On The Brink with Castle Island - Hass McCook on Bitcoin's energy use in context (EP.216)

Episode Date: May 24, 2021

Hass McCook is a civil engineer who has been delivering estimates of Bitcoin's energy use and CO2 emissions since 2014, as well as alternatives like gold or finance. In this episode:  Hass's background in civil engineering and how it prepared him for the energy debate The conflation between energy generation and electricity generation Why you can't just generalize energy consumption to carbon emissions Hass breaks down the varying carbon intensities of different sources of generation How much energy goes to waste globally The difference between CO2 and CO2e / greenhouse gases Why today's US grid has lowered its carbon intensity over the last decade Why combusting methane is a net good from an emissions perspective Hass' level of optimism around flared gas mining Why the changing rate of ASIC innovation affects bitcoin's energy consumption The opportunity for stranded gas at landfills Hass' estimates of the gold and the financial system's energy footprints How gold mining actually works The ecological and human cost of gold mining Hass' thoughts on offsets Sponsor notes: Copper is transforming how institutional investors engage with digital assets by developing award-winning custody and next-gen trading infrastructure. Headquartered in London, the firm is scaling rapidly across Asia and North America to bring its suite of products to a wider pool of institutional investors. To learn more visit copper.co or reach out on Twitter, @CopperHQ Aave is a decentralized, open source, and non-custodial protocol where users can deposits and borrow digital assets, and earn interest on those assets. Head over to aave.com to experience and learn more about DeFi.

Hello and welcome back to On the Brink. Today's episode is brought to you by Copper and AVE. Let's start with Copper. It's the global provider of blockchain infrastructure solutions for institutional investors who are actively trading digital assets. Its award-winning custody application is connected to 25 of the largest exchanges in the world, ensuring safe storage and movement of assets for the biggest crypto hedge funds, market makers, family offices, and high net worth individuals. Their clear loop system, is the first off-exchange settlement network for digital assets. It's the safest way to trade balances in custody across multiple exchanges without requiring on-chain settlement, on-chain movement of assets. To learn more, visit copper.co, or reach out on Twitter at CopperHQ. This show is also brought to you by AVEA, AVEE. AVE is an open source and non-custodial liquidity protocol where users can earn interest on deposits and borrow digital assets.

It's a decentralized community governed protocol. More and more about AVE at AVE.com. Today we're talking about the glorious Bitcoin energy debate, which I'm sure no one's fed up with at this point. So we bring on Hasma Cook. He is a civil engineer, and he's actually been making estimates of Bitcoin's energy consumption and alternatives like gold in the financial sector since 2014.

So he's really made his mark on this debate. We dig into some of the extreme nuances. here. I mean, looking at the difference between energy and electricity generation, why you can't just generalize electricity consumption to carbon emissions, you know, even subtle distinctions like CO2 versus CO2E. And then, of course, we get into Hasse's estimates of the gold and the financial system, which he has been so kind as to update for us. He's really one of the key voices on this debate, especially comparing Bitcoin to these other alternative systems. That's a really great conversation.

I think you'll find that he's a huge amount of subject matter expertise. Let's dive down by bad mortgage investments. Lehman, which has 25,000 employees will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, The two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy

with a new round of quantitative easing. You print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin. Bitcoin. So Hasma Cook, you're one of the permanent voices in the quote-unquote Bitcoin energy debate, which is the worst debate in the world. But it's one that we must have, I guess. You've written some really, really good stuff.

You've been at it for a very long time. You had analysis of, I believe, Bitcoin versus Gold in terms of the energy outlay back in 2014, which you refreshed recently. So it's been a long career of contemplating this issue for you. Hass, welcome. Welcome to All the Brink. No, no, very good to be here. Hello, Nick.

All right. It's, I think, what is it, it's about Thursday morning in Australia. Is that right? So if I kept, if I kept to my traditional bedtime, I would have woken up completely oblivious to the carnage that just beset us in the past 12 hours. Oh, that's right. So I decided to stay up an extra half hour and I watched the show. So I've caught about as much sleep in these past few days as you've called. food. Oh, goodness. Yeah, well, it has been fun. As we were just talking, I concluded my fast. I thought my fast would redeem Bitcoin in a certain way. And, you know, I felt that we were being punished, you know, and so what do you do? You, you self-flagellate, you know, you incur some physical

harm. And so that was the point of the fast. It didn't work. Penance is cheap. It only costs a Sotoshies. Well, we're so talking about penance. We're going to talk about indulgences later on in the show. I think you know what I'm referring to. I love how impregnated the energy debate is with, you know, religious overtones, sin, you know, original sin and then buying you way into heaven. Anyway, we'll get into that. So I guess like just to, you know, set the stage here, how did you actually get into modeling out, you know, Bitcoin's energy or gold. Like, what's your background there? So, so my original background is in, is in civil engineering and, you know, infrastructure, mega projects. I've got a master of civil engineering as well, where I did a lot of work on,

like, environmental management. You know, that was in the, in the long, long ago, you know, before, before Bitcoin was invented. I found Bitcoin in, in the, in the, in the, of, you know, 2013. You know, I thought it had changed the world. I was, you know, idealistic yuppie elite had just finished my MBA from Oxford. You're not searching for meaning, and I found that through Bitcoin. And at the time, it was about $1,000 each. You know, everybody goes into Bitcoin, you know, thinking they know everything, thinking they're the smartest guy in the world, wanting to fix Bitcoin, wanting to change Bitcoin. You quickly learn otherwise. And after the big price drop down to $400 and seeing all of the fud that was

coming out against Bitcoin, I said, what can I, as effectively a useless civil engineer, can't code, can't do anything? Like, what can I bring from my civil engineering and physical mining background to Bitcoin? And since civil engineers invented life cycle analysis and all that kind of stuff. I was very well equipped to sit down and do an analysis. And I suppose just due to the nature of the Bitcoin ecosystem in 2014, the release of my work coincided with, you know, Mount Gox going under. You know, the analysis sort of got, you know, lost to the ether until I, until I resurrected it in 2018. So that's effectively my background, a civil engineer that used to build big infrastructure, found Bitcoin, and like saw that, you know, no matter how big

the infrastructure, the physical infrastructure is, it's all irrelevant compared to the infrastructure that is Bitcoin. So I'm always been an infrastructure man and I still am. It's just now I decide to like work on the only infrastructure that matters. Yeah, that's well said. I mean, the beautiful thing about Bitcoin is, you know, a lot of people think the only way to contribute is contributing to core or whatever. But as it turns out, everybody has a part to play, you know, and you certainly, you know, found your niche. I've found your stuff very useful. And of course, you know, we were talking before the show about why comparisons to gold or the traditional financial system are incomplete in a way and they don't, you know, fully necessarily capture the scope of what's

happening there, but we still make those comparisons. People still want to have rough guesses around them. And your work has been some of the best in elucidating that. So it's been a great contribution so far. So a lot of my work is biased by being in sort of like the pre, you know, I don't know if I'm going to get banned for saying this, the pre-carbon hysteria days. But when I was like studying, you know, environmental management back in, back in 08, like the focus was pollution, pollution, pollution, pollution, and resource sustainability. Like, obviously carbon is a, is a huge element, but like, don't forget, like, we're running out of stuff. We're running out of, like, fresh water. So, like, when, you know, when people want to compare, like, polluting industries,

like with Bitcoin, you can't just compare, like, you know, electricity. like you have to you have to think about like about everything like gold like you can't plug you know something into the wall and spit out gold like trillions of liters of water need to get used cyanide and you know that all shows up as you know zero emissions right yeah there's the there's an ecological footprint to gold and obviously to you know even to banking to everything really Or urban installations, parking lots, you know, of course, yes. And this is another point that's totally underappreciated than dialogue. I mean, we're looking at energy, electricity numbers.

We're not looking at numbers of habitats displaced because of gold mining, which just pulls up, you know, square miles of Earth and, you know, requires very toxic chemicals to perform some of those extraction processes. You're absolutely right. And Bitcoin is a synthetic dematerialized gold, some would say. It's literally what plugs into the wall and the little bit of metal and silicon and stuff to make an ASIC, which can all be recycled anyway.

And that is the scope. You can touch it, you can feel it, you can point at it. You've got a couple of factories making these rigs. But in the scheme of things, it all pales in comparison to just, you know, what comes out of the wall. So. Or what comes out of the tailpipe of the oil and gas will. So I want to talk about some of your analyses you've done.

It looks like you've a new one coming out. But maybe before that, let's talk about some of these horrible conflation points. Some of these more subtle points in the debate that get lost, either because people just aren't as familiar with the subject matter, maybe they're a little naive about it, but they deserve to be clarified. I'm myself, I'm guilty of making these mistakes from time to time. So first one, energy use versus electricity use. This is so commonly conflated.

In my HBR piece, you very helpfully pointed out that I said energy, when I meant to say electricity. What's the difference here? And, you know, why does it matter? So this is probably one of my favorite topics because it hits close to home. So like you guys would have noticed a lot of a lot of famous Lebanese Bitcoin is. Your friend Jessica, like included, we recently learned. She's Lebanese, right.

Yeah, that's what she said. Now, the reason, so I'm also Lebanese got to spend five years there high school and freshman year of university. And Lebanese are naturally primed for Bitcoin. And we naturally understand the energy. versus electricity debate. Okay. Lebanon doesn't have electricity all the time. There's rationing everything.

So we get 12 hours a day of electricity, and then we have to figure out how to get energy. So all apartment buildings in Beirut have a big diesel generator down in the basement with a diesel tank room, because Lebanon has never had electricity, and everybody makes their own energy from oil. Right. And life goes on. this is fully the case for like, I'd say multiple billion people.

One billion at least have no grid whatsoever. And there'd probably be at least another billion, you know, that are on like Lebanese, like, conditions. So like, there's a huge difference between electricity and energy. Now, Bitcoin always gets, you know, stung that it uses, you know, X, X, Y, Z percentage of global electricity consumption. Bitcoin doesn't need electricity. Bitcoin needs energy. So Bitcoin doesn't necessarily need a grid to survive like these billions of people I've told you about. It just needs an energy source.

So in some particular places, that happens to be a grid. And in other particular places, it happens to be the tailpillar. pipe of an oil and gas well. Right. And so I guess the point is here that Bitcoin isn't necessarily depriving anyone of electricity anywhere. And it's not necessarily driving up electricity prices because there's this abundance of energy, right? So to contextualize, so energy is defined, you know, by the World Energy Association as transportation, energy, heating energy, and electrical energy.

And like of the 160,000 terawatt hours of energy produced by civilization each year, the grid produces like 25,000. And the remainder is... Transportation and heating. Right. So burning coal, burning firewood, burning gasoline. And now they say, like, you know, like, you know, you need petrol, you know, like to to drive your car.

Like there's, there's nothing preventing someone from hooking up an ASIC to a good old fashioned 5-liter V8 and, and, you know, putting up a through giga-hatshers

as they're driving down the highway. Like, it might not be efficient, but it's doable. Like, as long as you have energy, you can turn it into Bitcoin. So the scope of what Bitcoin consume,

excuse me, sorry. So the scope of, So the scope of what Bitcoin consume is not solely limited to the world's production of grid electricity is what you're saying. Not at all. And there's enough waste methane to power Bitcoin like multiple times, maybe not a hundred times over, but something like five or six times over.

Totally. Which realistically, which, you know, by the way technology goes, like, you know, ASICs already at five nanometers now. you know there's rumors that intel has a two nanometer chip and you know that's effectively the wall so in five years you're probably going to start having just commoditized like asic rigs you know that you sort of you know stay like current and don't get obsolete you know for 18 to 24 months you won't have just like extreme exponential like hash rate growth uh So like, yeah, waste methane alone could power Bitcoin, you know, to a valuation of, you know,

50 trillion or 100 trillion or whatever it is. So the next conflation point we have to do is, and this is a classic one, usage of energy versus actual climate impact from a, you know, CO2 perspective. So people in academia does this all the time. They look at an implied, excuse me, my voice is so bad today. They look at an implied energy consumption figure of the Bitcoin network that they derive from hash rate and a best guest of what kind of basics are active on Bitcoin. And then they extrapolate that to a carbon emissions figure. They, you know, superimpose some sort of emissions factor on top of that electricity consumption, and they get a CO2 figure in tons.

But they're often just using a generic world grid, you know, just a generic carbon factor. So tell me about why you probably shouldn't be doing that with Bitcoin. Okay. So with the, with the, there's a metric. It's called carbon intensity, which is. effectively your tons of CO2E, which is a very important term. So CO2E is CO2 and CO2 equivalents, which are the other greenhouse gases, which we'll talk about later in the other conflation points. So every source of energy has a different carbon intensity. So coal, for example, has an intensity

of in like at the 50th percentile level, about a ton of carbon per megawatt hour. Whereas something like hydroelectricity is closer to 10 kilos, so a hundred times less overall greenhouse gas emissions. So on average, the renewables, you know, in like the 20 to 50 kilo range of carbon per megawatt hour. So for example, solar ranges, you know, from, you know, 10 to 50 depending on how the solar panels are constructed. But generally speaking, your fossil fuels, coals about, you know, a ton, you know, oil, you know, 700, 800 kilos. Natural gas is a bit better, like, you know, in the maybe five, six hundreds. But the difference in intensity between renewables and fossil fuels is stark.

So even when you add, so when you add like a, so even if you have like a coal-dominated grid like China, let's say that it's 70% coal, the fact that the other 30 is, is hydro, you know, brings China's grid intensity like down like lower than the US's. You know, it's sorry, not not China wide, obviously the the the the provincial grid, that are, you know, half coal, half hydro. Yeah, it's been interesting to dig into the China grid. It's such a deep rabbit hole, actually. I basically figured out not to derail the conversation,

that the reason there's so much Bitcoin mining in China is not because China has some like special affinity for Bitcoin or anything. It's because China's the number one source of basically overabundant wasted or curtailed energy on the planet, as far as I can tell. Whether it is, you know, super abundant excess of coal in Sing Chong or Inner Mongolia, an excess of wind or solar in those same provinces, they have a huge amount, which is curtailed, or of course, as we all know, excess of hydro in Sichuan, Yunnan. And, you know, to me it seems like that particular, this our particular epic in history where China built up so many energy resources over the last

kind of 30 years and then they had too much energy that they couldn't integrate the grid and get it all together. That seems to be why Beiquin hash rate was so China dominated. And it has to do with effectively the poor integration of the grid. That's kind of a non-sequitur I know. But talking about the grid, actually, in one of your articles, you live. look at the breakout of the US grid. And it's, so just to refresh us, it's about, I want to say 60% non-renewables. And then if I'm getting this right, 20% nuclear and 20% renewables. Is that kind of a fair breakout?

Yeah, fair breakout. I personally love considering and love conflating nuclear with a renewable. But the eco-terrorists, they simply don't like nuclear. And I've got in my article a bit of a look at the trends. The market share of nuclear power is unfortunately going down over the years. But yes, your assessment correct. 40% gas, 20% coal, 20% new, 20% renewable. So they're or thereabouts.

And it's so depressing because I'm a big proponent of nuclear as well. And the term renewable, I mean, it doesn't really mean anything to me. I mean, what's renewable? Like, we've got enough uranium in the world, you know. out there in the earth's crust to power all of our energy demands many, many, many times over. In one postcode in South Australia, you'll have enough uranium to power the world forever. That's right, yeah. And to me, like the barriers for nuclear seem to be mainly political. And, you know, they have to do with making it costly to run a nuclear power plant.

And, you know, we see terrible things like in Germany. They shut down seven nuclear plants. after Fukushima, purely, you know, an aesthetic choice, really. And then as a result, the carbon intensity of their grid increased. So it was just a dramatic self-owned by the Germans. So returning to that U.S. grid, so if you had to weigh your best guess for, you know, the blended energy mix of Bitcoin, where would you benchmark it relative to the generic U.S. grid? So, like, because you're familiar with my work, you know I like to just take like educated best guesses, like based on incentives. So Bitcoin's a worldwide, you know, technology. So you'd have to like as a baseline, you know, assume that it runs on the worldwide grid as like a baseline assumption.

then you have to look at like incentives and like, you know, factors of mobility. So yes, although it's worldwide, like it's highly mobile, therefore logically you'd conclude for the maximization of profit, like mining will tend to go to the cheapest, or, you know, sorry, risk-adjusted, you know, cheapest jurisdictions they can find. So like not everyone wants to go and mine, you know, in Sishuan in West Seas. And they might not match, you know, their risk profile. You know, they've got geothermal options in Iceland or whatever. The point is they're mobile enough, you know, to chase their natural incentives.

So, so if you're, if, like, if you do that in my original work, I just concluded that, you know, doing all of that is too hard. Let's just be conservative and assume Bitcoin, you know, runs on the world grid. But luckily enough, you know, that my rivals over at Cambridge scratched together some grant money and actually went out to the field, asked the questions and got the number. You know, and the number is 75% of miners use renewables at a total of between 29 and 39% of their total energy mix. So they're all buying, they're all using renewables in one way or another. And it's anywhere the guess is between, you know, 29% and 39% renewable, which is 20, the low end estimate, 29% is the world grid effectively. And, you know, 39% is, you know, what their survey shows and factors in seasonal migrations.

Because they do spend, you know, months like in the hydro fields where carbon intensity, like is almost nothing. And that energy is not being used anyway. I mean, there's virtually no big cities in Yunnan or Sichuan. Well, a third of the energy that civilization produces every year

is waste. So enough to power Bitcoin hundreds of times over. Right. So the methane is just a very tiny part of waste, but it's a good opportunity because it allows, you know, oil and gas businesses,

you know, to turn their waste into a bit of profit and knock down their greenhouse gas emissions. So we'll talk about methane when we talk about that conflation point. Yeah, we'll get to that. So to put the code on this section, you can't just assume, given the knowledge and information we have today, that Bitcoin is following some generic pattern in terms of its carbon intensity, you probably should, drill down and try and ascertain where the miners are, what their behavior patterns are, so that we can make a more precise estimate, basically, of the carbon emissions. The thing is, like, because it's so dynamic, like, it's pointless to even make an estimate,

because whatever you estimate now, like, tomorrow the hash rate will change, like, the estimate's wrong. The important thing is consistency. So if you do want to, like, treat Bitcoin as an average world grid. Every year that you want to criticize Bitcoin, you will have to update your critique with an updated carbon intensity of the contemporary world grid. You can't slow Bitcoin. So in 2012, when I originally like, you know, you know, did the, or 2014 when I didn't did the study, between then and now, the world grid's carbon intensity has dropped like 20, 25%. Yeah. So there you go. Bitcoin's dropped 25% in submissions. So just be consistent with the metric you're evaluating. So don't slug energy use today based on a 2013 grid, for example. Yeah, well said.

And this is something people haven't noticed. The U.S. grid has also become less carbon intense, not necessarily due to the growth of renewables, frankly, but actually because more natural gas is being used in the U.S. instead of coal. So natural gas is half the impact of coal. Yeah, it's still 500. You know, it's still half a ton per megawatt, but that's better than one ton. Yeah. I mean, I would say it's dramatically better. And look at, with carbon capture and special technologies, you can get net gas down to the 50s.

But it's very expensive and no one is being forced to do it. Who knows if you have carbon taxation schemes and all of that, what happens like in, you know, the incentives and the economics change, you might, you know, have, you know, as Trump would a beautiful clean coal and, you know, beautiful clean gas. And coal can get down to like the 300s with carbon capture. And most American coal has carbon capture. But zero Chinese coal has carbon capture. Right. And yeah, it does trouble me that, you know, Bitcoin still has a lot of China presence. China is building something 40 coal plants this year. I mean, It is unfortunate, but unfortunately, like, these are the incentives.

Yeah, yeah. Like, it's only logical. And the incentives will turn soon enough. Yeah, my view is that China probably actually has the state capacity to dramatically decarbonize their grid if they wanted to. So it's just a matter of when the CCP starts to consider it a priority. the good news is that they are aggressively pursuing, you know, trying to root out and eliminate mining in places like Inner Mongolia, although that might actually be more of a regional thing as opposed to a state directive. But Inter Mongolia has been very genuinely aggressive in cracking down on miners. Got some new news about it actually this week.

And Inner Mongolia was the number two province in China during the dry season. for Bitcoin mining behind Sing Chung, and it was 70% coal. So them cutting it out makes the state of affairs much better for Bitcoin. So I'm very much celebrating that, and I hope they continue that in the other coal-fired provinces. So let's see, moving on to the third conflation point. This is a more subtle one, actually, I would say carbon dioxide emissions versus greenhouse gases. when people think about greenhouse gases, they think about CO2, but there's obviously others.

We talked about methane. What is the difference there? And how does sort of Bitcoin come into play here? All right. So a greenhouse gas is basically any of the gases that turn our planet into a greenhouse. CO2 is one of them. methane is another very highly potent one. We've got some also the fluorinated gases like, you know,

fluorocarbons, the stuff, you know, that's, you know, in our, in our deodorants and whatnot, you know, also known as F gases. And we've got, you know, some, I believe the other group is, is nitric oxides. But effectively, of all of the greenhouse, out of all the greenhouse gases, carbon only accounts for about 80% of all of them. So when, you know, they say, you know, Bitcoin uses, you know,

XYZ percent of the world's CO2 emissions. Why are we only looking at CO2? Like, why aren't we looking at all greenhouse gas, emissions. So that already makes like the ratio reduce and the important thing about about Bitcoin is it actually eats methane. So so methane causes four times the heating impact, you know, per you know, molecule or whatever it is as CO2. So it's very highly potent. And as a, as a, you know, like a not insignificant amount of all greenhouse gas emissions yearly, maybe 2% of them, are a result of methane flaring.

So for the benefit of the listeners, methane flaring is basically to be able to, like, pull oil out of the ground. Like, you need to release some methane gas. Right. And this goes out basically the tailpipe of a well. you know, as pure methane. And to save the environment, this methane is burnt, it's flared,

resulting in an impact that is more close to CO2. Because the output... It reduces the greenhouse impact by, you know, 80%. Now, Bitcoin can plug directly into this tailpipe. So not only does Bitcoin, you know, not emit CO2 in this case, it also decreases the amount of CO2 that's being emitted into the environment, like as a potential. Now, this industry isn't huge at scale, but it's scaling up.

And, you know, huge, you know, like companies, a good example is the ACA group through, you know, through their new subsidiary CT. You know, they funded, you know, this venture with, you know, $70-odd million. I can't remember what it was. And in their letter to shareholders, they basically said, we want Bitcoin to be the world battery. And like, we are going to like invest toward these ends. Like there's heaps of just wasted stranded energy. And, you know, we have the industrial know how to like go out and get it.

So more and more people like will just start learning about the incentives. That's, it's just information asymmetry. If you read the conclusions that I wrote in, in, in, 2014 in my 2014 research, they've pretty much played out to a T. And not because like I'm, you know, I'm unusually like insightful or intelligent or anything. It's just a simple matter of just chasing the logical conclusions of the incentives. Like it's textbook stuff. Like Bitcoin miners do not differ all from commodity miners like in terms of like textbook terms at all. The only difference is the production cycle. You know,

gold is six months, Bitcoin is a difficulty period, two weeks. That's the CAPEX and OPEs like planning cycle. But other than that, all the incentives are the same, all the motives are the same. It's just some people like mining by plugging into a wall. And, you know, getting smart maybe with cooling and, you know, data center configuration and whatnot. And, you know, others are pulling, you know, digging holes in the ground that you can see from space, you know, to get their, to get their treasure. But other than that, like, there's nothing too special about the mechanics, the business mechanics of mining Bitcoin. Just a Bitcoin mine is agile. You can't move a gold mine. Right. But other than that, everything's the same. Bitcoin mine goes in a shipping container and, you know, gen set maybe for natural gas and you can move it around. With the flared mining use

case, it has fascinated me. Ever since I'm at Steve Barber, I would say maybe back in 2017, 2018. I mean, he was really on the vanguard of this. Now there's hundreds of millions of dollars that have been thrown at it across a number of companies. New ones come up on my radar every week. I've talked to publicly traded oil firms thinking about doing it, you know? So this is a really material, you know, theme.

And if I had to guess, I would say, really. significant portion of Bitcoin's hash rate will be produced this way. Look, I've got a timeline for it. Okay. Let's hear it sounds it sounds bearish, but I'm saying 2025. I say that because TMC will have its mega foundry open by like 2024 among other like mega foundries. So the chip shortage will finally be over and probably, you know, the, the foundly foundry lithography will probably have hit a wall by then so everyone will be producing asics and and like you can you'll really start feeling its impact in the in the oil and gas

industry when an own g company can buy an asic and know it's you know it's mass produced and doesn't need to be replaced for another two years you can just sit and collect waste for two years and then get recycled. It might still be a bit early now, but the people that are taking advantage of it now will be making very good profits. So your timeline is, is that what percent penetration of Bitcoin's hash rate do you expect in 2025? I'd...

Not to put you on the spot or anything. I'd say, no, no, I'd say a quarter of Bitcoin will be powered by waste. Either stranded energy or waste, a quarter of Bitcoin. Hach rate 2025. And you know there's other sources of I say call it non-rival energy because it's energy that's just not making it to the grid otherwise. So it's not rival in consumption. Yep. There's plenty of other sources of that, which are similar in nature.

So landfills, for instance, landfills generate lots of methane, huge amounts. And in some cases, they're connected to a pipeline or in other cases they are connected to. wired up to the grid and so they can funnel power into the grid. In other cases, they're not and the gas is un-economical and it's flared. So there's all manner of systems that are producing this excess and this waste and these stranded resources. Bitcoin gobbles them up. No other commodity can do that.

But the current bottleneck is the chips, as they say. So the chips are giving us a bit of a problem. You can have a look like the last shipment of ant minor S-9s that left the bit main website. We're going for 90 bucks an S-9. So I don't know, that was a year ago or something. Now, you know, people paying a thousand bucks for an S-9. For an ant-minor S-9. And you can't get an M-Mindor S-19, which is old tech.

Yeah, it's absolute tech almost. It's like it's like it's not that bad, but it's got very high. high, like, energy per per terahash. The S-19 is like, you know, maybe half the energy. But, like, you know, the price is so high. Yes, we did have a pullback, but still, like, the cost to mine, like a good proxy that I like to use is the hundred week moving average. And like, that's what the best miners can probably mine Bitcoin for, which would be, you know, somewhere in the low $20,000 range at the moment. Yeah, that's what I've heard as well.

S-19s are mining very cheap. There's supply constraints. The foundries do not prioritize the bitmains or the micro-BTs. They prioritize their tier one clients, whether that is Apple or Qualcomm or Broadcom or invidia. And the Bitcoin miners, frankly, get the scrap. and especially Q3, Q4, that's when they make all the phones for Lunar New Year. They make the phones for Christmas.

Bitcoin A6 do not get made. And that's because the Bitcoin industry is not a predictable buyer of inventory at the foundries. As far as I understand it, I'm not a subject matter expert on it, but that's my read on it. So you're right. It does have to do with this supply constraint. I kind of want to talk about your work. You've done a lot of work on quantifying the impact of gold and, you know, the financial industry and Bitcoin is kind of like a hybrid of the two, you know, some say it's like

the asset itself. Some say it's the payment network. And so those are the, you know, most local cousins of Bitcoin. Maybe before we dive into it, you know, tell us about the merit of that comparison and, you know how it should be caveated also yeah so uh like uh i don't like uh you know comparisons but sometimes you have to you have to give the people what they want which is a comparison so whenever you like trying to compare like anything with bitcoin what people have to understand is like bitcoin is effectively perfectly definable so like what is the impact of bitcoin it's

just whatever's getting plugged into the wall in the mines and like the very few support staff and offices that are associated with like we were talking about it earlier coinbase publicly listed 50 billion dollar company doesn't have an office doesn't have a doesn't have a HQ crackin another probably similarly valued valuable exchange no headquarters it's just uh you know the finance like sector like needs over 60 like employees directly, you know, about, you know, 60 million people. This doesn't include, you know, support staff, cleaners, accountants, just people making sure, you know, the financial and insurance system runs smoothly.

Like, Bitcoin will never need, like, really technically anyone, like, to ensure it runs smoothly. like it runs smoothly whether people participate like or not but like if you if you don't want to if you want to steal man it a little like bitcoin could probably survive with the concerted effort of maybe a thousand people right right and it's proven that in history it's it's literally it was born and raised and reared by like a group of 10,000 randoms like it doesn't need an industry like to make sure it survives and runs smoothly. So, so yeah, Bitcoin is, whatever like goes

into the wall. All right, what's Fiat? Like, good luck defining Fiat. Right. I mean, the problem is with the Fiat comparison, you get back to the state's monopoly on violence and the state as the, you know, in particular the U.S., as the guarantor

of the dollar system. And then you have to go about quantifying government outlays, and military expenditure. I mean, there's definitely a causal line between maintaining the validity of the dollar system and our military adventurism. But people totally roll their eyes of you

when you start to point that out because it's such a diffuse comparison, whereas with Bitcoin, of course, it's this mathematical, knowable thing. But I don't know. I don't think you can actually untangle that from the security model of Fiat, so to speak. So I will endeavor to untangle sub elements.

So I've done a, I did a pretty lazy update of the banking system a couple of weeks ago for Bitcoin magazine just because I don't like comparisons. And I just merely indexed, you know, assumed growth, you know, 2% a year or whatever it was. So I thought I'd sit down and have like a closer look at banking. and I now do have a defined scope. The UN and the International Labor Organization have economic sector definitions, very, very specific, well-defined definitions. And I had a look at the finance and insurance sector,

and I assessed the impact of that. The update is, you know, the finance and insurance sector effectively uses about 2.5% of the world's energy, which makes sense. It is responsible between 7 and 10% of GDP. And in future sit-downs, I will uncover the greenhouse gas emissions of a functioning government, mandatory functions and social security. So I'll leave health and whatnot out of it. And that's a defined sector. And I'll also look at the impact of the world's militaries.

And I'll see if I can get some transparent literature on that. And really, if you want to compare Bitcoin to Fiat, you have to compare it to the emission. So Bitcoin, as I try to tell people, it's a very oxonian term. It's a PPE system, politics, philosophy, economics. It is a total package, and you have to take. all three or none at all. You have to take them together. So as something that offers a total political, philosophical and economic solution, you've got to compare it to the finance sector, the government sector and the military. That's very well said. You know, I applied to Oxford to study

PPE when I was in. Yeah, yeah. It's a it's a tasty one. That's probably too royal for my blood. I'm just, what's it called, lazy MBA student. Well, it's a moot point I didn't get in. Yeah. That's the degree you do if you want to become the prime minister or something. Yeah, very true. But if done well, it's a perfect primer for Bitcoin. Totally, yeah.

Bitcoin is a full-stack institution. It's a political system, has economic rules, and it's a very simple political system, but it's a political system nonetheless. Totally. And it doesn't rely on explicit violence. It relies on this insurmountable wall of energy. That's really it. And my view, that's much superior to having, you know, 12 Ford class aircraft carriers patrolling, you know, the Straits of Hormuz or whatever it is. But to each their own. So when you look at this 2.5% figure for financing. where does that compare to Bitcoin on a strict percentage basis? So on the spot here, numbers off the top of my head.

I think it's close to, you know, Bitcoin is like 1 40th, I believe. So in terms of the world's total, like a greenhouse, like total CO2E emissions, you know, Bitcoin would be about, you know, 0.1 of a percent. And then you also have a good study of gold, which you wrote in Bitcoin magazine. This is an interesting one because gold is economically bigger than Bitcoin by factor about 10, right? It may transmit less value than Bitcoin. I mean, I would question how many gold settlements there are per day, probably not that many. I mean, how common is it to actually make a gold transaction?

you know can you imagine um yeah like handing someone you know like a i don't know a cruegerrand or something like that um but be that isn't made gold is bigger than bitcoin it also consumes according to you more you know electricity than bitcoin has a greater co2 impact than bitcoin but not by the same factor as it is economically large in bitcoin right correct so so so There's a reason and there's a reason for this. Okay. So let's hear it. So like again, it's numbers off the top of my head here.

They sound fantastical because they are, but like the numbers are what the numbers are. So like all of the gold that's mined in the world every year will fit in your apartment like roof to ceiling or not. Even a Boston, a small downtown Boston apartment. Yeah, 600 square. You can fit all of the world's gold in a 600 square foot apartment, roof to ceiling. That's it. That's the 3,000 odd tons of gold we get. Right.

It weighs 9,000 tons per cubic meter. Or sorry, 9 tons per cubic meter. Right. So it's very dense. It doesn't take up much space. To get that, you need something like a thousand great pyramids of geysa of waste rock, something like 10 trillion liters of water, billions of tons of cyanide, and like none of that counts as like emissions. Right, right. Yeah, where do you count? I think like in Latin America there's more money in illegal gold mining than there is in cocaine now.

like they're ruining the Amazon but like none of that is emissions yeah Bitcoin plugs into the wall so the gold mining industry use cyanides African slave labor labor uses mercury

because it's cheaper yeah and they have to light the mercury on fire to get rid of the waste mercury and they usually get you know the village kids involved to sell like you know blow out the flames

like it's like it's It's like the illegal metals mining is harrowing. And like if the lefties actually knew the extent of it, I think they'd all sell their jewelry. You know, my sister went on an archaeological dig in Mali. And just across the river in Senegal, I believe, there was a gold find. And something like 30,000 to 50,000 people flocked to, you know, know, dusty patch of land in Senegal and started mining it with hand tools and, you know, stripping, stripping the land, right? And you're right, they use mercury to, I guess, like, distill the

gold, I don't know, they precipitate the gold. Maybe I don't know the exact chemical process. Just leeches it out of the rock. That's basically it. So gold mining is, so it's not as glamorous as it used to be with like panning for gold. Now you just dig as much or rich rock as you can. You crush it, you soak it in cyanide, turn it into a slurry, and you get the gold out. Right. And so what she said was, you know, they had to, they fished in the river, but they had to fish upstream, obviously, of the mine. Because they were literally dumping mercury effluent into the river. Yeah. Well, that's happening in the Amazon now as well. like in in in in big amounts uh so yeah i uh i i talked about a lot of this in my in my

in my in rigo which you can uh check out on my on my youtube channel uh orange coin good yellow rock bad i think if people like uh like really appreciate like how terrible gold mining uh is you know they they drop gold uh for reasons other than what you know gbtc uh that tells people. And one thing I think people don't appreciate is like or rich. I'd spent some time with the gold prospector two weeks ago. Oddly enough, I learned a lot about gold. Or rich gold or ore is considered to have something like a density of six grams of gold per ton.

I mean, it's incredibly like diffuse, like even ore that it's considered rich in deposits. Oh, six grams per ton is a good, like I'm telling you, you need like thousands of great pyramids of geyser of waste rock to just fill up your room with gold. That's it. Yeah. It's all you get. So yeah, six, now can you see where the six grams per ton, like why it makes sense? Like you don't actually get much gold. So like these African slaves slave all day and they maybe pull out, you know, half a gram a day.

of dust, but you're half a gram's still all right. That's 25 bucks. You know, the slave master only has to pay two bucks. Yeah. Like I say it nonchalantly, but it's, but like, like, people need to hear this. Like, this is what happens. Totally. So that's what's not accounted for. And the, the gold emissions debate, um, despite that, gold still does produce, uh, you know, consumes a lot of energy and it has a big ecological footprint and you need, you know, petroleum and gasoline to run the machines and so on. So that's gold. That's finance. Maybe to zoom out a little bit, you know, there's been a lot of conversation around, you know, offsets as a way if you're feeling guilt, this is the part where we return back to the religious metaphors, you know, if you want to

buy your indulgence to get into eco heaven. You know, one of the tools is an offset. We didn't talk about this beforehand, but curious as to your thoughts as to, you know, the validity of that to like remediate the climate impact of, you know, the Bitcoin you own. Yeah, you know, I love offsets. So the best way to offset is like you just buy Bitcoin.

And if everybody who wanted to offset just bought Bitcoin, Fiat would die and like the environment would fix itself. So like, so that's why I don't tell like, when people say, you know, pens, I'm like, I don't know what to tell you. Like, so for me, I always say Bitcoin like is only the second charity in history where if you donate to it, you'll become wealthy. Right. First charity being, yeah, so the first like charity that allowed you to do that, like

donate and get rich was like the Clinton Foundation. But this charity is much, much better. So with Bitcoin, all you have to do is just donate every day, you know, what you can. And if you get, you know, according to NIDIG, there's 46 million US Bitcoiners. If everyone paid $10 of daily auto DCA penance, that's a half a billion dollar wall of Bitcoin coming in relentlessly daily. That's a $500,000 Bitcoin. And a $500,000 Bitcoin will mean like the environment is soon to be saved. So yeah, whenever you feel guilty or penance or you want to do charity, you just buy Bitcoin and hold it. And like you've done your charity.

So you said energy has like religious undertones. You don't spend this long in the energy trench and then don't naturally gravitate to Bitcoin as your religion. Yeah. It's, this is Friar Haas. Friar Haas for us. So zooming out even further, I guess, you know, like, so we can debate the minutia all day. And I think it's actually important to have like some good estimates, you know, some like facts that we can level set and then, you know, argue about the norms from there. You know, what's your view of this ultimately?

I mean, you know, I think my view is that it basically comes down to whether you think Bitcoin is valid or legitimate system. and there is no, you know, threshold at which someone who thinks Bitcoin is invalid or, you know, fundamentally bad system, there's no amount of the energy that they'll, you know, permit or believe is tolerable for Bitcoin to consume. Is there a middle ground or is that sort of, you know, the ending point of the debate, basically? No, no, if we can, like, shift the debate, and I'll be asking the Cambridge guys to do this. So I've taken the liberty of estimating the Cambridge assumed carbon intensity. So they give a terawatt hour figure.

I would also like them to give a carbon emissions figure. Because in the scheme of things, like it just looks like Bitcoin is just, it's wasting, you know, half a percent of the world's electricity. Where in the scheme of things, it's contributing 0.1% of the greenhouse gas emissions and like trending down. Yeah. So if we can bring the playing field back to just greenhouse emissions, like civilization has only ever advanced in the history of civilization when we've unlocked new sources of energy. So this is one of the things like I banged on in the early days that like,

don't be afraid of energy. Like we need energy. If you want your communist utopia, Star Trek, replicate a world, that necessitates effectively free unlimited energy. Yeah. It's not infinite money printing. You need a way to get energy. Real, yeah, real resources.

I've never actually watched Star Trek. Do you know what they use in the show? Is it like nuclear fusion or something? Because they're in a post-scarcity world. They really like harness like entire systems worth of energy through some mechanism. It's it makes the show work effectively. But like the thing is, like this is something that can happen on earth.

Like instead of, you know, a monetary UBI, you know, an energy UBI. Like, you know, where energy is so abundant, it's free. And effectively, if you have access to free energy, that's a basic income. You can get anything you want, especially if you have a 3D printer or replicators or whatever. As long as you get free energy, like that's a UBI and that's at least something real, not printed money and like that's like given out. So like energy is good. Use more energy as much as you can. But like also pollution is bad.

So we got to figure out like we don't want to go and bulldoze all of our coal plants and nuclear plants like just yet. But yeah, absolutely we need to figure out like ways of getting more clean energy. But whether we get more clean energy or not, there's enough waste and like curtailed energy out there to feed Bitcoin forever. Yeah. Forever, Nick. Forever. Forever, Laura, forever. That's a great way to sum it up.

Has. Really enjoyed this really spirited discussion. I mean, it's very important topic. And, you know, we need to reset it because the debate is bad. And we're fighting on a, you know, foreign playing field. It's like an away fixture, you know, with all the fans are hostile and jarring at you. You know, telling the rough. to send you off for every single tackle.

So we've got to somehow get back onto our own turf here. I don't know how we're going to do it, but your work is much appreciated. I've very much enjoyed it. And likewise, I always say you're probably the only person that can really empathize with me on like this particular topic. I haven't been at it for as long as you. I've suffered, you know, this last year.

here arguing with the skeptics about it. But it's also been fun. And I learned a lot too. So I know a lot more about the energy grid than I did now, which is a great side effect of all this stuff. So I find it pretty fun, rewarding. But at the end of the day, Bitcoin is an energy play. It's not a finance game.

I think the oilmen of like the early 1900s. you know like the the new bitcoin miners are the equivalent of these guys like energy will be the single precious commodity uh you know of of this coming of this coming century so yeah it's no it's no surprise that you know china is starting i think like uh they've got you know several nuclear power stations uh you know under under construction uh as we've speak. So energy is going to be is going to be the rage and like expect more like an integration between the energy industry and the Bitcoin industry. I can see it becoming one industry. I could probably see a merger of the energy and Bitcoin industry more than like the finance.

Finance is a fake industry. It's existed for 40 to 50 years. Really. That's right. And yet and yet it's 10% of G. GDP, it's grossly oversized, grossly swollen. Well, now it is. It didn't always used to be. Yeah. It's grown dramatically since the 70s. I think energy will reclaim its place as top dog.

And by extension, Bitcoin. Well, that's, we ended on a cosmic note. But this is really fun. Thanks again, Hass. Thanks for coming on. No, no, always a pleasure. Any time. heaven us.