The Pomp Podcast - #1344 Greg Beard | Bitcoin Miner DESTROYS Bitcoin Halving Myth

Episode Date: April 17, 2024

Greg Beard is the CEO of Stronghold Digital Mining, the only environmentally beneficial and vertically integrated public bitcoin mining company. In this conversation, we talk about the macro situation of bitcoin and the US dollar, potential structural problems, bitcoin mining, impact of bitcoin halving, BlackRock and bitcoin ETFs, and tokenization. ======================= In this podcast, we dive into the revolutionary concept of PropyKeys, an application that allows anyone to mint home addresses all over the world on blockchain. PropyKeys.com is a part of the Propy ecosystem, that has a grand mission to make homeownership more affordable and user friendly. We will explore the journey of Propy’s founder and how this innovative technology provides benefits for homeowners, and for the real estate industry. Join us as we discuss the Propy’s latest collaborations, including Coinbase, and its new fun project PropyKeys. X (Twitter): @PropyKeys Website: Mint an address at propykeys.com. dApp: ⁠⁠⁠⁠⁠⁠⁠https://dapp.propy.com/⁠⁠⁠⁠⁠⁠ ======================= Get the freshest price feeds free for 12 months. Join Supra’s early integration program for zero-cost access to the fastest oracles and dVRF across 50+ blockchains: ⁠⁠⁠https://supra.com/pomp⁠⁠⁠. Earn $1,500 by referring Web3 projects to use Supra services. The projects get the fastest services for free, and you earn $1,500 for every referral. Learn more at the link above. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is with Greg Beard. He's the CEO of Stronghold Digital Mining. In this conversation, we talk about the macro situation for both Bitcoin and the US dollar

and why Greg has a unique view as to all of the doomsayers may not be correct, but there still could be structural problems. We also talk about Bitcoin mining, the effects of that incoming having, the role of miners in the market, how the Bitcoin ETF and BlackRock success may actually be something to be worried about, and why he sees tokenization being able to pull back some of the spotlight from artificial intelligence back into the Bitcoin and crypto world. Greg is a well-read, very interesting person, and today he shares tons of insights that I think that you will find very informative. I enjoyed talking to him, and I'm excited to hear what you all think. Here is my conversation with Greg Beard. Anthony Pompliano runs Pomp Investments. All views of him and the

guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Today's episode is brought to you by Propy. Imagine a world where you could buy and sell your home wallet to wallet. With Prop Keys, you can mint your home address and upgrade it to a real-world asset. This not only protects your home's title from fraud, but when you are ready to move, you can sell it through an NFT auction as well as through the traditional way. There's optionality here. PropyKeys is part of

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you likely need oracles and verifiable randomness too. Supra's offering the fastest oracles and DVRF free for 12 months at Supra.com slash POM for a limited time. Supra delivers the freshest oracle price feeds across 50 plus blockchains. critical price levels or liquidation triggers beat your competition to the punch with supra it's as good as having the first mover advantage on every price update supra is more secure easier to integrate and runs on up to 12x lower gas per feed than other oracles so you'll want to bank on this 12 months free offer as soon as possible if you're just listening and know any builders you

can earn 1500 by letting them know about this deal they can get the fastest oracles for free for 12 months and you get $1,500 for every referral. Visit supra.com slash pomp to learn more. That's S-U-P-R-A dot com slash pomp. All right, guys. Bang, bang. I've got Greg here with me. Greg, you've got some very nuanced and unique thoughts when it comes to the macro environment. Most people in Bitcoin and even in the gold world, the world is ending. Go buy your asset today and prepare for hell tomorrow uh maybe it's not that simple and so help us walk through like how do you evaluate the macro economy and uh specifically uh through the lens of people who are holding bitcoin yeah so that that's a big part of the bitcoin narrative is it's it's

protection from the debasement of the dollar and that's absolutely true but that's a generational story so you know when you do the math and i've got i'll thank christian on my team to put all of this together for me today um but hey right now we've got like 34 trillion in debt that's that number has doubled since bitcoin was invented you know in 2008 um we are running a deficit of 1 to 2 trillion a year now and like even so that that we're we're on the top 10 list of the most levered countries like the the next one up is number nine italy you know greece is on that that list venezuela sudan it's not a list of heroes um we just got downgraded you know by fitch our current our uh dollar you know government from triple a down to double a so it's sort of

it's happening but even so over the next 10 years our debt's projected to only go to 50 trillion our economy is going to grow um to you know to mid 40 trillion um government's receipts will still be there. So we're not like the currency isn't in trouble. So this isn't a rush to Bitcoin in a panic, but I make no mistake. We have a long-term problem, but it's going to take a generation or two for that to play out. So, and how does that play out? Well, Hey, there'll come a day where the government will go in and sell, try to sell bonds in the auction and they won't sell, or they'll have to go back and, and, you know, sell for a higher interest rate. So like the the cracks in the foundation is you know represent themselves as hey right now we're

taking our government takes in around four and a half trillion a year and interest is is more than a billion dollars a trillion dollars rather uh big big numbers um so it's it's it's just not it's not a like a i'll still plead with our government do not deficit spend you know i'm 52 we've had about four years in my lifetime when we haven't um or at least if you can't do that make sure that the economy is growing more quickly than the than the debt is growing so that's that is the way out of the mess is fiscal responsibility but i think just given the political messes that we live in you know it doesn't seem probable like a joe biden is not going to be alive when the u.s debt crisis hits so he's incentivized to to keep spending so i can impact him um i'm 52 as i said

probably in my lifetime we'll have a a crisis all of this these deficit spends will cause a crisis but i think if you're interested in bitcoin hey this that's a long term you know what i would describe as a generational issue um and and it's happening but i think the bitcoin story works better for countries that are even less responsible than the US. You know, like I was in Egypt over the Christmas break, they're suffering with 35% inflation. And I think they're more of the norm. So I think in a way, hey, while yes, the US is failing, you know, all the citizens by deficit spending, hey, we're sort of, we're on the top 10 list of most levered, right? So we're not looking great but it's not a crisis yet like it is elsewhere so it's a uh but i think hey what's

driving like the bitcoin price i think every everyone you have on your show talks about like the macro and the debasement of the currency and that's true but hey this this is going to take a long time to play out like decades and decades to play out before we have a a crisis related to debasement. When you wake up every morning, what are the things that you look at, either metrics or trends in the traditional financial system? So not Bitcoin or mining related, but what are the things that you kind of check to see, hey, how are we doing today? And are things getting better or worse? Yeah. So the things that are pushed on us are, hey, where is the stock market futures at upper day? Are we going to have an upper day down? What's pushed on us is what is

the Fed doing? Well, the Fed ease, and we all know the narrative. We had them, which they tend to do. We had multiple, what, seven raises and quickly try to tamper down inflation. And actually, when you look back at Fed behavior, that's how they normally do it. They don't go 25 basis points and wait a year to go another. They hit you pretty hard. And so they behave like they normally do, if you looked at past Fed actions. So now you're saying, hey, what we're being pushed on is what will the Fed do? When will they ease?

And obviously then look at inflation data that will then inform all of the pundits for what the Fed is likely to do. But I'm running a Bitcoin mining business, so I can't help it but to look at Bitcoin, look at hash price. That's what most impacts my day-to-day business business. And when you begin to think about kind of this macro environment,

we sitting in the United States tend to think of the U.S. economic situation. How much do you think the international markets or specific countries internationally where, you know, currencies are being debased at a faster rate, there's inflation rates that are measured in, you know, kind of high two or even three figures. How much of it is a, you know, U.S. story versus maybe a internationally this is a common problem that people are facing and some are dealing with it better versus others you know i think the best way to answer that is to say that hey we're still really in the early days of bitcoin adoption and and use and just the the the the utility of bitcoin today is is it's more has more utility in countries that are debasing their currencies

that are suffering with high inflation um but the quantum of of dollars in our retirement system um and i'll go to an example of like of what i think the impact of the etfs is likely to be or blackrock is likely to be on bitcoin price um but i would describe hey there are a myriad of issues that i would say are kind of ripples and on the water um including yeah countries like egypt or you know nigeria or pretty much you know the the list is is long most countries have no choice but to print more than they they take in um but that's that's just that's ripples on the water versus the wave of u.s etf money potential the wave of u.s retirement savings potential and still just the relative scarcity of bitcoin so like my example there

is uh sort of i guess going hey what will bitcoin price do and like my answer to that is you know as i said it's a long wait to wait for the dollar to crash we don't want it to crash anyway it's not good for bitcoin not good for the world if the dollar doesn't do well um so i can say bitcoin can do well even if the dollar does well um but in in the short run the wave is really related to blackrock so they've got 17 billion now in their etf it's three three only three months old um we're about to have the having and the having means we'll only be making as an industry uh 450 coins per day and that's that's that is the supply so this is a there's a bunch of noise at the end of the days is a supply demand problem we're capped at 21 million coins

and we're only supplying 450 new ones a day if blackrock next month they go from 17 billion to $18 billion, that is more than 500 coins a day of additional demand from BlackRock alone. So from what I've heard and the way I would behave about them is to be very measured. It's like, hey, they are going to end up with the biggest Bitcoin ETF. Grayscale is shrinking. BlackRock is growing. So they can rest easy knowing they have the market. They're managing almost $10 trillion, the size of their ETF growth should be measured, meaning they shouldn't go out to all their clients and have a big push to try to create $10 billion in a month of additional demand. There isn't the supply. We only see about less than 2 million coins now trade on exchanges.

I just don't know. The coins aren't available. So if they were to do that, they would by themselves almost cause a price bubble, hurt their own clients, probably have an egg on the face with the regulator that let the ETF through after almost 10 years. And so I think if you think about Bitcoin price in the short run, the wave is ETF capital and how these guys behave in terms of controlling the spigot of demand because the supply is fixed and known. What do you think are the downsides if BlackRock kind of didn't slow play this? And slow play sounds hilarious when you say it's a three-month fund with $17 billion in it.

But in terms of maybe let's just talk about you're an asset management firm. There's people knocking on the door. Obviously, you probably can slow play how much outbound sales and marketing and stuff you're doing. But what are the downsides if everyone just says, screw it, I want as many assets as possible and let's go? Yeah, I think because the supply of Bitcoin isn't there, and those that have it trading on exchanges, that's obviously more liquid. If you added a lot of additional demand, you're going to see really outsized upward price movement that then create the potential for a bubble. and i think bubbles are bad you know in any industry and it'll the implication would be it could it could lead to additional regulation if a bubble is burst you'll have then you know

the investigations like hey what happened why did bitcoin go to you know 500 000 a coin then then retreat back to 100 000 a coin you'll have a bunch of unhappy investors that that participated in that, a fresh regulatory look. It's a bad idea to create a demand-related bubble if you can avoid it. And of course, BlackRock isn't the only ETF. Many others are scrambling and doing their best to create demand on their platforms. But it is tough to compete with the largest asset manager in the world. So let's talk about miners. Obviously, the business that you guys are in on a day-to-day basis, and you probably think maybe the most about, there's some similarities to what the asset managers have to think about. That cut from 900 Bitcoin a day to 450 doesn't

just affect the asset managers, doesn't just affect the investors, it also affects you all. And so how do you think today about where miners are and what is the impact of the halving coming up? Yeah. So we're different than most miners in that we own our own power assets and own our own data centers. And we call that vertical integration. I think other miners will own their mining fleet, might own their data center, might not. But the vast majority, maybe only one or two others own their power assets. And so if that's your circumstance, your revenue is about to be cut in half, because that's what the halving means. The reward will go from 900 coins a day down to 450. Maybe we'll see a decrease in the number of people competing

for those rewards. So we could see an increase in hash rate related to that. We're having a slide on hash rate in a moment. But it really means you have two choices. One is you can upgrade your fleet by buying more efficient machines to get more hash rate out of your existing power supply, or you can try to drive your cost structure down as low as you can by lowering your cost of power. So there aren't that many variables. So it's really just two, as I said. So what we're thinking about is both. We're both working on ways to upgrade our fleet to make it more efficient, to get more hash rate out of our existing plugs. And then we are working on a variety of ways to drive down our cost of power so in our model um we are we are in pjm

we own two plants in pjm interestingly pjm has among the cheapest power and for the next two years so if the price of power is so low which it is right now that we can buy the power from the grid cheaper than we can make it we'll shut our plants down and buy that power from the grid In fact, it's cheaper than ERCOT for the next two years on average. So we are positioned to be one of the lowest cost miners just based on grid pricing. If the cost of power is high, like so high, we can shut down the data center and sell power to the grid. So last year, and I was quite proud of ourselves, we shut down the data center a few hundred times because the economic benefit to selling power to the grid was better than mining. And then everywhere in between, we generally will run the data centers and either have the plants running or not.

So the ways we can drive the cost of power down in our space, one is we have a very interesting carbon capture project that we announced late last year. And that's really a result of, as a part of our process in making power, we are reclaiming waste that was left behind by hundreds of years of coal mining. The waste that was left on the surface is toxic. There are like 800 piles. I've talked about this on that last time we met. And it turns out that because we have to add crushed limestone to the fuel mix to take out the sulfur emissions, that creates an ash that is beneficial use ash. So you can use it as fertilizer. It's non-toxic. It has in it calcium oxide, which acts as a sponge in pulling carbon dioxide from the environment to create calcium oxide.

So by weight, we can capture just slightly more than 10% by weight of carbon from the air. So if we make 100 pounds of ash, we can capture 10 pounds of carbon dioxide through direct air capture as a result of the carbon sponge properties of the ash. So the net result is we will end up with a, you know, as we roll this project out, it's going to lower our net cost of power. And in the Bitcoin mining space, you know, you have Bitcoin price, you have hash price, and you have the cost of power. And that's really, and then you have the efficiency of your machines, and that will dictate what your margins will be. So we're pushing on cheaper, lower emissions types of fuel. We're working on upgrading our fleet, and we're working on creative things like carbon capture. Ultimately, there's a lower cost of power.

How do you think about capital allocators judging or kind of making a decision between, you know, I have $1. I can go buy Bitcoin Direct. I can buy the ETFs. I can buy Coinbase or MicroStrategy and kind of like indirect exposure, levered exposure, or I can buy a miner. And it's like, what do you think are the pros and cons of miners in those comparisons? Yeah, so a miner is going to have an outsized benefit from Bitcoin price running than buying in the spot market or buying Bitcoin directly. So we'll have a lot more margin expansion with a higher hash price. So just as a reminder for everyone, Bitcoin miners share the mining reward among the whole group.

And we pool our hash rate and then get our pro-rata share of the work that we contribute to the pool. And there's a big deal about the halving. But in reality, the the hash, the amount of of hash rate globally that's increased four or five times since the last habit. So we're already we are already sharing the rewards. You know, they were cut by a fourth or a fifth just by a lot more miners competing for those rewards. The halving is yet another diminution in the economics of mining, but it still works well because the Bitcoin price has gone up enough to make it a worthwhile endeavor. But I think if you were to believe that, hey, if you buy Bitcoin on the belief that it's

going to go up, you will see a pretty dramatic margin expansion for the miners that should lead to an outsized gain in mining stocks versus what you just get from owning Bitcoin directly. And when you begin to think about, there's the block subsidy, there's also transaction fees. And at times, we've seen that become pretty meaningful. At other times, it's been negligible. How do you think about transaction fees moving forward? And is that something that you can kind of model out and depend on as a business? Or is it more so that's like icing on the cake and, hey, if fees spike, it's great to have, but we're not going to base our business on it.

Yeah, it's like looking backward. That's how we benefited from the spikes that occasionally happen. But on the future, it will have more havings in it. And so I think we're going to be driven to more efficiency, but transaction fees will become a bigger percentage of the economic offering for the work related to mining. Um, so I think it has to, it has to be considered more in the future, but looking backward,

it's not something that, that I think most modeled in as a, as a big contributor to margin. Uh, another topic that everyone seems to be very worried about or constantly talking about is the economic, uh, or I'm sorry, the environmental impact of miners. And, uh, some of this is like, what power are you sucking in? Some of it is like, what are the emissions on the way out? Um, and then a whole host of things that, you know, my words, not yours kind of made up concerns that frankly are just like a waste of everyone's time. But what do you think are maybe the, uh, environmental topics that are important?

And you're like, Hey, you know, actually we, we spend time thinking about these and we do think that they're fair things for us to be held accountable to. And then how do you think about, you know, maybe the areas where, look, everyone's talking about this stuff, but, but we don't see it actually playing out in reality. Yeah. So I think, I think first, first off, if you looked at the, at the top, you know, five or even 10 miners in the world, the projected growth rates of hash rate imply another two and a half or three gigawatts of power need in the next 18 months to two years. And that is a

tremendous amount of power. And my view is it's improbable that all the predictions of all the miners come true and they'll be adding that hash rate because it's a lengthy process to build data centers. It's a lengthy process to get things permitted and built. And I think Bitcoin miners are the best data center builders in the world, the fastest, the cheapest. And so I think that's a, we'll probably see a merge between those building these big data centers and Bitcoin miners at some point. I think we've seen it a little bit already, but that's part of the future. But I would sort of flip the answer a little bit by saying, hey, we as a country, we don't dictate the highest. And, you know, if something is perceived to be bad for society, we don't say, well, hey, we're going to tax your power differently than we tax someone who's sort of good for society or deemed to be good for society.

Obviously, hey, those listening to your podcast probably believe that Bitcoin is good for the world and society. um but you know hey should we be taxing the power for data centers that run social media servers um or distilleries or casinos i think it's a it's a dangerous thing to do to start to have the you know to to have government judge who they say is good and bad and then charge a rate for power um it's a free market system and you know those that that want to uh participate in buying power from the grid that's a a good thing and i think that those that are making power have benefited from the build out of of the demand from from bitcoin have benefited from the continued build out in data centers that are you know that's one of the biggest growth businesses

in the in the country now is to build out of data centers like unrelated bitcoin um but bitcoin is different in that it's decentralized so i think if you were to call google and say google we want to build your data center do you mind if if it cycles off a few hundred times a year to benefit the stability of the power grid and to help suppress pricing in the grid and they would say no i want to use the power regardless of price all the time because you know my customers don't want to have intermittent service um bitcoin miners can easily stomach intermittent intermittently turning off the data center so like we turned off one of our data centers a few hundred times last year in response to high grid pricing texans i think do it even more often than that

You know, I was with one of my, you know, peer CEOs last week, and he said, I bragged about 200 times, he says, hey, how about a thousand times? And so the effect of cycling a data center, even, you know, you don't have to take it to dark, just put the miners in efficient mode or put them in a sleep mode so they're not like rapidly cooling and degrading the equipment. The impact of that is the grid, even upon just a price response, will end up being much more stable if that grid has access to instantly 50 or 100 megawatts from a data center cycling down.

It's not talked about enough, but the impact of solar and wind, which are both intermittent sources of power it's a i'm for it it's greening the planet that's that's a you know it's heavily subsidized but it's still you know uh a carbon free source of electricity um to make a a to make the grid function like it functioned with a base load fossil fuel you need a like a grid scale battery and grid scale batteries are dirty they don't last long they're dangerous because if they catch fire, how are you going to put that out? And they only last a couple hours. And so I think without thanks, and even without any really recognition, Bitcoin miners are already acting like grid scale batteries. And the grid can't tell the difference. All the grid knows is, hey,

we had a spike in the price. And within seconds, a lot more power became available. And that's what would happen with a battery. And that's what Bitcoin miners are doing and it's stabilizing the grid and that's to the benefit of of society in the form of lower power prices because they we respond to those prices when we supply that power to the grid um and it else isn't talked about like a much bigger impact than bitcoin mining on the price of power for consumers is the forcing of renewable energy onto the grid and it's just it's it is it's not when people say hey solar's on power on par with with like natural gas in terms of of cost um well it's not because it's not apples to apples for you to you know if for you to recreate a hundred megawatt

power plant in the solar world you would need a giant battery and probably a you know a gigawatt of power to feed the battery to run at night when the sun isn't shining so like we've been fed a story that's apples and oranges. But I think the tell is that if you looked at the most renewable heavy grids in the world, they are also the most expensive power in the world. And that's just because you need effectively two grids.

You need two sources of power. So you're doubling your base and it results in a more extensive power pricing. So my answer is really, we're already... a solution for a problem that we have created by the introduction of these intermittent sources so what bitcoin mining can be an intermittent user and an intermittent curtailer and

i i hope that that's how it can be viewed because that's that's a way to prevent you know we're going to get more brownouts and blackouts the more solar and wind you add and so i think you You want to have Bitcoin mines in those areas where you have a lot of solar and wind. It'll help stabilize the marketplace. Another aspect is carbon and being carbon negative. Talk a little bit about how you all see kind of the environmental component around carbon kind of ingested. Yeah, so I think we clean up waste piles. So here's what happened.

So before 1975, coal miners, they would mine the coal, bring it up from beneath the surface. The good coal, they would take and turn it into power or use it to make steel. And the marginal quality stuff, which is about 30% or 40% of what came up beneath the surface, was left on the surface, and that is highly pollutive. it's it's heavy in sulfur in a mercury all the the cancer caught the truly cancer causing stuff um is is left on the surface that that is causing a massive amount of groundwater and and pollution in pennsylvania which is our biggest sort of coal mining state um and there is no you know the youngest of these piles is about 50 years old now so there is no other solution to clean them up if you leave them as they are the methane emissions um which are you

know methane emissions are multiples of of carbon in terms of greenhouse gas effect it's you know up to 50 times more impactful than carbon when released into the air so leaving them on the surface is a greenhouse gas plus like of the 800 piles maybe more than 50 of them are on fire right now so they're burning you know without emissions control so we we are carbon negative versus leaving the piles in their current state as they are um so we we go in with you know we partner with the pennsylvania dep to identify these sites we get grants to clean them up uh we earn renewal energy credits to you know when we create the power as a part of the the uh the benefit to clean up the piles we get that um and so yeah our carbon negative um role is really just a result of

the waste that we're cleaning up being so bad that it still makes sense to burn it with emissions controls than it does to leave it on the surface and that's that's that's not including the benefit to the communities when they you know right now you know you'll go to a neighborhood and they'll have a you know a row of houses backing up to a you know a hundred acre waste site it's just it's not a uh it's not kind the mine is gone the companies are gone and the state is left to to clean up the mess and so that's that's really what we're what we are are tasked with doing um and we have a purpose-built facility this is not a thermal coal plant what the things that we run these are purpose purpose-built plants specifically designed to clean up this legacy

problem and we've got like another 15 or 20 years left and all the stuff will be cleaned up so you know if we end up you know not doing it i think this this waste will be here and the water pollution air pollution will be here for another you know 500 years it's just there's no other way to do it do you guys get incentivized to do the cleanup or is it pretty much uh hey we there's like a market force that incentivizes you by it's cheaper or more efficient or something yeah so the yeah the market force is we we um we sell the power into the market or use it to convert to bitcoin um we get renewable energy credits which is a market-based system that pennsylvania set up but that's still a system that if you know if government didn't create the system then they

then we wouldn't get that benefit. Then we get a small benefit just on per ton for cleaning up the waste. But I'd say the big benefit is to the communities. Like I think they can go to our website, you'll see the before and after pictures. And you sort of, you know, they're ashamed that this country industrialized and left what we left behind. So it's important that we that would clean up the mess. Now, talk a little bit about Bitcoin and the amount of Bitcoin you're able to mine based on the current hardware. And it seems like every couple of years, hardware and machines and even the software that it's going to run, we get these efficiency and innovative gains. Should we expect that to continue? Is there

some sort of mental model you all use when thinking about, hey, here's the fleet we have today? How often are we going to replace this? What does that cost look like? Just how do you kind of think of cap allocation when it comes to the hardware and the fleet? That's a great question. So right now we're running about 4x a hash. If we were to replace our fleet with brand new machines that are the most efficient, that have a higher hash rate per power used, we could be at 7x a hash. So that's sort of our potential in today's terms. And of course, i think i would expect efficiency gains to continue um as long as it's a as long as mining stays an economic business like it is today um and as i said hey the other way to make the same

money is to just drive your cost down so like if you i think if there's a surprise coming to the market it's if you looked at where mining is likely to go it's in my view it's likely to go in jurisdictions where power is cheap, energy is abundant, and jurisdictions where people are looking to get out of dollar dominance, that would be a popular thing to do. We're going to find out that Russia has been mining and growing their mining activity. I would be surprised if the the answer is no you know I think they're um I hear like China has has quietly you know started to add mining again even though it's it's banned um the Middle East I think it's it's known publicly that they're growing you know mining activities and that's not a we should not be surprised by

any of those so I think it's a um I would expect in a global hash rate to continue to grow including in places outside the US. Now, when you look at those places, are there geopolitical concerns or should we want competition? And I go back to one point, China had 60% of hash rate. I think people are like, ah, it's China, that's 60%. We don't like that. They kind of self-inflicted wound, a bunch of people unplugged the machines. now the u.s has you know upwards of 30 35 plus percent 10 in texas like could the u.s have too much hash rate you know if we got to 50 or 60 in the u.s would that be concerning um and how do you just think maybe about the geographic both competition and also you know partnership of

a distributed or decentralized system not being too concentrated anywhere yeah so it's obviously it's important that it stay decentralized that's part that that is the you know the the key to the attractiveness of bitcoin is it's the it is the largest decentralized network in the world um i i still as as much as we all criticize sort of the the u.s we still have the best capital markets in the world we still have rule of law here and even if it in new york it occasionally takes a a detour um but i i don't i don't think that that a concentration of mining in the us would would constitute a threat to the network um so i i i would not be you know in spite of what you know the occasional letter from senators that we all get um i don't i don't predict a

uh a ban on mining here um or a there is no like imminent um tax that that would would cause mining to be unattractive in the us and i don't think that would change um but i i think it's it is because it's a truly global um store of value and we want to see you know i'd like to see activity of use in bitcoin and or you know around the world i think it's it's good for adoption good for awareness um and i think you can also benefit other power grids um you know i think i was uh like i saw a preview of a movie called dirty coin i don't know if you've seen that one yet um they're mining in africa and using the sort of excess power at night um is what's subsidizing like micro grids or african communities that

wouldn't get access that power otherwise um so yeah obviously that that's a relatively small component but and then you obviously have heard about you know stranded gas being converted to Bitcoin or electricity than Bitcoin. So that's a global thing. So I'm for a global product, global awareness, global utilization. And I think it's generally good for the ecosystem. And then what are the areas that maybe people are not talking about in mining, but you think are really important? They could be internal operations. They could be how these companies are being funded today? Or it could even just be like market developments over the next 12 months that, you know, you want to wave a flag and say, hey, everyone pay attention to this, even though

you're not yet. Yeah, so obviously, the it's the allocation of capital question. It's do you, you know, I think there probably isn't quite enough transparency with the public market as to, hey, is it a good investment to buy a new machine? Or is it better? Or is it better to to have the old one run with lower margin like what's the real return on on capital that we have um that we could that we can achieve in this business um i guess going back to the the the predictions for what people are are expected to grow in the next couple years you know to add almost three gigawatts of power, that's going to take, it's a $5 to $10 billion investment for the industry to grow as it's projecting it's going to grow.

And that's between power, data centers, new machines. And I guess what I'd like to see for all of us miners is just the proof that, hey, this is a good return on capital. um does it make sense to use you know internally generated cash flow to buy those machines or should you issue more stock to buy the machine should you issue debt like what's the best way to to grow um i think a few guys are sort of growing for growth's sake and being silent on whether or not this is a a positive return on on invested capital and so i think that's what i would hope to see is just the discipline. Capital can be scarce. And I think discipline and transparency

is what I would hope we can see. Talk a little bit about tokenization, which I know is something that you thought about. AI took the kind of center stage after crypto had 2020, 2021. AI kind of got 2022, 2023. But you think that Bitcoin plus some of the work that's on tokenization could potentially bring back uh the spotlight you know what that's that's right i i thought that and then and blackrock had yet another announcement on sort of a tokenization fund and like we're gonna see like the low-hanging fruits like hey who doesn't want to buy a minority share of a sports team like you know sports fans that's that's easy um Who doesn't want to buy a tokenized portfolio of real estate or aviation leases, like any

financial project that can be securitized, can be tokenized. But even beyond that, my first job was at Goldman Sachs in 1993. big theme of that like the annual and uh employee get together was derivatives that's what you know all the bankers were said hey here's what a derivative is and your clients may not know that they need it but you know they if they want to hedge a certain risk they can goldman can could then create a new product for just that that client and will sell you know break out the risk and sell to a different client and goldman being the middle could create a new market um i really view tokenization as the next step in how to make derivatives available while really shrinking the

role of the middleman and so like these example that would be like i think the first insurance company to say hey i want to i want to go on to write a you know a here's here's a basket of of insurance risks, and I want to sell that to the public or to other investors, tokenize it. Because you can then, the insurance company will say, hey, here's the product. They'll essentially be the, they would have been the underwriter. They can make their fee for underwriting. But the insurance company doesn't even need to own that risk anymore. They can tokenize it and share it, and there can be a return for that. So I think we're going to see the low-hanging fruit of things that can be securitized to be easily tokenized. But I'm actually more excited

about the coming change to what I think will be almost every industry for what it can mean to get access to less friction once you do a deal underwriting, which I would say is just next generation derivative transactions without the middleman. That's what I think. And that'll be a a 20-year benefit to and evolution of the you know fintech so i think it's yeah as you i'm so disappointed to say hey we sort of crypto had its moment in the sun for about you know an hour and a half but it's far from like that excitement is not misplaced it's gonna it's still gonna show up in industry the um beauty of bitcoin is that was adopted by individuals first then kind of you know financial organizations corporations eventually nation states um do you think

tokenization falls the same path or is it more top down where you need the financial organizations to do things that either are more you know kind of financial uh or they are more um regulated you know the easy way is would have to be top down right so and and i think there will be margin for the first mover but hey once the first mover happens like in insurance in my example everyone else is going to be required to do the same thing because it's it's going to impact cost of capital and that insurance is a cost of capital business um and so it's i think we'll have uh in this in this instance which i know is different than than you know traditional crypto it really it can be easily dominated by incumbents that i think will find a a good reason to enhance margins for doing

this it's just a you know when the first guy goes in the industry it'll be a race and then when you think of your company and kind of the team and and how you all are positioned when you talk to folks like what are the things you think give you an advantage in the market or you say hey look this is where we really think we've got like this wedge or advantage and we're going to try to exploit this throughout this bull market yeah so that's a great question say we're we're the only vertically integrated one of scale and so hey we're right right now at one plant we have it we have it idled while we're buying power from the grid because power is so cheap the other plant we're making power cheaper than we can can buy it so we're you know we have that that

arbitrage to make so i think we're the most effective um power pricing arbitrage vehicle of the miners that makes us different i think we have you know unfortunately i think the market has really just valued you know scale and growth rate more than than than that ability so i think we've you know we have not uh benefited from a stock price standpoint like we we think we should have i think i think people don't really understand our asset or a model as well as uh as we'd love them to um but i think as a market hey there there are more than 20 publicly traded bitcoin miners today and my expectation is that post having we're going to see consolidation so it's a um you'll have those you know being public is

an expensive uh way to go you know as an enterprise um so to the extent you can see consolidation and synergies between companies i think i would expect to see that this year and then if we look back i don't know maybe in three to five years and you guys execute how you you know plan to execute what does that look like in terms of market dynamics is there a lot of consolidation in the industry and you guys would eventually look to kind of buy up other firms as part of that consolidation and maybe you don't think there'll be consolidation like like you know you get credit and we'll give you the benefit of the doubt you're gonna do everything you say you are going to do and your roadmap and everything executes perfectly how do you interact with the

rest of the market yeah so if if we if we execute well we're going to drive our cost of power to to you know to a a super low point where it'll be it'll be clear that even with with less efficient machines that will end up with a a better margins than what's possible elsewhere without having to constantly reinvest new capital in in more efficient machines so that's that that's the so that's that's the best thing we can do is drive our cost of power down which we have a carbon capture project we're doing to do that as i said working on new fuels that can also have that same impact and so i think that's the our best way to execute which is different than others is we have the ability and levers to drive our cost of power down um given that we make it ourselves so that

that would be a an achievement and and with that hey we probably will continue to upgrade the fleet i think it just makes sense to um to push on that front as well got it where can we send people to find out more about uh you about stronghold and what you guys are doing yeah so i'm on linkedin greg beard and stronghold digital mining has a website that has a bunch of great case studies and uh all of our you know publicly um public information as well so yeah please have a look the the uh one thing i will say is that people go to the website uh the videos are pretty cool in terms of the communities i think they're if i remember correctly there's one where it's like a reclaimed site and there's been uh soccer football fields and baseball fields and then

there's some that are uh it appears like the vegetation is growing back all this stuff and so pretty cool to kind of hear what you guys are doing and the thought process but then actually see it visually in photos uh i remember saying wow that that's uh pretty just awesome to see that happening in a community no thanks now it's thousands of acres cleaned up so i'm really proud of the you know the we're really a reclamation business um coupled to bitcoin mining business and you know and they both are very important activities for us awesome well greg thank you congratulations to your big announcement today i'll be uh looking forward to uh you know more more of of your your thoughts and what you come up with uh on a daily basis so thank you i

appreciate it very much we'll definitely do this again in the future yep you bet thank you