The Wolf Of All Streets - How Everyone Can Mine Bitcoin | Whit Gibbs CEO of Compass Mining

Episode Date: July 20, 2021

China is shutting down Bitcoin mining operations, offering miners around the world the golden opportunity to capitalize and earn more Bitcoin. Whit Gibbs, the CEO of Compass Mining is bullish on the asset becoming more decentralized than ever before while the inherent risks of China impacting the network diminish. Compass Mining’s revolutionary business model allows anyone around the world to instantly mine remotely in a simple and cost-effective way. -- Matcha: Matcha is the easiest way to trade in DeFi. Matcha enables you to trade across all the major DEXs so you can be sure you’re getting better prices than going to a centralized exchange or Uniswap. Connect your wallet and start today at https://thewolfofallstreets.link/matcha --- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members

This episode is brought to you by Matcha. Stay tuned for more information about them later in the episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of All Streets podcast, where twice a week I talk to your favorite personalities from the worlds of Bitcoin, finance, art, music, sports, politics, anyone with a good story to tell. Bitcoin's meteoric rise in price and recent downfall has caught the attention of the world. But behind this volatile asset, miners are steadily

working 24-7 to secure the network and make money. Investors, including myself, have recognized this important facet of the space and decided to allocate some of their crypto portfolio to mining more Bitcoin. Today's guest is an expert in everything related to mining. As the CEO of Compass Mining, Whit has made it his mission to offer a fair opportunity for anyone in the world to mine Bitcoin and do their part in securing the network. It's my intention today to better understand how their strategy works, how miners have been affected by the recent market correction, and what's in store for miners for the rest of the year. Whit Gibbs, man, thank you for coming on the show. Scott, thanks for having me on, man. Good to talk to you. And now we're switching roles, right?

Because I came on yours a very long time ago. So it's nice to be on the other side of the mic this time. It is. I'm interested to see how this one goes. But I'm a longtime listener. It's good to be on here. I'm a believer that it'll go well. What can I say?

So listen, mining right now is a very, very hot topic. Obviously, within the community, as I said, people are looking at it, but also we have the Elon Musks of the world talking about it and shining a light on it. Are there some obvious myths circulating around right now that you want to dispel or shed some light on? So look, we have mining as the underlying infrastructure that supports Bitcoin.

So there's a critical amount of importance on it. And at this time, it seems like there are more eyeballs than ever focused on mining for two reasons. One, we have the massive exodus that's happening in China right now. They've announced that they're banning Bitcoin, shutting down Bitcoin mining. And despite all the times that they've said this in the past, this time it is for real. We are seeing massive data centers. And when I say massive, you have to imagine 60 to 70% of Bitcoin mining is located in China. And they have literally over the course of a month wiped all of that off the planet. All of those machines have been shut down, packed up,

starting to get shipped abroad, put in warehouses. It's a massive undertaking. And because of that, it's led to probably this last Bitcoin dip that that's, you know, part of the reason that the Chinese people who need to move their facilities, they've had to sell some of their Bitcoin in order to move them. So there's a lot of attention on that aspect of mining. And then the other aspect is the ESG movement, right? We have this battle cry that Bitcoin is bad for the environment. There's a lot of people who have been talking about the fact that Bitcoin consumes a tremendous amount of energy and that energy that it's consuming is dirty energy. And, you know, we're Bitcoin miners who are stealing power that would otherwise go to power people's homes. And that's just a blatantly false FUD cycle, right? Like Bitcoin consumes a very

small amount of power in the grand scheme of things, like less than 1% of the world's entire power consumption goes to Bitcoin mining. And the majority of the power that's being used by Bitcoin miners would otherwise go unused, right? Like all of the power that used to supply Bitcoin miners in China, most of that was excess power produced in Sichuan or Xinjiang. So now you have that also happening worldwide. There's a lot that we could go into for sure. But what's happened with Bitcoin mining is we've tapped the woke community. And if you give people who are environmentalists, who are headline readers, the ability to just grasp onto something and run with it they will and that's what we're now facing in the mining space well bitcoin used as more electricity than the city is a really good

clickbait headline right and so why even dig into it and if you see that you assume it's true like anything in this world and you just say bitcoin Bitcoin, bad environment, good, right? Right. Yeah. Oh, I mean, look, we all want a better planet. You know, there's no one that's going to say I want to leave the planet in a worse way than I found it. So it makes for a very easy argument.

But, you know, the power consumption associated with Bitcoin is actually a feature and not a bug. You know, it's a good thing that Bitcoin consumes the power that it does because that makes the network resilient. It prevents attacks. It disincentivizes bad actors to try to take actions, which could damage Bitcoin as a whole, which we have seen with other networks, other blockchains. We've seen Ethereum Classic get 51% attack multiple times, and that's bad for their blockchain. It's bad for the holders of those tokens, those coins. And we don't want that with Bitcoin. So it's great

that the network is built and designed in the way that it is. So I've seen some photos. Can you talk about the scale of this shutdown in China? You sort of talked about it a bit, but I mean, these look like cities, right? Full scale powered grids and their own towers and just as far as the eye can see, warehouses and racks. They are. And just any data center, if you think about it, is a massive footprint, whether it's your traditional data center or a Bitcoin mining data center, you're talking about, you know, 50 to 100,000 square feet for, you know, a good size data center. And in China, these get stood up in the, I mean, the only way that you can put it is it's ratchet, right? Like they're the most ratchet put together data centers. And the reason that they do it this way is so that it can be done fast and

cost effectively. But you're right. These are facilities that are stacked 40, 50 feet high. You have very loose building codes, really what I would say are non-existent, right? So they can be done and built in ways that you just couldn't duplicate anywhere else. And I mean, really, when it comes to Bitcoin mining in general, it's done by people in the past who didn't have traditional data center building experience. They were just crafty, right? They would duct tape together whatever they could

to get Bitcoin mining set up as quickly as possible. And in China, that is even more so the case. It's changed a little bit now. Now things are done more to code. But yeah, these takedowns now that we're seeing, it's basically undoing a decade worth of construction that's went into supporting the Bitcoin network. you go and you set up where the power is cheapest or where you can use that extra power. Most industries don't have that luxury. So I'd have to imagine that also has to do with somehow, somewhat how it's put together a bit quickly and sort of like Lincoln logs. For sure. It really does look like that, that they're taping it together, sort of like you said,

but that is unique because you're not reliant on any power. You can go to the power source and use that extra energy, right? Yeah. I mean, transmission loss is a very real thing with power, right? So if I create power in Texas, but I want to send that power to, let's say, Ohio, there's loss. So in that transmission of power, there's loss. So miners look to build as close to the source as possible, so they don't have to realize that loss. The funny thing is you could almost power the entire Bitcoin blockchain from the transmission loss of all power globally. So just the power that's being lost as we transmit it from where it starts to where it needs to go is generally enough to power what we need for Bitcoin. It's crazy. So it's leaving China. Where is it going?

Well, in China, it's a massive country, right? So they have to transmit it from where it's generated, whether it's hydro in Sichuan to the homes and other places. So even that short transmission of, let's say, what would be a three to four hour span if you were driving, there's still considerable loss. Right. So where are the miners going? Oh, the miners in China right now. That's a great question. Some have tried to go to Kazakhstan. Some are trying to come to North America. But in reality, there's nowhere for them to go right now. And we're seeing this with the block times of Bitcoin slowing down, with the difficulty dropping these machines that have been taken offline in China. There's no home for them. And it's a big rush right now for people to try to capture that business. We're seeing it in the States. We're seeing it in South America. We're seeing it in

Canada. We're seeing it in Russia and Kazakhstan. But because this is on the tail end of the 60K Bitcoin pump, Rackspace is at a premium. There already wasn't space. I mean, at Compass, we have 20 facilities that we work with in eight countries. And even going into this, we are, you know, for retail customers, we're filling about 10 megawatts of space a month. And it has been our main focus since day one to stand up more rack space. And retail is still relatively small in the grand scheme of things. We're looking at 10 megawatts a month when you consider that there's about 100 to 1,000 times that that's trying to move from China over to the States immediately. It's almost an impossible task right now.

So it's a matter of infrastructure and rack space, not a matter of demand in theory. It's just, they literally have nowhere to put them. So what happens to those machines as they depreciate in power and value? Are you guys buying them up? So we, we have been very fortunate to, to be opportunistic and pass those savings along. I know that you recently started mining with compass. with Compass and there's a lot of others that are now because the prices are in a favorable zone, right? A couple of months ago, you would buy a machine that was $10,000.

Right now you can get it for almost 6,000 and one day it will return to 10,000 in value. So it's a good value proposition for people who are looking to get started. It's a good time for them. Okay, so talk about exactly what you guys are doing because it's really novel and there's nothing like it. And when I wanted to get into mining, I was like, I'm not going to build a facility in my backyard. I don't understand the power

consumption in my local area. I don't want to buy the fans. I don't want to buy the equipment. And you basically explained to me that you just buy the gear and we do it for you. And it blew my mind. It blew my mind because I didn't know that something existed like this. And I think even before Compass, which is relatively new, it didn't really exist, right? In a limited capacity,

but basically with us, it was born out of necessity. When we started Compass, I wanted to mine Bitcoin, but I didn't have a ton of money to get started, right? So how do you tap into those economies of scale? How do you get cheap power? Where do you host these machines?

How do you even buy just one ASIC? Those are all questions that were very difficult for people to answer. And most of the community, the Bitcoin community, they didn't assume that they were able to mine. So when we launched, our goal was to make it so that everyone could mine Bitcoin very easily. So now it's super simple. You go to the website, compassmining.io, you pick your machine, and then that machine is generally tied to a facility that we've already verified.

And we create these nice little bundles. So it's one machine and a 12-month hosting contract. You pay for the ASIC. It is yours. You get the confirmation. And then a couple of days before that machine is set to go online, a member of our team reaches out, they get your Bitcoin wallet address. We help you connect to your pool. And then that's it. All the Bitcoin goes directly to your wallet and we bill you every month for power. Super simple. So you actually have a mining operation as opposed to how it used to be where you buy a cloud mining contract, which, in our opinion, was never advantageous to the purchaser. It took me less than five minutes. I couldn't believe it. And you were laughing because I was literally direct messaging you on Twitter. And I said, Hey, man, I want to be a miner. You said,

go to my website. There was no special treatment. You just said, go to the website, buy something and watch. And within a week, I was mining and it took less than five minutes of my time. I mean, it's absolutely incredible. I'd love to hear that. Thank you. Look, people want to buy. There's a very specific way that people want to do things nowadays, right? We're used to Amazon. We're used to Alibaba. We're used to these experiences where we can just go quickly to a site and get exactly what we're looking for. And mining didn't, it doesn't need to be any different, right? Where it should be able to be just as easy. So that's what we're always working towards. So I'm glad that it was simple for you. I remember

you told me you're like, look, I'm on the beach. I'm on my phone. Can I do this right now? I'm like, I literally did it on my phone while watching my kids like near a pool. Yeah, I'm at a hotel. So how long does a machine generally last? I mean, if you buy it from you guys secondhand or something like that, or just in general, how long are they usable? When do they become outdated, obsolete? When do new machines replace the old ones? Sure. So generally, we've seen new machines get released from the manufacturers every two years. But the useful life for a lot of these machines, I mean, and it's a nascent industry, so we're still mapping this all out. But if you look at like the Antminer S9s, which were released about six years ago now, we're seeing them still run just fine. As long as they start and they stay in good conditions and

they're kept clean, they'll run for as long as you'll keep them plugged in. Now, when it comes to profitability, that's the different side of the coin, right? Like how long are they profitable? All depends on the economic parts of the Bitcoin blockchain, whether it's difficulty or hash rate increases, the price of Bitcoin itself, how much you're paying for power. But in reality, I think that we're going to see these new generation machines that were just released this year, run for 10 years, as long as they're kept in good condition. That's incredible. So how much does the price of Bitcoin, you're talking about that, how much does

that affect miners? We always hear about sort of the minor floor or minor capitulation and sort of these terms, but I think, I think they're, they don't mean anything to the average person. They just sound scary. What does it actually look like for a minor? At what point do they have to really be concerned about continuing business? Or is it actually a boon to get in while the price is low? So it's like with the trade, right? You look at it just like your portfolio. If you were going to buy Bitcoin, you want to buy it when no one else wants to buy it, right? That's the ideal time to get in. And it's the same with mining.

You have to efficiently deploy capital. But for most miners, it's a huddle strategy. Miners are the most bullish people on Bitcoin, right? They're investing hundreds of millions and billions of dollars into infrastructure. So how we look at it is you should just always be looking to add to your mining portfolio. It's best to get in when the price is low because the price of the ASICs are low, because the economics on mining $3,500 are now sitting very pretty because they were able to lock things in at a time when no one else wanted to buy them. There was a time last summer, two summers ago, where the Antminer S9s, people were giving them away. If you can imagine,

they would say, look, if you will pay shipping, I will give you as many as you will take. Right now, each one of those machines is worth 350 bucks. So, you know, if you paid for shipping on a truckload of those, that's a ton of money that you now have, not to mention all the Bitcoin that you've been able to mine in the meantime. That makes perfect sense. So it seems like we have an interesting scenario here though, because price is down 50% as we're recording this, but it seems like we have an interesting scenario here, though, because price is down 50% as we're recording this. But it seems like demand is actually increasing because of China. So usually you would imagine huge correction. People start selling their machines. They start capitulating.

But now you have huge correction and people flooding into the space, it feels like. That's absolutely correct. I mean, we've noticed on our site that volume has went up almost 500% since the correction. And the reason for that is because on the Chinese side of things, the difficulty has dropped to its lowest point in almost two years. We're now seeing the total network when it comes to Bitcoin at around 69x a hash, which is crazy for how everything works with Bitcoin. When you look at the current difficulty drop, which is the metric which determines how difficult it is to mine a block for lack of a more detailed way of putting it, we are about to experience in a couple of days, the largest difficulty drop in Bitcoin's history. Almost

right now it's 25, 26% right now, which is nuts. So you want to plug something in, right? Like that's the name of the game is get something online as quickly as possible so that you can, you can benefit from this. What we feel is going to be really a golden era for Bitcoin mining. You know, a time when you have 60% of the network that's dropping off, it's probably going to stay off for quite a long time. So as long as you have anything plugged in, you're going to realize some very nice mining profits. Right. And, you know, everybody thinks of profit in dollars,

but you're just basically stacking sats, like you said, with your portfolio. So if you're stacking, even if the price goes down and you're not profitable for this moment, if Bitcoin goes to $100,000, everything you mined right now, while difficulty was low, triples in value. Right. Well, you know, the way that I think about it is, you know, especially now with us, you're able to take fiat and convert that fiat more efficiently into Bitcoin. So, you know, when you buy Bitcoin, one Bitcoin is one Bitcoin, right? As cliche as that sounds, whatever money you put in in fiat, you have to put in more money in fiat in order to accumulate more Bitcoin, notwithstanding leverage trading, which I'm not capable of. So it's

not something I would recommend. When it comes to mining, right? If I buy an ASIC, I can take my credit card, my debit card, I can buy that ASIC. I'm going to generate, generally speaking, whatever amount of money I've spent on that ASIC, I'm going to generate that value in Bitcoin over the course of 12 months. But I also have the ASIC itself, which is correlated to the price of Bitcoin. And at any time, I can sell that machine for Bitcoin itself. So it allows me to stack stats in a couple of different ways. And what we've noticed is a lot of our customers, they'll use this as a new hodl strategy so that they can keep getting out of fiat and getting into Bitcoin more efficiently. Yeah. Also, you mentioned that there's some, at least in the United States, some cool things you can do with your taxes if you buy a machine, correct? Yes. I recommend everyone have a good CPA. I'm not an accountant, but you can certainly

depreciate these machines over three years. Right now, that tends to be the standard. And there are some really cool things I think that we're going to see on the horizon with actually how Bitcoin mining is taxed. Right now, it's a bit of a gray area. When you mine it, it can be taxed as income. When you sell it, it can be taxed as cap gains. Depending on your accountant, they'll guide you to how it's taxed. But I think we're going to start seeing some definitive answers specifically out of Texas here in the next 12 months or so. So it's going to be more exciting. I know it's just conjecture, but what do you think that'll look like? I think that we're going to see it actually taxed as income. And I think that we're going to stop seeing every transaction that happens being taxed, right? Like every time you transfer Bitcoin or

every time you convert your Bitcoin to USD, right now it's a taxable event, but it can be a bit of a misnomer. It's not really taxed as it should be. We're definitely all paying more taxes if we're in Bitcoin than we should be right now. Especially if you're trading, it's absolutely absurd. Yes. And you can lose money on making money in theory if you don't realize gains to dollars. It's absolutely brutal to try to calculate that for anyone who trades or moves, which contributes so much, I think, to the investor and hodl mentality because it just eliminates the headache of trying to calculate all of it. Right. I mean, it's super confusing. And whenever I talk to my accountant, and most accountants nowadays are still fumbling around, they're getting familiar with it. But the old adage

that there's always take profit, you'll never lose money. Crypto is the one area where that's not necessarily true right now. If you're not careful, you could certainly lose money by selling depending on when you sell. Absolutely. So listen, it feels like Elon Musk sparked this entire energy debate. I don't give him as much credit as others do for moving the market so much with tweets. But I'm curious what your feelings are on his approach, because he seems to be vacillating, like he's just hanging out somewhere in the middle. Tesla bought, we have Bitcoin, we have diamond hands, but Bitcoin's bad for the environment and we're not accepting Bitcoin. But maybe we will, but maybe we won't.

You know, I think that, you know, everything that Elon Musk has done is a genius marketing move for Tesla. If you're looking at the masses, right? You can't argue with the fact that he's outperformed the market. He's done great things for his shareholders. People who hold Tesla have done phenomenally well. The challenge that I think comes with what he's doing is it's all a thinly veiled way to sell his ESG products, which I think we're going to start seeing in the next handful of months. He announced that Bitcoin's bad for the environment. And then there was also the announcement that Tesla was going to start moving into the ESG market or the carbon offset market.

So it's then it's then one hand washes the other. Right. Like I tell you, you're bad at something. But if you buy what I'm selling now, you're good. And I think that this whole carbon offset marketplace that's that's developing right now, it's very dangerous. It's a it's really just a scheme for a lot of people. And look, that's my personal opinion. I know there are people out there who find value in buying these offsets. And I'm sure that there are companies that are doing the legitimate thing that they should with the money that's being that's selling these offsets and actually doing any good with them with the money that's being generated. So I think that this is where Elon's coming in. His angle is just to try to sell more and generate more value for his shareholders, which as the CEO of a publicly traded company is his fiduciary responsibility. But I think there's a lot of people that are getting hurt in the meantime, like feel so bad for all these doge holders now. Isn't there an irony, though, in the fact that Tesla's run on electricity?

I mean, and it goes back to the debate, is how much electricity mining uses or Tesla uses or any industry uses is not as relevant as the source. Yeah, I mean, you have to look at how, how is a factory powered? Right. And that is really what it comes down to. So the car is going to be electric, but are they burning coal to actually build the electric vehicles? Like the grid mix that these factories are using, how much of it comes from renewables versus fossil fuels. And I think that when we start to drill down on those kinds of things, you start, you get a clearer picture of how the industry is actually forming.

It's like with solar and wind, right? If you look at a lot of how solar and wind materials are manufactured, they're manufactured using fossil fuels and slave labor in China, right? So even though they generate renewable energy, what's the cost of that energy being generated? You know, Steve Barber on Twitter is one of my favorite accounts to follow. He's just an absolute savage. And he talks about this constantly. So I think he has a very unique perspective, or I should say unique voice within the Bitcoin mining space on how he voices his views on all things ESG and carbon offset related. Guys, I really hope that all of you are not still trading on the old platforms like Uniswap

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Do it now. So do you think that the China move could be described somewhat as short term pain for long term gain? Because I mean, clearly, it clearly decentralizes the network, which is what I want you to talk about a bit more. But also, I mean, it's moving to more renewables and to countries where maybe it will be stronger regulation on the energy side. But wasn't it somewhat dangerous to have 60% to 70% of mining in one communist country? I think it's dangerous to have 60% to 70% of mining in any

country, right? Because then that means one country's regulation could do serious damage to Bitcoin. But that said, yes, I think long term, this is a positive for Bitcoin. I think the biggest concern that almost everyone voiced while all of that hash rate was in China is that we should be concerned about that hash rate being in China. So now it's going to be moving to different jurisdictions. It's certainly, I would say, a net positive. And you're right. Most of the energy that these people will be consuming as they shift is going to go to renewables and it's going to be built as such.

Now, the challenge is that short term, I think that it's unfortunately going to do serious damage to the Chinese miners who have spent a lot of time supporting the Bitcoin blockchain, right? Like they're going to take massive losses and they're probably going to sell a lot of their hardware for fractions of, you know, for pennies on the dollar of what they purchased it for, because they're not going to have any way to use those machines. So, you know, I'm sad for them. I am like, I think that we often can lump Chinese people in with the CCP and they're certainly not the same, right? And there are people who are being impacted here, which sucks. But long term for Bitcoin's network stability, it's certainly a positive.

That makes perfect sense. I mean, imagine building a business from the ground up, spending millions and millions of dollars to do it, and one day, your government just says you can't. Right. And as you said, you don't have an option. People think that, I think there's a general belief that they can just move somewhere else. As you said, you don't have an option. People think that I think there's a general belief that they can just move somewhere else. As you said, it's not possible. Well, I mean, also like in the in the US. Right. If the government does wrong by us, we have recourse. But in China, there's no recourse. What are you going to do? You can't. There's no Supreme Court for you to go and take the government's task. So it's just a completely different situation.

But you mentioned decentralization, right? And decentralization is critically important for Bitcoin. I mean, one of our biggest missions is to democratize hash rate, because we feel that by making it accessible to everyone, naturally it will disperse, right? Because if one person in Scandinavia can mine and one person in Asia can mine and one person in the US can mine, naturally things will spread out. What I look at with decentralization right now is the narrative is good, but it's still, as an industry, we're still, Bitcoin's network is being controlled by, I would say, 20 to 30 very large miners who have a considerable amount of the hash rate. So

I'm hoping that because of this Chinese situation, we actually see some of those very large entities have to break up. How much of a dent does it put having individual retail miners like myself who work with a company like you on that problem? At what scale would you have to see us coming in to be a powerful force like those 20 to 30 or 40 mining pools? You know, listen, the beautiful thing about Bitcoin is the power is in the masses, right? Like the people really do have the power. And I think that now that more people know that Bitcoin mining is available to them, we're going to be able to achieve in the next couple of years, 10% of Bitcoin's hash rate being controlled by individual miners,

which is what we're very excited about. And that's a very meaningful number. 10% is a powerful position for, you know, air quotes retail to be able to have. I'm curious. So I see a lot of traders, non-chain analysts talking about the correlation between hash rate and price. And there's always this argument, whether hash rate leads or whether price leads. I'm curious if you have any, any Intel on, on that, or there really is no answer. Price leads, technically. Price leads, you know, we're Bitcoin miners. I mean, when you think about self-mining, there's really four inputs. You've got price of Bitcoin, your operational expenses, the cost of your ASICs, and the cost of power,

right? So the price of Bitcoin dictates your actions. So if the price drops, I'm going to unplug my machines, which is going to then decrease hash rate. If the price pumps, I'm going to plug in more machines, which is going to increase hash rate. So that's really how it tends to work. Is there any threat to the security of the network at any certain loss of hash rate? Like you said, we're going to see a 25% decrease in difficulty. Now hash rates down 50%. So it's price from the top. Is there a critical level for hash rate? I don't think so because Bitcoin for one has a great self-correcting mechanism in the way that Satoshi has designed the blockchain itself, but also the economic incentive for more miners to plug in in times like this is important. Now,

despite China not being able to rack all of their machines, there is certainly still rack space available. And you will find that as difficulty drop and drops in the economics improve for everyone else who has the availability, we're certainly going to see more machines plug in. So short answer is no. But the beautiful thing is that because still we're in a place where there's not a ton of what I would call general knowledge about Bitcoin mining. There is a massive opportunity for the people who are paying attention to it to generate some substantial revenues. That makes sense. So what do you make of the fact that we are hearing politicians and billionaires now talking about mining? I mean, you've been in this forever. You guys have kind of just been underground. Nobody was talking about

you. And now you have this huge spotlight on you, but most of it is completely absurd what they're saying. It is. And, you know, we've been working at Compass with the Texas Blockchain Council to help with crafting the narratives. Because, I mean, I think of this a lot like the cannabis industry. You know, if you think back to when this all happened, no one was paying attention. And then the movement started and people were crying for legalization. And then the state started to take action. Right now, I think for Bitcoin, the best thing, especially in the United States, the best thing that can happen is that the individual states are the actors.

They're the people, they're the entities that should take action first. And we should really hope that the government just kind of lets things go. They let the states make the decisions and regulate for themselves, as we saw with cannabis. And the United States just has the same policies that they've had to this point.

I think that will be the most beneficial. So we're working on the state level with Texas and hopefully soon with the state of Florida to start passing meaningful legislation, which is positive for Bitcoin and Bitcoin mining. But the key here is that just like you read the headlines that some of these headlines can improve because politicians are people and they're susceptible to the same kind of biases. So we need to see that improve as well. I mean, it really shines a light on how influential a headline is, like you said, even with politicians, because no politician can know everything. And most of them are too old to care about Bitcoin at this point. It was always my

feeling that they just sort of hoped it would go away. And now they're having to pay attention to it because so many people are talking about it. But I think through 2018 and 19, they just sort of thought it would go away and they wouldn't have to learn about it or address it. So do you think that uneducated politicians regulating is the biggest threat to the Bitcoin network or is there something else? So I do think that that is definitely a big threat. But in the same token, I would say that they want to be educated. So a lot of the politicians, they're not ignorant for lack of trying. It's just that it's been very hard to get accurate information out, right? I mean, in mining, especially, it's an opaque industry where generally there hasn't been a lot of information that's been shared. So how do you research that, right? Like a politician doesn't have time to try to translate stories that are happening in China and figure out what's going on in the States and try to piece this all together. So I think that the most important thing that us as a community that we can all do is to really champion these causes that

are important to us, right? Whether it's mining or their aspects of trading or whatever the case may be, whatever your niches that you feel is important, that we have to start disseminating good information and leveraging the biggest voices in the room to start sharing that. And the Bitcoin Mining Council, which is something that Michael Saylor formed with Elon Musk and the big pubcos. Look, I tend to generally lean to the side of councils being a negative thing when they form in that way, because every example in will tell, right? Like those things usually don't happen because of the action of the councils. They happen because the actions of the council are paired with government bodies who then take what the council is doing and form regulations, right? So we'll see how that all shapes out. But the one thing that I think the council is a positive for is they have a tremendous voice. So as long as

they are going to use it for good, as long as they're going to circulate positive information, as long as they're going to start standardizing some of the data that's coming out about mining that actually is true and correct, then I think they will be able to do a lot with regards to educating these politicians. And I mean, God knows that like Saylor can go on the phone with anybody, right? So I I mean, he, I, him being in mining is, is whatever, like people are going to have their personal opinions about it. Do I think that he should be the voice of Bitcoin? No, but look, he's got a massive platform and the guy's bullish as hell.

So if he is going to have great narratives that he can share with politicians and it's going to benefit the space, let's go. Totally agree. I actually spoke with him yesterday and i think we did a podcast and it was almost two hours long and i think i said about 80 words total oh wow yeah yeah and he went very deep into all of this and i think actually he would almost agree with you you know i don't think that he necessarily believes he should be the voice of bitcoin he just happens to be the voice of bitcoin in that space at the moment. It was a very interesting conversation. I'm curious, how did you get into all of this?

I mean, knowing now everybody knows what Bitcoin mining is, but when you started, you know, it was a very, very nascent and small industry. Yeah. So, I mean, I saw Bitcoin in 2017 and realized that I wanted to make this my future. And the challenge was then what do I do? I was coming out of a job with a company called puppiespot.com, which basically is an online dog brokerage. In reality, and now that I compare the two, it operates very similar to how Compass operates. It's funny how that previous experience shaped that. But in 2017, bought the top, tried to trade for six months, realized that I wasn't very good at it. And then I saw mining

and realized that this is something that if invested in properly, it could generate some nice residual income. I built my first computer in Q2 of 2018 and realized that it was incredibly technically challenging. So I started the podcast. When I started the podcast, it was really just a way that I could start to get around industry leaders, learn from them. And frankly speaking, it was the only way I could get an hour with a lot of these people, right? Like you're Joe nobody and you reach out, they're like, I don't have an hour for you. But if you build a platform and you give people the ability to promote their product or service, it's much easier to get them on the horn. And, you know, and that was really where it all started through the Hashrate podcast, built a nice funnel, launched a, you know,

a mining newsletter with John Lee Quigley, and that eventually evolved into Compass Media. And, you know, with Compass Media, we then found a way to build the platform and launch it in October of 2020. And now here we are, which has been great. I mean, for us, it's always been about community. And it's always been about how many people we can serve. And I think that that's the most exciting thing now is we have the ability to just have great relationships with people, be friends with most of the people that are our customers,

and get more people into mining. What was the spark for you in 2017 when you said, Bitcoin is what I want to do. This is my thing. So in 2014, 2013, when I got married, my mentor at the time, his name was Tony White, and he had an electronic, this is when like electronic cigarettes were first getting started. He had an electronic cigarette business and he gave me a part of it as my wedding present, right? He was like, okay, you know, wedding present, this business has taken off. I'd love to have you come on and help with sales. I'm going to give you a part of it. And the company then sold in 2014. And when it sold, the buyer wanted to pay in Bitcoin. And I remember us having this conversation about this funny money, right? Like, we're like,

nah, like, we're just gonna have to pass on it. Right? So we did. And then I get back to Miami, I'm talking to my friend about it. And he's telling me how he's selling, he's selling, you know, products and services to gas stations. And some of these guys are paying him in Bitcoin. And so I like, I had that bug and I started to look into it. But at that time in my life, I was just like newly married, totally broke, didn't have any disposable income, was trying to figure out like, what did I want to do with my life? So in 2017, when things were more settled and this came around again, I'm like, all right, I got to take a real look at it. And when I started to look into the freedom that it really gives to people and, you know,

also using my conspiratorial brain and thinking all of the controls that we're giving up to the government and other entities, I saw this as a way to really take some control back for myself and my family. And that's what did it for me. And I mean, I was in hook, line and sinker. Like I literally quit my job, invested all of our family savings, also took out a loan and just went like balls to the wall. Had a conversation with my wife, like, look, we're going to live on the side of the road or we're going to figure this thing out. And, and that's what we did.

2017, 2018 was a very interesting time for us, but glad to see it all. Nice to have a spouse that'll go all in with you though. That doesn't always work out for the best. So that's certainly a testament to the strength of your marriage and relationship, I would say. It is true with a two-year-old nonetheless. So that's right. So interestingly, now we're at this time where you have your average person who views Bitcoin in the manner you just described, It's a way to save money for the future, to opt out of the system. But we Bitcoin. And now we have this sort of bipolarity where we cheer institutions and banks that people were supposed to be hedging against and opting out of because they helped the number go up. Right. So what do you think Bitcoin is for your average person now that we really do have some institutional adoption and billionaires and countries and companies talking about it? I think the average person just wants to make more money. If I'm honest, right?

I think that they just want to make more money. We're in a time when, especially if you fall in that 18 to 30 category, really, your ability to generate revenue, especially through the owning of assets, is diminished incredibly, right? I mean, I think the last stat that I saw, home prices are up 24%. You've got entities like BlackRock that are buying 20%, 30% above market price. So how do you get in where you fit in if you're a young person?

And I think that they view Bitcoin as this asset, this vehicle that's going to carry them towards the prosperity that they're looking for long term. And then there's a small sect of us weirdos who, you know, almost don't even care about the price of Bitcoin. We're just in it. Like this is just, this is just life. But the vast majority, they're just looking for a return. I mean, in El Salvador, now we're seeing Bitcoin accepted as legal tender, you talk about not caring about the price because you effectively just want to stack stats. Do you see a future where you could ever operate and live entirely in Bitcoin and really not care about the price? It is a tough thing to think about because I don't sell my Bitcoin right now, right? So I won't spend it. I won't sell it. Whatever I generate, whatever I buy, I keep, right? And it's not about the price appreciation, really.

It's about, I don't know what the future use case is going to look like, but I know that whatever that is, I want to have as much of it as possible when that time comes. But I do love seeing that people in El Salvador and other countries transact in it. It's very important for the network. And I mean, frankly speaking, for mining, there has to be more transaction volume in order for mining to remain profitable past the next couple of halvings. So there's going to come a time when more of us are going to have to start spending our Bitcoin for sure. Great question. So what, and you're the person to ask because there's so much conjecture, what happens when all the Bitcoin is mined? I know it's very far

in the future, but you just touched on it. After a few more halvings, you're going to have to assume that the revenue is going to have to come more from transactions and less from mining. Yeah. So I think it's very important. And this is something that I picked up at the Bitcoin conference in Miami. And I got to say, Bitcoin 2021 was lights out. That event, they did a great job. Bitcoin Magazine did. But the one thing that I felt is that the excitement was palpable for people to start building more on Bitcoin. We're coming off of DeFi summer and all of this hype where we're seeing what happens when you build on top of a blockchain. When ETH started to get used for all of these things, miners started to realize massive gains in mining Ethereum.

And coming out of the Bitcoin conference, internally as a team, what we were discussing is, we have to start contributing to Bitcoin core development so that there's more use cases, so that eventually miners are able to benefit more. Because as we go through these halvings, and as we eventually hit 2149, when supposedly the last Bitcoin will be mined, that time, there has to be transaction volumes to fill the blocks in order to keep mining profitable.

And mining obviously has to stay profitable in order for miners to keep their machines plugged in, which of course machines have to stay plugged in in order to continue to secure the Bitcoin blockchain. So what I think it all comes back to is contributing to to the Bitcoin developers. We've seen it with Stripe. I think BlockFi also just announced that their support, they're going to start supporting Bitcoin development. We are, you know, we're going to be supporting Bitcoin development more with some of the profits that are generated through Compass. We feel it's just very important. We feel like if you're a Bitcoin company, you should be spending some of the money that you're making on these developers so that they can build more on Bitcoin to increase these transaction volumes because it benefits all of us. Right. And we both just openly said we have no interest in spending our Bitcoin or effectively sending it to anyone. So

it really is a catch-22. Well, and I mean, DeFi is like, okay, take the blockchain that it's built on out of it. I think that DeFi is incredibly important for the world, but I think it should live on Bitcoin, right? And I know Sovereign is there as an example, but we can't just have one. If you look at ETH, you've got hundreds of these DeFi platforms and vaults and opportunities for people. We need more of that on Bitcoin. And that's only going to come through proper incentives. People have to make money to live. And it's just a fact. No matter how much you believe in Bitcoin, you have to take a job that pays you money because as much as you like Bitcoin, you probably like, you know, food and air conditioning and electricity more, right? So we just need to make sure that these people who

are supporting Bitcoin development have the funds that they need to live a good quality of life and be able to get the ideas and build their visions on Bitcoin. But I mean, is it your belief that the same things that are being built on ETH can be built and be able to get the ideas and build their visions on Bitcoin. But I mean, is it your belief that the same things that are being built on ETH can be built on Bitcoin? Can we have a robust DeFi platforms and system built entirely on Bitcoin? I think we can. Yeah. I think that there's certainly the ability for anything that's being built on ETH to be built on Bitcoin. Obviously, the blockchains are designed differently. And there's certain things that ETH has been built specifically for. But where there's a will, there's a way. And I think the best developers in the world right now are working on Bitcoin. So I certainly think it's possible.

Speaking of ETH, what does the transition from proof of work to proof of stake look like? And you talked about how profitable mining ETH has been, but one day they're just going to switch that over and those miners are going to become obsolete. Ricks. Yeah, for sure. I mean, it's very sad. For the mining community, I think honestly for the community at large, this is something that it's just a, it's a kick in the nuts because if you think about it without miners, ETH never would have got off the ground.

And now what they're doing is they're saying, thanks, but bye. And everyone who's now, you know, they've spent millions, millions of dollars on infrastructure to mine ETH. All of that infrastructure is now defunct. So it's just a slap in the face. I think that the transition to proof of stake will take much longer than ETH has anticipated because look, generally, I mean, dude, how long did it take them to do the Constantinople fork? I mean, it takes them a long time to do anything, right? And that's okay as well

it should because imagine if it goes wrong correct correct but so this is a situation where it's going to take a little bit longer but once it once it does happen i think that it will get the community support that it needs uh and right now there are so many people who would prefer to stake because they've made a lot of money in defy and they can do that than mine. I think that it will take and it'll stick and that sucks. But same token, it makes Bitcoin that much more attractive and it'll push a lot more people towards Bitcoin mining, which will make the network stronger. Right. Well, does the transition to proof of stake weaken their network in your opinion? It centralizes it for sure. I mean, it just left to our own devices, people will always move to the status quo, right? It's what we're comfortable with. So if you think of the banking system

and the banks are nodes, right? That's all that's going to happen with ETH. It's going to be highly centralized with people who have a ton of capital and they're going to be able to benefit while the people who are new to the system or don't have a ton of capital won't see the same kind of benefit, and they won't be able to participate in network security. Could somewhat look like Ethereum does pre-Eth 2.0, layer two solutions that work on the network and, or am I missing the point? No, I mean, that's the hope, right? The hope is that that is exactly what it can look like. I mean, I think that that's the most exciting potential for Bitcoin. We need to move it from this store of value to really a medium of exchange, but also a base layer protocol. It needs to be a layer one that people build on top of. So what do you think that life looks like for someone in El Salvador who gets airdropped $30 in Bitcoin? It's now legal tender. I'm just curious, you know, are they afraid to spend it? Because

El Salvador, as amazing as the news is, I absolutely love it. Obviously, legal tender, mining volcanoes, all this crazy stuff that we're seeing happening. Yeah. I also, nobody's talking about it, but I have a fear that it just goes wrong. And people don't use it or it just or somehow, you know, some external force like the World Bank or the United States or something put so much political pressure on them that they eliminate it and then nobody tries again. So yesterday I had the privilege of having drinks with some El Salvadorians here in Austin. The ambassador was touring a Bitcoin mining facility and one of her representatives or associates went out and we had some drinks. I think that they're actually doing it right. They're doing a lot of fact-finding right now. They're making sure that they are setting things up in a way that

is actually beneficial and they're listening. The one thing with El Salvador is because of the president's power there, they can actually enact the things that he says. He can tweet something and then it gets passed in Congress the next day, which is pretty amazing, you know? But the coolest story that I've heard out of El Salvador is that like this airdrop is, it's massive for their country. First of all, I think the, the monthly wage, maybe it's weekly, but it's like $7 US. That's the average. It's a huge amount of money to be given $30 in El Salvador. Yeah. Now the story that really impacted me is there's a guy that was talking about how he has to take a bus two hours each direction every month in order to pay his

utilities bill. And now he's got a wallet. He can just send Bitcoin, no bus. He gets four hours of his life back every month that he can be productive and potentially make more money, potentially earn more Bitcoin, spend more time with family, whatever the case may be. But all of these little changes, they add up, right? Because if you look at studies, like if this guy is a father, right? And let's say those four hours are the only four free hours that he has on a weekly basis. He can now spend that time sowing into his kids, instilling values, which will then allow his kids to further advance in life. And I think that this is a grassroots movement that we're really going to see the benefits

and the impacts of in the next 30 years in El Salvador. Yeah, the secondary effects are incredible, as you talked about. I mean, what's the point of storing value next 30 years in El Salvador. Yeah, the secondary effects are incredible, as you talked about. I mean, what's the point of storing value if it doesn't give you time? For sure. So even if it gets him off that little hamster wheel for four hours, it's a huge difference in that person's life. Like I said, I just have this sort of existential fear that like the IMF or World Bank comes in and sanctions El Salvador makes it just extremely difficult or, you know, makes it basically prohibitive for them to do it beyond their borders. What do you think that would look like? I don't really know. I mean,

some sort of sanction or saying that, you know, you if you're going to use this as legal tender in your own country, you're not going to be able to transact with other countries because in some manner it's, you know, although they use dollars, so, you know, or that they would block those transactions coming in from other countries, which we know that a huge part of the purpose of this is remittances. Obviously, I mean, in these countries, you have people who like the father gets out to the United States and sends money back home every month.

And listen, we've seen Bitcoin literally save people's lives in that regard in places like Venezuela. I know people who send $50 in Bitcoin to Venezuela every month and literally supports an entire family. It's crazy. And I mean, this is why we Bitcoin. The challenge I think that we're going to face is that states have to be waking up to the fact that Bitcoin success means the failure of the monetary system, ultimately. The two coexisting is going to be very, very tough. I'm just wondering when we hit critical mass and potential regulation comes in. and said, yes, I believe that Bitcoin should be everyone's retirement account. Huge words from a senator. And then said, because we're going to print money endlessly, which naturally debases and devalues our currency. I mean, that's a powerful message from a sitting United States senator. Absolutely. Absolutely. I mean, I hope people listen. I doubt it. So you're talking about Texas and Florida for mining,

but it seems that Wyoming is really ahead as far as, and maybe even Nebraska, they're saying, as far as regulation and obviously making crack in a bank. And Caitlin Long is there with Afonti Bank. So do you think that we'll see mining in Wyoming become popular? I do. I think off-grid will become more popular in Wyoming, especially when you're looking at like the Northeast corner where you have access to the gas that, I mean, it's the same, the same draw that people in the Dakotas are mining with

the Bakken. It's, it's, it's a very big parcel of land that I think can, can really benefit people who are looking to off-grid mine. It'll be a bit of a longer project just because right now infrastructure is hard to come by. But certainly, Wyoming as a whole, they've really led the pack when it comes to being pro-Bitcoin. And I think that they did it so fast that a lot of the companies within the state didn't really have time to mentally adjust to that change. But now that they're coming around, I think that we're certainly going to see more favorable conditions statewide when it comes to Bitcoin. And you're sitting in Austin, Texas,

as we're speaking, right? And you obviously talked about what the future could look like for regulation in Texas. Why is Texas so attractive specifically for miners? What is it with the electric grid? What's what's available there that that is making it such a hotbed? I mean, look, Texas is the world's the world's ninth largest economy, right? It's a massive center for energy, right? I think Houston is the energy capital of the world, really, if you think about it. And you have so much available power in Texas, whether it's natural gas or wind, and now a growing solar consideration here. There's so much power. And

I mean, let's not forget good old, you know, Texas crude and the oil industry, right? But you have so much available power. There's so much available land. And this is a favorable environment for any business to thrive. Right. No state no state sales tax. There's a ton of incentives that are provided when people are looking to move here to start businesses. And so far, Texas has been very forward thinking on Bitcoin money because they see the positive impacts on the community. Right. When you have the facility that was built in Rockdale, which there's a Bitcoin mining facility there, it's increased the tax base for this otherwise poor community. It's created these jobs that generally are very well paying. The one thing about the Bitcoin mining space is these data center jobs, they pay well, they have great benefits, and they go to people who would generally otherwise have nearly a minimum wage job. So they're not highly technical, but they allow people who would make $30,000 to $45,000 a year to make $60,000 to $80,000 a year and have benefits that are insane. And thosedale who came out and was very pro-Bitcoin mining because of all of the positive benefits that the community was able to realize just from this Bitcoin mining facility moved in.

And that actually has grown in the state. Now they know, like, look, we put one of these facilities somewhere. It's going to bring jobs. It's going to bring taxes. And generally, it's going to increase the quality of life for the community members. And doesn't that justify the energy expenditure, even if it wasn't renewable? I mean, isn't that the core argument against all this absurdity about the energy debate? Isn't the point of energy to better our lives? Yes. Yeah. But I mean, look, it's like I said, you have a sect of people, a group of people who are there. They're looking for a problem. That's it. They're looking for a problem. Maybe it helps them get reelected. Maybe it gives them a platform, maybe allows them to chase clout. But very little of it is based in actual benefit to humanity.

So when you look at the actual benefit that Bitcoin mining brings, they're tremendous. So it's hard to look at all of the facts and really be bearish on the potential for Bitcoin mining. Right. And we saw Suarez was trying to lure some of the Chinese miners over with cheap, clean. I love clean nuclear energy. I don't think people think of nuclear energy as clean, but it is. And cheap. What kind of energy? You talked about all the energy available in Texas, but from what I've read, which is a superficial understanding, a lot of it again is going to the source to wasted electricity. What kind of wasted electricity is there? Yeah. So in Texas, I mean, most of it is natural gas. There's a lot of the energy usage that we're seeing in West Texas, but you have the ERCOT grid here, which gives people the ability to draw from, right? And there's just

a tremendous amount of power. I was looking at a stat yesterday. There was 10 gigawatts of power produced by the grid that went unused yesterday, right? 10 gigawatts is more than the entire Bitcoin network, right? And so all of the Bitcoin miners in Texas, all of the people in Texas, every business in Texas were using all the power that they needed and there were still 10 gigawatts of surplus. It's nuts.

Where's that surplus go? It's wasted. So it's a loss for those businesses, right? Imagine generating a product or a service that no one wants to use. What happens then? It's wasted. You don't realize any profits from that. Potentially, there's government subsidies, which are paid to help you stay in business because people need power to their homes. So now the tax base is going to have to pay the subsidy that the government needs to pay the company so that they can continue to operate, even though they're generating this

power that's getting wasted.'s and it damages the environment i mean that's true yeah i mean if if energy is bad for the environment that wasted energy is the biggest crime of all i mean it depending on the source yes yeah i really it just Really, it makes your head spin when you start to dig into the absurdity of the argument. So listen, I know that we're running out of time here. Are there any final thoughts you have? And then please tell people where they can check out Compass, which I can't endorse anymore. And any parting thoughts people should know and where they can check you out and check Compass out? No, I mean, really, Scott, I'm just thankful that you had me on the show. I'm glad that we got you mining Bitcoin.

And I'm anxious and eager to hear how your journey goes from here on. So far, I know it's been good. And I'm grateful that you've given us that opportunity. And I'm hopeful that more people have a similar experience. You know, for anyone who's listening, all you need to do is go to compassmining.io and we'll help you get started. You can reach out to me on Twitter. Feel free to DM me. I'm at Bitcoin Broski, and I'll get you connected with someone who can help you if you want to get started. And our team is available 24-7, 365 for any questions, comments, any way that we can help people understand mining better or get mining more efficiently. We're happy to help.

Awesome, man. Well, thank you so much for taking the time. I love the work that you guys are doing. I love the product. And I hope that you can bring everyone together out there in Texas and improve the network. Thanks for having me on, Scott. I appreciate it, buddy. you