The Pomp Podcast - #409: Mike Colyer on Building North America's Mining Industry

Episode Date: October 16, 2020

Mike Colyer is the CEO of Foundry, a new DCG subsidiary focused on crypto mining. Foundry was created to meet the institutional demand for improved capital access, market efficiency, and transparency in the bitcoin mining industry. The company currently offers three services for the mining ecosystem: equipment financing and procurement; mining and staking; and consulting and advisory services. In this episode, we discuss Foundry's launch, how they invested $100 million so far, a general mining business overview, the importance of North American hash rate, and Foundry's current product offering. ============================== Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Try CoinList Pro and be first to trade on network launch. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100. ============================== Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link https://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. ============================== Pomp writes a daily letter to over 50,000 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://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Mike Kohler is the CEO of Foundry, a new DCG subsidiary focused on crypto mining. Foundry was created to meet the institutional demand for improved capital access, market efficiency, and transparency in the Bitcoin mining industry. The company currently offers three services for the mining ecosystem, equipment financing and procurement, mining and staking, and consulting and advisory services. In this episode, we discuss Foundry's launch, how they invested $100 million so far,

a general mining business overview, the importance of North American hash rate, and Foundry's current product offering. I really enjoyed this conversation with Mike, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is CoinList. Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. You can try CoinList Pro and be first to trade on network launches. You can sign up via coinlist.co slash pomp. Again, coinlist.co slash pomp. You'll earn $10 after you trade your first $100. That $10 will be paid in Bitcoin. So you can go and check

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but it's the place where mass adoption is occurring. Go to crypto.com. Lastly, don't forget that I write a daily letter to over 80,000 investors about business technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry, you can go to pompletter.com. Again, pompletter.com. So go check out CoinList if you want to trade crypto assets early. CoinList.com. CoinList.co. I'm sorry. CoinList.co. No M at the end. CoinList.co. If you want to go check out crypto.com, go do it. And then pompletter.com. All right, let's get into this episode with Mike. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed

by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Mike here with me. Thank you so much for doing this, sir. Yeah, absolutely. Thanks for the invite. For sure. Let's jump right into your background. Tell us, what did you do before you found crypto? And then how did you find Bitcoin and cryptocurrencies? currencies. Yeah. So if we go all the way back,

I was born and raised in Rochester, New York. And so I grew up in concrete, you know, turning blocks and, uh, learn a lot about work and passion. My dad had a lot of passion for that business. Um, so what it was like to have a small company and, uh, basically work ends. And the and I think the other part in my early beginning was my mom is from Iceland. So she came to this country when she was 18. And she left the family of 18. And just recently, I've been thinking about how risky that was. And I think some of the risks I've taken

throughout my life probably come from her as an example of that. And then I went to my dad said, do you want to take over the company? And I'm like, no, I want to go to college. And I went and got a civil engineering degree and MBA at the University of Buffalo. And then got on GE's leadership program, where I was a Six Sigma black belt, lean manufacturing. And then essentially, the last 10 years of my career, I spent as a hired gun in the private equity world. So kind of fixing companies. So that's, you know, my quick, quick background. not your typical crypto background i guess what are some of the biggest lessons that you learned as a hired gun like when you would go into these broken companies what are some of the things that

were kind of immediate we got to fix this stuff and so one was um you know setting a clear vision and tapping into the kind of the passion of the of the people and then i think the other the other big item was you know you gotta have the right people in the right seats so it was a lot of focus around talent, talent, talent. And then, you know, I'm a firm believer that if you get people that are excited about their jobs, they're gonna, they're gonna give it their all and you give them some freedom, and they typically over deliver. I tend to agree with that for sure. How did you first come across cryptocurrencies? So the first, so I would say, in 2000, I think it was June of 2017 uh i was in between assignments and my wife asked me to take the summer off she's like just

stop because i'd just been going you know like 20 years just not you know crazy and so we took the whole family italy for a family vacation i read a great book homo deus um by yuval harari i don't know if you've if you've read that or not but it's kind of about the future of how mankind and technology come together and evolve and literally we got home and i read an article about blockchain i'm like wait this is exactly what he's talking about and it reminded me of the start of the internet you know so i was in college like when netscape came out like early early early days and you know the reality was i i kind of i chickened out i should have moved to silicon valley instead i kind of took the safe route and went to work at ge which was you know like the

big company at the time. I just thought, man, this doesn't happen. This blockchain technology fixes a lot of problems. This doesn't happen very often in a lifetime. I decided to explore it further. I basically spent 15 hours a day going down the rabbit hole. I think my wife thought I was going to be serving her drinks out at the pool. Instead, I just sat at the computer all summer long and, and fell in love with crypto, I started trading it. And after about three weeks, I realized I'm not a really good trader, like, too emotional. And then I fell in love with the mining space, I thought, wow, you really have to build out the infrastructure first, before this thing's really going to scale. And it just made sense to me, like, I just, it just seemed like

that's the first thing to go. So I literally poured everything I had into it and went full time, you know, and I have to give a little shout out to my buddies in Buffalo, because there was a Buffalo blockchain startup group. And I would drive out to Buffalo every Tuesday to meet with these guys and talk about a fish out of water. Like these, these guys are, they're software programmers, traders, investors, they knew tons. And I'm like the old guy in the room with a notepad, like writing down everything they're saying, just trying to keep up. And it was like, they're on Twitter and WeChat and WhatsApp and Signal and Telegram. And they're in these chat rooms with thousands of people just saying whatever they wanted. And it was I was really

out of my element. But I've come to appreciate that that part of it. So what was the fascination or like what pulled you into the mining side of it all? Like, like I said, I think that it was, you have to build the infrastructure first to, to be able to scale. And I thought, I thought I can do that, right? Like I'm an engineer. I understand how to, to, to be efficient at, at plugging in machines.

And I just got, I could get my head wrapped around that concept more than like programming some blockchain application. You know, I, I, part of it, part of my journey, I thought, you know, at some point, this is gonna, this blockchain is going to come back into the traditional world. And since I spent most of my career in the traditional world, I thought if I could learn this new kind of technology, I could help bridge that gap.

I still think we're years and years away from it, but I think the easiest place for me to make that leap was on the mining from. For sure. And maybe give us an overview where the mining industry is today in terms of kind of how big is this? Who are the players? And then maybe geography wise, is there things going on in North America and Asia? There's kind of so many rumors, like how do you see mining as a business in an industry? Yeah, maybe I can tell part of that story is like how I kind of grew up in my journey. So I've been in the space for three years. um got a chance to run a small company here in western new york called savage we grew it from

like one megawatt to three megawatts which you know in late 17 early 18 seemed like you know a monster uh a monster location and then um i knew the guys that started core scientific and i went down to see what they were doing and this is like early 2018 and they had built out like six megawatts in six weeks which just kind of like i was like whoa these guys are moving fast and they talked me into joining um them and helping them kind of grow that business and over the next year it scaled to 100 megawatts and then um and then about a year ago barry called and said hey we're ready to get into the mining space and would you like to come lead the team so you know mining has you know if you go back to the beginning it was like any pc in the world

you could mine bitcoin with right and then it moved to gpus and then it got to these very specific computers asics that really only do one thing but mine bitcoin and the scale just keeps growing faster and faster and faster right so um you know one megawatt was huge four years ago and then 20 megawatts was big three years ago and now people are all talking about building 50 and 100 megawatt facilities um so it just it's moving the space moves so so quickly yeah and so talk a little bit about dcg and foundry right so you get this call from barry he goes hey we're gonna get into mining uh they're not an average investor uh or a team they've obviously made some very very big plays and been super successful with a lot of things they've done what was your reaction when

you got that phone call and then kind of what have you guys done so far yeah i mean i you know being on the outside always looking in it was it was like wow there's a lot of special things happening at dcg so i was and they they really avoided the mining space and uh you know the mining industry you were a miner right didn't you mine a little bit um in the early days it's a tough industry and it's like the wild wild west and there's a lot of interesting characters and everyone's got a story and you can't tell what's real and what's not real and you know when i sat down with barry he basically said look at this was my experience early in the early days and i just didn't want anything to do with it um and then he goes you know about a year and a half

ago they tried to buy some machines you know not very many and he goes it hasn't changed much and he just couldn't believe that the mining industry still operated that way and he and he just thought now's the time for it to kind of let's up the game around mining and uh he said he felt like it was the right time to to to bring in you know bigger capital um you know to take it so my job is really like let's leverage the dcg balance sheet let's leverage its brand let's leverage its its portfolio companies and how do we create um solutions that can help the mining industry in North America. And he really is like, look, here's a blank sheet of paper. Tell me what this industry needs and where we can add the most value. And it didn't take long before we kind

of came to the conclusion that we're getting ready to go through another cycle. There's new machines that are coming out, it's time for everybody to upgrade their equipment. And they just there's not enough capital. And what's interesting is, you know, most of these machines are all manufactured in China and the Chinese typically get the first, you know, crack at them and you need out, you need to make those, you need to make big bets early in the process to get to the head of the line. And we felt like this was the right time to do it. So, you know, back in January when nobody really wanted to buy machines, we started making very big bets on new equipment so that we could get to the head of the line

and that we could get our hands on the machines. So that's what we're doing. We are helping miners in North America upgrade their facilities. And we mine ourselves. That's not our goal is to be the biggest miner. That's not what we're set out to do. Really, our goal is to decentralize the hash rate around the world, right? How do we support these decentralized infrastructures?

And I should note, it's not just proof of work. It's also proof of stake, right? So we've got a whole team doing proof of stake nodes and supporting kind of that new industry that's starting to develop. Talk to me a little bit about this cycle that you're talking about, right? So there's kind of the price cycle, but there's also lead times on building out hardware. I think it was like Nvidia and a couple of other folks who had gotten into trying to build cards and GPUs and things like that really got kind of caught in the wrong side of the cycle in 2018, where, you know, 17, they saw this big boom in demand, they came to market with all kinds of hardware. Next thing you know, a lot of that demand had basically dissipated by the time that they actually got everything there, they had a bunch of inventory kind of on their hands, and they weren't able to, you know, offload it in the price points and timing that they wanted.

So maybe help people understand like where we are today. We're recording this in October of 2020. How do you see where we are now? And the kind of what is the expectation or like, why did you think that 2020 was the year to start something like this? The cycles in the mining industry are brutal. I don't know how else to say it. Why? And I think you have to have different strategies for each part of the cycle. Leo Zhang did a nice research paper on this just recently, and he kind of talks about the four cycles of the mining space. And part of it is the Bitcoin algorithm is the most efficient thing on the planet, and it's ruthless in terms of its desire to keep driving cost out. So there's this race to get lower cost energy. There's a race to build a stronger machine. And we go through these cycles because when new technology comes out that is, you know, two or three times better or more efficient than the prior generation, people want to upgrade to that equipment. And what it does is it forces, as we upgrade, it forces out the weak hands, right?

So it forces out the people with high operating costs. It forces out the people that have older technology. And what happens is the Bitcoin network just gets bigger and stronger and more secure each time this happens. And so we go through these cycles. And they're, they tend to be, you know, 18 to 24 month cycles, sometimes, you know, a little bit longer. And it really depends on how fast they can innovate the chips. So you have to understand where we are in those cycles and which machines to purchase. and it's interesting because you almost have to bet counter cyclical right so i don't think it's much different than probably you know exploring for natural gas or oil or like there's times to

be investing in the space and there's times to be pulling away and right now we were very bullish on where this is going we think that the latest generation equipment is going to be here for several years we think it's a great time to invest and i tell people because i get this i get asked this question all the time i'm like look at the minute all your online calculators say it's time to mine it's too late you've you won't be able to get the machines if you can you're going to overpay for them uh it's it's kind of you've got to be able to make that bet before that happens Like you want the machines plugged in mining when this thing goes up. So we think it's a great time right now.

Absolutely. And then talk a little bit about the process of actually upgrading a facility. So somebody's got a facility, they've got older equipment in there, they're mining, there's revenue coming in the door, you guys go to them and kind of how do you work with them? What is your product suite or service suite look like in terms of how you can actually help that minor upgrade? Yeah, absolutely.

So we created a product for using the equipment as collateral, which was something that really hadn't been done in the space before. And we've deployed $100 million into North American mining this year. And so what we do is we allow miners to get some leverage on, you know, they typically don't have a lot of cash sitting around, right? So we allow them to get their new machines, plug them in, and then, you know, we take a monthly, you know, interest and principal payment. We let the machines pay for themselves, you know, over the course of the next, you know, 12 or 18 months. We also provide advisory services.

So we help people think through their business, their, you know, how to avoid a lot of the traps that there is in Bitcoin mining. Like you really, you only have to make a couple of missteps and lose all your money, you know. So I would say that if there's anybody that's looking to deploy a lot of money into mining, call us first. We can kind of talk you through it, you know, like why this is either a good idea or a bad idea. And we can definitely help you find the right people in the market. So like we don't have any of our own facilities. So we've done a lot of due diligence to find out who the best operators are in North America. who where the best costs are, where you can put your machines and feel good about it.

And then we have a very strong working relationship with MicroBT and with Bitmain, you know, so we talk to them daily. And, you know, they're very excited about growing the North American market. They see it as a huge opportunity. Yeah. Can you name any of the people that you have kind of put a thumbs up on in terms of miners in the US? Or do you want to refrain from that? You know, as I was thinking about that, I'm sure they would all love me to name each one, and then I'll probably forget somebody and I'll get in a lot of trouble. So we'll, you know, over the next couple months, I think we'll be more and more vocal about who we're working with. But there's a lot of great operators in North America.

And, you know, they spent the last three years building out, you know, large-scale mining. And North America, you know, everyone loves to talk about the Chinese and all the stuff they're doing with hash rate. I would love, you know, my goal is three years that it's no longer a storyline. Like we don't talk about it anymore because the hash rate is more, you know, evenly spread out throughout the world. And North America has got a ton of advantages. I mean, it's, we have a lot of power in this country and in Canada. I think the temperatures are right.

The infrastructure is there and it's, you know, it's a lot of abandoned power. So we can, there's a lot of people, they find these spots, they step in and and and a lot of the local communities are figuring this out and they're embracing it they're like wow this is a big deal you mentioned power uh one of the things that everyone loves to talk about uh who does not like bitcoin is you idiots are all spending all of the power uh you're literally consuming more power than some countries uh stop doing that this isn't environmentally friendly uh i think usually the most popular response from uh those who support Bitcoin or are intrigued by it is, yeah, but most of it's renewable power. Kind of how do you guys

just see power consumption, the sources, the amount, like just talk me through, you know, how you guys look at that or any frameworks that you use to think about it? Yeah, so it's great. And a lot of people like to bring that up. So I think there's about eight gigawatts worth of power right now um securing the bitcoin network so there's definitely an element like if you believe in bitcoin the more power that secures it the better it is for the network and the more valuable the network is so um and i think there's it's an it's incredibly transparent how the how how much power is being used right like everybody in the world knows how much power is being used for the Bitcoin network. How much power is being used to run all of our banks? You know, every time I turn

around, there's like a new bank being built on a corner. I'm like, why are they building banks right now? It doesn't, this doesn't seem like it makes a lot of sense. Or how much energy does our military use to secure our country and the US dollar, right? Like you're, you're in the Air Force. I think you're in the Air Force, right? Army. Army. Okay, you're an Army guy. But the Air Force spends like $9 billion on fuel, right? We spend $2 billion on electricity to secure the Bitcoin network. And I'd say the other piece is where the Bitcoin algorithm is so ruthless in terms of driving cost out that it's constantly looking for low cost energy. And what we're finding is there's lots of pockets of this around the world where it actually helps the grid. It

helps the power grid it makes it more efficient you know there's there's peaker plants in new york the greenwich guys are the you know they're a great team there where they're actually they've got an on-site bitcoin mining facility and it allows them to be more efficient to power the grid and it's like wow or my other favorite is like new york you live in new york i i live in new york right we have an abundance of hydro power that just it just flows over the dam And it's like, guys, you could be making money off of that right now. It's just going unused. And they can't get their heads wrapped around it yet.

But we think that's changing very quickly. I mean, I think in the future, we believe very strongly that the electric companies, the power producers, they're going to get engaged in this industry. We're already starting to see it. And I think nation states at some point are going to say, oh, wow, we got to get a Bitcoin strategy, and we've got these natural resources, let's use it to produce Bitcoin. I don't think like the fact that it's Iran, but I think Iran created a process to license people to mine within the country and even put some of their national resources, not natural, but national resources towards doing it. It sounds like you think that maybe some of the more fringe locations will do it first, but actually we should see every nation state eventually do this?

I think so. I mean, every nation state has a strategy around oil. They have a strategy around natural gas. They have a strategy around gold. And I think they're going to have a strategy around Bitcoin. And I think part of that strategy is we can produce it. we have a we have an advantage and we need to take advantage of you know use that advantage to produce bitcoin um i think it's just a matter of time like where where does this go it's it's

moving so fast that i think it's inevitable that it's going to happen and our goal at foundry is you know when when that nation state is ready to get into the space you know we hope that they call us because we've got the experience and the trust to help them kind of navigate through that. Is there any specific inflection point that you guys are looking at for, say, like the U.S. government or other kind of global superpower that would really push them or accelerate them into doing this? I don't know.

I think it's kind of like once it starts, it's going to be hard to stop. You know, it's kind of like, you know, some of the companies now that are investing in, in their, their treasury into crypto, right? It's, I think all of a sudden, it's like, wait, they're doing what? And wait, they're, they're making how much money on this? And why are they doing it? And why aren't we doing it? You know, and I think it's just a matter of time before every country is going to be asking that, that question. Yeah. You mentioned North America a couple of times in kind of the hash rate distribution. Talk through a little bit of like, where are we from North American hash rate and kind of how you guys see that being important to kind of continue to increase on a global distribution basis? you know it's really hard to tell exactly the distribution of hash rate around the world but some studies like the cambridge study i think puts china at over 60 percent um i think they're i think there's a lot more in the u.s than than they've gotten their calculations but i think we're probably in the 10 to 15 percent range right now and i think over the next 24 months is probably going to double um i think there's there's going to be more and more capital

flowing into north american miners the facilities have been built out there's some really big projects that are going to be announced soon um for additional capacity um and i think you know there's a there's a limit of there's a limit at the wafer production uh facility so tsmc and samsung they can only give so many wafers to the asic manufacturers so there's only so many machines available and i think as long as we continue to to buy those machines we're going to start seeing the hash rate shift from um from china north america and look at i don't think north america should dominate either i think it needs to be evenly spread throughout the world that's what makes bitcoin you know great absolutely what's the biggest risk that you

see to the mining business whether it's here in north america or elsewhere biggest risk you know it's one of the most efficient markets right so i was gonna my first reaction was oh if bitcoin price tanks you know oh no but as you know every you know was it 2000 it's like 2000 blocks or something like that every 14 days the difficulty readjusts so it it self-regulates and you think about like the oil industry they you got a bunch of guys sitting in a room deciding how much oil they should pump out or not and what are we going to do to fix the price and it doesn't have the algorithm decides that you know and and everybody in the world collectively mining kind of decides that so if bitcoin price tanked hash rate's gonna tank difficulty's gonna

tank and then it'll make sense to mine again right so um so i don't know what the i don't see any major risks right now i suppose i suppose the u.s government printing more and more money and we head to you know economic ruin that that would be detrimental to a lot of folks but and in terms of how you guys see um kind of the mining cycles and some of those risks does it feel like there's just much more knowledge in the market like that's what i'm kind of pulling here I'm taking away from you is like, there's just so many more experienced miners and people who have kind of seen multiple cycles now. And so they feel like there's a better understanding of some of the risks or potholes, you know, kind of in the strategies, but also the market cycles

and kind of what to do, how to scale, how to build up these facilities that miners should be in a better position kind of moving forward through future market cycles. Absolutely. I mean, I think the industry's, it's maturing at this incredible pace and it looks very different today than it did a year ago. I mean, today there's, you know, we're financing equipment manufacturers. A year ago, every miner in North America was begging for that solution and it didn't look like anybody would ever step up and do it. So it's changing quickly. I mean, we're even, you know, we're looking at the derivatives market right so like miners i've always said like miners are really good at making a bitcoin and doing it really efficiently but most of them are horrible at

treasury management i know i can speak for myself like i didn't know what to do i'd mine this bitcoin and sometimes we'd sell it every day and others was like no let's hold it and let's try to time the market and it was just a mess um so we're working with like the genesis team and we're selling um forward or calls um on you know future production and it's like wow we're we're actually making we're making extra money doing this and it's not hurting our operation and it's a better way to manage our cash flow and it's like whoa this is really cool and our our goal is how do we train and help other miners take advantage of that stuff so that they can you know shore up their operations and be more profitable. Yeah. And it's one of these weird businesses too,

right? We're like, what other business does your balance sheet expand? Like the actual value of your balance sheet can expand or shrink at a very rapid rate, right? Yeah. It's scary. It can be very scary. And so really, is it fair to say that most miners are one, infrastructure investors, right? Two, they have to drive the cashflow from the mining activity, but then three also, It's almost like they're traders or that treasury management you're talking about. There's multiple components to this business, and you've got to be pretty good, if not great, at all of them to be successful. Yeah, I think you sum it up very well. I think I'm starting to view mining almost like critical infrastructure, almost like a utility.

right so I think a lot of miners I think they come into it with a little bit of a wrong approach of we're gonna you know get rich quick and I've yet to meet any of those guys you know so I don't think it's a get rich quick kind of business you know kind of like a utility is not a get rich quick business I think mining is over time is going to become a very stable industry, very predictable, it's going to, you know, kind of produce a dividend for its investors. And I think if you want to get rich quick, just go buy Bitcoin. Yeah, well, and I think that's part of the decision people have to make, right? Is do you want to just invest in the asset itself? Or if you go ahead and you invest in mining, the idea is

that those machines will generate more Bitcoin over time than you could buy right now with the same dollar amount right um and that's a calculation that to your point really depends on price on market cycle and the technology you buy the the shelf life of that technology how uh expensive is the power what's the source of your power like there's a lot a lot of inputs here and if you're sophisticated and you know what you're doing it's great business to be in if uh if you're not good luck right yeah for sure um what has been some of your biggest takeaways so you guys have invested a hundred million dollars or so uh into mining uh you've partnered up with uh with dcg to do this what's been kind of your biggest takeaways in 2020 the world's been chaotic and and uh in so

many ways but kind of from a business perspective what's been the one or two surprises or takeaways that you've had so early in the year um i think for me personally a couple surprises is the like the i the dcg team is amazing right like i i thoroughly they're just a great group of people i thoroughly enjoy working there they they have probably a better better outlook or look into the you know the whole blockchain space than anybody else so they really understand it and they understand the risks and the rewards and and uh barry's been really supportive he's like look at mike you don't have to hit home run just get on base like we just need to get on base on you know a regular you know cadence um and and this idea of betting counter cyclical i think is

is really really important so we placed some really big bets early on the micro bt guys they basically said mike get your machines installed help your customers um and you're going to be just fine and they've been right you know so you know all the online calculators would tell you that you know the payback is 18 months for the new equipment it was the same thing in may and yet i've been mining with equipment for six months and it's worth the equipment's worth more today than what i bought it at and i've been mining for six months you know it's like i think this is actually going to hold true for quite some time because we're early in the cycle so um i really encourage you know people if you're i've told a lot of people like if you if you don't

think now's a good time to get into the mining space, you should just buy Bitcoin. If you're struggling today with this decision, then this isn't the right space for you. One of the last things I want to do before we get into some of the rapid fire stuff is help people understand the unit economics. So again, a lot of these are variables that will change depending on your location, your operations, all this kind of stuff. But just generally, if somebody buys one miner, and they were to plug it in, kind of how do you guys look at, you know, the average costs on a power side? And then like, what does that look like over, let's say, 24 months or something like that, in terms of how much they can actually generate if they do it the right way, right? So

they come to your advisory services, you guys, you know, kind of walk them through, here's what to do. What does that unit economics look like in kind of the bull case? Yeah, so I think most miners want their machines to pay back in less than 12 months right and when when the industry gets really frothy or when it did the last time it was like machines were paying back in in three months four months you know it was like you plugged it in and you got all your money back and it was amazing i think one of the important things to look at is how long do you think the machines are going to last um and i and how efficient are the machines that you're buying because that's going to extend their life cycle right so we're we we believe that these current generation machines

will last three probably four years so you kind of have to look at that overall time frame and and part of this is look at you could buy you could buy bitcoin at a high price and the market could fall but while it falls you're losing money if you just bought the coin if you're mining you're still making money through that whole process right so the machines are still paying for themselves so it's a little bit of a hedge for the downside um and then you you kind of get all the upside if you get them plugged in before before the market really runs um so you got to buy them i always tell people you got to buy them at the right price you have to pick up a provider that can get them installed when they arrive and you got to have a low hosting cost and

those hosting costs continue to drift down. And then have somebody that you really trust in terms of running the machines for you because they've got to be up and running all the time. Yeah, makes sense. What does success look like for Foundry? If you look out 10, 15 years from now, what exactly are you guys doing?

And you're like, you know what? We did exactly what we wanted to. Yeah, so when I started, Barry said, look at it i want you to build a business for the next 10 to 20 years right like everybody looks so short term in this industry it's this is this is for the long haul and i think 10 years from now i i really do think nation states will be in the mining business somehow some way and i think will be their first phone call to to help them through that process uh i also think that you know we didn't spend much time talking about but the proof of stake world i think is going to be

fascinating over the next uh five to ten years um it's still early on but you know these teams have been heads down building for the last three years you know even like today's a big day filecoin launched right like they've been working on this thing for three plus years and it just went live today and there's so many other proof of stake protocols out there that are going live that the teams have been working for years on and i just think that's gonna it's gonna be really interesting to see how that all all plays out absolutely i always ask the same two questions to everyone before i uh i finish up uh first is most important book what you got for me yeah so um so most important book i would you know i think there's different books at different

parts of times in my life that have been like the most important book um i'll tell you when i was a young kid i really struggled to read um so when like early grade school that's probably why i became an engineer because i wasn't good at reading and writing and um so now i love to read you know like now i just can't i can't take enough of it in but you know probably the most impactful book for me was a book called a grace given um by by a guy named Kent Gilgus. It's about a father's journey in losing his daughter. In 2007, my four-year-old passed away. She had a bad heart. It was a really, really tough time, obviously, in my life. I got a chance to meet the author and read the book. It was like, wow, here's somebody who was

having the exact same, you know, crazy thoughts I was having. And it really, it really helped me to know that I wasn't alone, you know, in this journey. And it really, you know, it was just a big impact for me. So highly recommend it. It's, it's, you know, it's a sad book, but it's also very hopeful book. And we've been blessed that we were blessed to have another child so um it's been uh it's been quite the journey yeah that's uh it's always um the timing at which you read books is almost as important as uh the actual book that you read right and that's something absolutely over all of these episodes uh has come out over and over and over again so uh it's a great recommendation uh the second one is a little bit more fun aliens believer

or non-believer uh yeah i'm a believer you know like the math just seems to be there i was thinking about this like we only discovered gravity like 350 years ago like there's 500 years ago people still thought the earth was flat like we know so little about about our own world let alone the universe that i just think there's so much more to to be discovered i mean even bitcoin bitcoin's only been here for 10 years you know like very true very very true um do you believe that we're in a simulation or are you just sticking with the alien stuff oh i was that that i wasn't prepared for that question um you know i love that you know those things are always fun to think about right like somebody

came back and satoshi came from the future and you know i don't want to go that far on that one Or, you know, like, you know, like the machines, I love the fact that we're building, we're building a computer that can never be shut down. And, and, and the computer is incentivizing us to go do it. And we are totally hook, line, sinker, we are all in and trying to build this thing as fast as we possibly can. you know transferring value is just one level on what's gonna what this thing's gonna be able to do um so yeah it's kind of it's kind of crazy i uh i tend to think it is uh absolutely wild that we found ourself in this situation but i'm glad to be alive right now me too what uh what one question you got for me to finish up so i don't know people have asked you like 400 questions or something so it's hard to and this one's probably been asked in the past but um what do you think's the biggest threat to bitcoin besides government takeover or you know 51 attack or

self-inflicted wound like somebody introduces code that ends up having a bug in it i think that's by far like that's the most likely thing to happen right i don't think that it is likely to happen But the thing that is, has the highest chance of happening is that even more so than governments or any of the other things that people love to kind of talk about. But it's still such a such a small, you know, chance that that would even happen, which also speaks to like, how unlikely it is that a government is able to shut down the Bitcoin network or a 51% attack happens or anything like that. um so self-inflicted wound definitely is one uh and then two is um you know somewhat tangentially related like it just takes time from like a branding and marketing standpoint like people you know i used to joke i'd walk into uh institutions and meet with their investment committees uh or their investment teams like oh this sounds awesome where can we learn more and like what am i going to be like well you can go follow crypto panda on twitter like no right like

Like, and by the way, like, that's not a knock against a pseudonymous account, right? Of any of them. Like, actually, that's where most of the best information is, right? Or like, oh, you should go to this Telegram channel. They're like, what the hell is Telegram, right? So it's like, by the way, that's where the best information is. So I think that like, it's just, it takes time to kind of build out all of the infrastructure and kind of sophistication that they're used to, to make them comfortable with understanding

it. And we're getting there. But, you know, it just takes time to do this stuff. Yeah, people ask me all the time, like, can you explain Bitcoin or blockchain? And I'm like, look, you can watch Netflix on your phone. Do you have any idea how that technically works? Like, do you know the difference between TCP and IP? And they're like, no, so don't worry about it. Just believe. what's the uh satoshi line like uh if you don't if you don't believe in bitcoin i don't have time to explain it to you that's crazy um all right mike listen thank you so much for doing this where can uh where can people find you and more about foundry on the internet uh foundry digital dot com is um i think the best place to get us um twitter handle for me is call your mic

um twitter handle for foundry is foundry services so yeah we're we're looking forward to uh the next 12 months i think it's gonna be a great it's gonna be an exciting ride i uh i tend to agree and uh i don't think anyone believes that you or i have any other opinion than what we have so that's right i'm sure on the table let's see what happens that's exactly it we've placed our bet exactly all right mike listen thank you so much for doing this we'll definitely have to do it again in the future. Yeah. Thanks, Paul. I'll see you. Bye.