mining facility in the world. But we weren't done there. We weren't satisfied. The growth appetite was still there. So about two years ago we acquired 265 acres of land in a city called Corsicana, texas, about two hours away, and that was very valuable land to us because it was right next to an interconnect where we could get one gigawatt of capacity from the grid. So we decided well, what better place to build a one gigawatt site? So a lot of work went into that. That's why this energization today is so meaningful for us. There's so much that goes into building a site of this size from scratch. A site of this size from scratch. You know this doesn't start on a perfect piece of land with everything you need right there ready to begin.
Speaker 2:We had very imperfect land we had to build out to be accommodating to a one gigawatt facility. I think, when it's all said and done, we'll have over 660,000 square feet of Bitcoin mining facility space built out there. So there was a lot of work that get that went into that. These sites don't come up overnight. It's planning, there's permitting, there's approvals that you need at different levels and there's very long lead electrical uh pieces of electrical infrastructure. You need to make a like this site happen. So, um, this was a new challenge for us because the power for those of you familiar with bitcoin mining infrastructure our interconnect was in a 345 uh kV voltage.
Speaker 2:So we had to build a 345 kV substation and then a 138 kV substation, uh, which was a lot of work and upfront cost to get this capacity, and then we've built the rest of our facility from there. What's really exciting about our new facility in Corsicana is it is 100% immersion cooled. So one gigawatt, 10 buildings over when, all said and done, over 150,000 miners all immersion cooled. So today we announced energization has commenced there. The grid power is flowing through our substation into our transformers and our first miners began hashing there today. And this is the growth pipeline for Riot for the next couple of years. And it's a big advantage Riot has. Because of the investment and the work that we put in over the past couple years, we have this predictable and very visible growth pipeline of how we will add tens of exahash over the future years. And um, that's a big advantage that Riot has because a lot of other miners out there to reach their goals, they have to do different MNA, they have to do different M&A, they have to find a small to greenfield opportunities and build them all together. But because of the investment that we made, we have this growth pipeline. And the last thing I'll add is this the fact that we have this opportunity today is reflective of our long-term view and commitment to Bitcoin.
Speaker 2:We started this project in the worst market in recent years, in 2022. Bitcoin was sliding down Luna, three Arrows Capital, everything in the world was collapsing, bitcoin price was going down like crazy and I had other Bitcoin mining executives who are my friends in the space calling me up saying oh, what are you doing? This is crazy. You're going to need to just hold on to your cash and hunker down to whether this bear market. Why are you spending money and building a facility now? Well, it was because of our long-term belief and our conviction around Bitcoin and, as our historical strategy has shown us, that when we invest in building in bear markets, it pays off in an outsized way in the bull market, and I'm pretty bullish, so I wouldn't say we're quite there in the bull market yet, but the good market. We have improved market conditions this year, compared to last year at least, and we're very excited about capitalizing on that with this new site.
Speaker 1:So you mentioned buying the land, and that reminds me of when people say you know, mcdonald's is actually a real estate business. You can often look at Bitcoin mining in the same way that it's a real estate business. What is it strategically that is so important about? Where you site your Bitcoin mining facility?
Speaker 2:It's all about access to power. Texas, like you noted, is an energy country. You noted, is energy country. Texas has a ton of energy infrastructure built out there, so it is one of the very few actually probably more accurately, the only place in the world you'll be able to get a one gigawatt interconnection for power. So that land, while imperfect and needing a lot of work, was valuable to us because it was right next to what was known as what is known as the Navarro switch that has a total of five gigawatts of capacity. We had a one gigawatt Bay out of that and that provided us the tie-in that we needed to build this site the work, the civil engineering that was necessary.
Speaker 1:These were massive, massive machines that were essentially leveling the ground here, and then on top of that you've got all of this electrical equipment that goes into it. I mean, I think that for us, what's easiest to think about of Bitcoin mining is you plug a machine into the wall but you don't realize that you've got to build the wall, you've got to build the electrical that is going to that outlet, and so on and so forth. So you mentioned they were long lead items. Why are they long lead? Who else is competing for this?
Speaker 2:There are so many applications that are trying to get power capacity right now. As our world becomes more digital and there's increased demand for data center space, for AI application for all sorts of things, these different industries need to build their own substations, and this equipment is highly engineered. Only so much of it can be produced. So if you wanted to go out and build a site like that from scratch today, you're looking at close to a two year lead time to procure that equipment or you're procuring something that might have some operational risk around it. So there's a lot of competition for power capacity these days and there's probably never going to be a one gigawatt interconnect approved anywhere. Again, I could be wrong, but I think that's very likely. And even if you did get that getting all the equipment you need in this hyper-competitive time where you're not only competing against Bitcoin miners, you're competing against HPC and AI and all sorts of other types of data centers that need this capacity as well it's really tough. So it is a long-term view is required to succeed here.
Speaker 1:So with that long-term view, I mean rewind two years. You knew that there was going to be a halving this year, and so why is it that, as a company, riot wanted to invest in Bitcoin mining, despite the?
Speaker 3:halving.
Speaker 1:What's the thinking, what's the factors behind that?
Speaker 2:So the supply of Bitcoin, as obviously everyone here knows, is fixed and predictable, and the halving is the mechanism that makes that possible. So that's not something that we, as miners, are afraid of or have a bad relationship with. This is a part of what makes Bitcoin valuable, and I think the best evidence to that is you look at how the at least the US dollar value of mining rewards has increased so much over time, despite having from 50 Bitcoin block subsidy to 25 to 12 and a half to 6.25 and now to 3.125 today. So the opportunities in Bitcoin mining has increased over time and Bitcoin mining is a game of scale.
Speaker 2:So, when you know, it's funny today, as the halving comes up and it's a news item, different media outlets want to ask me what's Riot doing to prepare for the halving. Are you turning the machines up or off? Are you doing this or that? And it's like guys, there's no doing anything for the halving. Now. The preparation for the halving came years ago and Corsicana is one of those things. The fact that we were building a pipeline for growth with new generation, more efficient machines, the fact that we were building that two years ago, is how we prepared for this halving and the various strategic initiatives and evaluations we have underway right now are preparing for the halving in 2028. So it's important to always be forward looking and always be planning many, many years in advance in this business.
Speaker 1:So that seems at odds with the volatility of Bitcoin's price. Right, because you know, bitcoin was at 17K not so long ago. Now it's at 60-something thousand. So what is it about the DNA right that keeps people's heads screwed on straight right that during the bear market, you don't panic, sell and exit the industry and then, during the bull market, you don't massively leverage up and then blow up. You know, is it your background in poker?
Speaker 2:Yeah, Well, poker certainly teaches you a lot about volatility and variance and sticking to a long-term strategy and conviction, despite noise in the short term. I think what's really special and valuable about Riot is we are a Bitcoin company. People are here because of Bitcoin. We're not a commodity business that just happens to be mining Bitcoin because it's the thing that we can make the most money at. The leadership and the people that make up Riot are here because of Bitcoin and they're passionate about Bitcoin. Here because of Bitcoin and they're passionate about Bitcoin and with that long-term view, this short-term noise doesn't really matter as much.
Speaker 2:You mentioned poker. So I played poker professionally for a very long time and one of the most difficult things about playing poker for a living is sticking to a positive expected value strategy, when the deck gets thrown in your face every single day and you lose for months on end and you have to have the confidence and also the right objectivity to know that you have a winning strategy and you're making the right long-term move. Still and it's very similar to what we do here at Riot we have a long-term belief in Bitcoin. We believe the properties of Bitcoin means that the price will appreciate over the long-term, and what happens in one year, two year or even three year period is less important to us.
Speaker 2:What we have to do is build a business to manage through and weather all of those different periods. You can't realize the benefit of a long-term vision unless you make it to the long term. So because of that, we focus on having a very competitive low cost of power, so our direct energy cost of Bitcoin is as low as possible. We focus on that by having a strong balance sheet so we can weather downturns in the market and we can continue to build when the market is in tough conditions, which oftentimes are the best time to be building and we just keep that long-term vision of Bitcoin. And that kind of simple formula has boded well for the company over the long term, current share price levels not withstanding.
Speaker 1:Not withstanding. So you mentioned the low cost of power. Why is it that Texas in particular has a low cost of power compared to other states or other countries?
Speaker 2:So Texas is a very energy rich state. There is a lot of generation there. There is, however, a lot of volatility in that generation. There are a lot of renewable generation sources solar and wind which of course have a marginal cost of production of $0, and they're receiving pretty significant federal subsidies so they can afford to sell power even when the market price goes negative there. So you have a lot of zero-cost marginal energy there. And then there's a healthy amount of baseload energy there, and right now natural gas is particularly cheap. So the break-even prices for natural gas plants are around recent level lows in the past few months in the past year.
Speaker 2:So all of this generation and a pretty healthy amount of transmission as well although there's still work to be done there has resulted in a competitive energy environment. I think that's the kind of final, which actually foundational, pillar. The fact is is Texas has a deregulated energy market. The state does not control energy. You have these different generators and buyers of power who are in the marketplace freely competing, and that is what drives some of the lowest wholesale prices of energy in the country, if not the lowest in the country.
Speaker 1:All right, now I'll switch to a harder question. Okay, so 2017, people are saying there's too much Bitcoin mining happening in China and then China banned it and then a lot of it came to Texas. Do you think there could be too much Bitcoin mining in Texas? Do you think there could?
Speaker 2:be too much Bitcoin mining in Texas. I think Bitcoin mining is going to evolve to be a tool that's paired with energy generation and electrical grids all over the place. So there's not enough Bitcoin mining yet. The flexibility, the interruptibility of Bitcoin mining makes it such a valuable tool for balancing supply and demand mismatches in the grid.
Speaker 2:The more Bitcoin mining you have on a grid, the less volatility you have in that marketplace, which is a overall better power environment for everyone, including the consumers. So I think ERCOT, and any energy grid out there, benefits from more Bitcoin mining being there, and by building this new one gigawatt site in Corsicana, we're going to be participating in the same power strategies that we use out in Rockdale that are beneficial and supportive to the grid around us.
Speaker 1:So Rockdale is an amazing facility. We learned a lot from the Rockdale facility. What do you see in Corsicana, where, whether it's micro BT or the, the focus on immersion? Do you think that the outcome in Corsicana is going to be different than what we've seen in Rockdale?
Speaker 2:Yeah, we're really excited about that. You know we've been talking about the energy opportunity in Texas and one of the costs that comes from that is having to operate in a very hot environment. Anyone who has experience in Bitcoin mining knows that heat is essentially the enemy you're fighting all the time. Even in more temperate environments, heat is something you're always trying to manage and in Texas, when it gets up to I don't know 120 degrees, it can be very challenging, especially in the summers. I mean even today it's April, I think it hit a high of 90 degrees today. You know that's still warm weather.
Speaker 2:So one of the major ways that we're managing that is by using immersion cooling infrastructure out at Corsicana. We've done that at Rockdale to some extent. We have 200 megawatts of immersion running there. However, at Corsicana we're building all immersion. We've learned a lot from that technology. The manufacturers that we buy from have improved models and offerings all the time. We had the opportunity to test a lot of that before deploying it at Corsicana. We had the opportunity to test a lot of that before deploying it at Corsicana. We got the opportunity to test micro-BT's immersion cooling specific miners before purchasing a large amount to deploy at Corsicana. So we're still building out the site here. There's still work to do to optimize it, but I think we're really going to have something special here and we're going to have a site that's able to withstand those tough temperatures more and get us higher uptime and higher utilization of hash rate around the year.
Speaker 1:That's fantastic, so I want to open it up. Do we have any questions from the audience? Yes, you were raising your hand. Yeah, yes, you were raising your hand.
Speaker 3:First of all, appreciate you guys giving us an insight into the whole mining industry from Riot's perspective.
Speaker 3:So I have done extensive research and if you look at what Texas experienced during the storm in 2021, storm Uri, I think where it was able to basically Bitcoin mining was able to facilitate the grid, the grid, um, do you guys foresee a future where energy is denoted in bitcoin? So, like you have more futures instruments, derivatives, contracts, options that are settled not in usd but actually in bitcoin? And if adding bitcoin to your balance sheet, just like tesla did and micro strategy and all those uh, forward-thinking companies, do you think that the esg component that is very popular right now in the investment world can be satisfied simply by just adding Bitcoin to your balance sheet? So, let's say, you have 100 Bitcoin on your balance sheet. That gives you I don't know, I'm just making up numbers like $1 million, $2 million in credit as a tax, like an offset, basically for your balance sheet. So do you foresee that future getting there as we accelerate the adoption of, you know, renewable energy, basically with Bitcoin mining?
Speaker 2:Thank you, Selling energy contracts in Bitcoin.
Speaker 1:Yeah, so selling energy contracts in Bitcoin?
Speaker 1:I think it would be very interesting. There has to be a double coincidence of wants right, that one, we're producing Bitcoin so we can pay in Bitcoin, and two, that the energy producer is selling electricity and wants Bitcoin, because then they can turn around and use that Bitcoin, either hold it on their balance sheet or go pay for their vendors, go pay for their fuel, and so, because of there being a whole supply chain, I think my thesis and what we're seeing is that Bitcoin has to first be adopted as a store of value by everyone in the supply chain and then, magically, you get a circular economy and everybody can pay in bitcoin because everyone's comfortable with it. So they're, you know, energy companies. On one hand, um, you can think of them as old, right and slow, but on the other hand, they're some of the most innovative companies in the economy and they've really unlocked, uh, the potential of energy in texas, uh, several times reinventing themselves. So I could absolutely see that future. It's just going to take time to do education on that.
Speaker 2:And then the second part of your question was holding Bitcoin on our balance sheet as a demonstration of being an ESG-friendly asset. I think well, one. I don't think ESG focused investors are looking at Bitcoin miners much right now. I think if the market better understood the value that you know that you're talking about, that Bitcoin mining brings to renewable generation sources into the grid, they'd have a different view around it. So I think it's the operations, more so than the Bitcoin on the balance sheet, that would change those minds. Though If an investor understood, hey, this miner A, for example, is paired up with a renewable generation and this is supporting that generation in ways X, y and Z, then you know that could be compelling to kind of fit their investment mandate.
Speaker 2:But there's a lot of education to go there on it, because most people just stop at anything that uses energy is bad. That's a very dangerous mindset. That's a scarcity mindset. The use of energy fosters human flourishing and it supports and new innovations like Bitcoin that are critically important. So we're fighting the good fight out there and doing all the education that we can.
Speaker 1:Great questions, though I'd add on ESG. I mean, I think that the words make sense, right Environmental, social, governance these are all things that we want. Then, I think the sticking point comes how do you measure it? Governance these are all things that we want. Then, I think, the sticking point comes how do you measure it? And a lot of the measurements that we've seen for ESG are not adapted to Bitcoin mining, so they won't even have Bitcoin mining as an industry category. Instead, they'll tell you that you're a telecom company or that you're a software company, which doesn't make sense and then, when they apply all the metrics from those industries to the Bitcoin mining industry, then everything looks out of whack and they're scratching their heads of why did you score so high or so low on these different metrics? And so I do think that there needs to be. If we're going to want to do ESG reporting, then we need an ESG framework that is adapted to the Bitcoin mining industry, so that we can actually be comparing apples to apples. But that's a great question.
Speaker 2:Drew.
Speaker 4:For the fans.
Speaker 2:For the fans, you can do the mic. Thank you very much.
Speaker 4:So my two questions second part's for Pierre. But first, do you, what year, if any, do you anticipate your power trading side of the business, called basically the demand response game in ERCOT? At what point, what year do you think that might surpass Bitcoin mining revenue in terms of how much value you bring to the shareholders, if any? And then my second question is really just for Pierre, about the Satoshi Nakamoto Institute. But I'll let you guys answer the first question first.
Speaker 2:Pierre, I feel like the first one's probably more up your wheelhouse.
Speaker 1:Well, that's up to God, because it depends on the weather is the honest answer. When I look at the development of renewable energy in Texas, there can be such a thing as too much of a good thing and I think that we're already there of too much of a good thing, of too much wind and solar and not enough of batteries and dispatchable power in Texas. I think that the natural fix for that is peaker plants for natural gas, but so I had on top of that, there's more development of renewables in the pipeline, and so I do think that this problem is going to get worse and that the solution is going to become more valuable. But then the other side of the equation is what's going to happen to the Bitcoin price. Bitcoin price continues to appreciate, then it might be a very long time before the energy aspect of it outweighs the Bitcoin aspect of it.
Speaker 2:Yeah, kathy Wood says her bull case is $3.2 million by 2030. So we're going to need a lot of bad weather to beat that. Too conservative, I like it.
Speaker 4:So inshallah, the I mean S21, inshallah. Bitcoin goes to $3.2 million, but there could be many. S21s is also the other part of the question, and my question for Pierre is what year will the Satoshi Nakamoto Institute accept their first matriculating class of young students looking to learn from the best and brightest that the human race has to offer?
Speaker 1:That's another great question. So I co-founded the Satoshi Nakamoto Institute in 2014 with my college buddy, michael Goldstein, and he is. You know. This was 10 years ago and now, 10 years later, we're revitalizing it. Michael really is revitalizing it as the president of the institute, so he's currently running a fundraiser.
Speaker 1:So, if you're interested in accelerating Bitcoin education, go to NakamotoInstituteorg and consider contributing Now. In terms of where it's going to go into the next level of having people getting their degree, their advanced degree, in Bitcoin studies, we'll see. I think that is the future, though, ultimately, because when I go and look at university curricula, there are great universities, like Texas A&M University, which is very close to our facility in Rockdale, where they are teaching about the Bitcoin protocol. They have Bitcoin protocol courses, and so we have the next generation of students are learning about this industry very well. On the other hand, there's industries or, sorry, there's colleges and universities that don't have any courses about Bitcoin, and so those students are going to be left behind, and I think that creates an opportunity for the Nakamoto Institute to do some remedial education.
Speaker 5:Sam, how's it going? Big follower of you guys, I was curious. So one gigawatt, that would be the biggest mining farm and you went with immersion. So I'm wondering if you could speak to the pros and cons to that and what went into that decision process.
Speaker 2:So immersion cooling number one con is it's way more expensive to build than air cooled. Our cost per megawatt for the first phase of this development was about 800,000 a megawatt, although that includes a lot of site general stuff that we don't incrementally need in the future. So I think immersion I don't know the exact breakdown of what immersion is of that off the top of my head but it is more expensive than air cooling. We have seen the challenges of doing air cooling in Texas. We've seen the benefits of using immersion in the same facility.
Speaker 2:The technology around immersion has improved, around immersion has improved and in our estimation, in our view, the extra upfront costs for immersion is worth it because of how it will one increase the operating uptime of machines but, more importantly, extend the useful life of these machines. We believe with our very low cost of power, with this dynamic power strategy where we're very responsive to power prices, at least these machines should be able to turn a positive margin for a very long time. Now we need the machines to continue operating for a very long time to get there and we've seen you know through our experience in the industry air cooling machines like they really take a beating over time. You're not going to get eight years useful life out of a machine unless you're doing many repairs and refurbishments along the way. We look at the hash rate miners that we purchase as the major investment that we make and we want that investment to have the longest useful life possible, way beyond our depreciation schedule.
Speaker 5:Yep follow up. So traditionally the efficiency of ASICs has gone up and the price per terahash has gone down. So there's kind of a trade-off between running the older hardware versus swapping in for a new one, depending on kind of how Bitmain or others how that pricing goes. So it sounds like you're sort of you want to ride it out for longer with the ones you buy now.
Speaker 2:I think what you'll see over the long term as we build up this portfolio of infrastructure is you know, different sites will have different operating profiles depending on the hardware that's there. So for the least efficient hardware, you know, maybe that isn't getting as much of an uptime because it's much more sensitive to that break-even price. But when that margin gets too small, you know if that overall operating uptime that you'll achieve by trying to achieve, by trying to hit those break-even prices ends up being too low, you know, at some point it just makes sense to upgrade. I guess we don't know what that's going to look like yet. I think we have to kind of play it by ear. But the vision at least is having this portfolio of infrastructure in different places with different classes of machine efficiency there, and you know they go through their upgrade cycles as time goes on. But I'm glad you asked that question because it does lead into Bitcoin mining gets criticism for its e-waste.
Speaker 2:People think that these machines are becoming useless every two years and there's just landfills filled with Bitcoin mining ASICs somewhere. I don't know where those landfills are. If they are, tell me, we'll go pick up some ASICs. These machines, they exchange hands, they're pieced out, and they continue to find homes in one way or another as time goes on.
Speaker 3:So it's been. Can everyone hear me? Oh, cool. So it's been very insightful to listen to everyone's perspective on the computational power hash rate of Bitcoin, and we know that in economics, like technology, is deflationary, right. It gets better as the years progress and the costs are supposed to be reduced significantly With AI, for example.
Speaker 3:The convergence with AI and Bitcoin is truly fascinating. So I imagine a future in a couple of years where, basically, ai and Bitcoin will essentially make the whole public to private process of a company beginning, going private and then going public through the IPO, because, if you really think about it, bitcoin's a public good. All you really need is a Wi-Fi address and a wallet to access it, right? So do you think that we get that future in a couple years where, essentially, I can go on a prompt and say, hey, I'm a business owner, I want to develop a business site. Hey, ai, here's like one BTC for your budget, go find it. As a business owner, I don't care how, where, when, who does the work, I just care that it's completed, right? So how do you see AI and Bitcoin intertwining? Because Cathie Wood right, you mentioned Cathie Wood she says bulk case or base case of $2.3 million for one Bitcoin in 2030. Like she said, it's very conservative, so your thoughts on that?
Speaker 2:Yeah, I mean, I think Bitcoin would be the natural currency of AI agents doing business amongst each other. I think, as far as going public if you mean in the sense of going public as a company you'll always have that regulatory hurdle that I don't think AI is even going to make it through for a little while here. But have that regulatory hurdle that I don't think AI is even going to make it through for a little while here. But, yeah, I think that's a great comment. Like you know, that is the natural currency, I think, of AI, of agents doing business and commerce with each other online. What do you think, pierre?
Speaker 1:I think that Bitcoin mining helped shift the Overton window for AI compute, where before Bitcoin mining there might have been a perception that AI was just not feasible due to the power requirements, and by Bitcoin miners, demonstrating that you can procure power at scale if you're willing to be flexible. I think that improving it in the real world right, not just on paper or hypothesizing it, but actually doing it has changed the mindset within the AI compute space of hey, actually, we got to think about how to interrupt AI loads so that we're able to have the same flexibility, or a similar flexibility. The Bitcoin miners have to be able to achieve that this at the scale that they want to achieve, that right. And so it's interesting when I've heard AI people, they'll say, oh, we can't find enough power for our application. And you know you ask like how much power do you need? And they're like well, we need like 10 megawatts. Like well, okay.
Speaker 1:Well, how hard have you looked? Because there's a lot of 10 megawatts out there. There's a lot of 100 megawatts. There's very few 1 gigawatt, I'll guarantee you that. So I think, by leading by example, that we're showing that to the AI community hey, there's a future of energy abundance here that you can tap into. Don't feel like you have to limit yourself and limit your ambitions due to the power requirements. Okay, next question.
Speaker 6:Hi, I asked Pierre the same question, but kind of curious to hear your answer, jason. Does Bitcoin have a security budget problem and, I guess, what are the long-term effects of mitigating that?
Speaker 2:I. I don't think it has a security budget problem. I think you know the. Obviously, the incentive to uh deploy hash rate around bitcoin mining just continues to grow, um, as the block reward has get cut in half, you know. Now, coming up for the fourth time, there's still more and more demand and there's enough margin to attract a security around that. So one that brings up one point what is the correct amount of security? I don't know if there's a way to answer that. I think really, miners, the world, are just following the incentive structure that Bitcoin has laid out. And as far as offsetting that block subsidy as it declines over future years, I think what we've seen with transaction fees over the past year, a year and a half or less than a year shows us kind of what the future can look like. And if this is what we're seeing in transaction fees at this low level of adoption in Bitcoin, we're still incredibly early. Then I'm very bullish about what transaction fees are going to look like in the long term.
Speaker 1:I know I already answered the question earlier today, but I think that ultimately, if there's not enough security, then people will pay more for transaction fees, and then there will be more security, and so it's a bit of a circular loop of you know. It's the same question of what if oil prices are too low? Well, they'll go back up.
Speaker 4:And so that's the way I see it. One quick follow-up question based on something you mentioned there, pierre, in the first part what sort of Straussian tactics, speaking of some of the competitors who might publish false information in order to attack us, in order to attack the freedom of Bitcoin and the human flourishing that Bitcoin can bring what sort of Straussian tactics should we adopt in order to ensure victory in sort of the discourse around Bitcoin Famously was it? Newsweek in 2017 said that Bitcoin was on track to use all of the world's energy by 2020. How should we be thinking about, in terms of the public discourse around Bitcoin and Bitcoin mining, to ensure that human flourishing is preserved and that potential is preserved?
Speaker 1:Yeah, that's a really big question. So I think that the first is to reframe the issue and that you know when we, for example, with the carbon emissions right On one level, we have to ridicule them because Bitcoin mining has zero carbon emissions and you know anybody?
Speaker 3:We tested it. We tested it yes.
Speaker 1:And, you know, releasing a video to kind of humorously poke at them, I think is part of that.
Speaker 4:And have we done a follow-up test recently? Or could we get a second data point just to ensure statistical significance?
Speaker 1:Could we get a second data point just to ensure statistical significance? Yeah, so we're waiting for Corsicana to have enough Bitcoin mining there where we would be able to measure the CO2 emissions. So I'll be back up there with my meter very soon. We'll also want to test for noise levels as well, because that is an area of increasing concern. And this is where you know if you disprove or if you show that, hey, bitcoin mining is fine for the environment, it's fine for energy consumption. They always our critics, try to find some other third thing, right? So oh, what about the water usage? Right, where it's like okay, what do you? You know, this is an inconsequential amount of water use, bitcoin mining. You compare a golf course to a Bitcoin mining facility. The water usage is just orders of magnitude different.
Speaker 1:Or even a normal data center, dare I say e-waste or e-waste, yeah, which Jason addressed, you know, with the lengthening longevity. And so, on one level, it's like attacking their arguments for intellectual purposes of, well, here's the real data and here's why your data is wrong. And then, at the more cultural level, that essentially they're representing a system that is, from my perspective, a zombie system, right, and the fiat system is just, it's dead but it's walking and it's kind of an undead type thing, and I think that makes it really easy to be able to disarm and to stop. But the metaphor that I like to use is if you've got a Premier League soccer team, which is Bitcoin, and then you've got a bunch of five-year-olds who are, you know, the kiddie soccer team, which is fiat or zombies, right, because, to continue the metaphor of zombies, well, the Premier League team still has to play, still has to go out on the field and play if they want to win, right, even though they know they're going to win if they play, they still have to play, and I think that's where Bitcoin's at.
Speaker 1:And so when I hear people want to disengage from politics and say, oh, you know, bitcoin doesn't care, yeah, on some level that's true, because we know Bitcoin's going to win. But, on another level, even though Bitcoin's going to win, it only wins if we fight for it, and that, I think, is an argument that we have to make within the Bitcoin community that this is something worth fighting for and being active for, and that we can't just sit on our hands, sit on our coins and wait for a number to go up, even though I also think we should do both.
Speaker 4:Yes, another question from here, but if anyone has questions, raise hands and I'll deliver a microphone.
Speaker 3:So a lot of people talk about evaluating Bitcoin. Right, it's a non-productive or, yeah, non-productive asset. It doesn't produce cash flows. Right, you can't apply traditional financial frameworks. I know because I worked on Wall Street, so I have that experience. But one of my biggest concerns is we've only seen institutions and very mining-specific companies. What are your thoughts about this whole game changing as nation-states enter the space? There's talk of, potentially the UAE, or a large nation-backed state has been basically buying 100 Bitcoin every day. This entity has been basically showing DCA behavior and it's very unusual. They basically stacked 8,000 BTC in a month, and so I just wanted to get your thoughts on this dynamic changing. I know we've talked about, like, just mining companies. You know specific states that are very energy intensive. What do you think about? You know nation states and, potentially, areas around the world leveraging their geographical location to harness, you know, bitcoin mining like el salvador is proving to be a very like volcano. Bonds, right, everyone's going on crazy over those. What are your thoughts on that?
Speaker 2:yeah, it's a gradually then suddenly kind of thing. So, like you noted, el salvador was kind of the canary in the cold mine for that, and now you noted there's some entity, potentially an asian state, accumulating bitcoin in a massive scale and, uh, that trend is extremely exciting. That's one of the use cases in Cathie Wood's ARK Invest's 2030 target. Their base target is 1% of sovereign treasuries being in Bitcoin and it only takes a few to show the others that it's safe and then it continues on from there. So I think that's one of the more difficult use cases to get through Typically, governments are adopting things last but it is certainly one of the most exciting. What do you think?
Speaker 1:Yeah, one of the most surprising moments for me this year was hearing Larry Fink on national television say that Bitcoin is bigger than governments and that I think there are some governments that are humble enough to accept that reality and to buy into it, quite literally. Right, uh, and I think that that makes a ton of sense. Now, the ones that are trying to resist that reality, uh, are the ones that are going to be in trouble going forward, and so, um, I think that the, the nation-state adoption is also really important in the sense that it shows that, uh, it doesn't matter how powerful you are outside of bitcoin. Uh, that power shows that it doesn't matter how powerful you are outside of Bitcoin. That power, you know. It doesn't matter if you own 100,000 Bitcoin, you know, like Michael Saylor, or if you own 8,000 Bitcoin or 5,000 Bitcoin or whatever number of Bitcoin you own. That doesn't mean that you can control the Bitcoin network. Right, if you own lots of hash rate, you still can't control the Bitcoin network. So having nation-states involved proves that that is not just merely rhetoric. It shows that.
Speaker 1:Here's a case study of hey, el Salvador has 300 million dollars worth of Bitcoin. That doesn't mean that they can stop you from using Bitcoin if you're an enemy of El Salvador? Right, it's a. Really it's a neutral global monetary system and, seeing nation-st states that might disagree with each other on diplomatic levels or might even be at war with each other, there's Bitcoin mining happening in Ukraine and there's Bitcoin mining happening in Russia, and so it really demonstrates the value proposition of Bitcoin to say that, hey, we're going to have a decentralized system. That is part of the Captain Wood of Art Invest. He's a very big proponent of the Bitcoin. So, basically, like, if I'm a business A, I get 100 Bitcoin and I can make new coins that have their value in it.
Speaker 1:So where's the price rule? Where's the year in point? Is the price rule? So where are your thoughts on that? Yeah, I mean I think that the Bitcoin code has a supply rule built into it. Right of the hal. Yeah, I mean I think that the Bitcoin code has a supply rule built into it. Right, the halvings in 21 million Bitcoin.
Speaker 1:And that the Bitcoin price is unknown to the Bitcoin system? Right, it's just something that's external to it, although there was an interesting analysis done showing that if you look at the difficulty adjustments, you can pretty correctly guess what the Bitcoin price is based off of that transmission mechanism. But you know, to your point of the valuation of Bitcoin, I think this is very challenging because, as you pointed out, bitcoin doesn't have a cash flow. It is the cash right and that when we think about Bitcoin from a currency trading perspective, well, currency traders are used to thinking about, okay, well, what's GDP? They're also used to thinking about what's monetary policy, and Bitcoin's GDP is pretty transparent, right?
Speaker 1:You can look at the on-chain activity and the circulation of Bitcoin. I think this year is slated to be about $18 trillion worth of Bitcoin circulating on the ledger, and then you've got a $1 trillion market cap. But the question then is where does Bitcoin go from here? What are the adoption mechanisms and what's the ceiling? Is it realistic to think that everyone in the world will hold Bitcoin, or is it more realistic to think that only some subset of nerds on the internet are going to hold Bitcoin? And when I look at the properties of Bitcoin, I think that they are interesting properties and superior properties for any kind of user, not just nerds on the internet. And so when I look at Bitcoin adoption as below 1% of the total addressable market, it doesn't give a valuation framework, but it certainly makes me bullish.
Speaker 4:Do we have any other questions? I would also be remiss if I didn't say that the man who perhaps coined the term hyper-Bitcoinization is here with us in the room right now. Whoa, I think a few understand this, but yes, that's a myth.
Speaker 1:I'll debunk it right now. The person who came up with it was Daniel Krawis, who was also at the Nakamoto Institute with us. That is a very valid question and I hope Daniel comes back.
Speaker 4:Me too.
Speaker 1:Bitcoin's about protection. It is, it is back. It is. It is the term that I didn't coin, so there's hyper-Bitcoinization. There's another term, though, that I want to point to, which I didn't coin, but Paul Krugman coined, which is speculative attack.
Speaker 4:Well, I was going to give you credit for that as well. So you penned the piece Speculative Attack. What was it 2015? 2014, july 4th 2014,.
Speaker 1:Came out with an article explaining that essentially how Bitcoin adoption could happen in the future. Some parts have come true, some parts TBD.
Speaker 4:I think Michael Saylor is doing his best to prove it correct, but I'm shocked to hear this about hyper-Bitcoinization. Do we have any other questions as well for the gentleman on stage?
Speaker 2:Thank you very much, everyone, thank you so much for coming Everyone.
Speaker 4:thank you Riot Platforms for coming here and sharing your evening with PubKey and everyone else. Thank you for coming. Make sure to tip your bartenders. Hope you have a great night.
.png)