The Breakdown - The Great American Bitcoin Mining Plan

Episode Date: August 12, 2024

A reading and discussion inspired by https://www.coindesk.com/opinion/2024/08/02/make-america-mine-again-how-donald-trumps-plan-for-us-bitcoin-dominance-could-trigger-a-new-digital-gold-rush/ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

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. What's going on, guys? It is Sunday, August 11th, and that means it's time for Long Read Sunday. 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 if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link of the show notes or go to bit.ly slash breakdown pod. All right, friends, back with another Long Reader Sunday this week. Today we are reading a piece by John Marie Magnetti, the CEO of Coin Shares,

and this piece is called Make America Mine Again, how Donald Trump's plan for U.S. Bitcoin dominance could trigger a new digital gold rush. Now, for those of you who are sick of political talk, do not worry. This is not about any particular personalities. It's just using some of these comments as a jumping off point for a broader exploration of what it would look like to make U.S. the distinct mining capital of the world, even more so than it already is. Indeed, this This particular author says that this should not be a partisan effort. It should be something that matters to all parties because of its role in shaping the future. Anyways, let's go read it, or rather listen to an AI me from 11 Labs read it, and then we will

come back and discuss. In a bold proclamation that has sent ripples through both the cryptocurrency and energy sectors, former President Donald Trump recently suggested that all remaining Bitcoin should be mined on U.S. soil. While this goal is technically unattainable due to the decentralized nature of Bitcoin mining, it It raises questions about America's potential to dominate this burgeoning industry. As of 2024, the U.S. accounts for approximately 37.8% of global Bitcoin mining, according to the Cambridge Bitcoin electricity consumption index. Could we push this figure above 90%?

This ambitious goal, while challenging, could reshape America's technological and economic landscape in profound ways. Importantly, the thriving of the American Bitcoin mining industry should be a bipartisan objective. Whether you lean left or right, the potential for job creation, energy innovation, and technological leadership makes this a topic that should matter deeply to both Democrats and Republicans alike. Section. Transforming America's Energy Wealth. The United States is blessed with an abundance of natural resources ideal for energy production. It boasts 48.3 billion barrels of proven oil reserves and 691 trillion cubic feet of natural gas, reflecting significant increases from previous years. Additionally, the U.S. has vast potential for solar, wind, and uranium

for nuclear power. However, it's crucial to not forget that China is making significant investments to become abundant in energy. According to the U.S. Energy Information Administration, China's total energy production reached 141.7 quadrillion British thermal units, BTO in 2021, compared to the U.S. 95.7 quadrillion BTU. While the U.S. still leads in per capita energy production, China's rapid growth and massive investments in this sector underscore the urgent need for a strategic reassessment of energy and technological policies to maintain a competitive edge. Energy is at the core of the reshoring plans proposed by both the Biden and Trump administrations, and naturally the cheaper and more robust the energy infrastructure, the better

positioned American Bitcoin miners will be in the global market. Beyond energy considerations, Bitcoin mining is emerging as a powerful force for economic revitalization of rural areas hit hard by globalization and the offshoring of American industry. According to our research team in 2003, U.S. Bitcoin mining operations generated $2 billion in revenue, a figure that represents 3% of the American iron and steel industry's output. This comparison underscores the growing economic significance of this nascent sector. In just five years, the industry has created substantial employment opportunities. According to our internal estimates, direct employment in U.S. Bitcoin mining has grown to approximately 1,700 jobs, doubling over the past two years. When considering indirect

employment, PWC estimates the figure rises to around 11,000 jobs nationwide. The impact extends far beyond the mining operations themselves, with a job multiplier effect of 6.4, meaning each mining job supports an additional 6.4 jobs in the broader economy. These opportunities span various sectors, including transportation, construction, plan operations, electrical engineering, and cybersecurity. As such, Bitcoin mining is not just a technological phenomenon, but a potential lifeline for communities seeking economic renewal in the wake of industrial decline. America stands at a crossroads with three divergent paths to Bitcoin mining supremacy. Each route, ranging from aggressive dominance to free market evolution, carries profound implications for America's

industrial future and global standing. Let's dissect these strategies and their potential to reshape America's technological and economic landscape. Let's start with the Oops I Nuke the Competition Strategy. This approach straight out of a Hollywood blockbuster would see Uncle Sam flexing his military and intelligence muscles to unplug every non-American Bitcoin miner faster than you can say geopolitical disaster. Sure, it would corner the Bitcoin market in weeks, but at the minor cost of triggering World War III, It's a brilliant plan if your goal is to mine Bitcoin in a post-apocalyptic wasteland where bottle caps are the preferred currency. Needless to say, we're mentioning this option purely for its absurd value. Hello, friends, before we get back to the rest of the show, I want to implore you to join me at Permissionless.

Permissionless is the conference for Cryptonatives by Cryptonatives, and the reason it's so important this year is that despite regulators' best attempts to push industry founders, devs, and executives, out of the U.S., the United States remains the beating heart of crypto. Today, the tide is turning. Policymakers have pivoted from fighting crypto to embracing it. Literally now, we are in a major political party's platform, which will lead ultimately to the creation of new financial products, new applications, and ultimately new adoption. Permissionless is the conference for those using and building on-chain products. It's home to the power users, the devs, and the builders. And perhaps more importantly, I will be there.

The location is Salt Lake City, the dates are October 9th to the 11th, and tickets are just $499. If you want to get 10% off, use code breakdown 10. Go to the Blockworks website, blockworks.com. There will be links to register for the conference, and again, you can use code Breakdown 10 to get 10% off. Section. Neokinesian interventionism. A more realistic strategy is the state intervention approach. This method, implementable within a single presidential term, would involve recognizing Bitcoin as a strategic asset aligned with U.S. interests. Key policy changes could include eliminating capital gains tax on Bitcoin transactions, currently at 20% for long-term holdings,

and mining equity, offering tax-efficient loan facilities to miners and abolishing the 21% corporate income tax rate for mining operations. Designating Bitcoin mining as critical national infrastructure could transform the American approach to grid management. Bitcoin miners, with their ability to rapidly adjust power consumption, can act as a dynamic buffer for the electrical grid. During peak demand periods, miners can swiftly reduce their operations, redirecting power to essential services. This flexibility is particularly valuable as the U.S. integrates more intermittent renewable energy sources like wind and solar. By offering tax incentives for participation in grid stabilization, we can make it economically attractive for miners to

operate in the U.S. while simultaneously enhancing our grid's resilience. The Department of Energy estimates that data centers, including cryptocurrency mining operations, could provide up to two gigawatts of demand response capacity by 2030. This strategy creates a win-win scenario. Grid operators gain a powerful tool for network management, while miners receive economic benefits that could boost U.S. competitiveness in global Bitcoin production. Rather than aiming to increase both energy efficiency and mining output simultaneously, this approach fosters a symbiotic relationship between Bitcoin miners and the grid, potentially increasing America's share of global mining operations while strengthening our energy infrastructure. This approach would also prioritize energy abundance

as a crucial national development goal. The U.S. currently spends about 2.3% of its GDP on energy infrastructure. By increasing this investment and focusing on high-density electricity generation, grid connectivity, and internet infrastructure expansion, we could create a dynamic, competitive environment for Bitcoin mining. Section. Less a Fair Bitcoin. The third strategy is the free market approach. While slower to implement, potentially taking decades to fully materialize, this method could have far-reaching positive effects on American prosperity. This approach centers on recognizing the free choice of money as a fundamental right and involves massive deregulation of the power generation industry, removal of energy policy barriers, and elimination of manufacturing

obstacles. Consider that the average industrial electricity rate in the U.S. is currently 7.74 cents per kilowatt hour, as of March 2024. By removing regulatory barriers and fostering competition, we could potentially drive this cost down significantly, making U.S.-based mining operations far more profitable than their global counterparts. Additionally, this approach would advocate for significant reductions in capital gains, income, and corporate taxes. The current combined federal and state corporate tax rate in the U.S. averages 25.1%. A substantial reduction could unleash a wave of investment and innovation in the Bitcoin mining sector. By dismantling excessive taxation and regulation, we could naturally position the U.S. as the most attractive location for Bitcoin mining globally.

The size of its resource and capital base, combined with the entrepreneurial spirit of the population, could drive energy abundance to unprecedented levels, making mining elsewhere economically unfeasible. Section Crossroads The United States stands at a digital crossroads. While 100% Bitcoin mining dominance is a lofty gold, the pursuit itself offers a golden ticket to national renewal. Imagine revitalized rural areas humming with high-tech activity, America leading the world's first truly digital commodity, after oil and natural gas, and an energy revolution fueling a new era of industrialization.

This isn't just about Bitcoin, it's about mining the foundations of 21-century economic power. By reshoring critical supply chains from chips to ASIC miners, we're not just creating jobs. We're securing our technological independence. Economist Noah Smith warns, if U.S. heavy manufacturing withers and dies in the face of Chinese competition, the U.S. won't be able to add much to its defense production capacity in a war. Bitcoin mining could be one of the keys to preventing this scenario. By driving demand for cheaper, more abundant energy, it could catalyze a renaissance in American manufacturing, ensuring we maintain our industrial might and national security. The potential economic benefits are substantial. Projections suggest that if the U.S. can capture 90% of the global

Bitcoin mining market by 2028, it could contribute $30.6 billion to GDP, representing 1.2% of the projected U.S. GDP. This includes both the direct impact of $10.2 billion in Bitcoin mining revenue and an estimated $20.4 billion in indirect economic activity. Additionally, the industry could support over 54,000 total jobs nationwide. The choice is clear. Watch from the sidelines or lead the whether through government intervention or free market innovation, the path America chooses will shape its energy future, technological leadership, economic destiny, and global dominance. In the race for digital supremacy, Bitcoin mining isn't just an economic opportunity. It's a strategic imperative.

All right, back to Real Not AI NLW here. I think for me, what's interesting about this is not just the specifics of Bitcoin mining itself. It's really this suggestion, which comes up at the end, that this is a lot of the same. This is part of a larger conversation around reinstating American technological independence and dominance. There is a broad sense across political parties that we need to be making more stuff here in America again, that we need to control key inputs of technology, that America is better when we're building.

You see this in this conversation around Bitcoin mining, you see it in the discussion of artificial intelligence. You increasingly see it with defense tech as well. Go check out Anderil's recent announcement of a 1.5 billion. billion-dollar funding round and how they discuss these issues in the context of American defense. This is a theme that I would like to see pursued, explored, and expanded no matter who wins the White House this year. And so I welcome all of this sort of bipartisan discourse around it. Thanks once again, John Marie for this great peace. And until next time, be safe and take care

of each other. Peace.