The Pomp Podcast - #737 How Everyone Can Become A Bitcoin Miner w/ Whit Gibbs

Episode Date: December 2, 2021

Whit Gibbs is the Founder and CEO of Compass Mining. One of the fastest growing mining businesses in the industry In this conversation, we discuss Bitcoin Mining, Geometric Hashrate Distribution, Decentralization of the network, and how you can invest and get in the mining game today. ======================= BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications worldwide. Circle is also a principal developer of USD Coin (USDC), the fastest growing, fully reserved and regulated dollar stablecoin in the world. The free Circle Account and suite of platform API services bridge the gap between traditional payments and crypto for trading, DeFi, and NFT marketplaces. Create seamless, user-friendly, mainstream customer experiences with crypto-native infrastructure under the hood with Circle. Learn more at circle.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. Now let's kick this thing off. Whit Gibbs is the founder and CEO of Compass Mining, one of the fastest growing mining businesses in the entire world. Whit and I spent a bunch of time talking about Bitcoin mining, geographic hash rate distribution, the decentralization of the network, and also the difference between institutional and retail miners. I really enjoyed this conversation. I learned a ton from it, and I hope you do as well. Before we get into this episode, I want to quickly talk about our sponsors. First up is BlockFi. BlockFi provides financial products for crypto

investors. Those products include a high yield interest account, a US dollar loan product against your crypto collateral, and a no fee cryptocurrency trading platform. BlockFi also just released a brand new product a bitcoin rewards credit card it's a normal credit card that when you swipe it you earn back bitcoin rather than cash back or airline miles normal credit card bitcoin rewards no cash back no airline miles it's awesome i've been using it now for a couple of months and i gotta say that not only am i earning bitcoin back but also there's a great feeling when you're swiping your card knowing that it's going to end up being much less expensive than it is today. Go check it out at BlockFi.com slash Pomp. Again, BlockFi.com slash Pomp to start with

that Bitcoin rewards credit card today. BlockFi.com slash Pomp. Next up is Choice. It's time to stop paying capital gains taxes on your Bitcoin and Choice is here to help. They are rebuilding the way Bitcoiners approach retirement by making it possible to invest in Bitcoin and 19 other digital assets inside your IRA. Right now, every time you make a trade, you have to pay capital gains taxes that can be as high as 37 percent choice enables you to trade real bitcoin other crypto and stocks without having to pay a dime in capital gains the best part they just released an ios app so you can open an account in less than 10 minutes and take control of your future from the palm of your hand join me and the 20 000 other bitcoiners who have started their tax efficient stack and open your

choice account today search stack sats in the app store or visit choiceapp.io slash pomp again choiceapp.io slash pomp. And one more thing, if you want to hold your own keys, Choice lets you do that too. So start stacking tax-efficient stats today and visit choiceapp.io slash pomp. Last but not least are my friends over at Circle. If you manage corporate or institutional funds, you're probably looking for ways to access opportunities in crypto. You see the growth and momentum and want exposure, but a lot of institutions don't know how or aren't comfortable with the risks of Bitcoin or DeFi. Now there's a new investment that's built specifically to help institutions get into digital assets. It is called Circle Yield. It's a blockchain-based

investment built with USDC, the leading dollar digital currency. Circle Yield is over collateralized and fully secured with Bitcoin collateral to protect your funds. This also makes it a great fit for crypto institutions who want to diversify their treasuries and reduce risks while staying on-chain. You get your choice of terms from one month to 12 months and a fixed rate that's higher than what you'll get at a bank or in many fixed income markets. Visit circle.com slash pomp to book a meeting with one of their experts. Again, circle.com slash pomp to book a meeting with one of the experts at Circle who will help you figure out how to manage your corporate or institutional funds or your treasury to earn higher yield. 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 all right first of all bitcoin mining i want to talk about the industry first i'll get into what compass does okay uh bitcoin mining is on an absolute tear in terms of the hash rate over the last five years or so uh there's all sorts of geopolitics that play into it just walk me through your analysis of how big is this thing how important is the actual network and the hash rate and then any

of the geopolitical stuff that you see yeah so there's a lot to unpack with with that right there but when it comes to bitcoin's hash rate the growth of bitcoin's hash rate is incredibly important because obviously as a as an asset class we want to see it continue to succeed and be secure. So we need more machines on the network to further that. The one thing I'll say is it's incredibly resilient, right? We saw China basically cut half of Bitcoin's hash rate off the network in June. And there wasn't a hitch in the giddy up when it comes to Bitcoin. Everything still ran just as it should. Block times continued on. It was a great period of profitability for miners. And now we're starting to see the hash rate climb back up as these machines go online

in different areas. But the cool thing about mining is we never know what country is going to go wacky, right? You have China that banned Bitcoin. Then you have Russia who started to constrict the energy supply to Kazakhstan. So Kazakhstan's hash rate started to fall off. So we're seeing all of these different geopolitical things that are leading to increased profitability for any miners that are plugged in, specifically those in North America that have continued to benefit from the support that they've gotten from different states like texas and kentucky that have really fostered the growth of mining within the within the u.s how much of this went from people were doing on their laptops to hey i got one or two you know

s9s or whatever kind of plugged away in a closet to then it became like more professionalized today because it seems like uh there's really big players now and we kind of sort of saw that beginning in china was the first time i'm with bitmain and some of these players where i was like whoa that's a big facility yeah now it feels like this is happening all over the world and people have woken up to the idea of like i can literally just sell this energy for a very very profitable margin like talk about the sophistication today versus maybe a couple years ago well i mean now it's now it's an actual business that you can plan on right before i think there was still just a lot of speculation around whether or not bitcoin would succeed you had the real believers who

continue to scale up their operations and those are the guys and gals that went from laptops to gpus to fpgas to asics and then focused on you know increasing the amount of machines that they had online but now what's happening is you have people that have large amounts of capital that are just entering the space and they're they're you know they're bum rushing the bit mains of the world to get as many machines as they can because they already have access to capital markets you look at some of these companies that were already publicly traded and then just pivoted into bitcoin mining basically and they have access to hundreds of millions of dollars they're able to get up and running very quickly and take a substantial amount of that hash rate and i mean

we've seen their stock prices appreciate accordingly because of how fast they were able to deploy and when you think about these companies uh historically they've essentially self-funded from the entrepreneur a very small group of investors they mined bitcoin then they had to sell the bitcoin uh usually a majority of it to be able to fund operations moving forward if they got into a bear market they didn't have capital to kind of weather the storm we got into the whole you know death mining spiral concern the whole thing um and usually at the bottom of the bear market people had to tap out right you got you got below some price and just hey i can't operate anymore i gotta shut down how has the capital markets changed for miners over the years

as well it seems like now people are very well capitalized they've got access to debt markets equity markets and and people on the investment side have woken up to this as well which makes it much better business uh at the same time of course i mean when you think about the amount of capital that's available in the united states especially right now that's just looking for a home it needs to find yield somewhere right you talk about all the time on the show if you don't put your capital to work, it's going to leave you, you know, and now you have access to those markets here in the States, all of these financial products that are available, allow miners to not have to sell their Bitcoin in order to increase their operations, they can take a loan out on the

value of their ASICs, and then just buy more ASICs, increase their hash rate, increase their profitability. And that's what we're really seeing as a trend. Now, you did have a situation where what was it in March of last year of 2020, where we had that black swan event where Bitcoin crashed, because of the financial services that were available. And you had a mass liquidation event of a lot of miners in China, which led to Bitcoin's price crash. But since then, you've seen a maturity in the space

that's allowed people to more accurately plan to avoid those kinds of situations now. And when you start to think about the average person, they're not gonna go raise hundreds of millions of dollars and go build Rockdale, Texas, the big facility. They're not gonna try to go figure out how do I buy discounted miners from somebody shutting down in China

and move it to my home country. They're like, dude, I just want to play. I just want to play, right? I was like, get me in the game. I think that's where Compass comes in, right? And you've got a couple of different products. Maybe walk us through your business in terms of what does the product suite look like

if somebody wants to get into the mining game? Yeah, so when we first started, our whole idea was we wanted to be this Airbnb for Bitcoin miners, give them an easy place to source their machines, an easy place to host them at a verified facility where they could feel comfortable that they weren't going to get scammed

and someone was going to run off with their hardware. They'd still get that Bitcoin directly to their wallet. And we've really just built up that product offering, which is essentially just a bundle where we sell one ASIC with a 12 month hosting contract. It allows you to get all of your Bitcoin directly to your wallet. You just pay for power every month. We also sell miners to people who want to mine at home. There are a lot of people right now who have really taken on this idea of mining KYC free Bitcoin. And the only way that you can really do that is to mine at your house.

So now there are people who are purchasing machines through Compass. we ship them directly to their door. And then they'll work with some of these consultants that are out there to, you know, retrofit their home to be able to take on these ASICs. So these are really the two main products. And we do a lot of sales for institutions as well, funds and family offices that want to get into their own mining facilities. They don't want to host with someone else. They want to achieve that cheaper power price. So they'll come to Compass and they'll buy, you know, a thousand to 5,000 machines, and then they'll build out their own facility. Can you break down in terms of which is the more popular product? And like,

how do you think about managing your business in terms of, do you do more sales and eventually you'll build out more kind of self-hosting? Is it more self-hosting and sales is a kind of a growing part? How do you think about the difference? So our focus is retail, right? Everything else that happens is a benefit. Like we, we take that as a bonus, but really our focus is helping people that want to get one to five miners, buy those machines and get them hosted at a facility around the country. You know, for this year, we've basically helped put about 45 megawatts of hosted capacity online for retail miners. It's about 95% of our business, but moving into next year, we've actually already secured 280 megawatts. That's going to be available for retail

miners. These people that are buying one to five machines hosted at facilities around the U S and Canada. We also will have facilities coming online in Norway, Paraguay, and we're looking at Peru and walk me through the economics right now. So let's say that I do self-hosting with you. How much do I pay for one minor or the equivalent hash rate? And then what can I actually earn today fully understanding not financial advice and this changes significantly with difficulty bitcoin price it's all moving target but like right now what does that look like yeah so just brass tacks when it comes to the numbers you're looking at machines that'll range anywhere from 10 000 to you know we have machines right now listed on our marketplace for 20 000 that

resellers are listing for it's crazy to think that an asic is selling for 20 000 but when you're looking at mining you're mining profitability depending on your rate your power rate it's about 30 bucks a day. You're going to make about 30 bucks a day. Your electricity for the course of a month, it's about 165 bucks depending on the machine, but it's a ballpark. So when you factor all of those numbers in, most industrial miners are looking at a return on their initial purchase price somewhere between nine and 12 months. They try to scale lower, obviously the, you know, the more capital they can put in, the better their economics. But for retail miners, if they're able to get in that sweet spot of 12 to 16 months, that's a good range for them. And that is measured

based on the US dollar value of the Bitcoin when I mine it that does not plan for any appreciation of the Bitcoin as it sits on kind of the balance sheet over time. That is correct. And it also doesn't take into account the appreciation of the value of your ASIC, right? When you're purchasing an ASIC, that asset is correlated to the price of Bitcoin.

So as an example, Compass miners who were purchasing ASICs this time last year, they were buying an ASIC for 3,000 bucks that now is selling for 20,000 on the marketplace. How many of them sell them later on for more versus they just run them until they die? so we're a year into operation right now our churn is effectively zero percent uh we do have

people that are that are selling their machines through the marketplace now the prices are what they are but effectively those new those new sales are just rolling into new hosting contracts as well got it so basically somebody bought a year ago for at three thousand dollars they've mined for a year now they're saying okay let me sell my equipment but when they sell the equipment they're literally just handing it to the next compass mining customer and they're pocketing some difference in whatever the the underlying hardware cost is that's correct because i mean the whole problem that Compass was setting out to solve is you don't want to get trapped, right? When it used to be that you would buy this hosting contract, you're locked in. You can't sell. Where

are you going to sell? You have to go and figure out how you're going to sell five ASICs or six ASICs to some random person. It was hard. So when we launched the marketplace, the idea was you can get in easy, you can get out easy, you can make whatever you make in the meantime, but it's just a seamless process. The whole idea is just taking that user experience and making it very simple for anyone to get involved. All right. I got a lot of nuanced questions here because I had my uh my uh fair share of mining in the past yes um and actually went pretty well uh when you think about the cycles of price to mining if you had bought a s9 let's say in 2017 at the top of the market you paid 2,500 3,000 4,000 dollars and you plugged it in yeah you got crushed you overpaid

for the equipment correct then you ran it right into the teeth of a bear market you had to mine for a really long time hold that bitcoin and but you came out on top if you were able to run the machine for two, two and a half years and hold all the Bitcoin. How do you think about cycles and like, is there timing the market, right? I'll put that in air quotes in terms of when to get into mining and when maybe not to get in, or do you think about it more as the time in the market of just the longer that you're in the market, the better off you're going to do? So I think that there's two dynamics here, because when you're talking about S nines, those machines were at 13 and a half terahash per second. That's just their, their computational power, easiest way to

think of it. But now we're getting to a point where the difference between new machines isn't as great. You know, you went from 13 and a half to basically 100 in the course of two years. Yeah, crazy. It's very hard to buy an overpriced 13 terahash machine and ever competitively mine with that, considering your power rates. But nowadays, it's time in the market. So before it used to be time in the market. Now it's time in the market. You want to get in, you want to look at this as a business, right? And we get spoiled in mining because we're talking about an asset that is going to break even in the course of 12 to 14 months. Where else in the world do you start a

business and you break even on your initial capital investment in 12 to 14 months? It just, it doesn't exist. I think as the market matures, we're going to see that expectation of 12 to 14 month break-even period start to go away. And we will see people start to approach this as more of like a real estate investment of sorts, where they're looking at this and, you know, instead of buying a rental property they buy an asic that's going to generate them that that ask that passive income does every energy producer have to get in this game like is it yeah at this point it's just like it's such a no-brainer you can sell the energy for more here than you can anywhere else in the world and so why are you not in the bitcoin mining game i mean it's not only that

it's just they have excess right so you're producing this excess energy that what do you do with it if you're not doing anything with it do this with it and make money right produce bitcoin even if you don't sell the bitcoin you just hold it on your balance sheet we've seen already, companies that hold Bitcoin on their balance sheet, it makes their stock appreciated at a value that is insane. So why not just take what you're already producing, mine some Bitcoin with it and just let it sit there? Yeah. When you think about the access to capital markets, how many of these miners are borrowing capital in order to do this versus using equity based investments? Like is the debt market mature enough now where that's really where people

are going more so than the equity market or is there still pretty good balance? No, it's mostly debt now, right? The bigger companies are focused on debt. You'll see some equity raises every once in a while, but right now it's basically focused on debt. I mean, there was a grid, grid infrastructure. They raised, I think, 525 in debt, 525 million in debt from blockchain.com. And then they just announced that they're spacking at a $3.3 billion valuation, right? That was all within the span of a week or so. So this is the pattern now. We're seeing that this is the way that people are looking to raise the capital to expand their operations. Yeah. And it feels like the more public companies we get in the mining business, the more that sophisticated investors will wrap their head around the business and they'll start to understand it's a cash flow business and it's a great cash flow business. How long do the ASICs actually last in terms of if I buy one today, brand new off the shelf, what should I expect? 18 months, 36 months? We don't know yet. How do you think about it? You can appreciate them over three years, right? But I think usable life is going to prove out to be five to seven years. When you look at the S9s, which are tanks, they're the Air Jordans of ASICs.

They're still running, right? Like you're talking about the GOAT. These things came online in 2016 and they're still running strong in Venezuela and these places that are not great conditions, right? They were coming out of China where if you've seen any of these Chinese mines, they're not the most clean.

They look like they're duct taped together. These things are still going strong. When you talk about now data centers that are built specifically to keep these ASICs free from debris, free from dust, very clean, I think we're going to see the new models run for a very, very long time. The Air Jordan of mining equipment.

That is a great way to describe them. One of the other mistakes that people make, and I say this because I made this mistake, was I've talked about it now a couple of times. I think I started mining with GPUs first, not ASICs. I was mining ETH. There was a guy, JP Barrick, who was a young kid, came to me and basically pitched me on mining.

not as a hey here's what bitcoin or crypto is just like there's a cash flow business you understand data centers or data been the data center business and so uh we started mining and we started mining maybe it was like 10 bucks uh for eth right so pretty early on and it quickly went this is in the beginning of 2017 with 10 to 30 to like 100 and i'm pretty sure that we sold everything or almost everything at like 150 bucks and thought we were geniuses right like oh my god this was amazing sure in hindsight that was one of the stupidest financial decisions i ever made but we didn't know that at the time of course how do you think about whether it's uh gpus a6 whatever people holding it on their balance sheet versus selling it because they quote unquote think they

made a profit because it's appreciated on the balance sheet like do you talk to miners about how they think about or how you think about like what they should be doing there so hindsight is always 2020 right trust me i know so i mean look whatever you sold that for you rolled it into other opportunities that probably have done very well for you as well but when it comes to mining it's different strokes for different folks if i'm looking at bitcoin mining i think it's very safe to hold a heavy percentage of what you mine on your balance sheet because over time we've we've seen it right bitcoin the ngu technology is real right number does just keep going up so why sell it if you don't have absolutely have to when it comes to gpu mining it's more speculative i know

there's eth and you know people think what they think of that but i started out as a gpu miner most of the gpu mining that people do is a speculative speculative play um and in those cases you don't want to hold it for too long you want to make sure that you're able to achieve whatever you feel is that comfortable number and get out while the getting's good because if you don't you're going to get trapped in that effectively you're going to get trapped in a trade that's going to have you know not as much liquidity as you're going to need to get out when you want to yeah and then how do you think about servicing these right you know so if i have a big farm a thousand machines obviously some of them are going to break etc like what does that look

Like back in 2017, 2018, if you didn't have the technician there on site, you literally would have to take it, you have to ship it, they would fix it, they'd send it back, and it was kind of a pretty big process. Part of, I guess, what the cloud mining, if you will, or the hosted mining, is that you guys have folks there that are actually able to do this, and the individual retail investor can think of this more as a financial investment rather than like, oh, shit, is the power on? Did I have to fix the machine? Is that a way to think about it? So there's always going to be problems with machines, right? Fortunately, now the failure rates are much lower than they used to be. the S-17s had a failure rate of like 22, 25%, which is nuts if you think about it. 200,000 of your million dollar investment is down the drain. The challenge right now is that the queues are

very long for repairs. So if anything does happen, you're looking at a machine being offline for two to four months for it to get repaired. So we do staff up our facilities to make sure that things can get repaired quickly if there's some small thing that needs to be fixed. But the one benefit now seeing North America's hash rate grow is that the return process or the RMA process, if there is machine failure, you no longer need to send those machines back to China and wait. There are repair facilities in the United States that are accredited and they've got the certifications to do those warranty repairs here. Got it. What questions you guys got? Is there insurance on repairs like that? Like, do you guys offer insurance for people? So Compass is launching an insurance product here in

the next 30 days that will be available to retail miners. Right now, everyone is required to have insurance per their hosting contracts, but no one offers insurance to retail clients, right? There is underwriting and insurance policies for people who are purchasing, you know, 100 to 500 to 1,000 machines. But, you know, these people don't want to take on the paperwork to underwrite a $10,000 unit. So Compass is launching that product to help service the customers that we have. And what percentage of your clients are what we'll call like more institutional clients versus retail clients? So when we started, it was, you know, three or four big buyers supported our entire business, which kept me up at night because that's... Who were they?

Scary. Are you allowed to say? I can't say. Okay, all right, go ahead. But but now it's about 98 percent retail. The majority of our customers now are people who are buying one to five units. The average purchase on the Compass website is 20,000 bucks. So you figure two miners and we are excited for that.

Right. We hope to scale that business more because we feel that that's what's really going to help to decentralize Bitcoin's hash rate. You know, if you look at all of these big miners, you basically got call it 25 boards or decision makers that are controlling the majority of Bitcoin's hash rate. Not really decentralized. Right. If you can get all of Bitcoin's hash rate in one room, and let's say somebody was to take that room out and now Bitcoin's hash rate is in jeopardy, not really a decentralized thing. We want a million miners held by a million ASICs held by a million miners everywhere around the world so that we can truly decentralize this and strengthen Bitcoin for the long

term. Gotcha. And what does that liquidity look like on your marketplace? Should someone want to sell it? Say they buy them six months later, they realize they don't want to do it anymore. They go to sell them. Is that a quick process? Does it take longer than, you know, a week or so?

So as of right now, if they're priced appropriately, they sell within 30 minutes. Oh, wow. So you post it with a contract that's going to sell within 30 minutes. It depends when it'll go online. But if you've got something that's running right now, you'll achieve a nice premium and somebody will buy it right away. Even the machines that are priced at 20,000, people are buying them right now. So it's a pretty quick process.

You'd have to KYC. That takes a couple of days. But from the time you start the process to the time you finish, including the sale and the transfer of either the fiat or the Bitcoin to your wallet, it's about a week. And how do you guys think about selling new units versus old units on the marketplace? So we do, I mean, we sell new units as well, those that we source from either distributors in China or from the manufacturers directly.

But it all just comes down to what people want to sell. So we'll put the new units on there, someone will buy them, they'll hook them up, they'll mine with them for a little while, and then they'll sell them as lightly used to a new buyer. But in reality, because of the usable life of these things, even if it's a year old, it's a solid purchase, and you're really not seeing any decrease in price for the age of the unit. If something's a year old, it's going to sell almost at the same price

to something that's brand new. And how did the taxes work from a depreciation standpoint? So that's a question for a tax accountant. Somebody who's going to provide you that information. Just curious, I'm not doing anything. But you're able to depreciate that over the course of three years,

which will help to offset your income. When it comes to the market as it stands right now, one of the things that's been very interesting is that most ASIC sellers, they don't actually assess taxes. So when we were looking at people who are distributors within the United States, they were basically not charging taxes on a lot of these things so when we went through and we

did a nexus audit on our taxes uh just to make sure that we were doing things by the book it was one of the the weirdest things that we saw you have hundreds of millions of dollars worth of asics moving through these different sellers around the country that nobody's assessing taxes on eventually uncle sam's going to come calling right so when we look at our prices versus some of the prices of competitors you'll notice that ours are a little bit higher and that's just because of the taxes that are included in there right just trying to make sure that we're doing things on the up and up as much as we can as much as nobody likes to pay taxes john what questions you got for the non-technical person can you walk through just hosting like you guys take care of

everything it sounds like yeah so basically you go onto the website you pick your asic once you add that to your cart we let you know which facility it can be hosted at if there are multiple choices then you can pick which facility you'd like it to be listed at you add that facility to your cart you check out pay with you know cash card crypto whatever you prefer and then we notify you about a week before your machine is going to go online we get your pool information if you need help setting up your mining pool address or your mining pool account and getting your your bitcoin address connected we can walk you through that as well and then once that's done you're off to the races we help you connect everything you're mining directly to your wallet and then you just

get your power bill every month and you can pay that again with cash card or crypto and then jack dorsey got into mining recently with you guys can you talk a little bit about that or so you know the cool thing about this and um it's just it speaks to his character we didn't even know until the tweet like there was no special treatment he just went through the website made the purchase i found out like a day before he tweeted and it was really cool i mean it it validated for us how easy it was for people to use um and also like i said it just spoke to his character that he wasn't looking for any kind of special treatment he just really wanted to get mining he wanted to see the experience of it and yeah okay yeah very cool when you start to think about uh mining on the

geopolitical um kind of scale if you will so we've got el salvador they're in the game now with the volcano mining china obviously was doing all kinds of stuff uh i'm not going to say where i know this from but venezuela they're mining uh there's other countries that are mining sure um maybe not the most friendly to the united states what do you think is the milestones or inflection points where we go from uh maybe countries that are uh not so friendly to the united states and or small countries like el salvador um mining to everyone's money like what's it gonna take for the united states to start mining the united states is already mining okay maybe maybe i know they might have like 10 or 20 megawatts running somewhere in the midwest to test it out maybe

it's hypothetically speaking but it's it's a matter of national security right when it comes to mining when you're talking about what bitcoin is right whether it's a store of value it's or a medium of exchange it is the future financial instrument that many many things are going to be built on top of uh nations would have to be absolutely out of their mind to not be getting some exposure to the underlying infrastructure which supports it so the u.s i think is on the front foot we've done we've had a lot of conversations with uh the government in dc state governments to help to educate them but they are very forward thinking when it comes to uh to supporting this but i think that what we're going to see and we're seeing it already

is nations around the world who want to move from the third to the second to the first class, right? They want to become these first world countries. They now know that being early with this will take them there. The move in El Salvador is going to be a big one that proves out in 20 to 30 years. I want to play a game with you.

It's called like a story poker. And so I'll tell you one story then you got to tell me one in return. So I know for a fact that there's a federal law enforcement agency that was mining Bitcoin in 2012, 2013. very early on, and what they realized was they couldn't get the budget to go buy Bitcoin

in one of the exchanges and then use that in undercover operations. So what they did was, it was very easy, though, to get budget approved by computers. Of course you need computers. So they bought mining equipment. They mined the Bitcoin. It also was untraceable. It was

basically, you know, virgin Bitcoin, if you will. And then they would take that Bitcoin and they would use it in undercover buys, etc. sure they could trace it somebody who uh participated in this told me this one time after they had left wow i was blown away i was like man it's and not only to be doing it the way they did it it made sense um kind of uh in hindsight as to why they would get computers approved versus go purchase directly uh but also to be doing it that early very very good your turn you tell me a story so so this is how you get in trouble right but i will say there is a there is

a north african country uh that it was a a hot spot for for the united states a few years ago a movie was made about it there may have been some emails that a person didn't manage properly that caused some issues um and they are now getting into bitcoin mining and uh it's actually at the presidential level that they are they're looking to do this um there's also you know i live in latvia for the majority of the year there's a very close neighbor of latvia that uh you know may have stopped a plane not too long ago to remove a journalist um they are mining bitcoin with nuclear power so you have countries now that i mean compass can never serve because of of lists and and sanctions they are all mining bitcoin and i don't believe that they're mining

bitcoin to skirt sanctions i believe that they're mining bitcoin because they see it as the future and they want to they want to boost their economy they want to they want to grow correct grow that wealth why aren't they talking about it publicly why would you most most miners don't talk publicly about their operations because it's just a threat vector, right? If you're not a public company that needs to pump your stock, why talk about it at all? Stack in silence and just be happy with that. Yeah. All right. I got another story for you.

A lot of people don't know that North Korea, one of the biggest revenue sources now, comes from either hacking exchanges or mining as well, right? If they basically have access to it. I've read a number of reports that have talked about how they have sanctions. They're cut off from the global financial system. There's ways that they can do other things

that end up being pretty effective. When you look at places like Venezuela, North Korea, others, it feels like those countries are doing it out of necessity. Developing nations, they're not bad actors, they're not adversaries necessarily to the U.S., they're also doing it out of necessity. They want to move forward their economy. When do maybe non-U.S. developed nations,

when is france or spain or the uk when do they get in the game not because it's a necessity but because like we're going to get rich right we're going to benefit from this economically and it is uh more so the innovators dilemma and we're going to disrupt ourselves on purpose because we see this as the future versus we got no other shot at you know leapfrogging all these countries so like screw it let's go all in and see what happens they'll probably be late right i mean this is all cyclical so you're going to see the countries that are that are the first movers that are forward thinking, they're going to get into the game. And by the time the bigger established countries want to get in, you know, they'll come and they'll throw a bunch of money, but they'll

be late to it. So the United States, I think, will be among the first of the developed nations to come out in support of Bitcoin mining, just because it's a massive, I mean, you're talking about a multi-billion dollar industry now within the borders that they're able to tax. They're not going to, you know, shun that revenue or send it somewhere else. France, Germany, the socialist states of europe is going to take them a while i mean they they creep their government creeps it moves very very slow yeah well they all got suits and ties and act really important i got two more questions and then i will let you go uh first is talk to me about the energy mix uh so we've seen obviously all the nonsense about china sure now we've got uh texas is becoming a huge hot spot

number of places in the midwest uh here in the u.s we've got the bitcoin mining council we've got people publishing energy mix like just what's your read on the whole is it environmentally friendly is it not does it matter uh what is the mix like how do you think about it so when i think about energy just in general right when you talk about the advancement of any society it requires the consumption of as much energy as possible the one thing that we're going to start to see in the united states because of like the decommissioning of power plants we're going to see rolling blackouts right business cannot happen if there's no power for buildings so we're seeing new york and california and other places be impacted and we'll continue to see that um so where i in my

read on the energy consumption of Bitcoin is that it's a feature and not a bug. We want the network to consume as much energy as possible. Now, when it comes to the mix that people are using, Bitcoin miners are always going to gravitate towards the most plentiful, cheapest sources of energy. And for the most part, those tend to be renewable, those tend to be hydro, those tend to be nuclear. So we're going to see the gravitation towards those naturally. The information that's being put out by different actors, whether it's the Bitcoin Mining Council or these other public companies, they all have motives for why they're doing this. You know, my guess is that when it comes to, let's say, the Bitcoin Mining Council, and, you know, Michael Saylor has done a lot for

Bitcoin, so not to pick on him too much. But when you think about BlackRock, right, which is a big owner of MicroStrategy's shares, they are big proponents of ESG. And having someone on your cap table, or someone that holds that much of your available shares that's a proponent of something it's going to force your hand on certain matters which i think is why he's been involved and he is now on the you know the front foot trying to put more information out about the energy mix that bitcoin's using talking about to finish up the decentralization of the network uh 60 plus percent was in china and other asian countries now it seems like maybe the u.s has got like 25 or so uh of the mining uh we've seen wyoming recently come out so they want five percent

of the hash rate. We've seen Texas come out and say that they want 50% of the hash rate. We see other countries that obviously are getting in the game. How do you think about decentralization? Is there a healthy percentage that a country should have? Should we be concerned if all of a sudden the U.S. had 75%? Like, would that be a downside? Like, just how do you think about that? Bitcoin's non-state money, right? So if you take the ability to print cash from any government, you steal their thunder i think that it's very dangerous for an overwhelming majority of bitcoin's hash rate to be located within any country any country's borders i think that you know before it was 60 in china we're going we're going to see it creep up on 60 in the united

states and bitcoiners will again be up in arms about the fact there's too much hash rate within america's borders what we will also see though is a diversification out of these two main countries we'll see some in canada we'll see in the united states we will see in south american countries and what I think will be the natural effect is that Bitcoiners will then focus attention on new developing nations where they can put this hash rate and those nations will be open to welcoming it because they understand what a boon it will be

for their economy to bring that in. So decentralization is very important. Having too much hash rate within any country should worry every Bitcoiner but I think that as just a function of this market Bitcoiners will naturally look to move hash rate out of countries that are amassing too much of it. How much of your business is in just the United States

versus other international countries? So the majority of our customer base is in the United States. The majority of the hash rate that we're managing for customers is split basically between the US, Canada, and Russia. We have a big part of our machines that are running in Russia right now. And do you own the real estate? No.

Is that McDonald's, bro? No, I'm just saying. Airbnb, right? Think of it like Airbnb. So these facilities come to us and they say, hey, look, I've got this space. We verify them, right? We make them a super host, if you will.

And then they can list on our site. Gotcha. Did you guys raise money? Yeah, we did. We raised a small seed round in December, January of last year. You looking to raise again? We may, we may, we may be in the process. Damn, John, okay.

We may check the valuation. John's got his checkbook out, ladies and gentlemen. John ain't even no Bitcoin out on the show, but John might be stroking equity checks. All right. Damn. Okay. Seems profitable.

How much would it cost if each of the three of us wanted to start with just one machine? How much does that cost? Right now, about $15,000. $15,000? Including your deposits, yep. All right, and you said it's about $30 a day, $35 a day, basically? Starting when they go online, which right now,

the earliest available time that we have is May. However... Oh, god damn, what y'all doing? Y'all walking to the facility? However, we have 135 megawatts that begins to come online in January, and then we have another 100 megawatts that begins to come online in March. So by Q3 of next year, we'll have 250 megawatts online. That's available to sell.

And that still means that people who order today, like May or so, is when it'll become live. That's when we have sold it, yeah. So here's the best part is, I feel like you're under-promising trying to over-deliver. Remember that the Tesla cars that were supposed to come out in April or May, I just saw that they pushed them back to 2022.

The trucks? They got whistles now. Here's a whistle to buy in. gonna release another flamethrower just to distract people yeah no he just did a uh a whistle so you can blow the whistle on tesla paying 50 you can blow the whistle on him that's pretty good right good guy meme lord right there he is um all right where can we uh where can we send people to uh to find out more uh which is compass mining.io that's it compass mining.io go there get started in 10 minutes you can get your setup going and be online in may

all right um and then what uh where can they find you on uh on the internet i am at bitcoin broski on all social channels uh it still just can't break away from it man it's an old coin broski bitcoin broski so let's i got it let's go that's a great one if you give that one up and somebody else gets it they'll never give it back you two got any more questions no no i appreciate joining you sure having me fellas you sure yeah all right how long are you in miami for i'm here until tomorrow and then heading to austin to austin what's going on austin seems that they're blowing up with uh bitcoin right i mean i grew up in miami so it's nice yeah it's nice to see all of the growth down here it's awesome to see what mayor suarez is doing to bring business here

very politician answer go ahead but austin is the bitcoin capital of the united states yeah i actually uh right now i would agree with that i think that uh texas in general yeah and a lot of it is because you've got the uh the miners it's true you can replicate investments you can replicate holders you can replicate a lot of other things but you can't replicate the miners i mean it's also all the energy right yeah all the energy there as well In hindsight, it makes complete sense. I think people for a while have thought that this was going to happen.

And I think part of what to me has been the most interesting is this isn't Bitcoin trying to infiltrate oil and gas. What you're now seeing is the oil and gas folks say, wait a minute, teach me about this Bitcoin thing. Like you Bitcoiners are smart. I like you guys. Like maybe you can help us, but like we're the oil and gas experts.

We're going to go play this game and no one can compete with us. And I think that ends up being a pretty, pretty defensible moat there for Texas. Absolutely.