TFTC: A Bitcoin Podcast - #227: Mining, energy, central banks of the future and capital allocation with Harry Sudock

Episode Date: February 5, 2021

Join Marty as he sits down with Harry Sudock, VP of Strategy at GRIID, to discuss: - Meeting in NYC - Stumbling into the mining industry - The merging of the bitcoin mining and energy industries - Energy delivery problems - Grid stabilization - Central banks of the future - Efficient capital allocation under a Bitcoin Standard - much more Follow Harry on Twitter Check out GRIID Shoutout to this week's sponsors. Cash App. Start #stackingsats today. Use the promo code: "stackingsats" to receive $10 and contribute $10 to OWLS Lacrosse when you download the app.

What's up freaks, it's your boy Marty here to introduce this episode of Tales from the Crypt. The immense pleasure of sitting down with a long time Bitcoin friend, Harry Sudek. I can't believe it took us this long to sit down and actually record a conversation. We've had so many great conversations over the years, so I'm happy we finally got one on the record. And this is one of my favorites I've had in a while. we talk about bitcoin and energy uh the transition from the fed window to distribute and produce money to the bitcoin mining pool layer to distribute and produce money fascinating conversation that's all i'll say this episode is brought to you by our good friends at

the motherfucking cash app excuse me i'm drooling right now went to the dentist earlier got some work done they novocade me up my lips like i don't i may be drooling right now so forgive me if my speech is is worse than it typically is because it's pretty bad already where are we cash app yeah cash apps helping you stack sats send sats receive sats and sell sats if you so please remember if you sell sats it's like tax implications so it's just better to stack sats and hodl stacks hodl your stacked sats we're saying sat sat sat sat sats because sats are the standard in the app what is a sat you may ask like i thought this was like i think you buy

bitcoin on the cash app that's exactly what you're doing sats a satoshi or a sat is the smallest denomination of a bitcoin there are 100 million sats in one bitcoin so instead of buying fractions of bitcoin you're buying whole sats thousands tens of thousands hundreds of thousands millions tens of millions hundreds of millions if you're a big baller cash app makes this easy you can dca in the sats by daily weekly bi-weekly set it and forget it just start stacking in the background so you don't have to think about it you don't have to stress about it it takes the stress out of the stacking cash app does that for you on top of that they have their boost program sometimes you can get sats back they have a bitcoin boost it allows you to go shop somewhere anywhere visa's

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It goes a long way. Trying to get as much quality Bitcoin information out to newbies as possible. If you'd like to cut through the noise here at TFTC, get to the signal. I have a newsletter that I write daily, Marty's Bent. You can go to tftc.io and check that out. Sign up, subscribe to that, and get some Bitcoin information,

some macroeconomic information, some Liberty in the Digital Age information sent directly to your inbox. I've been writing it for quite a while now, coming up on four years. It's hard to believe. People seem to like it. enjoy this episode enjoy your weekend enjoy your life be happy life is good you've had a dynamic where money's become freer than free if you talk about a fed just gone nuts all all the central banks going nuts

so it's all acting like safe haven i believe that in a world where central bankers are tripping over themselves to devalue their currency bitcoin wins in the world of fiat currencies bitcoin is the victor i mean that's part of the bull case for bitcoin if you're not paying attention you probably should be probably should be what is up freaks second recording of the day very excited for this one i'm sitting down with somebody a bitcoiner a very strong bitcoiner who i miss having breakfast with harry sodick vp of strategy at grid systems how the hell are you doing marty it's uh it's what it's such a pleasure to sit down with another fellow miner how did we end up here we went from shooting the shit in diners and in the lower east side about what we wanted to do to ending up in

the mining industry? Well, I'll, I'll tell you, I'll tell you a quick, a quick story about what that's felt like for me. Where, you know, I got the, I got the bug, you know, I'm a financial services kind of guy background that, that whole, that whole education is where I came up. And I know, I know similar to you. And, you know, didn't know sort of what my, what my Bitcoin role was going to be, knew I needed it, knew I was obsessed, you know, couldn't stop reading, couldn't stop focusing on it, but didn't know where my place in the industry was going to be and really kind of fell down the mining rabbit hole by accident. It was not, it was not planned. You know, I kind of felt that, that, you know, something was sick in the tech sector more

broadly. And, and, you know, I came out of a FinTech, but, but, you know, valuations were running so far ahead. This was a little before WeWork blew up. And I just had this sort of the same way that we feel the sort of gut sickness about things in our society. I felt that around tech valuations and just knew that what I did had to have revenues, profits, business fundamentals, that these were things that i um i needed to discover as part of my bitcoin journey um and it turns out that mining was the perfect place to to gravitate back towards those things yeah because gosh when we first meet in new york was it 2017 2018 it it it was it was um it was right before bitcoin cracked 3k yeah yeah it was right before the run-up i was at barstool

I remember the first time we met, it was in Flatiron, right around the Barstool offices. Yeah. And you were working on a data product for funds back then, correct? Yeah. Exactly. So, worked at a FinTech halfway through college, through college, two years after graduation. And we worked with 150 hedge funds that lots of folks have heard of. Some of them have been in the news recently. And basically we built like back in middle office optimization stuff. So super not sexy data trade processing optimization software caught the Bitcoin bug seeing what these guys were doing and kind of this was another market that they could go play in. I like to think that that was when I was sort of Bitcoin curious, but not a Bitcoiner.

yeah and then i remember and then like we met at the ace hotel i mean we had coffee standing up um in the coffee shop in the ace hotel flat iron exactly i remember and it was and it was freezing right um and and you you were kind enough to just like come and talk to me for an hour and pierre was kind enough pierre richard was kind enough to just like have breakfast with me and and responded to my cold dms well that was the beauty of new york man that's the one thing i miss about new york is being able to do stuff like that like sneak out i was i was if anybody from barstool is listening i was such a bad employee i was just sneaking out in the middle of day to have hour-long coffee meetings about bitcoin like completely unrelated to work but well well and

then and then you know soon after that you were you just took those meetings and started recording off hours off hours using their equipment thank you dave portnoy please uh please don't like try and like pre uh pre-monocte the podcast and bringing into your to your umbrella if it gets too popular but call him daddy daddy hey daddy it's uh no it's funny to see how far we go because i didn't know i'd get in the mining industry then like i know i was writing the newsletter at the podcast working at barstool yeah it wasn't um until like eight months later i got introduced to the team at great american mining like how did you fall not fall into it how'd you get hooked up with the guys at grid so i mean this is this is one of those like in the right place at the right

time small industry and and you know for for the freaks like owe a huge debt of gratitude to mike dudas met our founder met our founder and ceo in in the blocks telegram group oh boss hold dm'd him so like saw him he he jumped in trey kelly our founder and ceo jumped in with like these two long posts and was like asking a couple questions about mining and i'd randomly put together some like machine level analysis and was just like like like dicking around on a spreadsheet with like all the different you know i think the s15s had just come out and i wanted to see how profitable they were so i like put together a little spreadsheet and then wanted to test them on some bitcoin price sensitivity so i messaged him like hey i put this thing together like

you could probably use it and just flipped him a spreadsheet and he was like oh this is good let's talk so we we similarly like went and grabbed coffee he you know had just had kit you know kid number one started a business what you know was figuring it out and you know i was thinking about you know do i want to go do my own thing do i want to go see if if i can kind of play in the hedge fund space a little more uh you know in a more entrepreneurial way and you know two breakfasts with him later uh joined as grid's first employee and was like fully bought in mining all in like we're going to build a dominant north american mining entity we're going to bring a ton of hash power online here you know the the transaction finality and hard cap supply of bitcoin are going

be in the strongest possible hands that we can that we can build boss yeah it's it's incredible to see like the trajectory from that first coffee meeting and like we we met we would meet for breakfast well like once every few months and yeah three four five times a year yeah one of my favorite bitcoiners like have conversations because that's what's so impressive about you personally to me at least is there's the the uh range of of topics that we could talk about whether it be Fed policy, what's going on in the hedge fund world, what's going on in the mining world, what's going on at the Bitcoin development level, the data aspect of it.

It's just like a never-ending rabbit hole, which is why I'm pumped that we're finally here doing this podcast because I can see it going in many directions. Like I said, before we hit record, we've got some Fed bashing in, some Bitcoin mining talk in, some Bitcoin mining and energy talk in, and this is going to be a cathartic conversation because it's going to be like breakfast again and there's exactly i miss you i miss you it's been a long time i did too you know you know separated by screens right uh god i don't know if i'll be back in new york though i don't i don't think i will now that i have a child i don't think

new york's conducive for for that considering the lockdowns and the space the bang for your buck that you get or the lack of bang for buck that you get in the city in terms of space yeah i feel my i feel my wick burning down frankly yeah yeah yeah it's a shame it's a shame because that was the beauty of new york just being able to randomly reach out to very smart people be like hey let's talk get coffee get to know each other and like get to learn from each other like i've been bouncing ideas off of you for years now and it sucks that we can't we can't meet in person due to the nature of what's going on but so much to talk about let's stay on grid though like how would you describe grid we can't get too specific but i'm very excited about what you guys

are doing because you're very we're not we're not competitors right you're focused on renewables i'm focused on flare gas so this is like we can have like a nice powwow here um and and talk about different aspects of the bitcoin mining world north america and how like it's it's tacking the energy sector from all sides and is actually good for, for the energy sector, the environment and the Bitcoin network overall. Yeah. Well, so, so grid infrastructure is fundamentally an infrastructure business. And, you know, we, we call ourselves that, you know, very, very specifically and what that means is that we see an opportunity for the american industrial landscape to change via market forces at this at this beautiful inflection point um that we think

that we can we can really kind of sit hip to hip with a bunch of different players um in the space and do something special, aggressive, and really big. So, you know, fundamentally, you know, we understand the opportunity in front of us around Bitcoin mining and the monetization of energy. And so, you know, we're a team, you know, when you think about a young company, it really is about sort of the personalities

and the talents of that young, small team. um so you know i have to give a tremendous amount of credit to trey to recruiting the folks that we have um and then just generally to the guys you know across the board uh and really it's about you know when i got into bitcoin i was obsessed with it first because there were so many things that i knew that i was an amateur at that i needed to get better at and and the second time i had that experience was when I got into mining, which is you had to all of a sudden get smart on the power grid, electrical engineering, cybersecurity, construction and construction management, all of these different things, the same way that you have to get deep in all these ways around

Bitcoin, mining takes you even further. And so what did we do? Our CTO formerly ran a cybersecurity company. You know, Trey worked at OpenDNS, you know, earlier. We hired folks from, you know, local power utilities. We hired electrical engineers and took this sort of really wide ranging talent set and said, like, how do we forge these disparate things into the infrastructure businesses of the future? And the way that that works, you know, first and foremost is we take this emergent technology, and we wed it to one of the oldest things that society advances through, which is energy density and energy production. So fundamentally, we monetize energy by mining Bitcoin. We think that Bitcoin is the most exciting asset on the planet, and that it opens

the door to incredibly creative structures around renewable energy the grid broadly grid with one eye um uh and uh and and really you know sets us up and sort of sets um the stage for a next level energy infrastructure business which you know which we're going to be um and so we focused on renewables and working hip to hip with generation in addition to utilities, because we think that there's, I don't want to say overproduction because the, the right now systems aren't being overproduced. They're just being over optimized around redundancy rather than utilization in the energy, in the energy markets broadly. So, you know, taking a step back, the way that energy generation and transmission works is you generate a lot of energy at one

place and then you got to move it all over the place so that we can you know turn our air conditioners on and so when you move energy over a distance you degrade how much energy can get delivered at the far point so there's a loss factor along the transmission line and then And so exactly. And so the grid is incentivized to overproduce because you're transmitting it far away. You need a level of redundancy contractually or regulatorily. And so the energy producer is incentivized to produce a lot of energy. The energy consumer is incentivized to consume, you know, less or little because they're paying dollars for it. And it means that there's this misalignment of incentives around production and consumption. In steps, the Bitcoin

miner and the Bitcoin miner functions as a load balancer, where they're able to say, you know, as long as you're willing to price my power advantageously, I'm willing to buy it with interruptibility. And so you're able to trade interruptibility in exchange for price and help some of this overproduced energy get monetized on the one hand, but not affect the strength of the redundancy in the energy network. So that's kind of the academic definition. What that lets us do is align really closely with some of these renewable projects that are out there that struggle to make market sense without government subsidy. And we help them make a lot of market sense without government subsidy. And so we provide a free market bootstrapping

mechanism for renewable projects to either enhance existing operations or justify net new operations. And that's where I get really excited where, you know, what I want to do is walk into an energy executive's office and say, you should greenlight building another 100 megawatts of hydro, because we're going to help you make that economically viable for the lifetime of the asset, because Bitcoin is going to unlock the future of energy production. And so those are conversations that fire me up. Yeah. No, particularly like the fact that this is all market driven. You don't need subsidies. You don't need the government to step in and try to allocate capital to force a certain outcome like the market being driven by bitcoin miners looking

for low cost abundant energy sources is is helping secure these systems and overall like secure the grid system which is arguably very weak right now very vulnerable correct extremely extremely so i think you know i think that you know we we as a we as a nation um have an opportunity to make strong investments in the future of energy production and energy density. And so this is something that I think doesn't get enough press. I think there's a lot of press around we need to become greener and consume less and X, Y, and Z. But if you look over the history of civilization and you look at what I think of as key civilization health markers, which are what is the nutrition density of the food that the population is eating? What is the infant

mortality rate? What is the education per capita? What is the healthcare per capita? All of these kind of, if I were to give a blood test to a country and I wanted to look for what were the health markers, that whole laundry list, all of those improve with energy density per capital and so what that says to me is we need to become a nation of quality of life maximalists not consumption minimalists yes and this is it's such a shame how how far the the conversation and the narrative has gotten from where it probably should be which is what you just described i think everybody yes pollution and polluting the atmosphere is terrible like no one is going to deny that nobody's going to like say like we shouldn't be pumping methane into the atmosphere

it's probably bad at the end of the day like obviously like we should not be we should be aiming to reduce that as much as possible but like the focus on reducing consumption and not being more efficient is something that drives me crazy like efficiency should be priority number one before you like maybe after you become extremely efficient then you can begin to have the the reduced consumption conversation but until then i don't understand why we're not focusing on efficiency well and and if you look at the if you look at the long arc of history the only times that we make real progress are when we innovate into the future not when we you know nobody nobody who got electricity wired and i'm and i'm totally i'm totally stealing this from michael saylor's

interview recently but nobody who had running water or electricity installed in their house said yeah let's dial that back i don't i don't think i don't think we need that you know because you look back at at you know john d rockefeller was the richest man on the planet and and you know pardon my language but he shit in the woods he had an outhouse right like richest man on the planet had a lower quality of life than, than nine, than 90% of Americans. That asshole never took a shower. Exactly. Exactly. You know, and, and so, you know, I, I find it, you know, really, um, really disheartening when, when the focus is not, you know, innovating into abundance, um, as sort of a baseline core societal tenant where, you know, you know, what I would love to

see is a huge investment in nuclear technology, a huge investment in, you know, hydroelectric production. You know, the idea that we're going to reduce consumption into the future is untenable. So we need to make the, you know, the bold investment in the technologies, you know, that will leapfrog us into this abundant state. Yeah. And again, that's like the beauty of Bitcoin, it incentivizes it, right? I mean, So from our perspective in the fossil fuel area, the energy sector, what we're doing at GAM, that is the opportunity to be more efficient

with the waste gas is unfathomable. Sometimes you sit down and you just look at the amount of gas that's oozing from the earth in these oil fields. It's like, holy shit, imagine if we could harness all that. like bitcoin finally makes it possible and it's and it's we believe it's gonna for what we're doing specifically gonna help shift this conversation especially for the oil and gas industry which has been plagued with terrible pr and and they've been on the defensive for decades now i mean arguably like they should be they are the oil spills are not good the flaring

is something that's very visible and and you're literally just lighting economic potential on fire it's like how do we solve this problem not until bitcoin existed was this problem really solvable at scale and it's just very exciting to be like on the front lines of this as i'm sure you're seeing it as well in the renewable side but like we finally have something that can help turn the tides of this conversation this narrative back to to a sensible point like hey all right like we don't have to go crazy here we can figure this out and try to be as efficient as possible which we're not there yet we can get there we have some work to do on all sides of of the fence like we're still educating producers producers are still getting comfortable with bitcoin it gets easier

as the price is going up but it's still an uphill battle i guess that's what i'm interested to see from your end, like with the execs that you're talking to, how's that Bitcoin education sort of battle going for you? Yeah, it's a great question. And, you know, I want to break it into sort of two main tracks. The first is dealing with Bitcoin miners and getting comfortable with Bitcoin the asset. So we're really, really excited about what we're able to do, getting energy executives and utility executives comfortable with us as a Bitcoin miner. We've had a ton of success. We're operating in multiple jurisdictions. All of that process has been one of the great pleasures of the last few years.

uh so that's number one and and it's important to to get a little bit of historical context there as well you know in in 20 you know really 2017 2018 there were a lot of of you know i don't want to say fly by night but there were a lot of um starry-eyed operators who who thought they were going to build you know massive you know they wouldn't get out of bed for less than 100 megawatts and to you know to give to give you know the freaks a sense of what 100 megawatts looks like. Imagine 15 hospital campuses. It's enough power to make multiple New York City skyscraper. It's a massive amount of energy. And so these folks were coming into utility CEOs or energy generation executives offices and saying, I need 100 megawatts and

I need it in 90 days. And that's a crazy ask. And then, you know, and then Bitcoin went from 19.5 to 12.5 and then from 12.5 to 8,500 and then from 8,500 to 3,000. Those folks asking for all that power stopped answering the phone. We didn't go in there asking for 100 megawatts. You know, we went in there and said, we want five. And we want to show you we know what we're doing. and we want to crawl and then we want to walk and then we want to run and we want to build a you know we want to build a 50-year business here you know that that's the point you know we don't care if bitcoin's at 20 000 or 3 000 we want to we want to build the same damn thing and so from from that standpoint you know getting some of these energy folks kind of open to working with

a bitcoin company um was was awesome it was really successful and and you know it's it's important you know for you and i to remember because i think we live in our sort of you know more insulated sort of good actor bitcoiner bubble to remember that like this is a high octane industry full of high you know high octane operators and you know as much as those folks find ways to make money some of the time they find ways to blow themselves up a lot of the rest of the time yeah i think it'll be interesting to look back in retrospect two years from now and see some of the decisions that are being made out there and how they turn out.

Exactly, exactly. So, you know, so I think that like the education efforts on what is it like to work with a Bitcoin company have been great. Getting a lot of these traditional folks excited about Bitcoin is much more challenging. You know, where I think we've been able to get to is, and there's a few of them that we work super closely with. A few of them, it's the classic

story of what happened on Wall Street up until about a year ago, which is some of the folks were really excited, owned it personally, investing in it personally, not ready to do it as a firm. So I think that we're basically lagging last cycle, one cycle in the energy side. So I'm seeing executives tell, you know, texting me and emailing me when, when price is up or they'll send me a research report or they'll, or, you know, and, and they're pumped and they're asking questions and, you know, and, and that's really encouraging. And so I'd expect two, three, four years lagged from forward from now, we start to see them at the firm level ready to get involved directly. But, you know, but I think the big, the big jump between last cycle and this cycle

is that they are not afraid to have a Bitcoin-focused company as a counterparty. They're not ready to be a Bitcoin-focused company themselves. Yeah, right. Like bringing it on their balance sheet and being exposed to that risk. Like on the mining side too, you got to think for a lot of people,

it's like, all right, Bitcoin's risky enough. Like getting into Bitcoin mining, that just adds a whole nother layer of risk, acquiring and acquiring the head hardware executing the the installation and uh upkeep and uptime most importantly of this hardware you're holding a physical option on future bitcoin right then it could get drowned out or catch on fire literally um and you got to protect those options and and make sure they're performing uh as as best and as often as possible it's uh it's an insane like execution is key and it is uh it is stressful like thinking about it and and making sure that

your systems are operating so that you can execute consistently uh and to the level that you need to to remain profitable and to make sure that you're getting the most value out of those physical bitcoin options that you can yeah i mean the the the anecdote that i tell when when folks ask about sort of our risk management perspective, is I had never plugged Bitcoin 40,000 into a model until it actually happened. Right, yeah. My spreadsheets look at Bitcoin 3000 and 5000 a lot more than they look at Bitcoin double digit thousands, let alone 30,000, 40,000.

Yes, make your models as conservative as possible to set expectations because it is risky it is stressful and uh i don't want to say fickle but like you're you're at the whims of many factors whether it be more hashrate coming on from other areas of the world uh again like execution of the actual operation like do you have like a fire happened do you have a bunch of miners go down the you could get a bad batch of miners and a bit main particularly the s15 series sent out some batches at what like a 33 percent failure rate which is untenable for for like higher than that in some regards uh some aspects um some instances excuse me um there's so many variables to take in into into consideration and it's a ruthless ruthless competition um well and that's

what that's what gets me so fired up is like like on like you know i i read there's a great there's a great paul graham essay um about about how to design engineering decisions in startups um that i think fits this really well it's a mental model we use all the time which is do the harder thing every time you face a fork in the road pick the harder fork because that's another choice that your competition will not make that's uh and got and we you know we we basically you know we think you know we think about we think about this at a couple of levels so like we don't host other people's machines we just don't do that we're here to mine bitcoin for ourselves we bring a lot of the design and fabrication work in-house

we you know we we work we work really closely with a couple of of contractors and do the vast majority ourselves. We build our network ourselves. We build our cybersecurity tools ourselves. We build our monitoring and repair and maintenance function ourselves. Building in layer after layer after layer of vertical integration, at the end of the day, is how we capture more margin and more margin and more margin and have a larger moat against downside risk, downside risk, downside risk. So we have an internal rule, which is number one, don't die. Every decision we make should help us not die and as long as we approach the whole business and the whole world from that sort of first principle we might do all right no like we are wavelengths here what's going on

again we want to control everything that we can that's going on in our boxes so coming down it's like building our own pdus writing the software that allows us to interact with those pdus and then the miners by extension building the the airflow systems that that allow us to push the heat out of the containers you want like because that that's what helps you reduce that risk right if you know exactly what's going on you're not dependent on a third party providing you something and you don't have to call somebody up like yeah what the hell happened like if you fuck up it's on you but if you fuck up you probably have a better idea of actually what's going on and how to mitigate trusted third parties or security holes right this applies to many aspects

of the bitcoin it's uh exactly it's fun too man it's a lot of fun like for me at least uh i get just fascinated by the physical nature of everything i tweeted out this morning like most people like i don't even think about altcoins anymore we'll definitely shit on this for a while but like people very very very much underestimate the physical nature of these blockchain systems like you need physical infrastructure to make this stuff work and i see it firsthand like what we're doing great america mining when you're doing a grid like we're building things we're building things on american soil it just feels fucking good doesn't it bricks and sticks right and it gives me it feels so it feels so good it's one of the most exciting parts of the business

you know, certainly for all of us. And, and, you know, a big piece, a big piece of our culture is like new miners are getting delivered. The entire company flies to the site or drives to the site and plugs them in. Those things do not stay in boxes. No, no downtime, you know, every, every hash, every hash second available is, is achieved. And there is, you know, you know, all that stuff, no job too small and and you know it's a it's a cultural thing this is this is the proof of work way um because you get the visibility and the insight into each of those little efforts and those little optimizations uh and it's it's ridiculously rewarding i'm you know i'm endlessly grateful for the opportunity to work on this um you know and grateful to bitcoin for

for creating a a system that has you know an entrepreneurial opportunity like this within it yeah i mean i feel grateful every day to be able to do what we're doing at great american miami would have conversations like this on a podcast and support myself and my family it's like i feel like one of the luckiest motherfuckers in the world it's insane and so what does this look like right now we're we're at the cusp of this like hash rate on north american soil in your mind what does it look like at scale i think when like yeah so i think there's a couple there's a couple layers to scale the first one is like you know i think that the we need we need to basically make the u.s the premier destination for hash um and i think we've got a couple of really exciting

building blocks and a couple of things that we'll need to solve along the way um i think that we have a massive abundance of energy here in a way where we can compete with anything globally You know, I think I think the the energy here can power a huge amount of Bitcoin hash and and and should not be a blocker, but neither in terms of volume or price. The next component is is we've got the you know, and you know, it's it's not very it's not very anarcho capitalist of me to say, but we've got the best damn court system in the world. Wasn't expecting that. Yeah. And it really matters. It really matters that like your like asset forfeiture is not a thing here. And that, you know, that, you know, property rights are enforced, you know, to a significant, significant degree. And so having that level of certainty, given the nature of the

CapEx required to scale these businesses is key when you think about how you're going to fund that growth. I think attracting dollars here to build the infrastructure layers of the future of money is going to be easier than deploying in Inner Mongolia or Kazakhstan or Peru. And I think those are great places and there's a great opportunity. I feel really good about America's role in sort of the hash stack globally. Yeah, you're not worried about the Maduro of America coming and seizing your equipment and plugging them for themselves exactly at the very least at the very least i can sue them and jail them all right and then we'll and then you think like from a law perspective in the united states and in north america particularly right this is gonna be a north

american phenomenon let's not kid ourselves canada's gonna be taking part of this uh as well i think that's the beauty is this bleeds across state and international lines too so you have a bit of jurisdictional arbitrage within the country too like and it's that's something that's been fascinating for me to learn has been on this ride with great america mining is like the different flaring regulations state to state and that drives different incentives for different producers and different borders to to actually engage with us in north dakota they're highly incentivized to engage with us texas up to this point they haven't been it looks like they will be more incentivized as the state regulators are looking to levy a 25% tax on flaring.

But that is another beauty of what's going on in the mining industry specifically is that you're able to have this jurisdictional and regulatory arbitrage from a state-to-state level. What we're doing, and I'm sure what you're experiencing too, there's different sizes of producers, so you have different types of stakeholders within the energy production levels. So you have small producers, large producers, they have different incentives and drivers. And so from a Bitcoin network perspective, you couldn't ask for a better marriage with like a type of industry than the distributed energy industry across state and international and corporate levels that really distributes the network, right?

At the end of the day, between different stakeholders. I think that's exactly right. And I think it, you know, the Bitcoin network does something really elegant and exciting, which is it makes the use it or lose it nature of energy production a huge asset. you know where every every um every megawatt hour generated out here that that gets consumed by the bitcoin network is another another layer of amber that it's encasing the transaction history and the utxo set and so you know because of that because of these these thermodynamic properties the the shelling points of the bitcoin network are are subtly and i don't think this is talked about enough um they're they're so ridiculously strong and they're strong in excess of the ways that

maybe they're they're more commonly thought of or talked about like it's easy to say that you know bitcoin transaction settlement is final or that 21 million is a hard cap then you look at the history of sunk energy costs into what has been committed to those rules and and you just have a whole a whole profound brand new appreciation um for for this thing satoshi drunked up right and that's what makes you laugh at like sideline armchair theorists who are like oh miners are going to attack the network it's like do you understand the the skin that miners have in the game and like how much capital they have in this game like they're like whenever like anybody's like worried about like a 51 attack 51 attack probably like the incentive is not

there in my mind like the incentive is to cooperate because the margins are so low and you've sunk so much goddamn money into this not only are not only are the incentives aligned the right way to prevent that from happening the logistics of coordination are so cumbersome when you think about just the massive size of the of the entire bitcoin network at this point and and it's only growing i mean let's not kid ourselves this thing's about to get a lot bigger Yeah, and the alarm bells that would be going off before, you would be able to, you would have such an early warning before an attack, like a state attempting to amass 51% of the network to attack it and reorg and double spend transactions. They're warning, but you would be able to tell at the foundry level, like it was based on how much space is being leased out by hash cash shot 256 producers, right? look there was an article today that gm is slowing production of their cars because they can't get

their hands on enough semiconductor chips yeah and so if gm can't buy the chips then i don't think that you know insert government state actor here is going to be able to get their hands on more chips to to go fight against bitcoin yeah and like is that their biggest priority right now no way they have more things to worry about like a civil unrest and social incohesion across the country at least here in america and and in india and in russia and you mean like the the list of the list of places where where mass protest um is happening is it's only getting longer at this point it's growing man yeah this is a perfect transition into the meat of the conversation i want to have for you so i've been spreading this theory like i think the energy producers that

we're working with and that are going to be the largest bitcoin miners at some point in the future the next decade and by extension if the overton window moves from this everybody or the the shelling point of money in the world moves from the u.s dollar to a bitcoin standard at some point in the next two three decades these energy producers are going to be the central bank of the future and not in the sense that they decide money supply and rates but in the sense that they control the the distribution and facilitation of of the movement and production of money right like and so i think what like comparing energy producers to the fed when i do that i'm comparing the fed window to like the bitcoin mining pool level like what is the fed

window now will be the bitcoin mining pool layer in the future like that is where money will be produced and distributed right now it's done via the fed to primary dealers in the future it will be bitcoin miners mining pools by extension they're going to build this whole financial stack on top of that before we get to like dreaming about that and talking about that Like, we just talked about the social incohesion going around, like all the unrest in the world, probably being driven by the former, the Fed, and the way money is produced and distributed, arguably, right? Yeah, so I think there's a behavioral phenomenon that's really important to understand about where we are, and maybe about where we're going. so the and and i think about it a lot of like you you know you don't really care how well you're doing you care how well you're doing relative to your neighbors from a you know from a quality of

life perspective and i struggle with that because i think on the one hand that's true and i think we see that with the sort of the eat the billionaire movement that's out there right now and the you know the tax the wealthy you know we just saw another proposal from from you know dear elizabeth warren who uh who wants to tax two percent of net worths above 50 million you know when you look at let's not let's not fool ourselves the governments are going to print deficits into eternity for as long as they can manage it. And so two cents on every dollar above 50 million bucks

is spitting into the ocean. And it's not about the money that gets raised with that policy. It's about sending the signal that A, what you have is not yours. It's only on loan because the government enabled your ability to have this wealth, number one.

Number two, it is paying lip service to the folks who have been under the jackboot of the Cantillon effect for the last 50 years. Yeah, it's insane. And you said they're going to. Not only are they going to, they have to. They literally have no other option. They do have another option, which is overt default. jubilee-esque but it's politically untenable so they're just forced to go down this road that makes life shittier for everybody and they wonder why like people are like rats in a cage

just getting smaller and smaller all around the world like it's becoming obvious the common man the average joe has had enough and the way the system is designed the way the monetary system is designed specifically has pushed people to the edge and they are starting to lash out and that's for me at least i don't say it's disconcerting or it's just i hate that people don't recognize what the core of the problem is right it's like red versus blue left versus right and it's complete like throw the throw the stick this way to confuse you like it's not like it's it's just like narrative framing to to to make sure people are only having a type of conversation that not actually focusing on the actual problem. Yeah. You've had Ben Hunt on who I disagree with lots

of his Bitcoin thoughts, but I think he's a brilliant social commentator and his ability to observe the social dynamics of the world around us and of the financial world around us specifically. He uses the terminology, the nudging, the nudging oligopoly. And I think that it's really important to highlight where when you feel angry about, and I try to catch myself in this as well, when you feel outrage, think about your media diet. What are you eating with your eyes and your ears? What are those inputs and what are the incentives that sit behind those inputs and try to understand if the incentive structure around the words that you're hearing or reading are the same as the incentive structure around the long-term future for you and

your family. And if you can't map those incentive structures together, it's really reasonable to deeply question what you are seeing and hearing. Yeah. Luckily, I think people are starting to I may be naive. I may be a bit hopeful. But it seems like people are starting to realize, like, all right, why are we printing so much money? Like last year, like the printer go burr meme going off. People asking Dave Portnoy shroop bucks.

People asking if we could just print the money, why do we even pay taxes? And now Bitcoin, its price being where it is and the attention being where it is and the validation from a certain class of people, like it or not, humans are social beings and they like to look up to people they deem as experts. And so in the case of Bitcoin,

having a fund manager, institutional investors, people like Michael Saylor, Jack Dorsey, Russell Okung, even from an athlete perspective, the Soulja Boy last night talking Bitcoin, like this is the stuff that the average Joe needs to start thinking about and accepting something as something that may be around and actually acceptable yeah when when i think about when i think about why bitcoin is so important i think about it as as bedrock really where you know i know i know that that i have a different

you know, set of, of values and incentives and, and goals and dreams and hopes that are different than everybody else's because everybody's are different. And so when I think about a world where people are best able to self-actualize those hopes and dreams and incentives, I think about everybody needing the most stable, certain rules to build their lives on top of. And so that, when I think about why things are so effective in America, it is the stability of our court system. It is the stability of our democracy and our social order. For all the warts, the thing works pretty well, at least relative to most of the rest of the world, from all I know. When you look at a structure and you think about separation of power rather than the accumulation of power,

it's about, it's about, you know, introducing decentralized principles rather than centralized principles and not get, you know, don't there's, you know, it's a, and I spent a lot of time now thinking about the, you know, the rule of law. Um, and it's about, you know, there's a reason there's a saying you can't be jury and judge, jury and executioner. And that's actually a commentary on decentralization. It means that it means that putting all the power into one set of hands creates bad outcomes for everybody. And so the more that we are able to broaden the base and create stability and certainty, the better we are to realize, you know, higher quality of life. And, you know, and I do in the context of Bitcoin, I do think about it in terms of,

you know, being really sensitive to the fact that, you know, that there's a lot of people out there who who are just looking to survive till their next paycheck. We're just trying to put food on the table, who are just trying, you know, to, to get to the, to get into the, you know, into the next day. And, and, and it's really a subsistence, you know, type of existence. And, and, you know, my hope and, and goal is that with, with all of the stuff that, that you, you guys at DAM are working on, that we at GRID are working on, and that the Bitcoin community believes in, you know, we're building savings technology and that savings technology will allow for the relief that that folks in that position today can get so they're not in that position tomorrow and and that

you know and that you know you know parker lewis writes a great article called bitcoin is for enemies um you know i i go further and say bitcoin is for everyone right it really is and like again like pulling this back to the the um not the democratization but the liberalization liberation liberation that's the word i'm looking for of the ability to produce and distribute money you're liberating that process from a very select few people and opening it up to the world yes bitcoin mining is very capital intensive and it's not for the weary but compared to the federal reserve uh system with 12 board members a chairman or chairwoman five voters at the end of the day like you have 12 chairman but only five vote in a given point

in time and completely liberating that process of production and distribution and manipulation of interest rates to the whole world or anybody who's willing to take on the capital risk to plug in a Bitcoin miner. It's mind blowing for how that can level the playing field to make this a much fairer system. I'd go even further and say, how much money in legal fees do you think it takes to start a bank? It's impossible. It's impossible. The regulatory gap is so high or so wide that you need to raise tens or hundreds of millions of dollars just to pay the attorneys to get you the charter then you need to capitalize the goddamn thing so you have to be like a base you got to be like a bezos or a must to do it like there's probably if there's anybody

you could probably start like a competing bank today it's those guys obviously we have avanti bank and it was wyoming that's starting it's a bitcoin back bank but they have the the benefit of number one having good people like uh caitlin long but then two having the luck of bitcoin appreciating significantly in value over the last 12 years as well exactly and and you know that's that's you know i get i get commentary around the sort of the the one computer one vote idea that was in the white paper and you know well mining is so centralized and i'm like yeah i mean it it takes it takes startup capital but it's not like it's not like ridiculous or prohibitive um and it's all driven by the market if you've got a great power cost and you can

manage a supply chain and deal with a software business and do all these things you got every you got every you know chance to come in and and you know build a great business for yourself in bitcoin mining and so it's a you know there's no regulatory capture and i guess like that's that's a nuance um maybe relative to where the white paper was at originally but but i think it's i think it's super exciting that you know that the the money production of the future just comes with an outlet in the computer right and if you can execute the cash flows come almost immediately right it's it's pretty insane which is uh sats flows the sats flows we got to start changing the uh the terminology here you get immediate sats flows um yeah so let's talk about

this new like this transition right we get away from the fed window and the new fed window becomes the mining industry and by proxy the mining pool industry and you get these services so you're already starting to begin beginning to see like what the stack will look like right hash rate futures are beginning to be dabbled with i think what really starts to incite is hash rate forward contracts right like when you when you sell hash for cash and you're you're that i think that is a very important primitive for the future banking stack on bitcoin like i'm still trying to run through this in my mind like what it would look like right like but you'd have the pools being like the fed window and then you'd have these services built on top and these

products built on top and that's how you would begin to to finance and and create a new financial system am i completely off base like crazy here no i want to go i want to go further with it and and start to core and not correlate but start to merge two ideas together one of them is hash rate and the other is transaction fee volumes so you know the the that to me is that are the are the the commodity, the true commodities of the future are going to basically look like energy, hash, and Bitcoin. And, and they're all, you know, they're all sats denominated, but they, but they each come with a little bit of different risk profiles. And so you can hedge them against each other and they're all sort of interrelated. And then there's a huge derivative stack that sits

on top of them around transaction fees and, um, you know, and, and changing, you know, time forward and back options at, of different durations at different levels. And, you know, and, and eventually, you know, eventually that's how you end up with sort of a, a, a Bitcoin, uh, reserve currency where you're able, you're able to work through all of these. Um, you know, when I think, I, I think the commodities, um, have become pretty financialized But the way that I think about commodities are really, they're really the input functions. And so in an economy, you've got inputs and outputs.

And outputs are usually goods or services and inputs are commodities or labor or capital. And so when you start to think about how Bitcoin can function across the input stack and the output stack, it gets really interesting and starts to look a little bit more um you know parallel to what we're doing today and maybe a little more achievable where i think like you know you say you say bitcoin could be the reserve asset of the future people look at you like you've 10 heads or they look at you say yeah i agree you know those are the two options um but i think that being able to being able to break down you know i love i love what ray dalio did around sort of the macro and the micro credit cycles, because I think it made a part of the economy that was

really hard to digest, easier to digest. And it's a half hour YouTube video called, I think, The Economic Machine is what it's titled. It's animated. It's really good. It's a really simple explainer for how credit cycles work. I think we need to do similar things for the Bitcoin standard and what that can look like. And you look at, you know, inputs, which are, you know, energy, hash, you know, maybe a few other things and outputs. And, you know, you take some other commodities, some raw materials, some, you know, whether it's a physical output or a service,

and you start to map the existing economy into a Bitcoin standard economy and make it really clear that this is achievable, um you know and and and continue to define it and continue to pave the way right and once you start thinking of these these bitcoin native products and like bitcoin native solutions to a lot of the problems that the traditional financial world solves right now and like like just thinking like the cme bitcoin futures contracts like i think that's going to get completely wiped out by like bitcoin native stuff like so taking away from mining and pushing it to like dlcs uh on lightning network when they're possible when they're widespread or like the short bits

contract for difference blew my mind like the the ability for one side of a contract to go long bitcoin price exposure and the other side to uh lock in a stable usd value um of in bitcoin And basically you just in that DLC, you have sats moving around to each party based off of what's going on with the price of Bitcoin. If it's going up, the person is looking to keep a stable value, gets less sats. And the one that's long Bitcoin gets more sats. It's going down the opposite. But that's all. You don't have to interact with anything outside of Bitcoin to get that financial product. And it's just like a mind blowing. yeah i mean i think you know i think that i think that financial engineering around bitcoin

and especially i agree with you i think i think the bitcoin native functionality um is just super exciting and you know and that's what that's what i try to keep in mind when i think about sort of what um what's possible uh you know the think about the internet think about the internet when you know when it was when it was like email and a couple of indexed web pages and a few things here and there and and you know imagine if you thought that you could order and a black car to your house from your phone i remember the first it's actually a funny story i remember the first uber i ordered in chicago i was like the second or third city that got it and there's actually a tesla that showed up and i was like oh shit what the hell is going

on here blew my mind like not only one that i could order a taxi from my phone but they're like a fucking tesla showed up i thought that was like the norm i thought uber was just like a fleet of teslas like when i was a kid i would take i would you know did not grow up taking taxis in the city we would take we would take a car service once a year to the airport to go visit my grandparents that was my how I interacted with car services for 12 or 13 years and then all of us actually maybe more like 16 17 18 years and then all of a sudden you press a button on your phone they show up at your house and they're cheaper than taxi they got water waiting for you in the back they know where you're going you don't even have to tell them exactly and that's

I want to mention one other thing that I love. I love the Uber example. I think that there's such a powerful mental model for what an addressable market looks like when a better product shows up. So the number of people who took taxi cabs before Uber showed up was way less, way more people use taxis today because there's a better product. the same thing is going to happen and i think i think of gold basically as taxis and i think of bitcoin you know in this example as uber like there's a lot of people who have really sophisticated and exciting portfolios that don't allocate to gold that are going to take one look at bitcoin and say fuck yeah why do you think that because it it has it has incredibly incredibly upgraded

store value properties. So fixed supply, starting with that. I can always divide my Bitcoin divided by 21 million and I know how much I have. That's it. The ability to just on a calculator divide your sats by the total network at maximum circulating supply sats, that very simple ability is so powerful. And being able to offer that degree of certainty is so powerful. Because then you start to be able to say, well, I understand how to price my time. I understand how to price opportunity costs. I understand how to use a time machine that takes value today and sends it into the future. And it works. Guess what? If I want to send some of that value to the complete other side of the world right now done like immediately and it works

and i don't and i don't have to pay anyone other than other than us maybe you could do some uh what is it out of band payments too hey like here's some here's some cuck bucks why don't you get my my thing in there for that's if you're at the pool level that's it we could have a stratum v2 conversation down the line but that was shout out to kareem fell me for for that piece of deribit last week on stratum v2 so good he's so sharp yeah the out-of-band payments is something i always forget about that like some pools offer it that is pretty pretty bullshit especially for us right it's like yeah especially for contributing to a pool no but it is in terms of going back going back to total addressable

market it's so it's such an upgrade you know like big and and you know love me some gold bugs culturally i think they're going to come around eventually um they're gonna have to yeah but but bitcoin is such a massive feature upgrade you know forget the forget the geopolitical forget the macroeconomic just on on what can the tech do it's so much better than what gold does and so that the number of people who are maybe gold curious will be bitcoin obsessed like and it is the nature of this podcast the website and just forcing me to to interact with the technology and test lightning network specifically the lightning network is so goddamn beautiful and it's like magic like people just streaming me 10 sat 10 cents worth of sats

like randomly like people listen my pot even less people like pay 10 sats a minute to listen to this podcast on sphinx they're doing it right now somebody's sending me 10 sats which is like three tenths of a penny right now like that in and of itself is something that could never be done before you can never do that with visa mastercard swift transfer wise good luck like that like you're it's a better product it enables things that have never been possible before Exactly. And that's what's so exciting. Like, you know, I'm so hesitant to try to project out into the future what I think will happen, because I think that the emergent properties of networks are much smarter and more effective than whatever small amount of futurism I'm capable of. And so my job, like I really, I try to break the world down into things that I think will never change and things that I think will always change and try to only interact with those things, at least from a financial perspective, because everything in the middle, like the the whether it's the market or the decentralized network or the hive mind or the Twitter sphere or whatever, that that collective intelligence is just so much better than that. me at figuring out a better answer well and like so like we're going to get into a clubhouse

conversation now too because i was a clubhouse earlier today and like somebody some somebody's like i don't know if bitcoin will ever be a reserve currency like it's going to take a while i think this is going to happen faster than people can even like i think like especially if you get the energy industry linked up to it like at some point like it's going to click like why am i ever converting this to dollars like just like hold the bitcoin we'll start that's how you start the mining the miners being the new fed window like they just refuse to convert to dollars because they don't want to and then you start going from there and they start trading goods for sats uh but like bringing this back to clubhouse that like the the amount of knowledge being spread

on that app particularly like it has been incredibly insane to watch over the last few weeks particularly it's it's like the cyber hornets have attacked that app and are just like we were fucking me and you were talking to soldier boy about bitcoin last night like what the fuck it's crazy it's like it's like really really crazy um i want to i want to pause you on the previous point which is you know when when people are skeptical and listen like bitcoin is not the obvious winner it this is we are still this is still an experiment this is still you know something that is new it's what i've bet on you know both professionally and financially i think it's obvious man yeah i know but but i the but the the the counter to me though is like

do you know anyone who would argue if you said that the internet is the reserve the reserve information economy it's the it's the it's the information settlement layer everybody will like yeah duh i do everything on the internet all of my interactions with information are broadly internet based your iMessage if you're on an iphone goes over the internet texting goes you know telecom is internet adjacent it uses the same rails twitter facebook email slack any crm product you use any remote you know github code everything that touches information is actually just getting settled by tcpip yeah and so the idea that we can have a global um a global upgrade to a network like that should should not feel like out of scope

in my opinion no it definitely shouldn't especially it's happened in our lives i fucking remember taking aol out of the back of the backstreet boys millennium album and downloading it for my parents when i was like seven or eight years old like and that like that like that walled garden internet experience has gotten to where it is today where i'm fucking teleconferencing you from hundreds of miles away we're recording it we're gonna post it to the internet it's gonna get distributed to the world like that happened real fast and like that like and again thinking about exponentials and the pace of innovation like people are like oh bitcoin will probably follow the same trajectory that the internet did it's like no bitcoin's being built

out on the internet like we have the internet that like expedites everything and like makes this process that much faster. I think this is going to happen much faster than people realize. And the example, so my dad is always my base case for how well is Bitcoin doing, because he's excited about it. He loves it. He's not a naysayer by any stretch, but he's a healthy skeptic for the real upside cases for what this can be. So he's very confident that Bitcoin will be a $10 trillion asset class. He does not understand, I think the last six to 12 months have been really good for him and his orange pill.

But he did not, until COVID, I think, he did not see the $200 trillion case for Bitcoin. And I think he does now. And I think that this is, you know, this is one of those, um, examples that I, and so I'm constantly, you know, testing my sort of mental models on him to see what works and what doesn't for, for his demographic. Um, and one that is like super compelling is, is Tesla. And I know Tesla has its own, you know, has, has its own community around it, but Tesla is 10 times bigger than like Ford. it's like just as big as like all the major car companies combined right yeah so the idea that you can invent something new that's that you know similarly to you know technology enabled so i think of i think of um bitcoin miners is basically technology enabled energy producers so i think that you know we have the ability to 10x traditional energy producers or or enable traditional energy producers to 10x themselves um super super easily where just the

example between you know what's the difference between you know ford and and tesla is just one of these one of these leaned in to these enormous tailwinds that are native to the things they were already doing and and producing and they were able to they were able to lap the competition 10 times over. It's the same thing with the broader S&P 500. What of the top 25 companies 10 or 20 years ago were not internet companies? Big percentage. Today, Apple, Amazon, Facebook, Salesforce, pick your tier. It's 80 to 90 plus percent internet native businesses. Airbnb went public at $100 billion. Alibaba, huge, huge IPO.

You know, these companies are being built faster than ever. They're bigger than ever. They play more of an active role in society more than ever. And they deliver more value. Why? Because they're tech-enabled. You know, the same way that when John Rockefeller started digging around in northwestern Pennsylvania and found oil nobody else wanted to go hunt for whales to cut open their skulls to put oil in

lamps oh that was so much fun though you know it's this it's the same to me it's the same analogy if you looked at where capex was being spent prior to the discovery of the ability to refine kerosene people were capitalizing shipbuilding to go out to sea to go hunt for whales which was not a safe thing to be doing killing whales to to cut their skulls open to light and heat their homes like think about how ridiculous i sound and now think about if i built a car that was not software native it's gonna sound just as ridiculous yeah those those whale skull hunters were the innovators of their day right the first guy to figure out they could turn like whale blubber into kerosene it's like oh this dude's a fucking genius the henry ford of his time exactly

and then john rockefeller digs in his backyard and figures out how to do it right well and then like it's great like because like the piece that we put out for gam this week that austin and i wrote like it really highlights how that opportunity cost shift you don't have to for at least what we're doing in the oil fields like now the the questions a producer would ask themselves when they were IPing a well. It was like, all right, how many LNG units do we need? How many flares do we need? Are we going to pipe this gas to market?

If we're not going to pipe it, are we going to vent it? What's that do to our carbon credit? One variable being entered in the equation now in the form of Bitcoin mining changes the opportunity cost and that decision-making process drastically. like you're talking about you don't need to build pipelines that are 100 miles along anymore you don't need to invest in elegy units you don't need to flare that you can literally plug in these bitcoin miners like you said it's adding value via technology like you can go to our gas to hash calculator the data is real-time data these people are getting 15x the value out

of their gas by mining bitcoin with it than doing any of the other things i just mentioned and most of the time especially if they're flaring it they're losing money so the ability to turn that previous drag on your balance sheet into a significant revenue driver is just going to thrust this industry into a whole new paradigm that like like we've been mentioning you can't even fathom what's going to happen we have ideas we think it's going to go to a certain direction but really don't know at the end of the day yeah i i am i remain you know i remain recklessly bullish on what this is going to do for, you know, I think that a technology-enabled business eats the face off of the previous generation of businesses that refuse to upgrade and integrate.

We've seen this story, you know, this shouldn't feel new. We've seen it play out with the internet. We've seen it play out in energy markets previously. We've seen it, you know, even just, you know, simple things like, you know, and I love the historical examples. I'm such a i'm such a a nerd about it all but like the erie canal we dug a trench from lake erie to the hudson river and that's why new york is one of the dominant centers for commerce and boat and boat building and why new england was such a center for boat building historically like we've seen this playbook it just looks new now right and like so we've seen that playbook and arguably we've strayed a little bit from that playbook due to the misallocation of capital enabled by

the monetary system that we're able and so like this transition to like a bitcoin stare like everything we've been talking about just gets taken to a whole new level because you're not allocating capital as inefficiently as you previously would have it's like again like attacking it from all angles you have a tech innovation that induces a sound monetary system that induces a reduction in misallocation of capital like efficiency efficiency efficiency like productivity gain productivity gain productivity gain we can't even fathom where this is going freaks you are at the beginning of something like massive exactly exactly you know i'm obsessed with eric weinstein um he does the portal

you know again you know trends towards the shit coinery makes me a little uncomfortable but you know but the but the deep academia of his thinking and the structured nature of his thinking um is so exciting and and he has a term he has a term um for higher education that i've expanded uh which is like you know he his thought is that like higher education is basically a ponzi scheme and you've got a professor you've got grad students grad students want to be professors to go find more grad students to work for them and so there's your pyramid i go further and say that the cancel on effect creates the ponzi-fication of our economy and and the and the the pyramid becomes the central bank the injection points the injection

points go and and accrue asset ownership the and then rinse and repeat meanwhile there's more and more and more friction for everybody else to get access to asset ownership and asset ownership becomes the the you know the the top tiers of the pyramid and everybody else is trying to scramble to buy into these because if you don't own assets, you get inflated to zero over time otherwise. And so there becomes this pernicious forced buying function within the economy that basically pays the higher levels in the MLM while you try to create a layer below you, which are the not asset owners who are trying to become asset owners.

And so this ponsification in our economy distorts all of these other things. And, and what happens over time and is what's so dangerous about this, this type of rot is you stop tech enabling the next round of businesses. You stop in, you know, innovating, you know, anybody look outside and see any flying cars recently? Nope. That's what we were promised. You know, you, we grew up, you know, our, our parents grew up watching the Jetsons and

they didn't get any of that. And so what are we doing now to make sure that the incentive structure for participating in the future of our economy leads with longevity, proper time preferences, innovation, tech-enabled businesses, fairness, access? You know, the values that we hold so dear can get realized. It's available. We've got this. it's possible and it's right in front of us right like one of my favorite examples like point out this pontification or like this more specifically like the misallocation of capital that literally that leads to terrible

externalities and like it completely perturbs the opportunity cost like my favorite example is having lived in chicago for five years six years almost and gone through those winters and in the winter obviously it snows a lot they salt the roads a lot they plow the roads a lot and like living there like potholes galore all over the city of chicago and come spring when the the snow melts away and the ice melts away it's time to fix the roads there's potholes everywhere and it like came to be known to me at least i think it was more widely known to to native chicagoans but they were it was basically a jobs program where they were just like wanted the spring construction jobs to be there every year so they use like a mid-grade gravel to repave the roads knowing that

in the winter like when it got snowed on and salted and plowed it would get beat up and you'd have to and you'd have to pay them again in the next spring and summer and like thinking like how much capital is misallocated from that one process alone is like mind-blowing right like you just you're wasting money on redoing it every year right like with the potholes come broken tires broken bumpers that cost those individuals in those cars to have to pay that it's a cost on them like when you're doing construction in the sprint causes traffic that waste time like that that economic value isn't calculated either like thinking about how much value just can be saved not even like created by by thinking more long term and thinking harder

about the opportunity cost and doing things that will make sure the roads don't need to be paved every every year use the high grade gravel so you have to do it once a decade if that is mind boggling. And, and what, and what underpins all of that is having an incentive structure on the individual level that promotes savings and reward savings. Because the reason that you need that, that, you know, that forced sort of revenue stream for the construction company every year is because the pay that everybody takes home, the incentive structure right now is to consume it right if the incentive structure becomes to save it and you're able to actually save your way into retirement you don't need to be on the hamster wheel anymore

think about the possibilities freaks makes you angry when you think about it right it's like why are we this stupid how to get this bad it's cyclical right like a human society goes through this all the time and that's it's another heady like conversation to have like does bitcoin break this cycle um does the the nature of consensus in this distributed system and the inability to change the 21 million supply cap throw a wrench in the system that perturbs that cycle um moving forward i don't know i go back and forth do you have any thoughts on that so i think from first principles really what's so exciting about bitcoin and and what's truly brand new because because there's truly a brand new component to it that i think you know what are

we 13 years in um we lose sight of maybe now but provable scarcity is an innovation it's a and and more than that it's an invention we we this was something that had not been invented before um and now it exists and so you know i love i love what you say which is a yeah no i was just gonna say the wheel never existed and think about how much that changed exactly so so like when when i think about bitcoin i try to keep in mind the fact that it is a brand new invention and so brand new things get to happen now and bitcoin happens to us we don't happen to bitcoin right so you know so marrying those two ideas together you know there are emergent behaviors at the societal and global and

multinational level that will become available to us because something new got invented um You know, there's lots of other times that we've seen this, you know, whether it's, you know, the combustion engine or, you know, pick your big, you know, societal shaping innovation. I think that there's there's a spectrum to how big those can be you know when I think when I think about the two most important things around productivity at the international level I think energy and money are the two rails that matter the most and so that's an argument for it being a cycle breaking you know invention you know i'm conflicted because you're combining you're combining them right it was to energy and money like we're creating an energy currency that's the beauty of proof of work right like you can literally look at the hash rate and the difficulty

target at any given point in time and ballpark how much energy is being expended into this network. Exactly. It is the, you know, this is the merging of the digital world and the physical world and governing money based on the laws of thermodynamics that is so, it's just so exciting. You know, we've never had this before. We have it now. What can happen is, you know, is this boundless frontier. You know, I hear all the time and think all the time about sort of the the societal challenge of not having a great new frontier um and that you know we you know we human beings thrive when there is a frontier space to be pressing up against and that's how we're designed um and i think about you know the frontier space that bitcoin can introduce to us

um and has introduced to us and it's just it's just so cool it's just so exciting right it's just getting more people to come explore that frontier with us and i think we're winning I mean, again, going back to Clubhouse, like how many orange pills are being doled out on that app alone? Like the ability for people to team up in that app and literally a thousand people listening to you. I mean, obviously there's billions of people on earth, but one man at a time,

I believe the network effects of educating on that app are going to be profound. I don't know. Am I too bullish on Clubhouse? What do you think? I think you're not bullish enough. yeah frankly say that why do you say that i think that it is the it is the most effective onboarding tool i've ever seen to an idea right right it's insane man it's insane and i don't

want to like fall into like the the the fanboy club of like new social network no from a human to human onboarding capability like i have never seen something where you are able to like impart ideas with depth and intimacy and effectiveness as quickly and and as well as as what they've built right and they like the diversity of thought and perspective that is offered is insane like so if i come up short somewhere in an explanation somebody can hop in right behind me and fill in the holes all right like yeah and i think you know as something i didn't appreciate until we got into clubhouse um was how unbelievably clear and powerful the bitcoin

shelling points are there are people all over the planet who i've never interacted with or spend any time with and likely never will spend any time with or interact with who have 90 plus percent overlapping first principle values with me and think the same things about bitcoin as me and i will never need to meet them and we are entirely coordinated around realizing this future together right that's crazy it's beautiful man it's fucking beautiful things are gonna get weird freaks in a good way in a good way this is like i'm so bullish on the future i know it's 2021 we just had 2020 we got riots going on over the world this is just this is the storm before the calm it's uh it's the darkest before the dawn moment like we have the tools to make

this world better bitcoin certainly helps i think considerably more than anything else and it's happening like i could say that because i see it happening i see like we engineers in the bakken right now plugging and mining containers you are building out infrastructure as well at the moment from what i understand like it's happening it's here it's possible it enables something brand new we can't fathom what it's going to do but people are tinkering with it and it is going to to happen there's no stopping it now like the incentives of integrating this like what everybody thinks about like state attackers and maybe like all the crazy adversarial thinkers gonna throw shit at me and be like oh marty you're you're too naive you're too optimistic but the incentives are

too fucking strong like again the the amount of money that these energy producers alone will be able to make from integrating bitcoin mining into their operations and creating that financial stack on top of their mining operations is considerable it's material i think if you're thinking from a natural national security perspective and energy independence perspective like nothing helps us get to a more secure energy independent country they're not even just like any country if any country wants to be energy secure like integrating this stuff makes that possible exactly and again it for me it comes back to this idea that we have never had something provably scarce and now we do and we don't understand yet what it's

going to take to get your hands on some of this stuff at the individual level, at the high net worth level, at the, you know, pick your institutional capital level, at the nation state level. There are only 21 million of these things, and the ability to get your hands on them will become increasingly challenging, both in terms of what you got to pay for it, also in terms of the logistics of actually getting it and getting you know getting it secured and validating the transaction with your own node and running all sort of the sort of the basic um you know privacy you know operate you know i say operating system is sort of a broad catch-all but like you're you're running a node interacting with lightning securing your own you know securing

your own key securing your own coin all of sort of the basic bitcoin os actually getting that accomplished with any kind of significant um significant size and scale in the future is going to be harder and so the way you do that and and part of the reason why i'm ridiculous you know this is as much talking my own book as i'm willing to do you know i think that that you know the demand for ownership and mining businesses in the future is going to be huge right it's like it's it's hilarious too isn't it because mining has always been this oh don't don't mind you're not going to want to mind but it's like literally going to be at some point in the next decade or two the only way to actually like access considerable amounts of bitcoin this is this

is one of my pet theories this is absolutely one of my pet theories it's gonna completely shift it's like oh fuck i should have been mining like it's the it's the only you know it that's the real that's the real satoshi spigot right it's like uh gotta get your sats flow freaks mining makes it possible like and that like and then mine like uh we could go on for hours i don't have hours at bedtime and story time and dinner time soon but before we get to all that like sats flow where was i going with that um god i completely this is this is the this is the this sort of you know i i think of this sort of as the as the bit one of the bitcoin singularities that's going to be out there which is that the availability of bitcoin supply and the

and the sort of i hesitate to use this term but like valuation model for mining access are going to become sort of bedrock foundational ideas in financial markets of the future where the only way to get guaranteed access to future bitcoin is to own is to directly own mining capabilities yeah completely agree and where that's a flywheel yeah i mean and like it's going to get so competitive right and like again we're talking we already talked about how thin the margins are like it's going to drive creativity and innovation to levels again that we can't fathom but like miners are are going to be highly incentive like to keep as many sats out of their sats flow as possible and so they're going to use that like like in the like we already have ideas of using the waste heat

of the containers to to create supplementary revenue streams like exactly i'll just leave i'll just leave it at that i'll just leave it at that like revenue outside the block reward that allows you to hold on to as many sats as possible i'll leave it at that yep yeah it's you it's utilizing the intrinsic properties of the business to diversify across revenue streams and continuing to do whether that you know imagine your imagine your work you know you build a solar a solar plant that's um just for bitcoin mining and you're able to generate a bunch of of uh renewable energy credits as part of that all of a sudden you get to monetize the renewable energy credits and you get to monetize the bitcoin mining and you get to monetize the energy if there's if there's a bidder

who's willing to bid more sats than your mining revenues for the energy, now they're competing for it. And you're able to start to build the infrastructure base of the future and the commodity marketplaces of the future. And that's how we get to these positive some environments when we're all innovating together and thinking about these businesses with a new lens, because there's a new tool in the tool belt. Imagine trying to build a house with a screwdriver, and then someone shows up with a nail gun right that's what just happens oh we're gonna have many of these conversations i'm very bullish i'm always bullish after speaking with you again i can't wait till we meet can meet again at a diner in person are you gonna

bitcoin 2021 uh i haven't planned it yet but i'm i'm yes as of now you you just you just convinced me i'm in my miami beginning of june why not right we could make that happen yeah it doesn't sound like a bad time um dude it's always a pleasure today was a particular pleasure it was i love these conversations i mean i love that we're like both on this mining tip too because we can bounce these ideas like we thought bouncing ideas off each other before we were in this space was cool like right now like it's it's taken to like a whole nother level so thank you for for being a backboard for me to bounce these ideas off of it's always always fun you know i can i can honestly say i i owe you a debt of gratitude getting into into this whole industry the way

that it worked out like i i lean on your brain and your expertise you know especially in those early days like i would not have made it um without you and without sort of a the gratitude the graciousness and kindness to to come have breakfast with me all the time oh stop it it's selfish it's selfish my wife doesn't want to talk bitcoin at me i just have to go eat breakfast and people want to do it no i mean the feeling is mutual i think i mean i've learned just as much from you as as you probably even more from you than you've learned from me so it's a feel the feeling is mutual i'm pumped to see where you are right now and very excited to see where we are in the future um where can the freaks find out more about you or do you have a final thought

for the freaks as well uh final thoughts for the freaks number one is long bitcoiners like this is you know we we come from all walks of life we look we look different we sound different uh we smell different for sure and and you know there i have never been part of a community like this um and it's just it's ridiculously special the mental horsepower is is unbelievable and um and i am you know i'm humbled you know time and time and time again to be part of a community like this um you know the the best places to find me these days are twitter and clubhouse um harry underscore sudok at both uh and you know and like the dms are always open you know you want to talk mining you got questions whatever you know please you know don't be don't be a stranger you know too

many too many bitcoiners have opened their dms to me and and so i must do the same well go check him out freaks again one of my favorite people to speak bitcoin with harry until next time i mean i'll see you in clubhouse in a few hours we got the bitcoin like wednesday meetup but until next time on tftc um thank you awesome i appreciate you marty thank you that's all we got this week this week this episode freaks peace and love