Why bitcoin mining is good for reducing carbon emissions

Today I am pleased to welcome Jaran Mellerud. Jaran holds a Masters in Energy Management from Nord University in Norway and works at Luxor Energy. His focus is on the bitcoin mining industry. We will discuss why energy is even necessary in bitcoin, how much energy do gold mining and other industries consume, is there enough clean energy for bitcoin, the properties that make bitcoin optimal to develop renewable energy, how bitcoin can become carbon negative, recent hash rate increases and bitcoin price, and much more.

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Time stamps

01:33 Why does bitcoin need energy

06:41 Comparisons to other industries

11:08 Bitcoin and renewables

15:03 5 properties that make bitcoin perfect for developing clean energy

26:55 Methane and bitcoin helping become carbon negative

34:59 Switzerland and bitcoin

37:51 Hash rate and bitcoin miners

44:58 Rapid fire questions

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Transcript

Jaran: 0:06

Bitcoin mining is, probably the cleanest industry in the world if you look at the share of renewable energy. So that makes it very strange that it's so attacked for its energy consumption. But I know why it's attacked for its energy consumption, and that's because it's very easy to, to see how much energy Bitcoin consumes. You can calculate it very easily and you can find the number online. But it's very difficult to estimate energy consumption of other industries. And so that makes Bitcoin mining a very, very easy target.

Didier: 0:44

Today I am pleased to have Jaran Mellerud. Jaran holds a masters in energy management from Nord University in Norway, and works for Luxor Energy. His focus is on the bitcoin mining industry, and especially its integration with the energy industry. We recently met at the Plan B conference in Lugano, and I was impressed by his presentation, and that's why I have invited him. On the podcast, we will discuss energy in Bitcoin, for example, why is energy even necessary in Bitcoin? How much energy does Bitcoin mining or the banking sector consume? Is there enough clean energy for Bitcoin? And why Bitcoin can help develop clean energy production and much more Welcome Jaran.

Jaran: 1:29

Thank you Didier, and uh, thanks for having me.

Didier: 1:31

My pleasure. So first, before we really get into the energy usage of Bitcoin, like why do we need energy consumption in Bitcoin? What, why is energy at all even necessary or useful in Bitcoin? What, useful purpose does it serve?

Jaran: 1:48

The reason why Bitcoin consumes energy, why it's necessary for Bitcoin is because, um, it secures the Bitcoin network. The more energy Bitcoin consumes, the harder it is to attack the network to do so-called 51% attacks. And, uh, you have other networks like proof of stake that are not secured by energy. But proof of work, it's, uh, very, very simple. It's, uh, it's, it's like a brute force method of securing the network because the only way you can do a 51% attack in a proof of work network like Bitcoin is to amass more than 51% of the energy. And consume that over a period of time, which will be extremely expensive. And its also constraints on the natural resources, which you will have to amass to get this energy. Uh, Bitcoin uses, uh, asics, which are computers, which are specially made to mine Bitcoin. So you can't, uh, you can't take control over of other data centers in the world and use them. Attack the Bitcoin network, you actually need those, uh, those asics that you can only use for Bitcoin mining. Um, and amassing more than, uh, 51% of them is going to be very, very hard. So Bitcoin consumes energy, uh, to, to secure the network. That's the the short answer.

Didier: 3:21

Okay. Yeah. For me, the main sort of reason why you want to consume energy is you want to have, yeah, a lot of hashing power, which consumes energy. And the importance of that for me is basically a replay attack. It's, it's, it contributes the censorship resistance in the sense that. If, if the whole point of Bitcoin is that it's censorship resistant, if I want to take your money, there are two ways. Either I get your private keys, so not your keys, not your coins. And the other way is if you sent me money last week and I want to, in fact, or I sent you money last week and now I, now I regret that and I wish I hadn't sent you the money. Let's replay all the, all the blocks that have been mined since then. And if the hashing power is very, very high, and if you, therefore you need a lot of, you would've to re mine all the blocks from a week ago or something. And if that requires a hell of a lot of energy, it becomes basically impossible. So it becomes impossible for me to annul a transaction that took place in the past. And that's a form of, uh, censorship resistance for me. That struck me right away is the, one of the biggest qualities of, uh, the energy consumption. So for example, if. If you are naval in Russia and, uh, Putin doesn't like you and you send all these people, send money to an account of naval, uh, Putin right now. He just calls up the bank at Sparebank and he says, Hey, cancel AL'S account and send the money to me and it zero energy. But if you want to do that with Bitcoin first, you have to get's private keys or the private keys of this political party, huh? And, and or, or if you don't have his keys, let's just replay all the transactions that happened when people gave him money a week ago, a month ago, and so on. And if there's so much energy that's consumed, it becomes impossible to replay those attacks. So it becomes impossible to take his Bitcoin. In fact, for me, that's the greatest. Utility of, uh, of the energy, and nobody in fact ever speaks of it. They speak about energy consumption as if it's a bad thing for Bitcoin, but it's in fact extremely important quality to assure as you said, yourself, the security of the network and assure the, censorship resistance

Jaran: 5:40

to assure that the ledger can't be changed. Bitcoin is, uh, the only ledger in the world which you can't change. And the reason is the energy consumption, just like you said, you can't do a, a re replay attack. You need, uh, more than 51% of the energy, which is used for Bitcoin mining, and it's already about hundred terrawatt hours a year, which is about the same as, uh, Norway consumes, uh, a lot of energy. It's basically impossible to amass all this energy to attack Bitcoin. So that's what makes me very secure of Bitcoin, that Bitcoin's ledger can't be, uh, changed, is that it's backed by all this energy consumption while other cryptocurrencies that rely on proof of stake models, you need to in some ways to trust the stakers. But Bitcoin is a hundred percent trustless because it's based on, on physics,

Didier: 6:40

absolutely do we have any, any comparisons of how much energy it compares to other industries like gold mining, we often say Bitcoin consumes a lot of energy. It consumes often like the equivalent of a small country like. Like Ireland or Norway or Switzerland, which is just, like I said, I think is a good thing because it protects, keeps the censorship resistant quality. But are there any good numbers on how much energy it consumes vis-a-vis compared to gold mining or compared to, I don't know, data services of a web service provider or compared to the banking industry or anything like that?

Jaran: 7:18

So, uh, we can look at gold mining. Gold mining consumes about 240 terat hours a year, which is more than twice the amount of Bitcoin. Uh, in addition, gold mining consumes energy in a way that is. Quite bad for the environment because, uh, to mine gold, you have to actually dig up huge holes from the ground. Also gold mining is more, uh, reliant on uh, fossil fuels because you, you need a lot of heavy machinery that run on, on fossil fuels where bit mining uses electricity, which is, uh, has a quite high share of renewable. We can also look at video gaming. For example. Video gaming consumes about the same amount of energy as, uh, as Bitcoin mining. And, uh,

Didier: 8:08

Don't say that

Jaran: 8:09

a lot people like to play video games. Uh, and we have, uh, paper production, for example, it consumes 2,400 Tet hours a year, which is 24 times the amount of Bitcoin mining.

Didier: 8:24

Yeah, but that's not as useful as gaming though.

Jaran: 8:26

No, no, it's true. We don't need papers. Um, and the banking industry, I, think it's very difficult to, to estimate the energy consumption of the banking industry. Some people have tried, but I think it's, it's extremely difficult. But, I'm sure that, the banking industry consumes more energy than, than Bitcoin mining does. but, yeah. To me it's not really, like if the banking industry consumes more energy than, than Bitcoin mining, it's not that, big of a deal to me.

Didier: 8:59

No, and I'm sure for example, a lot of governments, all the government agencies of the government in the country consume a lot of energy, and a lot of people will tell you, yeah, but my government is very inefficient. They spend all this

Jaran: 9:11

course. most good things in the world consumes energy. It's very difficult to, to create something productive and good without using energy. So, that's also why money could be secured by energy. But yeah, I think the best comparison to Bitcoin mining is of course gold mining, which consumes more than twice the amount of energy as. That's, uh, Bitcoin.

Didier: 9:38

Okay. do we have any numbers on, in, in the actual Bitcoin network today? Bitcoin is mine. It's consuming energy. How much of that energy comes from a green source or a source that does not produce co2 vis-a-vis sources that are bad for the environment? Do we have any numbers there or not?

Jaran: 9:59

Cambridge did a study on this quite recently and uh, I think the land. Around 40%, which is, uh, almost twice the, the share of, uh, renewable energy and then the world average. So mining, Bitcoin mining is, is one of the, probably the cleanest industry in the world if you look at the share of renewable energy. But, and so that makes it very strange that it's so attacked for its energy consumption. But I know why it's attacked for its energy consumption, and that's because it's very easy to, to see how much energy Bitcoin consumes. You can calculate it very easily and you can find the number online. You just look at average, uh, machine efficiency in the Bitcoin network, and then you look at the hash rate and then you have the energy consumption. So it's very easy to to, to estimate. But it's very difficult to estimate energy consumption of other industries. And so that makes Bitcoin mining a very, very easy target. For journalists that want to make a case about something.

Didier: 11:07

All right. Is there enough energy in the world to mind Bitcoin cleanly? Do you have any I how much clean energy? For example, I heard the, Adam Back who was on the same panel as you at Plan B in Lu. He was saying that, Blockstream mines Bitcoin. Using energy that comes from Hydro Quebec and he said the potential of hydro Quebec, only about half of it is used. The hydro Quebec could produce about twice as much electricity as it actually does, and it does not produce more because of political reasons and things like that. And he said, that one half more that they could produce would be more than the whole Bitcoin network would need. So I mean, my point is, is there enough clean energy in the world for Bitcoin?

Jaran: 11:55

So there's uh, there's basically infinite amounts of, uh, renewable energy in the world because the sun is constantly shining on the earth, and we are not all harnessing all this energy. And the solar energy, which hits the earth, is going into the hydro power. It's going into wind power. We are, we can harness like the maximum energy we can harness on the planet earth is the amount of solar, which is timing down on the planet. And we are not harnessing like even a fraction of that. So, so the energy potentially is enormous. And then we can look at the, the already developed renewable energy, power plants if they are enough to, to power the Bitcoin network. And that's completely true. You have the, as you said, the hydro Quebec, which could power the entire Bitcoin network, which its, uh, its excess energy, which is not consumed right now. You have, uh, enormous amounts of, uh, hydropower in Norway, which is instant excess In northern Norway, we have, uh, enormous amount of, um, Of excess produced wind in Texas produced solar. Uh, we also have the new excess produced nuclear power because nuclear power always needs to, to produce, uh, its base load energy, so it can't reduce its energy production. So in certain times of the day, it just produced more energy than the grid really needs. So you have all this, uh, inefficiencies and renewable energy around the world which leads to renewable energy not being consumed, and this energy is wasted right now. And it could power the Bitcoin network many, many times over. I don't know exactly how much, but I would be surprised if it couldn't power the Bitcoin network at least 50 times. And And that's not accounting for the potential, development of all this renewable energy. which is, is extreme. You have a lot of renewable energy, which is stranded and renewable energy is very often stranded because you can't transport, uh, the hydropower, you can't transport the wind and, or solar. If you have the resource there, the renewable resource, you needs to consume the energy close to this energy source. Because Bitcoin mining is allocation agnostic, energy consumer that can come directly to the, the renewable energy source. We can actually develop this, this, uh, a renewable energy sources, uh, in the future. So I think bitcoin mining will incentivize the development of more, renewable energy.

Didier: 14:41

That's what I wanted to get to In your presentation at, plan B and Lugano you gave the five properties of Bitcoin that make it great for, for the energy mix of the grid in general and for renewables. Do you mind going over those five points again?

Jaran: 14:58

Absolutely. So those, uh, five properties, they're, they're crop properties that makes Bitcoin miners unique, energy consumers. Bitcoin mining is a uniquely flexible energy consumer. These five properties are. Price, responsive, interruptable, location, agnostic, modeler and portable. I can now go through them all. So first of all, Bitcoin owners are price responsive energy consumers. Around 80% of the operating cost of Bitcoin mining is energy. So Bitcoin owners always, always monitor their energy price and if the energy price rises above their, break even, uh, energy, price for Bitcoin mining, they are incentivize to turn off their machines. A Bitcoin minor basically turns energy into Bitcoin. So if the Bitcoin value of the energy is worth, uh, it's worth less than the energy that Bitcoin minor need to buy. Make that Bitcoin. Then of course the Bitcoin min is incentivized to turn off its machines, and there's basically no industries in the world, which has 80% of their operating costs of energy. So does make Bitcoin mining quite unique based on that property alone. So not only are Bitcoin miners financially incentivize to respond to changes in that energy price, but they're also able to do so. Big mining is an interruptable process, which means that you can turn off the, the mining process by the click of a button. It only takes a few seconds to turn, turn off a whole bitcoin mining farm. All other industries are different than that from bitcoin. if we, um, compare mining to a conventional data center, we can see how interruptable the mining process is in comparison to the data center. For example, one of Facebook's data centers, it's, uh, it's main selling point is that it can provide a very high up time for its customers, so it can't turn itself off in fact, most commercial data centers have, diesel generators on the, on the site in case their electricity supply is, um, guess they will not have energy anymore. So it just shows that, and Bitcoin miners, they don't have reserve, uh, generators on site. They, they turn off themselves, uh, if they need, uh, because Bitcoin minors, they only produce bitcoin. Secure the Bitcoin network. And the Bitcoin network consists of thousands of computers all around the world and it doesn't, uh, rely on any one of these computers. So for the Bitcoin network, it doesn't matter if some of these, uh, Bitcoin mining machines turn off every now and then, it doesn't matter at all because there will always be a lot of other machines. Uh, Bitcoin Mining is also a location agnostic process, which means that Bitcoin miners can locate their operations practically anywhere. They only need, uh, cheap energy and an internet connection. So that makes it possible for the first time in history to bring the energy consumer directly to the energy source. Most other industries are not location agnostic because they rely on supply chains to sell their products. Um, they rely on supply chains for, uh, for buying inputs to their production. Bitcoin miners, they don't rely on supply chains at all because they sell the Bitcoin through the internet so you can look at them, them practically anywhere. In addition, bit mining is a modular process. Uh, one bit. Mining machine consumes about three kilowatts. So you can scale the a bitcoin mining operation in three kilowatt increments. That makes it possible to exactly match your your available energy with the corresponding Bitcoin mining load. So let's say that you have five megawatts of available energy, okay? Then you can buy 1,500 Bitcoin running machines if you have 10 megawatts, okay? Scale it up to 3000. You can always match your available energy with a Bitcoin mining load of the exact same size. And the fifth factor is, portability. Uh, bitcoin mining machines can be moved around the world and you can actually design a bitcoin mining facility to maximize the, the portability. By designing the facility inside the containers, you can ship these containers around the world. That's actually very valuable because a lot of energy that is stranded right now might not be stranded in five years. And then it's, very beneficial to be able to, to move the bitcoin mining loads to another place. So for example, in, uh, in Norway where I'm from, we have, we had a lot of bitcoin mining operation in the southern part of the country. But then the electricity prices suddenly started surging. but in the northern p, the country, they didn't increase. They were still very low in the northern part because their transmission constraints between the northern Norway and southern Norway. So what did the victim manners in southern Norway do? And they just moved their operations up to northern Norway because bitcoin mining is a, is a portable energy consumer. You can't move, for example, uh, uh, aluminum smelter if you haven't built a huge aluminum smelter in southern Norway and the energy prices increase, you can't move it even though you should have. So, uh, to sum up five properties, price, responsive, interruptable, location, agnostic, modular, and portable. And this unique combination of these five properties makes bitcoin miners uniquely, uh, flexible energy consumers that can solve several energy problems.

Didier: 21:17

Yeah. I think you gave an example, if I remember correctly, at the Plan B presentation that I had never thought about, which was, for example, say, in Africa you could have a, uh, you know, a river on which you could do hydroelectricity, you could potentially do, I don't know, a hundred megawatts of electricity from a dam, but the local demand is only 15 megawatts or something. So basically nobody ever goes and invest. The amount of money needed to make the dam because we're only gonna have demand for 15 megawatts once we do it. And there's no point in developing a smaller dam that will only produce 15 megawatts. So basically because the It's modular and you. Location agnostic and so on. We, we could now have a way to build out a dam and produce a hundred megawatts because we now have a way to monetize the 85 that we're not selling to the local community. And I think you even like that idea because once you have developed, uh, the dam and you've created energy for the local population that demanded initially only 15, the economy develops and little by little their demanding energy also increases. But you take that from the dam, so it creates a whole sort of economic, uh, flywheel or a positive effect that would not have occurred. If we hadn't had a way to initially monetize the, the energy is that, That was

Jaran: 22:43

Yeah, that, a very good a very good explanation. Yeah. Yeah. So, uh, bitcoin mining can be, a kick starter for industrial development, especially in developing countries. Uh, like firstly, Bitcoin miners can incentivize development of renewable energy that previously was stranded. Uh, and let's. We have in, in Africa for example, there is extreme energy resources, especially hydro and geothermal energy. And both these um, uh, renewable energy sources are not that modular in their build out. You, if you have the possibility to build a hundred megawatt hydro power plants, you generally want to maximize, uh, the size effect plants. It's no point to to develop only five megawatts. Like wind and Solar, their advantage is that you can, can build them out in a very modular way, but hydro, geothermal, you gen generally need to maximize the energy production according to the, the available energy resource if it should make economic sense. The problem is that in, in Africa, uh, there's not a lot of, uh, energy demand, so you can't go to the bank to get financing for a hundred megawatt hydro power plant in, in Africa, if there's only 15 megawatts of local demand. But you know that if, if this power plant will be built, it will be a driver for economic growth in the region, which will lead to increased energy consumption over time in that area. The reason why they only consume 15 megawatt in the area is, is partly because they don't have more energy than that to consume. So they're in, in many developing countries, they're kind of trapped, uh, in a situation where they, they don't consume a lot of energy because they don't have access to that energy, and no one will build out more energy because there's not a lo lot of local demand that can be verified. So let's say you have this 15 megawatts of local demand and the possibility to build a hundred megawatts hydropower plant, then you can, you can fill the large 85 megawatts With Bitcoin mining, because it's modular, you can exactly scale it up to 85 megawatts and it's. It's location agnostic, so you can place it directly at the hydro power plant. You can also, you can use the same electrical infrastructure as the hydro power plant uses and thereby save a lot of, uh, of money as well. And then you, uh, so then you have the hundred megawatts that is necessary to build this hydropower plants, and you give their 15 megawatts to the local population and. Bitcoin miners are very price sensitive energy consumers. So if the local population will need this energy later, they'll basically be able to pay a higher price than the Bitcoin miners. And thereby they can, gradually take over an larger part of the, of the energy, which is power plant consumed. So after 10 years, Maybe Bitcoin mining is not consuming 85 megawatts, maybe it's only consuming 20. And then the local population consumes 80 megawatts because the power plant has driven economic growth, the household energy consumption has increased. There's a lot of new business activities there. To, to take advantage of this energy. So, um, yeah, Bitcoin mining can be, like a kick starter for economic, and industrial development especially in developing countries.

Didier: 26:42

Okay. So another one of your big themes, is that you think that Bitcoin can help, become carbon negative. In other words, take carbon out of the atmosphere, reduce carbon emission. Or can you explain that?

Jaran: 26:56

That's mostly the how bitcoin mining reduces methane and emissions.

Didier: 27:00

Okay.

Jaran: 27:01

Because methane is 80 times, uh, more potent green out gas than co2. So, uh, one of the most important or most effective ways to reduce, carbon emissions is actually to reduce the amount of methane in which we emit. And the the biggest methane in emissions in the world are made by, um, gas flaring of natural gas And that's because natural gas is a byproduct of oil, oil extraction. So when you produce oil, you will have, uh, also some natural gas that comes out. And generally, if, if the oil well is located far away from a population center, you can't transport the gas to their population centers. So then you, you need to burn the gas. And in some cases the oil producers even just went it out of that out in the atmosphere. But in most cases they burn it. That's called flaring. And the problem here is that flaring doesn't burn all the natural gas, some of the natural gas, able to escape the the flare and go into the atmosphere. So what you can do then is. You can economically incentivize oil producers to not flare this gas by taking the Bitcoin mining load directly to the oil well. And you have a, an electrical generator where you burn the natural gas to generate energy or electricity and use its electricity to produce Bitcoin. And this Bitcoin is then helping to finance. Generator system. So by burning then natural gas inside is a close environment of the electrical generator. You're able to burn a hundred percent of the methane, instead of, let's say just 80%, thereby you massively reduce the CO2 equivalent emissions of this oil well, and. An American company, which is called Crusoe energy, which does is in, in uh, America and in, uh, in Arabic countries, they have calculated that, reducing gas flaring with Bitcoin mining is about five times more efficient for reducing use CO2 emissions than building, a wind power plant. So it gets a better return on the investment if you want to reduce the, the carbon emission. So that's why actually a lot of environmentalists, have, embraced Bitcoin mining. And I see that more and more environmentalists are waking up to this.. And the thing is, you don't need to love Bitcoin to love this technology because this technology is actually reducing carbon emissions. So if you really care about the environment and want to reduce the carbon emissions, you should really embrace this technology. And that's, that's what's happening there. A lot of the oil producers are doing this not because of the financial benefits, because of course they earn more money. Producing Bitcoin than just burning off the gas. But most of the oil producers are not doing it for the economic benefits. They're doing it for the regulatory benefits because there's a lot of, uh, regulations against flaring. And, so it oil producer uses the, the Bitcoin mining system. It's actually able to, to get around its regulations and it can reduce the CO2 emissions of its own production. For them. Bitcoin mining is just a emissions reduction technology. And, all the natural gass that is flared globally could power the Bitcoin mining network about five times. And this energy that is just wasted and it creates enormous CO2 emission. So if the Bitcoin network. Used a hundred percent stranded natural gas, it would become carbon negative. So it could be possible that Bitcoin mining went carbon negative, but probably it'll not happen. But, at least it reduces the CO2 emissions of the Bitcoin network significantly. This, uh, natural gas mining

Didier: 31:25

okay. Yeah, absolutely. I had previously on the show, um, Adam Wright from Vespene Energy, and they burn natural gas that comes from, uh, landfills of garbage in the US. Of course, he was saying, Basically the same thing as you. And that the primary motivation is regulatory. In fact, that's where they, in fact, for the, for the landfill manager, he's now submitted to a lot of new regulation, and so that costs him a lot of money. And so the way he can make all that worthwhile is by mining Bitcoin with the, with the methane that is, That would, that is naturally emitted into the air, but they're flaring it and, and mining Bitcoin, The other thing you once said that, uh, would please some of my friends who are physicists and who like, nuclear power is, uh, renewables, Bitcoin and nuclear power is a marriage made in heaven. So do you want to explain that?

Jaran: 32:16

Yeah. Um, like the special thing about Bitcoin mining as an energy consumer is that it's extremely, it's an extremely flexible energy consumer. That means that bitcoin mining is a very good match with energy production technologies that are not flexible. Nuclear power is not a flexible energy production technology. It's a base load and its production technology, so it generally needs to produce about the same amount of energy constantly. So what that leads to is that in, uh, certain times of the day, there will not be enough energy demand to use all the nuclear energy produced and, for example, in the middle of the night, there's very little energy consumption but Bitcoin miners, since they're so flexible, they're able to ramp up their energy consumption and consume this excess, uh, excess nuclear power. And that's why, the flexibility of Bitcoin mining makes it a very good match. Not only with hydropower, but with wind and solar as well. Because wind and solar is also not flexible energy, uh, product and technologies, they're weather dependent. While nuclear is, uh, it's not weather dependent, we can actually, we, we can actually control the output, but it always need to produce energy and the interest. An interesting model for developing nuclear power. Is to have more nuclear power than the, the grid needs and just constantly produce. Let's say that the average demand of the grid is, is a hundred, megawatts, but, um, the peak demand is 150 megawatts, but usually it consumes around 100 then you can build on a nuclear power plant of 150 megawatts, which just always produces that 150 megawatt at its maximum capacity. And then the Bitcoin miners will be there to provide the necessary flexibility there because the energy consumption and the production always need to be matched. And Bitcoin mining can, can adjust this, it can put the flexibility to the demand side. To adjust the demand after the available supply. So that makes, uh, bitcoin mining and nuclear power, uh, a much made in heaven.

Didier: 34:41

Okay. All right. Thank you. So, uh, before I wrap it up with some rapid fire questions, I just wanted to, well have you as a Norwegian, see what you think of Switzerland because. We met in Lu at Plan B in Lugano, and we were lucky that we had almost spring like weather, even though it was late October. So did you like the the conference? What did you think of Switzerland?

Jaran: 35:07

Yeah, I, I loved the conference. Loved being in Switzerland. Uh, I, I've been in Switzerland one time before when I was like, when I was a child, but, this was really awesome. What impressed me the most was one weather, the weather. Of course, I came from, uh, five degrees in Norway to 20 in Switzerland, so very good. But the other thing was, Like how open Switzerland seems to be to new technology and innovation. And it really surprises me because I'm from Norway, and Norway is a very rich country, about, probably the same as Switzerland, but, the wealthness of the country has made people quite, um, quite lazy. I'm not interested in the new innovation. But you, Swiss seems to be still hungry to create more and to, to have more innovation and that's what's so fascinating that I come into Switzerland and I, like the signs of all these multinational companies that ex export a lot of products from, from such a small country as Switzerland. We don't have that in Norway. We basically only have the oil and gas and the fish And the most impressive thing, which I like the most is, is how open Lugano is to Bitcoin. Uh, it could not happen in Norway that, uh, local government in Lugano was participating in this conference and like really trying to attract the businesses. Into the city and using it as a way to get to, to develop the local economy. I think it's, extremely fascinating and, uh, it's very refreshing to see that, these initiatives are actually happening in Europe because, uh, I'm used to just seeing all these things happening in El Salvador and other, like smaller developing countries, but, I know now know that there's a beacon of light in Europe, which is Switzerland.

Didier: 37:11

Yeah. Yeah. I always find it sort of paradoxical or funny or interesting that like Norway, like Switzerland or Singapore. I would say that the three countries in the world at least need Bitcoin in the whole world. And they're all very interested in it, so I find that always sort of funny or paradoxical or something.

Jaran: 37:30

Hope. Hopefully I can move there one day.

Didier: 37:33

You're

Jaran: 37:33

know, these days a lot of Norwegians are moving to Switzerland.

Didier: 37:38

Yeah. You're one of the few who are rich enough to move here, So we'll see. That's

Jaran: 37:43

Not now, maybe one year ago, but now they're bitcoin price, so low, so need to wait till it goes up.

Didier: 37:51

What do you make of the fact that recently, okay, now we're recording this. In November, 2022, uh, recently a lot of, uh, bitcoin miners have received their latest asic so that's why even though the Bitcoin price is down, the hash rate on the network is near all time highs cuz a lot of miners, I think were delivered their, their asics that they had ordered a while ago. And I find that a bit, paradoxical that the price is low and uh, and the hash rate is high. But on the other hand, it's not paradoxical because a lot of these miners have, uh, in fact leveraged themselves up to buy their equipment. Now they've received their equipment and, uh, a lot of them had maybe too much leverage and sold Bitcoin, and that was probably one of the factors that contributed the price to go down over this last year. But I, I suppose now we're having our shakeout in, in Bitcoin minors, and we're almost at the end. Or what are your thoughts on this subject?

Jaran: 38:43

Yeah. So, uh, that's probably most in Bitcoin over by now. The, uh, there's a very long lead time with the production of, and delivery of mining equipment, so, Last year when the Bitcoin price was at, uh, hit 69 K, uh, a lot of Bitcoin miners, especially the public Bitcoin miners, made extreme, um, machine orders. And these machine orders are being delivered now. They were also delivered during the spring, and we have seen the hash rate continuously increased. But it's, uh, it's, uh, really, really surged lately because a lot of miners are getting this new ant minor, uh, S 19 X P machines, which are very, very, um, energy efficient and, uh, and very, very powerful. So they're plugging these machines in. And another reason is, as I explained earlier in this podcast, bitcoin mining is very good for demand response that you. You, you pay the energy consumption if the grid needs energy more than the mining. And, uh, a lot of American Bitcoin miners participated in demand response programs during the summer when the energy demand surged in the US due to, uh, due to, to a heat wave. And now this, uh, these minors are not, doing this demand response anymore. So. We have all these minors coming back online that were, were turned off during the summer. And another another factor, which uh, some people think it's, uh, kind of a conspiracy theory, but I think it's quite interesting, and I think it, it might actually be true, uh, that Russia has a lot of strand natural gas right now because they can't sell as much to Europe as before. Which means that they are mining Bitcoin with this natural gas, at least some of the oil producers. And, uh, I, I believe that theory is quite viable because I know that, uh, Gazprom and, uh, Rosneft they, they have been mining Bitcoin since 2020 and I don't think in a very big scale, but they have obvious. Like in these two years, they have obviously, um, like amassed necessary know how to, to be able to scale a mining operation. So if they have all this stranded natural gas now and there's all this excess machines in China that are just standing there, they can just import these machines, not, will not be that difficult and turn them. Uh, and you also have the Ethereum, which is going over to proof of stake. So you have a lot of, uh, of data centers, which previously were used for Ethereum mining that could be rep repurposed to Bitcoin mining. So I think the surging hash rate is a result of all these factors. There's a lot factors. I think, uh, I think we are coming close to our shakeout because especially after the bit comprised dip below 17,000 now after his FTX, stuff. So, um, I, public minors, not only public but private as well, but especially the public, they are really struggling right now. Um, we already see so Core Scientific and Argo blockchain, which are two big public minor. They, if you'd, um, uh, notices that they actually might go bankrupt quite soon. And that was before the Bitcoin place, uh, fell below 17 K. Uh, I also gone through the, the public reports of most of the public miners and I see that they don't have that much machine deliveries coming, in the next few months. So I think the hash rates will, uh, will stop increasing soon and it might actually start falling if a lot of miners go, go belly up, which I think a lot of them will, uh, in the next few months. But I think we, we close to the peak now of, of, uh, calculation. But

Didier: 43:00

Yeah. Yeah, I think so too. Also, I when you look on the balance sheet of, of public minors, the amount of, uh, or, or you look on addresses that we think are minors. The amount of BTC that is there is like 80% less than it was a year ago. So I think they've done most of their selling. Yeah.

Jaran: 43:17

Yeah. Yeah. They've done most of their selling.

Didier: 43:19

You might still get one last step down that's possible,

Jaran: 43:22

Yeah. But they, they don't hold that much Bitcoin right now. The public miners, which are like every month, they're, uh, they're providing information on how much Bitcoin they hold. They hold about 35,000 Bitcoin right now. And the, I don't think the private miners hold that much Bitcoin, to be honest. Um, So if, if I were to give an estimate of the total Bitcoin holdings of the miners, I'm sure that it's like way less than a hundred thousand Bitcoin, uh, of the active miners, of course, but of, because of course there were some, uh, like people of mine Bitcoin in 2010 on their computer as like a hundred thousand Bitcoin now. But if we exclude. I think there's less than a hundred thousand Bitcoin hold by the public, by the Bitcoin miners. Um, so of course that could impact the market. But, um, I think, uh, there are other factors that will impact the market much more like this FTX situation, which sent the bitcoin down like 15%, in a few, uh, in a few days. Uh, and we. A lot of big players now in the crypto industry are really struggling. Now. It's not only Ftx uh, I think a lot of the exchanges have some problems we don't know, but we will see what happens. I don't think we have seen the last of these problems if they go, if, if more of them go belly up, I think that will affect the the bitcoin price much more than if some of the miners need to sell their.

Didier: 44:58

But I certainly agree with you on that one. And I certainly think they probably have more problems that they, they aren't telling us, you know, they're not bragging about it, but if the price dips a bit more, you can have some more selling and then you really have the final washout and then we go way back up. But anyway, I shouldn't say that. Okay. Let's wrap it up if you don't mind, with some rapid fire questions. So somebody you admire, either dead or alive and like, why do you admire them, him or her?

Jaran: 45:27

Uh, probably, uh, Jesus. Is the, the ultimate person that has lived, which is, uh, good, uh, person to look up, I think.

Didier: 45:39

Okay. Uh, one of your favorite books.

Jaran: 45:45

Mm, I like all Nassim Taleb book. I know that a lot of Bitcoiners don't like Nassim Taleb because he hates Bitcoin.

Didier: 45:55

And so, which book, because I've read most of his books. Was it Antifragile Black Swan? Uh, uh, fooled by Randomness. Uh, dynamic Hedging

Jaran: 46:05

Yeah, my, my favorite book is, uh, probably Fooled by Random Randomness of Nassim Taleb, uh, because that was the, that is the one book I read that has changed my life the most, I think because before that I was a very big believer in everything, scientific, everything about statistics, all econometric analysis. I really believed it, it fully, but that took, opened my eyes to that. A lot of things. Um, like science can't explain everything and a lot of the science, especially in, in economy, has big weaknesses in their methodology. So yeah, it opened my eyes to, to that and, uh, and I was sad when Nassim Taleb uh, started hating bitcoin. Bit fine.

Didier: 46:57

Yeah. Well, I certainly agree. I think that is his best book, as you said, and as you said, it shows you that the science, especially in economics and finances, is weak. Unfortunately, his, his ego gets in his way. So I think he got into this fight with um, uh, somebody else who has the same personality as him. That is to say safeedean Amous They both have the same personality. They're both Lebanese, so they've gone to a

Jaran: 47:19

but at, at the same time, this, uh, this, uh, personality of him that he always trying to, to like argue with people. That's also what makes him such a great author. And I, I liked in the book that he always was like trying to

Didier: 47:33

Yeah. I find on the one end he has an original mind. On the other hand, sometimes now his ego overtakes his brain and so his ego gets in the way. But also now his, he's made this point of. I'm gonna show you something that you think is obvious that you don't understand correctly. So it's almost to the point now where he is telling you you don't know what a standard deviation is. You think you know what it is, but I'm gonna show you. It's really not that sometimes he's a little bit like that now, but he, he still had a lot of great ideas that, that that is my favorite book of his. I agree with you and I agree that he, he, he showed you. He shows you that a lot of things that you think are true are not really necessarily true and that I like, but he should does it to you in a very intelligent way. I think the other books, he repeats himself too much like Black Swan or Antifragile. He takes the same idea and he just, every chapter, he sort of says the same idea in a different way. But, uh, fooled by Randomness snow, he develops the idea more. It's a little bit more in the form of a novel.

Jaran: 48:29

Yeah, I think, I think that was his first book in that, in that book series.

Didier: 48:35

Ah, maybe. Okay. I thought it was, yeah. Anyway. All right. I remember I first came across his book, uh, when I was a trader myself in London, and it was called, I think, dynamic Hedging. And I thought he was very, very good at making the bridge between. Math and statistical models and the real, the real world of finance, he was very good at seeing this is the model, this is what it's based on, and this is the reality and this is where they match and where they don't match. And that he was very good at. And I thought that made him quite, uh, quite interesting. Okay, finally, and a lighter question. Favorite movies.

Jaran: 49:15

Uh, the favorite movie? Probably a Scarface.

Didier: 49:20

Ah. Okay. All right.

Jaran: 49:23

it's, it's a good, uh, good, uh, good movie about the rise to the top and all the traps that are alluring. If you. If you rise, if you rise high, you need to avoid certain mental traps that, uh, that Tony Manana was pulling into.

Didier: 49:40

Okay, great. Okay, Yaron, thank you very much. And uh, maybe we'll speak again in the future when, I don't know, hash rate has changed and price has changed and so on. Okay,

Jaran: 49:50

Yeah. Thank you for having me. It was a great, uh, great conversation.

49:55

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