The Breakdown - The Future of the Bitcoin Energy Debate, Feat. Troy Cross

Episode Date: July 22, 2022

This episode is sponsored by Nexo.io, Chainalysis and FTX US.   Today, the Bitcoin energy debate is all about how much energy bitcoin mining consumes, and what percentage of that comes from renewable sources. Today’s guest Troy Cross argues that in the future, Bitcoin will be seen as a technology that actually enables the overall economy to move to cleaner, greener energy sources even beyond mining itself.    Find our guest Twitter: @thetrocro       - Nexo is a security-first platform where you can buy, exchange and borrow against your crypto. The company safeguards your crypto by relying on five key fundamentals including real-time auditing and insurance on custodial assets. Learn more at nexo.io. - Chainalysis is the blockchain data platform. We provide data, software, services and research to government agencies, exchanges, financial institutions and insurance and cybersecurity companies. Our data powers investigation, compliance and market intelligence software that has been used to solve some of the world’s most high-profile criminal cases. For more information, visit www.chainalysis.com. - FTX US is the safe, regulated way to buy Bitcoin, ETH, SOL and other digital assets. Trade crypto with up to 85% lower fees than top competitors and trade ETH and SOL NFTs with no gas fees and subsidized gas on withdrawals. Sign up at FTX.US today. - Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Michele Musso and research by Scott Hill. Jared Schwartz is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsors is “The Now” by Aaron Sprinkle. Image credit: Eoneren/Getty Images, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8.

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexus.com, and FTCS, and produced and distributed by CoinDes. What's going on, guys? It is Thursday, July 21st. Today we are back with more midsummer macro, this time with Troy Cross. Before we get into that, however, if you are enjoying the breakdown, please go subscribe. to it, give it a rating, give it a review, or come join us on the Breakers Discord. That's the place where we talk about big, interesting things exactly like what we are about to discuss, and you can find a

link in the show notes or go to bit.ly slash breakdown pod. Lastly, a disclosure as always that in addition to them being a sponsor of the show, I also work with FTX. So we are back with round two of midsummer macro, and this conversation is just a little bit different than yesterday's. It does go very big picture, but around a more specific context, with that context being Bitcoin and Energy. I'm joined by Troy Cross. Troy is a professor of philosophy and humanities at Reed College, a fellow at the Bitcoin Policy Institute, and an increasingly important voice in the Bitcoin energy space. As I think you'll see, Troy is far more nuanced and thoughtful than both Bitcoin antagonists, but frankly also many advocates. And I think it's a disposition and an ability to

articulate that we will absolutely need for the battles to come. I really enjoyed this conversation, and I know you're going to as well. Troy, welcome to The Breakdown. How are you, sir? I'm great. Thank you for having me. It's fun to be here. Yeah, I'm really excited to have you. I think there's a lot of good stuff we can talk about. You have been a voice that is getting more prominence over the last few months, which I'm very excited about as sort of representing an important and also some ways, different perspective in the Bitcoin community. So I anticipate a great conversation. But before we dive in, just for those folks who aren't familiar with you, tell us a little bit about yourself, what you do, and maybe how you started to get interested in Bitcoin.

Yeah, yeah, actually worried that I am saturating the attention space in Bitcoin. I'm on podcasts seemingly nonstop. But this is one that I've been listening to actually for quite some time. And I'm really excited to be here. Really appreciate you having me on. I'm a philosophy professor right now. I'm in my office at work at Reed College right now. And I do analytic metaphysics and epistemology, none of which is really directly and closely related to Bitcoin, but I'm also a bitconer since 2011. And I'm an environmentalist by leanings and by values. And when I was mining in 2011, I kind of did a back of the envelope calculation on the potential emissions and energy use from Bitcoin, if it were to reach, in short order, reach the market cap of gold.

And I was kind of horrified. I had a calculation kind of like the World Economic Forum or Newsweek did in 2017, but back in 2011, that this would literally destroy the electrical grid and the planet. And so I had my environmental fud moment over a decade ago. It did cause me to stop mining, actually. I was mining in my own basement with a couple of machines and gave those machines away. And it also caused me to kind of question but not give up the idea of Bitcoin and proof of work. I stayed involved in. I still loved what the project represented, which was disintermediating the financial system and delivering power from the few to the many, financial power, monetary control.

But it was really a couple years ago. We got back into thinking about Bitcoin and realized. the energy scene, the emissions picture much more complicated than my back of the envelope math. You know, I came to hold some very, very different views that Bitcoin can actually usher in, help us accelerate, a kind of optimistic, abundant, and energy abundant, and low emissions, decarbonized future. I also had an idea for an investment product or an investment strategy for holding carbon neutral Bitcoin, holding Bitcoin in a carbon neutral way in a way that wouldn't threaten Bitcoin's fungibility. So I tried to give this idea away. I wrote a paper with

Andrew Bailey, who said, YELD NUS. Actually, I think you've had Andrew on the show, along with Bradley and Craig, the other philosophers in the scene. Yeah. And ABC, yes, resistance money. They call themselves and I'm resistance money adjacent. You know, I think Andrew is awesome. And we both tried to just kind of like give the idea away just like emailing cold emailing everybody in the space hey we have an idea for how you can hold bitcoin in a carbon neutral way but there were really no takers so i did this uh 21st century thing which is i started engagement farming posting uh tweets that were you know just over the edge of acceptability and uh triggering people and gathering a following you got to play the game you have to play the game

trying to be intellectually honest, but at the same time, going for engagement as well. I admit it. So I got a following on Twitter. And then I started going on podcasts. I shared this idea. Eventually, I went a Peter McCormick's podcast. That's when things blew up and everybody started contacting me. And then I realized, like, this is overwhelming my life. Actually, I'm just, you know, talking to companies and individuals all day, every day about various aspects of Bitcoin. and I started working for the Bitcoin Policy Institute as a fellow and realizing that, wow, my whole life is really Bitcoin now, not even by a conscious choice, but it's just how I found my attention. You know, the rabbit hole is deep. It pulls us in. And then you find yourself just like I had two

full-time jobs. One of them was teaching here at the college. One of them was just doing Bitcoin, almost entirely for free. And I decided to take an unpaid leave of absence for my job. So I'm in my office, but they're not paying me. anything anymore. Not in the near future. I'm teaching class on philosophy of money in the spring. Right now, I'm a free agent working with some companies doing some advising, trying to sell my idea. I just pitched my idea to a financial firm this morning. I pitched it four or five times over the past week. And of course, yeah, still engagement farming on Twitter, still posting provocative stuff out there, writing for the Bitcoin Policy Institute, talking to people like yourself. This is the new life,

All Bitcoin all the time. Well, I think that one of the things about it is it's not just that it draws you in. I think if there's something that you have to offer this space, it kind of tries to pull it out of you in a really positive way as well. And so I guess maybe let's use that as a way to jump into the sort of rediscovery process that you went through. You know, what started to kind of shift your thinking around Bitcoin and energy? You know, how much of it is different ways of looking at this versus lived experience proving different than you would have imagined. Oh, that's good. Yeah, I have to say there are so many great people in this space who did Drume me.

It's not just like the thing draws what you have out of you. It's people. It's individual people, you know, want to help get your idea out. And I had helped from so many people early on, especially Andrew, Bailey, and Craig and Brad. But there were many others, you know, Dennis Porter had me on this podcast early on and he wanted to get my story out. really helped. Steve Sandusky had me on early and let me tell my story. And there's just so, so, so many people. I can't name them all. But I feel like I should write something, just thanking each one of those people for helping me bring this idea forward. But in terms of like, how did the

transformation happen? Well, Nick Carter wasn't in Bitcoin in 2011. I didn't have his work to draw on. He's written a ton of amazing stuff about Bitcoin. I read that stuff. And he's also a brilliant writer and a great thinker. Nick was a philosophy major too as an undergraduate at St. Andrews, and I think he could have been a terrific philosopher if he had gone into the field. He clearly has the right gifts for it. So Nick really sunk deep. I mean, I read stuff by Linaldon. I read stuff by Hasma Cook, who was sort of a unsung hero in the early years of fighting Bitcoin Fudd. He wrote some brilliant pieces for Bitcoin magazine that it ended up getting cited. in the academic literature. I also went into the academic literature. I read Alex DeFries's stuff.

And I read, you know, I just did a Google Scholar search and started going through the papers there. Their stuff was theoretical. It was realizing like, look, you know, Bitcoin's halves every four years in its output. And something I didn't realize in the early days, the incentive is all coming from the block subsidy, not transaction fees, because we have layer twos now. So that block subsidy cuts in half every four years. Bitcoin has to double in price every four years in order for the mining revenue, total global mining revenue, just to break even. Otherwise, it's headed down. And if you know anything about existential functions and Ponzi's, you know that there is a much, much lower ceiling on the number of doublings that you can have in a commodity than you might think at first. You know, how many doublings are we away from the total of world wealth in Bitcoin? Not that. many actually. In 20 years, if we double every four years, Bitcoin's going to be like everything. So realizing that first of all, in the long term, because of the halving, we might have a fee problem. We might have a security budget problem, not spending enough on energy and the chain being too easy to attack with 51%. Once you go down the rabbit hole and you're like, oh my God, the energy,

then you see the halving. And then you think about how many times it has to like double just to keep the budget even. And of course, if you want to keep the budget as a proportion of Bitcoin's market cap, you have to do better than that. So, because if price is doubling, but the budget is staying the same, then the budget is half as a percentage of the total Bitcoin market cap as it was before. So just the halving alone, just realizing that, and I knew about the halving. I just hadn't really done the math. I hadn't really thought about because Bitcoin was tiny when I was in in 2011. It was so tiny. It was so many halvings away. But watching its growth and it's grown faster than having. But that's slowing too. Bitcoin's growth is slowing, of course, as it grows

as a percentage of world wealth, its rate of growth must slow because the ceiling is not that far above us, actually, in exponential terms. You know, that's all theoretical, like realizing kind of what this curve looks like over time that if there's a problem at all with Bitcoin's mining is that there's going to be enough of it in 15 years, likely, or 10 years, rather than there's too much of it. But some of it was also empirical. Like, Satoshi mentioned. that you can use the heat from miners as a byproduct to, you know, heat your apartment or whatever. And he predicted that mining would favor the colder regions of the planet, you know, in some of his posts on Bitcoin Talk forums. But we've seen really creative uses of waste heat now, you know, greenhouses growing flowers or vegetables in the far north or desalination or fermentation of whiskey or beer or drying wood in lumber mills.

like realizing that, oh, wait, we have a lot of electric heat already. All of this could be mining Bitcoin, basically, wherever you have an electrical capacity heater. We could replace it with a miner and just like mint coins along the way. And other stuff too, like realizing how much waste methane is out there. And I didn't know at the time that how bad the methane problem was. I mean, nobody did. The methane problem is way worse than we thought it was a decade ago. It's the number one threat to the climate. It's responsible to offer up to one third of all global warming. It is 80 times as potent as CO2 over a 25-year period, 20-year period, 25 times as potent over a 100-year period as CO2, and even more potent over a five-year period or a 10-year period. So methane is really the most

dangerous greenhouse gas. And there's a lot of waste methane, more than we thought, coming from landfills, coming from oil and gas, coming from agriculture, coming from wastewater treatment facilities coming from wetlands. And Bitcoin can monetize the conversion of methane into CO2. You know, they do that on the oil field by bringing out a gen set, burning the methane to run an engine, using that engine to spin a generator, using that electricity to mine, and soaking up the methane byproduct of oil drilling and converting it natural gas and converting it into CO2. And on landfills, The same thing is happening. I'm working with a company now that is mining on landfills. Hugely exciting. There's 2,600 landfills just in the U.S. more than three quarters of them

are not generating electricity with their methane. They're either flaring it or most of them just releasing it into the air. Flairing is really inefficient. Bitcoin miners can set up right there, monetize the conversion of that methane into electricity. And if there's grid connection, they can then feed the grid with that electricity. But before the grid is connected, a lot of these landfills are remote or small. They can pay for the infrastructure to capture and convert that methane. I didn't have any idea of that. Now it's like, wow, methane is, management is going to be required to keep us under two degrees. And it's possible just by vigorously going after our methane to keep us under 1.5 degrees.

And Bitcoin is the only thing I know about that monetizes in a global, ground up way, incentivizes through money to clean up that methane. There are programs we have are all topped down. Like, oh, put this million dollar stack on your tiny flare at your tiny landfill and none of the landfill operators can afford it. And then the other thing is renewables. You know, renewables are great in my book. And we need to triple the production of electricity in order to meet our climate targets. We need to triple the production of electricity.

Switch over the entire economy from fuel combustion-based activities to electrical activities. And we need this new grid to be. green. And the problem is that it's not going to happen in time. And it's not going to happen because even though solar and wind are the cheapest forms of power, solar is now you can build a solar plant for roughly two cents a kilowatt hour. It's incredibly cheap and it's dropping by 15% a year. Even though it's so cheap, financing solar is really uncertain. That's what's the number one barrier to build out of solar is the security and confidence in financing. Because if you're going to build a solar plant, you don't know how much you're going to be able to sell that electricity

for. Bitcoin is the buyer of first resort. Can agree to buy up solar, even in advance of it's being connected to the grid and underwrite the buildout of new renewable energy. Also, Bitcoin mining is flexible. It's the most flexible load ever. Within five seconds, it can power up or power down. to any degree, and that can help with voltage regulation, that can help with keeping the frequency of the grid right. And it can simply balance intermittent sources of supply and variable sources of demand where that variability on both the supply side and the demand side for electricity don't match. So Bitcoin miners can just kind of absorb the differences between what the grid has to supply and what users need from the grid and thereby monetizing waste energy and financing

the transition to renewables. So, sorry, that was a lot and that came very fast, but I didn't realize that either back in 2011. I did not think about this kind of second order effects, waste cleanup for methane. You know, there's something in Mexico. He's got a farm with 10,000 pigs. He's got a methane digester. The pig shit literally goes into this, this methane digester, decomposes. He gets digester at exactly the right temperature. There's just an anaerobic process. It produces methane. He captures the methane. He burns it in a gen set. Mine's Bitcoin takes the excess heat from that and uses it to reheat the next batch of poop and literally is turning pig shit into Bitcoin and fertilizer. His neighbors along this river in Mexico are just dumping their pigs.

slop into the river where it's super nitrogen rich and, you know, it's a serious form of pollution. His waste stream is Bitcoin, heat, and dried compost, which is the byproduct of this. And then you think, like, how many pig farms are there in the world? How much pig are we wasting? And you look into it and you realize, ah, well, digesters are expensive. You know, to build and operate a methane digester is not cheap. So you need something that monetizes this waste energy. that allows farmers to finance the construction of a digester.

And then you realize like, oh, you know, the Department of Agriculture is doing it through subsidies in the U.S. But worldwide, what's going to get farmers to build digesters to process pig waste? Bitcoin. Bitcoin mining. So essentially the higher order, the second order effects are positive and crazy optimistic looking forward. and also because Bitcoin is so price sensitive as a business, right now, you know, we had a, we had a 20-fold

increase in price. We went 3,000 to 69,000, 20-something-fold increase in price. It just became economical for anybody with access to power to plug in. Access to power and access to A6 were the choke point for Bitcoin mining. And so if you had to pay 10 cents a kilowatt hour, 15 cents a kilowatt hour, you didn't care. You just plugged in. But, That's because we have a shortage in A6. Over time, what's going to happen is this market has no barrier to entry. The margins on mining are going to collapse. They are collapsing right now. They're going to keep going. They're going to go to zero, basically. Consequently, the biggest input to mining, its price, it's electrical price, that input will decide whether you're profitable

or not. So miners are going to be mining on the cheapest energy possible or they're going to go under. That's not true right now because we're in this weird anomalous little bubble of incredibly high Bitcoin price and a shortage of basics and a shortage of outlets to plug into. Once margins basically collapse to zero, then power price is going to be everything. And it just so happens that the cheapest power is the one that feeds these second order effects. You know, waste methane is pretty close to free. It's a waste product.

On the oil sites, like you either have to put in a million dollar flare stack or you have to mine Bitcoin. So you're actually looking at an opportunity cost for not mining. there aren't any other people competing for this wasted energy. And the same goes for solar deflation. You know, when you have that midday time when there's too much solar on the grid, nobody else wants that power. That's why it's negatively priced. So if a Bitcoiner can snap it up, awesome, a Bitcoin miner, and they won't be competing with any other demands for power. So this combination of both incentivizing renewable buildout, cleaning up methane and while at the

same time, not being a rival load, look, any load is going to incentivize. build out of power, but it's going to come at a price of pushing up people's electricity costs. But what Bitcoin does is like takes the power that other people don't want, but pays for it. And that's accelerating an already exponential trend in the energy world towards renewables. In times like these, security of your assets should be your number one priority. If you want to offset risk as much as possible and still stay in crypto, you need a trusted partner by your side. NXO is a security-first company that manages risk by relying on mechanisms such as over-collateralization, real-time auditing, and insurance on custodial assets.

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How much of this is happening now versus theoretical, and maybe even in the context of happening now, because you obviously gave a couple examples, is it too scattered individual or nascent to be noticed, right? Because the obvious question, and I think the place that we'll get you next is this seems so kind of transparentlyly obvious and useful that it makes the sort of policy discourse around it surprising, right? So I guess let's start with the first part of that, which is just how prevalent is this now. And then maybe we can kind of segue into the policy discussion, which is something you and I have talked about kind of separately around this as well. They're so closely related those two questions because what we see in the media

is examples of Bitcoin mining keeping open fossil fuel plants that would otherwise be shuttered. So we see it in Harden Montana. Marathon is contracted with a plant there that's mining with coal, behind the meter at a coal plant. situation is complicated. Marathons pulling out, they've announced that they're moving elsewhere and they're moving to 100% renewable power. But there are cases like that in New York State. That's what triggered some of the legislation there, greenage. You know, there's a gas plant that wasn't really making it, but then Bitcoin came along and wow, they're doing great and other places like that in Kentucky and West Virginia. I've talked to the guys from the Sierra Club. You know,

if you're trying to shut down coal plants, you're working really, really hard to do this. you see them shutting down and you're happy about it. And then this thing comes along, keeps them open. You're furious. And that's really happening on the ground. That's not some guy, some philosopher in his office telling you what Bitcoin could do. It's telling you what Bitcoin is doing. And what it's doing is saving fossil fuels. And then when you tell those same people that, yeah, but it's burning methane on flare stacks around the U.S. keeping methane out there. like, yeah, but who's getting the profit from selling that methane, like oil majors? We're in a sort of full-blown moral panic because of what is actually happening on the ground.

Yeah, other instances, there's a paper about what happened in New York when a bunch of miners moved in, started consuming a lot of electricity, driving up residential electricity prices in that region. So the concerns are, you know, it drives up electricity prices. It keeps fossil fuel plants open. And then there's an e-waste concern, which I won't even get into because it's so wrongheaded. But you see what I'm seeing. I'm talking to solar developers every day. I'm talking to, yeah, the company I'm working with on landfill mining,

with methane miners, talking to people who are testing Bitcoin mining as a way of reaching their carbon targets in grids, in utilities. And the disconnect between those conversations I'm having on the inside about what is happening in industry, although it is nascent. And what you're reading and what the activists are pointing to, it's whiplash. I mean, I've never actually encountered any kind of narrative in my lifetime where the reality that I'm seeing and the dominant narrative among the intelligentsia, the thought leaders, you know, the New York Times, The Guardian and the activists and the politicians, I've never seen this kind of stark divide. And it's scary because I'm an epistemologist. I mean, this is actually what I do is study the theory of knowledge. It's one example of highly fractured. fragmented epistemic reality where I live in one world and the people are living in a completely different world. It bothers me there. But I also think about it in terms of, I think I'm right,

and I think they're all wrong. They're not wrong in the sense of these coal plants have stayed open to mine Bitcoin. They have. But they're wrong in the sense of they don't know where Bitcoin is heading. We've been in this little price bubble anomaly where margins have been ridiculously high and people will just plug in wherever they can. And that's not the future of Bitcoin. It can't be. It's not sustainable. A6 are cheap to build. There will be plentiful. And we will be headed to zero margins because mining is the closest thing to a perfect market that's ever existed. There's no barriers to entry. People will keep plugging in as long as it's profitable to plug in. And the cheapest power is renewable. And so the first plants to close will be those coal plants and then the gas plants.

I mean, there's a reason why coal was phasing out is because it has really, really expensive power. But guess what? Bitcoiners didn't care because Bitcoin's price was on such a tear that they could make money even paying for us with super expensive power. The other piece of the puzzle is Margo Paez is my partner at BPI researching and she's looked deeply into all these stories. And what we find everywhere is subsidies. What we find is the same sort of tragic American story everywhere. We have one of these plants that staying open to mine Bitcoin, where we have a town that was an industrial town, industry left. Well, it went to another part of America or it went to China. And then the town just kind of dying. And the plant was like barely open. And then Bitt

Bitcoin miners came in and refilled the town's coffers, refilled the school budget, gave people jobs and people are like happy about it again. But there's often political action in the step in between there. These people will reach out like, hey, we got to save this dying town. And some politician passes a subsidy or incentive to draw those Bitcoin miners there. So we're not looking at a free market. And there's also a human tragedy side to each one of these stories. But it's also not sustainable. Because when you can get, you know, two, three cents a kilowattens. hour for solar generated power. You cannot match that with Kentucky coal plants. Just can't. So it's a matter of time before Bitcoin mining pushes out the most expensive forms of mining and the most expensive forms of mining are the most harmful. Like, how much is this happening? Well, it's happening. I mean, look at the Bitcoin Mining Council's report. And of course, none of the environmental activists will believe this. I think it's 58% total. There is there. estimate for the industry of sustainable power. And for that group itself, it's like 67% something like that of the people who report. It's over 50% of the hash rate that does report. That's

extraordinary. That is unlike any other industry, major industry in the world. And where is that money going? That power expenditure, more than half of that power expenditure is going to renewables. A lot of that renewable is not new renewable buildout. And this is what pisses off the activists. It's like, you're not building out new renewable. You're setting up camp in existing renewable. To that, I have to say, for the most part, yes, there are exceptions like Aspen Creek Digital just opened a solar plant in Colorado where they built it and they're mining behind the meter there. And they're committed to building out more generation than they add in load and also building near places where the power is needed like Houston rather than West Texas. I know, that's awesome, but that's rare. Most people are buying from existing renewable facilities. Hydro is the first to go because it's steady.

but a lot of people are parking behind wind farms in Texas. A lot of people are using solar. And the people who aren't are using grid mix, but then they're buying renewable energy credits. And there's a lot of shenanigans around renewable energy credits and exactly how they're done. Kind of like there's shenanigans around carbon credits. But the truth is, I think we could do better on that front.

I think we could do better as an industry, matching, say, what Google and Amazon are doing by timestamping their renewable energy credits and buying them from the same local market. and I think we can do even better on that front. But the truth is, renewable energy credits is money paid to renewable producers. Yes, it's existing. But Bitcoin mining is funding renewable buildout.

It just is. There's also a tremendous amount of mining on methane already. So to some extent, it's already doing it. It's nowhere near. It's potential to do it if that helps. Do you find the political discourse around these issues is better, the closer you get to the source of discontent and worse, the farther away it is and it moves up the food chain. So the example being the Sierra Nevada person who said what the fuck because they

had just tried to close a firm versus the politician who just wants to use this as sort of like a hot button touchstone. You know, because I mean, it sounds like part of what you're saying is the base level critique of some of these activists is they're not wrong. It's sort of just like the way that that gets metastasized up to a broader narrative that gets seized on by politicians, it doesn't take advantage of all the stuff in the middle. And I guess the one thing to add to this is the narrative around the New York moratorium on both sides was so stupid in the sense of like, you have Bitcoiners just losing their minds. And it's fine. Like I'm fully support people fighting these things. But it was very much not a ban. It's literally a moratorium so they can actually

take time to look into it, at least some of the people who are kind of voting for it. Now, there were some political shenanigans in terms of how it got passed and things like that. I'm not kind of giving too much credit to the people who passed it. But compared to Dick Durbin, you know, tweeting this weekend, it looks much more like a, hey, this is a new thing that we really need to learn. Can we take time to learn it? In the meantime, let's not authorize more fossil fuel-based things. Again, not the approach that I would take. I think it has serious ramifications for business. It continues to make New York the least friendly state to the whole industry, but very different than a ban. And so again, this kind of sparks my question of the closer you get to the

like literal local physical source of the consternation. Is it more sophisticated there? Or is it has the potential to be, but it still just gets swept up and kind of like broader narratives. The problem is like clickbait is the principle of journalism. And the truth is not as good at clickbait as the scare tactics. And it doesn't raise funds as well either. I mean, I saw fundraising letters. I've seen fundraising letters from politicians that are based on the scary stuff. And it's like, oh, it just clicked in my head when I saw the fundraising letter. Oh, they're asking for money. If they tell the truth about Bitcoin, well, it's kind of complicated. It is keeping some coal plants open, but it's got great potential for transforming the future of energy. That's not how you raise money.

You could raise money that way, but you're not going to get as much as this, centralized sort of automated system of selfishness is going to destroy the planet. That's going to raise money unless you stop it and write me a check today. And the same goes for stories. You're right. The closer you get to the source, the less bad it is. I'll say with a caveat that a lot of the people who are pretty darn close still do not understand the fundamental dynamics of Bitcoin.

Like you have to understand the having. You have to understand its limited, its schedule of. issuance because when you ban Bitcoin, you do not change the rate at which Bitcoin is issued whatsoever. If you ban any other kind of mining, you dampen the supply. You cannot dampen Bitcoin supply. You can only push that supply to other places. So the incentive to mine remains exactly the same. And how many people like on the legislation in New York even understood that? I don't know. I talked to lawmakers in New York. I talked to legislative staff in New York, just in an educational capacity. You know, I just said like, I work at the Bitcoin policy institute. I'm here.

you want to talk to somebody to get information about mining. And some people took me up on that. And yeah, it was an absolute clown show, absolute clown show on all sides. And I heard, I only talk to Democrats. And I heard them saying like, your allies are actually your worst enemies. Like they're basically arguing, yay, Bitcoin, yay, coal, stuff like that, you know, on the floor. It's like, they're not helping your cause. And then they're like, also, yeah, it seems very dishonest how this thing is being marketed as a ban on Bitcoin mining when it's, in fact, it will affect no existing Bitcoin mining facilities at all. It only affects basically additional mining with non-renewables.

Pushing deeper into that, and you should talk to my partner, Margo Paias, who wrote a report at the Bitcoin Policy Institute. I think it's the first link if you go to the Bitcoin Policy Institute page. She did the deep dive, and I'll just send your listeners there on what's weird about this legislation. In a way, it actually does nothing. It does nothing at all, because the authority to deny these permits to, generation facilities that we're going to mine with Bitcoin already existed in law and already

does exist, which is why Greenage was denied a permit just days ago, basically under the existing law. So the real problem with that legislation is nobody understood what it was doing on either side. And it didn't actually do anything in the end if I understand the law correctly. And if Margo understands it correctly. It was pure symbolism, actually, pure symbolism. there are people who actually understand the protocol and are legitimate critics, and they get it. They get the having. They get the schedule of issuance. They understand that it's decentralized. And there's great critical dialogue to be engaged in with knowledgeable critics. But I just think most of the critics are actually uninformed, which actually gives me kind of hope.

In some ways, you know, I said earlier, the principle is clickbait and fear. But I also know as a teacher that any kind of paper that my students write, like I always tell them, you need tension. If you have problems, if you have a critique that you're worried about, don't run away from that. Run towards it. Tension is your friend because it builds narrative suspense. If you're confused about something or you're worried about something, make your reader worry about it and then solve that problem for them. So I think when people actually learn how Bitcoin works and what its potential is, we have solar developers who cannot advance. And a lot of the people who propose these projects, they never come to fruition. And the International Energy Agency is telling

us the number one problem is insecure financing because they don't have a guaranteed off-daker of power. And the number two problem is intermittency and how they handle that. And you're like, oh, my Lord, Bitcoin just so happens to fix both of those problems. And you realize like, oh, the IEA also says we need to multiply 10-fold flexible demand by 2030 and by 20-fold by 20-50. Demand response needs to increase. And you're like, wow, we need massive amounts of flexible consumer of the sort that Bitcoin is. It doesn't just consume power. It pays for power. You realize that the problem of power and transitioning to renewables is that no one is willing to pay for a lot of green power. One of the things that I think you and I agree on is that a lot, a lot, a lot of the mainstream discourse around Bitcoin's energy issue is not from that set of. critics, either who do understand and come to different conclusions, or even who are just haven't had the time to really understand, but are skeptical, but instead from people who

just plain don't like Bitcoin. There's no conversation to be had ultimately. If it's, I don't think this thing is valuable, so why would I want it to use any energy? Which is the starting point. It is literally just a consumer to, in the minds of most of the people who are kind of critiquing it the most loudly. Changing those. those perspectives is not where I think this is this conversation is going to get resolved. Yeah, I'm writing a paper. I've been writing this paper for a long time. Paper is called what we disagree about when we disagree about Bitcoin's energy usage. And the premise of the paper is that it's always about the value of Bitcoin.

It's never about the energy usage. That's not strictly true, but it's true so often that you can get away with just believing it. I've learned us the hard way by sincerely engaging and in deep disagreements with people about Bitcoin's energy use. And once you've sort of batted away every single objection, they never changed their mind. It's always like, yeah, but it's a waste. I mean, basically, the only electrons you should use to mine Bitcoin are electrons that are absolutely wasted. If it uses a single electron that somebody else could have used for any other human purpose, then that's terrible. And since that's likely to happen, Bitcoin should not exist. Let's, as one critic said, burn it to the ground and send its ashes into the sun.

We're in the middle of something like a moral panic. And it's a social, psychological phenomenon where Bitcoin becomes a sort of bearer of all evils. It's the symbol of everything bad. It's the locus of crime. It's the financialization of everything. It's the symbol of neoliberalism somehow. It's just everything you hate about the world. Destruction of the environment, tech bros, everything, all in one.

It's weird given how small Bitcoin's impact actually is on the world. In terms of energy, you know, it's 0.12% of global energy, according to Cambridge right now. So, you know, a thousand. That is a really small amount when we have $450 billion a year in direct subsidies to fossil fuel companies. When we have banks landing trillions of dollars to fossil fuel development, to focus on this 1,000th of energy use, most of which is renewable. It's weird and perverse, and it really comes down to a very basic hatred of Bitcoin. And if you try to talk to people at a wonky level, you're just not going to get it. And I think even beneath that, the value of Bitcoin, something deeper, which is something like the right to use energy once purchased in the way that you see fit.

And yeah, I think this is a deeper principle even than Bitcoin. I think we're in a moral panic. And because of that, we're willing to lash out and pass extreme legislation, take extreme regulatory measures to stop the perceived end of everything. You know, Bitcoin's destroying civilization. It's destroying the planet. So we've got to stop it. And this is kind of like other moral panics, whether it's communism, whether it's child satanic,

whatever ritual in the 80s or whether it's 9-11 in our security apparatus response to that. But we're having a government-wide, culture-wide attack on this new hyper-evil thing that crystallizes everything evil and threatens everything good. And that puts us in a position to make terrible legislation, as always happens in one of these panics. I think the principle that we have to fight for as bitcoinsers is use in different legislation. What I don't like about the New York legislation was that it singled out proof of work. I would have no problem with that legislation at all if they had just said, we are going to deny permits to any new fossil fuel buildout that has behind the meter electricity consumption, including aluminum smelting, including other sorts of data centers, you know. But it's weird to single out what electrons do and say, some of them are wasting energy and we have to prohibit that. And others are not.

we have a mechanism for deciding how electrons once paid for get used. And that mechanism is just called the market and human free choice. And that's the principle we have to stand up for now because it is under threat. And you saw it under threat in New York. And while the New York legislation did not threaten Bitcoin in any way, and while it was massively overblown in terms of the effect it would have on industry directly, I think that philosophical principle of neutrality on the end use of power, it's really important.

you don't pump gas and then have somebody say, ah, but you can't use the gas for X. You can use it for Y. You don't have electricity come into your home and say, oh, you can use it for the computer, but not for the TV. Like, what the hell is that? But that's essentially what's happening. And that seems perfectly reasonable to a lot of lawmakers. And it seemed reasonable in New York because they don't understand and see the value of Bitcoin,

they don't see it as a real thing they're prohibiting. And they don't see that as precedent for attacking the right to use power in the way you fit. If you care about the environment, you care about the planet, you care about emissions, regulate the production of power. A tax on the production of power? Sure. Then it affects all consumers. If you want to make the tax revenue neutral, then okay, go ahead and redistribute it to people who need it. But I mean, every economist is like pro-electricity tax or pro-carbon tax, right? Here's what's weird. It's just as if they just like picked some industry, I'm looking at my bike. the bicycle manufacturing industry was like, oh, you know, you can't use coal or gas fired plants to build bikes, but you can build cars or whatever.

That was, you know, it's just weird. This is unprecedented. That's very bad. We have to stop it. And what we disagree about when we disagree about energy, sometimes is the value Bitcoin. But even deeper, it's the principle of regulation being neutral on the end use of electricity. Yeah, I agree wholeheartedly with that. And I would like you to finish that paper because I think that that point needs to.

to be crystallized in a way that is actually not Bitcoin-centric. Because if you're looking at allies in Washington, there are a whole hell of a lot of people, I think, who don't particularly care one way or another about Bitcoin, but don't like the idea of that sort of, or would not like the idea of that sort of level of granularity. And I don't know, you do see this argument floating around a little bit, you know, like, but it's not a prevalent thing. The conversation about Bitcoin tends to be because the Bitcoiners feel attacked. And so they attack back in stupid ways, too. And that's the state of the discourse, right? I couldn't agree more. We have to meet. I'm not doing a good job of it today. But we have to meet people where they're at. We have to see what their values are,

what their presuppositions are and meet them. That's really, really hard. That's such hard work, especially when they're ignorant and they're all incensed and indignant. It's very hard to be gracious when someone has just slapped you in the face and told you that the thing that you, are devoting your life to is evil and you're evil because of it. It's very hard to turn around and say, well, tell me about your values. Maybe this thing actually can help you achieve what you want. But that's what we need. We need coalitions. We need relationships. Think about the future. We do want to regulate the end use of electrons. What kind of an apparatus does it require to enforce that? So we have other kinds of flexible data centers. And those machines look a lot like

ASICs, and we can put those behind meter in New York at new gas facilities. So you're going to send somebody in to the plant and they're going to be like, well, what kind of computer is this? We're lucky enough that ASICs do look a little different. But suppose you can do different kinds of computing, you know, and we regulate it. Like, you're going to need a mechanism for the government to peer into the processing that's happening inside a machine to determine whether it's lawful or not. And so this kind of regulation carries with it. the necessity of a certain kind of surveillance, and I don't think people have thought either about the principle or about the surveillance machinery and the enforcement machinery that would be

required to actually make good on it. We could talk about this all day. I guess just by way of wrapping up, I'll leave it on a huge question, which is expanding out even a little bit from the Bitcoin energy conversation. One of the things that feels like is inevitable right now in the sort of shadow of Russia's invasion of Ukraine and what Europe is going through is a different type of conversation around energy that puts it squarely in the realm of national security. And I think you can kind of see both the right and the left lining up in different ways in America to reframe their energy points on this, right? You have the right who is basically like, why would we constrain ourselves at all when it comes to energy with all this green crap?

And then you have the left who are basically saying you're literally subsidizing oligarchs by not moving to a more renewable system. And so in either of those cases, right, the frame is around the sort of national security dimensions of energy. Do you see that shaping or changing our kind of larger national conversation around energy in the U.S.? And if so, how? Yeah, it's been wild to watch this discourse unfold. And it's really a tragedy that something as real and practical as energy gets captured by this ideological difference. And we don't get acknowledgement on both sides of this discussion of what's valid in the other point of view. Because to do that would be to break narrative allegiance or whatever.

So let me give you an example. So I guess I want to say they're both right and they're both wrong in a way, both of these sides. the way I see things. I think that renewables give us energy independence and give Europe energy independence. The idea that we just fix the problem by pumping more fossil, it's incredibly short-sighted. We continue the system of dependence. And by the way, we're still dependent on Saudi Arabia, even though we're now a major power producer. It's centralized and it shares the failure of centralization. It's weird for me to hear bitcoins who are super gung-ho big fossil, which I see as a system of dependence. I share the left's take on this. But at the same time, in the short term,

we need to get Europe gas. We need to keep those houses warm. And so I'm like, whatever we can do in the short term to solve that human, human and geopolitical crisis, like, freaking do it. Do it now. And then the thing that I think the left really gets wrong, a lot of the left, is nuclear. When you realize how many nuclear facilities are being shut down, have been shut down, in Germany, for instance. Like, yeah, they're dependent on Putin. They would be much less dependent if they had just kept their nuclear on. So it's like not about renewable at all. It's about nuclear. So yeah, I see the discourses in some ways being captured by the political divide, unfortunately. I think that nuanced thinking where you say something like, we need gas in the

short term right now and a lot of it, we need to eliminate all barriers to it because we're in a crisis with a long-term vision of building out energy independence, renewables and nuclear. You know, that package is hard to find together. Jesse Jenk. who's a professor at Princeton argues for this package. This isn't my original idea. I like Jesse a lot. He's a, he's one of these people who's close to the source. He's, he's said some nasty things about Bitcoin as a critic. And we got involved in a conversation. And he was really aggressive, but also willing to learn as I kept introducing other features of Bitcoin, introducing to other experts in the field. And Jesse eventually kind of came around like sort of seeing the potential for upsides with Bitcoin while still being a critic. But I'm not surprised because his take politically on this situation is in the same way. He wrote an editorial saying, like, basically, we need to do everything we can do to get gas to Europe. And his whole life's goal is to decarbonize the electrical grid, you know, around the world. And are those compatible?

Yes. One is short term. One is long term. The right is suddenly become humanitarians. They're all interested in human welfare and they see the left as Malthusian and, like, killing people. But it's a convenient talking point for fossil fuels is why. And it's like they're committed to drill baby drill. The left suddenly has become like indifferent to human welfare.

And like they're denying like just this morning on Twitter. I have a debate with somebody who's denying there's any connection between energy and human welfare, energy consumption. I'm like, are you kidding? I mean, Liberia is not going to be Denmark without consuming a lot more energy, even if they do it very, very efficiently. But the left is like hard pressed to admit that. And the projections of how we meet our climate goals just are not compatible with the thriving of the global south. Here's the big dilemma. We need to meet our climate targets, and we need to do that without impoverishing humanity.

Energy is wealth at some very deep level. If energy, you can do stuff, you can get what you want. So we need a way to bring energy to the world at the same time that it's low emissions. Why can't we do that? Why is that too hard to do? It's financial. It takes an investment to build out renewable energy. The thing with renewable is your costs are all up front.

And your payout is over the next three or four decades. You know, solar is guaranteed for 30 years. It typically lasts a lot longer. Wind is the same. So where's the money to install this, especially when people don't actually, like, you know, in the parts of like Africa that don't have electricity, there also aren't people with lots of refrigerators and air conditioners. Like, they don't have electricity.

So of course, they don't have electrical appliances. They don't have electric cars and so on, right? So there's no offtake or there's no buyer. So why are you going to throw up a wind farm or a solar facility in a village? in a village of 20,000 people where nobody has electrical appliances. You're not. This is where we need something, oh, just exactly like Bitcoin, you know, something that can pay for power while the human economics catch up. And once we have power production and that power is cheap and available, we're going to see the economy of the global South, you know, explode because it's held back by a lack of

power. Once again, I'm sorry, I've turned into Bitcoin Breacher here. But I think what's so exciting and partly why I'm on leave right now for my job is that it's hard to find optimistic narratives that aren't captured by narrow political vision. You know, it's hard to find optimism right now. And Bitcoin actually is so out of the box. It's so new and out of the box as a consumer. It's like this crazy long shot for the climate and for the economy. It's worth trying and worth exploring because the current system is grim. It's very grim. Love it. Well, Troy, awesome to have you the show. Let's do it again soon. There's going to be lots of new developments, I think, over the course of the next six months or a year. So looking forward to seeing how this narrative shifts

and these discussions change. And hopefully we can get more nuanced and smarter about it. Thanks for your great questions. I can tell kind of what you're thinking by what you asked. And I like it. I like where you're at. I wish more people were there. Awesome. Thank you for having me on. Cheers, Troy. Cheers. Hey guys, back to NLW here. I just want to give one more big, big, big thank you to my guest, Troy Cross, to my sponsors, nexo.com. Chainalysis and FTX for supporting the show.

And of course, to you guys for listening. Until tomorrow, be safe and take care of each other. Peace.