On The Brink with Castle Island - Weekly Roundup 09/10/21 (Bukele buys the dip, oil majors are mining, SEC v Coinbase) (EP.241)

Episode Date: September 10, 2021

Matt and Nic are back for another week. In this episode:  El Salvador's bitcoin launch Was the Chivo rollout really that bad? Bukele buys the dip Did El Salvador's bitcoin day cause a 20% selloff? McDonalds supports lightning in El Salvador SEC v Coinbase Introducing the Reves test Takeaways from the Miami Bitmain conference What is the NFL planning with NFTs? Oil majors are getting into bitcoin mining Is flare gas the future? Sponsor notes This episode is brought to you by Withum, a top 25 accounting firm with a cutting-edge Digital Currency and Blockchain Technology practice. To learn more, visit  withum.com/crypto. This show supported by Coinbase Prime, an integrated solution that provides advanced multi-venue trading, custody, and prime services for institutions. For more information see coinbase.com/prime

Brought 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 to Britain's ailing economy with a new round of Concentive 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 a Bitcoin. Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. And this episode is brought to you by Witham and Coinbase Prime. More on those two companies in the middle of this episode. We've decided to professionalize our advertising.

And we're going back to mid-roll, which means that you read the ad in the middle of the episode. Put that ad right in the middle. Like Peter McCormick does that too, right? kind of tricks you into thinking, is this an ad or is this just the content? Well, Witham and Coinbase are two products that we, two companies we love, two products that we use. Yeah, we're happy to actually partner up with them because they are great. And we weren't even paid to say that part. Exactly.

Well, a busy week this week. So you're on Bloomberg talking about this El Salvador Bitcoin purchase and the fact that they officially went live with Bitcoin as their. I guess it's kind of a medium of exchange play over there in El Salvador. Yeah, so I'm back on TV. Well, actually, I can't forecast when it happens. They just ask me with little warning, and then they don't tell me what they're going to ask me. But the occasion of this one was Bitcoin Day in El Salvador, which some in the press are characterizing as a failed or troubled rollout. which I think is a little unfair.

So the fact that Bitcoin tanked about 20% and then you had the president of a sovereign nation tweeting that he was buying the dip, I was shocked. I did not think that I would be seeing that. Yeah, I was actually speechless. I mean, the president of a nation tweeting like Michael Saylor.

Yeah, it's like, you know, is this Jason Williams or is this, you know, the president of a country tweeting that he's buying the dip? Yeah, and mocking the IMF at the same time. I don't even know what the IMF happened to do that day. I don't think they did anything. He was just generally scorning them.

Just, hey, I'm going to dunk on you. I mean, it's always a good time to dunk on the IMF. Just wild. I like that the press coverage was trying to suggest that bugs or instance, stability in the Chivo wallet, the official El Salvador wallet, were responsible for the 20% decline in the price of Bitcoin. Yeah, I don't think those two things are connected. As if, you know, the global audience of 100 million plus bitcoins was, you know, waiting with baited breath to see what the performance of this wallet would be. So what actually happened

with the wallet? I believe that they just had some initial bugs. I mean, there was some instability, which you expect with any, you know, new launch. A lot of people are trying to get it to get their $30, theirirdrop. And then there was also some privacy issues. I believe the Lightning invoices, this is a funny thing. The Lightning invoices in the Chevo wallet, so it does support Lightning, actually, which is, that was a little surprising to me.

And apparently it works. The lighting invoices included the name of the user in them. So basically leaking your real name to your counterparty, and maybe to the blockchain. And certainly a bit of a privacy leak. And Matt Alborg, who's been on this show before, it works a bit refill now, pointed this out on Twitter, and then I think they fixed it.

And they also thanked him via the lightning invoice system. Really? That's pretty funny. So I love that the Salvadoran government is kind of taking advice from or feedback from people on Twitter about their wallet. That's so funny. Well, it sounds like that, you know, could have been better. But in the grand scheme of things, you had a country buying $21 million worth of Bitcoin and officially making it a currency in their country. So pretty breathtaking stuff.

and not to mention other businesses went live with their Bitcoin integrations. So Aaron Van Weirdam, the journalist, posted that he bought breakfast at McDonald's with Lightning. Wow. Apparently using Open Node as the payment processor.

Interesting times we live in. So, I mean, I can't say I've ever felt the need to use Lightning to buy breakfast. but it's nice to know you could that's his god-given right in all Salvador now nice to know you could well there's a bunch of deals this week

the first one is mastercard has acquired a blockchain forensics company so mastercard has acquired cipher trace it's an undisclosed amount but really interesting to see mastercard jump into this feels like just a year or two ago that mastercard was on the private blockchain bandwagon maybe this is a sign that they're trying to catch up to visa Well, Visa's just been so aggressive and obviously has a budding portfolio of Cryptopunks too. So who knows what NFT MasterCard will have to buy. It's interesting.

I wonder if there will keep this core line of business. So Software Trace is a chain analysis competitor. I wonder if MasterCard will be going out to the financial institutions and I'm trying to cross-sell on-chain forensics here. I'd imagine they will. And has MasterCard? Card suggested that they're going to incorporate cryptocurrency into their payment network or just stable coins. It's unclear. I'm not sure if I've seen any comments, the likes of Visa with a big, bold strategy. Here's what we're going to do at a MasterCard yet. Maybe that's coming. Maybe this is their crypto play to acquire the team.

So next seven deals, we have 10T Holdings, which is Dan Tapie hours firm. They raise a $750 million $750 million fund to invest in the space. So huge, huge congrats to Dan and the team over there. Yeah, huge congrats to the team. Dan was on this podcast a few months ago. $750 million for a debut fund is outstanding. So really great to see. And more capital will be flowing into the startup community.

So it's also great if you work at a startup or if you're starting one. Next one is parcel. So parcel is an Indian company. They're building tools for decentralized autonomous, organizations. They raised $2.5 million from Dragonfly, Scalar ventures, A Capital, and Sixth Man Ventures. Then we have ZBD, which is a company building lightning payment systems for online gaming. They raised $11.5 million in around led by Lake Star Capital. Also known as Zebedee. I guess, yeah. I mean, fair enough. I don't know. So congrats to the Zebedee team. Next one is

subquiry. This is a decentralized data aggregation play. This is built on top of Pocodot. They raise $9 million from Arrington and from DCG. Then we have Simba chain, which is an enterprise blockchain company. There is $25 million from Valley Capital Partners, Notre Dame Pit Road Club and others. This deal, none of it, I understand. I don't understand any of it. was that the that's a lion king reference yeah that's a lion king yeah so it's a on a blockchain pretty good uh well next one is de bridge so this is a cross-chain interoperability protocol they raised 5.5 million dollars it was from parify anamoka lemniscap and others then we

have eden network which is a i believe a tokenized MEV solution for ether There is 17.4 million in a token sale with participation from multi-coin, jump capital, Alameda, Winter, Mute, GSM, and Defiance Capital. And no small amount of controversy, I believe there was some pushback from the folks at, what the heck is it called? The flashbots, guys. Well, I need to rephrase that. And they immediately got into a bit of war of words with flashbots. Yeah, Eden Network is formerly known as Archer Dow, actually. All right, well, let's get into the big story of the week here.

So we talked about this a little bit on our mini Colin episode. So if you're listening to this and you want to have a little bit of a behind the scenes take, we're doing a new show on Colin, which is a clubhouse competitor app. And we did one episode this week. it was pretty good, pretty good app. What do you think? Yeah, so Colin is pretty cool. So it's like Clubhouse,

except it's more focused on, I guess, podcast discussions, and the flow is more like dialing into a radio show as opposed to kind of a free-for-all forum discussion, which was always the problem with Clubhouse, who just degenerate into basically nonsense. So Colin is much more structured and it's more focused on a piece of content that you sort of intend to produce with, you know, an optional sort of Q&A element. And it's also reduces this synchronicity requirement because you don't have to be online to listen to, you know, shows and it's easy to create little clips.

And so I think it's a great platform. We're going to do after parties for this show on there, but it's going to be weird because you won't have heard the episode by the time we do the call-in live session. So you won't actually know what the news of the week was yet. But we're going to put some special content in there. We gave a little bit of more information about maybe how I'm dealing with the turkeys in that episode,

stuff that maybe I wouldn't want to go into detail about on a broader distribution platform like this. Okay, so the call-in platform is for a truly uncensored takes. And sometimes we'll probably censor them, but if you listen to them live, then they will be uncensored. But anyways, so the basis of this call-in episode was talking about what's going on with Coinbase. So we have a lot to talk about here. So it was a busy, busy week for cryptocurrency regulatory news, as it seems to always be. So it started on Sunday.

the New York Times had a front page above the fold article about the concerns that regulators have with crypto companies that are moving into banking activities. Highlighted BlockFi, highlighted a number of companies that are just racking up customers, I would say. You know, tons and tons of users are opting into these crypto banks. And it's because they have the products and services that they can't get with traditional retail brokerages or banks. So that was that. It definitely felt a little bit like hit piece and it felt like there was some off the record comments in there potentially from the SEC in my opinion. Later in the week, Coinbase CEO Brian Armstrong had this really lengthy tweet storm, which he started off by really just digging into the SEC. So the first tweet of

this tweet storm was some really sketchy behavior coming out of the SEC recently. Storytime. And I won't read the whole thing, but suffice it to say the gist of it is that Coinbase is trying to launch Coinbase Lend, which is a product that would offer yield on cryptocurrency holdings. And this is notably, this is a product that exists in the market already across a number of other providers. BlockFi and Gemini come to mind, as well as like 10 or 12 others in the United States. So Coinbase wanted to launch this product. They went to the SEC to basically give them a heads up and see if they had any concerns. The SEC has said, if you launch this product, we will sue you. Not only that, part of this tweetstorm revealed,

that Armstrong several months ago was in Washington, D.C. to meet with regulators doing the whole push, doing the education push, requested a meeting with the SEC. And keep in mind, the SEC has historically said, we have an open door policy, come talk to us first. We've heard Hester Purse say this repeatedly. Hinman's always been saying that. They wouldn't take the meeting. So the CEO of the largest company, a public one in the industry, can't get a meeting with the SEC. and the agency won't give details on why they think this lend product classifies as a security. There's no framework, there's no rationale for the position. And so Coinbase's position here appears that they just want to take this public and just have this

fight out in the open. So Armstrong does the long tweet storm. Paul Griewall, who's the chief legal officer, follows it up with a blog post immediately thereafter. The SEC has told us it wants to sue us over lend. We don't know why. It goes into a lot more details. So that's the setup. A lot to talk about here.

What's your quick take? Well, I think it's a little bit disappointing in terms of behavior from the SEC. And I think Brian is right to do his threat. He certainly got some pushback and critique in terms of, well, is this the wisest way to operate? But when lending is a mainstream product that already exists and you will, you, want to enter that market as well and you go to the SEC in good faith and tell them you intend to do it and they tell you we'll sue you if you go public with it but we're not going to tell you why what other option do you have other than to just be bullied in the silence and coinbase can afford

to litigate and go to court and find out what the SEC's reasoning is but if the SEC is not going to be forthcoming what other choice do you have yeah by the first reacting to this is just the SEC's general posture on this is just jaw dropping to me. I cannot actually believe that Brian Armstrong can't get a meeting with the SEC. It's breathtaking that in the United States, the number one cryptocurrency company who's going about it, by the way, the right way, you know, getting the licenses, hiring the compliance people. Meanwhile, they're competing with the likes of these offshore exchanges that are just competing for U.S. users that are accessing them via VPN, listing any asset under the sun, and not playing by the same rules, you know, if you're

Coinbase, this has to be one of the most frustrating things out there. So just the SEC's general posture on this is concerning. And a lot of people thought that Gensler was going to be very open-minded towards this and, you know, embracing of the industry. Not necessarily that he would be a pushover. I don't think anyone thought that. But did they think they think. think that you'd be able to get a meeting with him. I think that there was some expectation that he would engage with the industry in a constructive way. That is clearly not happening. So their posture on this to me is troubling. And I guess if you're Armstrong, your kind of choices are silently keep on battling this or just bring it, you know, bring it out and hope that people have you back and maybe

hope that some of these Congress people make a fuss about this and try to try to rally some support. My guess is that that's what he's doing. So the interest-bearing product here, it appears that the relevant case law is moving beyond just Howie now. And all of the crypto-commentariat are going to have to learn the details of this additional case, Reeves versus Ernst & Young, which had more to do with notes issued by the Farmers Cooperative of Arkansas and Oklahoma.

So these were uncollateralized and uninsured promissory notes. And the Supreme Court found that they weren't securities under Howie, which was a 1946 decision. The Reeves case was 1990. But they were still securities using the family resemblance test. So anybody that wants to sound smart and weigh in on this stuff, Now you have to learn about the Reeves test as well. I mean, so we are going to have a lot of discussion about the Howie test. We've been talking about the Howie Test for the past seven years, you know, are some of these cryptocurrencies securities?

We're going to get into this Reeves versus Ernst & Young thing in a pretty serious way it looks like over the next few months as these lending companies start to battle with the SEC. Why don't we just take a step back and think about why we are running markets in the United States? of America based on a law that was put into place in 19 or a case that was settled in 1946 when most of the houses in the United States did not have telephones or a case that happened in 1990 when the internet didn't exist in a commercial web manner like why don't we take a step back here and just think about is there a framework that would be more broadly applicable to digital assets a world where you can actually issue bearer instruments on the internet and why don't we talk about putting a framework in place that just makes the law make sense?

Is that too much to ask? Well, the problem is that when Congress does make law pertaining to the crypto industry, it's apparently terrible, as we saw with the infrastructure bill. So I can't decide what's worse. The bad old laws or the bad new laws. But I don't have a ton of confidence in Congress to make good law. relating to the industry. Yeah, I mean, I guess it's, you could argue it's good that it's very difficult to make new laws.

That prevents you from having really terrible laws, I suppose. But we're going to have a battle here. And there's the backdrop of this, a lot of people in the cryptocurrency industry think, is that Gary Gensler is trying to make a mark on the industry and that he's obviously an incredibly ambitious person and that he would like to fold cryptocurrency companies and potentially protocols. calls under the purview of the SEC, sees it as a land grab. A lot of these companies are regulated on a state-by-state money transmission basis. There's no federal kind of oversight on many of these companies. And, you know, the view is that, hey, look, he wants to bring that all under

his umbrella and regulators are ambitious people. Yeah, so we'll see what will happen there if they're able to, certainly not the last we'll have to say about this. Speaking of battles, actually, to the infrastructure bill, it now appears possible that the squad, the progressive house faction, might actually block the passage of the bill in its current form because they aren't satisfied with the concessions given to them. So maybe we're going to have a second breath of life here. Second pass at this. I had kind of given up all hope on the infrastructure bill removing some of that language. And for those of you who might just be tuning into this, the infrastructure bill, as it's written right now, has language that would essentially say

anyone who touches a blockchain is a broker dealer. So it doesn't make any sense. And Treasury has come out and said, hey, that's actually not what we meant, even though that's in writing. And it's a complete dumpster fire. I'd just like to compare it with other nations like Ukraine, which just passed a law legalizing Bitcoin and putting it into. a pretty sensible framework. Ukraine is actually, I think, the fourth most highly penetrated in terms of per capita adoption country in the world, according to chain analysis, is a crypto adoption study. So the policymakers there, you know, listened and reacted sensibly, and yet the U.S. can't pass sensible, like, legislation at all. Yeah, I agree. And I guess my last thought on this

Coinbase situation is that if you're an entrepreneur, if you're an investor, if you're a fan of this industry, you should be paying a lot of attention to what Coinbase does right here. And they are potentially setting a standard here and going to battle for the whole industry with this fight. Coinbase is well capitalized. They have a billion dollars of cash in the balance sheet. They have world class lawyers. And they've gone about this the right way. And so this is not some Series A company that, you know, has $5 million in cash in the balance sheet and is going to quickly settle with the SEC and pivot their business or something. This is this is a fight that I think they are willing to wage. And unlike some of these other like ICO fights that have happened with KIC trying to raise

money to fund their defense, this is one that the industry can actually rally around because you're basically just fighting to have the products and services that people want that are, you know, these things don't look like securities to most people. Whether they are or not, I think we're going to have to find out. But this is a fight that feels. like coin based on the right side of. Well, just most fundamentally, we're talking about an interest-bearing product, you know, the creation of credit. And the question is, should that be an activity that is limited exclusively to chartered banks

or can non-bank entities also create credit? I mean, the medium of settlement, you know, cryptocurrency or dollars is irrelevant to me. We're just talking about credit creation. And of course, there are non-bank entities that, you know, create. credit in the U.S. There's an abundance of them. And so the SEC is fixated on this because it concerns cryptocurrency, but ultimately it's just a question of credit creation and whether that can occur outside of the banking system.

And I think a world where they are extremely aggressive and, you know, limit non-bank credit creation is just not a great world. That's well said. This episode is brought to you by Witham. Witham is a top 25 accounting firm. They have a cutting edge digital currency and blockchain technology practice. Wherever your company is from a stage perspective, from precede to IPO, they have tailored solutions just for you.

They have helped some of the largest companies in the crypto industry with audit, tax, and advisory needs. And they've also helped a number of our portfolio companies. To learn more about advisory, audit, and tax services, head over to on thebrink. that's on the brink. link slash with them. That's on the brink.com. This show is brought to you by Coinbase Prime. Coinbase Prime offers trading, custody, and financing tools for institution. Trade financing includes the ability to trade from cold storage instantly, as well as margin lending and shorting. Coinbase custody is battle tested with dedicated on-chain addresses and

industry leading insurance. As far as trading is concerned, Coinbase Prime offers sophisticated, integrating trading tools, including real-time market data, smart order routing, robust analytics, and algorithmic execution strategies. To learn more, visit on the brink.com slash coinbase. In other SEC news, they did announce a suit this week against a 2017 ICO project that was called Rivets. This company issued tokens called RVT tokens, and they were unregistered securities. This is the type of thing the SEC should be doing. There's thousands more of these ICOs that issued unregistered securities. And these are the, you know, on the flip side of everything we just said about Coinbase and the SEC and how the SEC is on the wrong,

they're in the right on these type of things. And they should continue to clean up the bad actors who've done certain things over the course of these ICO bubbles. So good job, SEC on this one. On more regulatory news, former FCC, CFTC Commissioner Brian Quintenz has joined the Andresen crypto team as an advisory partner. He was on the bankless podcast this week, and I took special note of his comments around the SEC and how he thinks that there's a lot of legacy building going on. There's a lot of land grabs going on.

So I'm glad to have Brian Quintens on the side of the industry here. So we'll see how that unfolds. Did you see the NFL was in the news, the crypto news this week? So they came out and they said, teams cannot sell NFTs and they cannot do sponsorships with cryptocurrency trading firms. What a bummer. Kind of suggests that the NFL, the NFT, the NFL is planning on instituting some sort of single policy relating to NFTs. Oh, interesting. Well, that's my read from this.

If they're, I mean, teams in the NFL don't have that much individual liberty anyway, because it's, what's the structure of the NFL, like a partnership or something? I think it's a dictatorship with Roger Goodell in charge of it. He's the dictator. I mean, any issues, I mean, I'm still waiting on the apology for Tom Brady and what they railroaded him. So, of course Roger Goodell is going to say he can't have fun. Anyway, NFL teams are like franchisees or something, and I think they even share revenue from merch sales. So it kind of makes sense that, you know, they'd face limitations when it comes to selling digital merch.

So I think what this suggests to me is that the NFL is going to develop some sort of single policy on NFTs. Well, what they should do with NFTs actually is just turn the ticketing systems into non-fundable tokens. because you just completely eliminate the secondary market or you'd at least be able to participate in it. I mean, what are you going to pay $200 in gas to show your ticket to get into the game? Well, I guess, yeah, I mean, I guess that would be the big implementation hurdle.

And could you run this on a layer two on Ethereum? Would you look at Salana? Or could you just net settle these things? Do they even need to necessarily be on-chain transactions for every ticket? And you could introduce some centralization with provable notarization or something, just put a Merkel hash at the end of the day and net settle it, there's probably

a way to think about implementing it in a scalable way. Well, I guess my question would be, do you lose the benefits of having an NFT if it's not really settling on chain? But I'm starting to think that some of these NFT platforms like OpenC should not actually have every transaction be on chain. So I'm actually starting to think that NFT exchanges in particular, the brokerage platforms should do a lot more off-chain than they do on-chain.

It kind of comes back to your blog post about the settlement assurances. I think it depends on the value of the NFT, what the actual use case is. But, you know, if a ticketing use case, you could theoretically, you could introduce some centralization there. It would be fine, I would think. Yeah. And then maybe you would only.

hit the chain if you needed to do a secondary sale or something. Right. You do a secondary sale, but the benefit here would be that anyone with an Ethereum wallet or whatever platform you built it on could access it. And you could make money off of it without driving people into a common, hey, download my app. And this is the only way you can buy it. You have to authenticate. So you'd just be on a free and open platform and be able to capture transaction fees regardless of how people access it. So in other NFL news, the NFL's back. It is back.

Thursday night football tonight. It's back. Cowboys, Buccaneers, who you got? I'm going to go with the Buccaneers. I think Tom Brady is probably going to end up in the Super Bowl this year against the Patriots. Unfortunately, Brady's probably going to lose that one. But, yeah, I've got the Bucks. I think the Bucks could go, yeah, there's an extra game this year.

I don't know if you knew that. I keep on, like, falling back into, like. There's an extra game? Yeah, there's an extra game. So, speaking of Tom Brady, he did a F-TX commercial. Like most things that Tom Brady does, just best-in-class performance, probably the best commercial I've ever seen. I thought it was okay. I didn't really understand it, actually, for honest.

Yeah, he just said, are you in? That was kind of a lot. Yeah, but into what? Like, what, in how? He's like in on FTX. okay but he didn't give the people on the calls any context so how would they know what they were in being invited into well if tom brady called you and it's just like are you in what are you going to say you're not going to say you're out yeah i'd say yes yeah i'd say yeah man what are we doing

ask questions so so bucks you got the bucks tonight we'll see by the time this episode comes out that we will the world will know the answer well and i'm excited about mac jones i think this is going a great, great year. Hey, did you see this Long Island story? So a guy in Long Island, who was an IT, who is, I think, still an IT supervisor in a Suffolk County government office, he was hooking up some Bitcoin A6 and he was just mining like crazy. And they found out that the room that he was mining it, it was like 20 degrees warmer than the other rooms and the electricity bill. was going up and he you can't do that it turns out at stealing yeah uh theft so i don't know if you've ever visited a mining farm uh i've never i've never been to one probably should i mean at least

once they're incredibly loud so the asics are like screeching i mean it's i don't know if he was able to achieve scale but when you have tens of thousands of asics in a single location it's deafening Like you wouldn't believe. Yeah. So running an ASIC is like not that pleasant. Like it's not something you'd want to do in your living room. It's hot and it's loud. He probably had it in like the boiler room, right?

You'd have to think he probably put it in the basement of this, you know, government facility and just thought he could. He probably mined a bunch of Bitcoin too. Yeah. So not recommended. I mean, you know, for, you know, obvious reasons, but also because it's just really annoying. Yeah, I mean, you just, you know, at the end of the day, you're kind of like stealing electricity from the taxpayers. Probably don't want to do that. I feel like we went through a stretch where a lot of entrepreneurs that we were talking to, their story about discovering Bitcoin was, you know, I was mining it for free because I was plugging it into my college dorm room.

Remember that phase? Oh, yeah. A lot of people who got to start there. Speaking of mining, I went to a mining conference today. That's my first mining-specific conference. What's the word on the street in the mining community? Well, I would say generally optimistic. The mining community, the U.S. mining firms have been massively empowered based on what we've seen in the last, well, since May, really.

But the China crackdown has put the American, especially the big publicly traded firms, like the riots, the marathons, the high. put them front and center. Most of the new miners that are being created by Bitmain and Watts miner are being delivered to the U.S. And we're looking at, you know, in the next through 2022, we're looking at probably two gigawatts of new miners being delivered and three quarters of that to U.S. entities. That's huge.

With, you know, the Bitcoin network itself right now is, is, you know, around 11 gigawatts. So just based on those new deliveries of ASICs, we're going to see more of a shift towards the U.S. The other interesting thing is I found out that apparently some Chinese miners have actually turned their ASICs back on. So the storm passed a little bit. So the biggest miners basically had prior notice and shipped their operations out of China. The smallest miners, you know, were kind of small enough that maybe they could conceal their operations, but they put them in warehouses for a few months. And then now that some of the scrutiny has passed, they're turning them back on.

It was the medium-sized miners that got screwed and basically sold their A6 at fire sale prices. Because they couldn't afford to offshore them. They didn't have the reputation to find a host in the West, things like that. So some of the hash rate climb now is attributable to probably smaller operations coming back online, believe it or not in China. That's really interesting. And you're seeing a lot of surge in piped crypto chatter in the mining community? So, yeah. I mean, the chatter is that the oil majors are getting into it in a big way.

and not just in the U.S. That's absolutely happening. I think you'll see, you know, in the next few quarters, discussion of flared gas mining among the majors. You're also going to see the Saudi Aramco's of the world getting involved in, you know, grid mining and most likely fair flare gas mining. The way this is going to me, it looks like the largest energy companies are going to incorporate mining into their operations.

That's not just a pipe chain. That's just happening. My suspicion, and maybe this will be a prediction for next year, is that we're going to start to see vertical integration into ASIC manufacturing by some of those energy players. Because the biggest issue, I think, for them is going to be, can I guarantee access to this supply? So can I lock in my position with Bitmain? it wouldn't shock me if we start to see some investment into building alternatives

or if we start to see some M&A within the ASIC manufacturing sector. Not that there's a lot of companies. Well, there's only two real players, which are basically Bitmain and what's minor? Two for now. There's a few others that are earlier stage don't have really competitive products out there, but there are a few others. Yeah, those are the only two that are. you know really at scale and are able to get found reallocation so blockstream actually mentioned

making a six in one of their press releases but uh it's going to be a challenge to get there one interesting thing that i heard both from bitmain and from other large miners was that they're looking at immersion cooling for mining because the traditional models this fan cooled shoebox and if you go for emergent cooling, you can overclock your ASIC because you have a lot more surface area with a much more dense medium, whether it's water cooled or whether it's typically like a specialized kind of oil that you bathe your ASIC in. And the interesting thing with that is that it unlocks new geographies where mining becomes viable because then you can go to low-combe. places which are super hot and humid where air cooling doesn't really work. So the geos are changing here. The US is obviously really critical and probably going to have you know 30 to 50% a hash rate within a year or so but new more tropical geos are also being unlocked

if this immersion cooling thing takes off. Who's going to be the first company to figure out how to put these things at the bottom of waterfalls? that doesn't make any sense so why wouldn't you why wouldn't you want this just constantly you know you got water flowing it's free energy so you're you're the idealized diagram that you are thinking up is one in which you mine was this kind of a turbine and you also get cooling at the same time is that the point yeah this is like a fifth grade science project idea so you put a little you know a wooden kind of runner across the bottom of Niagara Falls and you attach some turbines to it. The water comes down and it just mines A6, that mines Bitcoin the whole time.

Well, I will pass it on to some of the miners that I know. Run that up the flagpole. See what comes back. That's a free idea. I'm not no charge for that idea, but miners at the bottom of waterfalls. Okay. And then lastly, in terms of takeaways, the miners are definitely pretty aware of the sustainable energy requirements. So they are buying offsets. They're buying renewable energy credits. Some of them are just 100% renewable.

Some of the miners I talked to today, their operations were just by default 100% renewable. some of them are locating in places like west texas with abundant wind and drawing grid power but paying extra to effectively pay for exclusively sustainable energy things like that um and also the flaring use case is really taking off so you know i wouldn't be surprised if 30% of bitcoin's hash rate was off grid sources within a couple of years So, I mean, it's a very good time, I think, in bankwood mining overall. It'd be nice to see people talking about that more. It probably needs to be something that a PR firm is hired to get some of these stories out there

because that is not the story in the popular press. Well, they are welcome to hire me or I could just say it for free. All right. There you go. There you go. Well, I think that's all we have for the week. So again, check out Colin. We'll probably do a couple of these things as news breaks.

We'll just top on, talk for 10 minutes, take a few audience questions. But that's a more interactive way to kind of run a periodic AMA. So check out the Colin app. It's on the brink. It's the same name on the Colin app. And we'll be there. So I think that's it for the week. Everyone have a safe and healthy weekend.

We'll see you next week.