The Wolf Of All Streets - Mining Clean Bitcoin For Profit | John Warren, CEO Of Gem Mining

Episode Date: March 3, 2022

Bitcoin mining has quietly taken the world by storm, as the network’s hash rate has continued to grow at unprecedented speed. John Warren from Gem Mining, one of the largest private U.S. miners, came on the show to discuss the current global mining environment and why many of the popular myths in the media are false. It’s his belief that mining is one of the greatest arbitrage plays in the entire space and the opportunity is still growing. Both John and I believe that miners are the unsung heroes of Bitcoin and probably forever will be. -- Secure your assets, secure your future, with Arculus. Arculus is the crypto cold storage wallet that combines the world’s strongest security protocols with an easy-to-manage app. Store, swap, and send your crypto all with a simple tap of your Arculus Key™ card.  Order the safer, simpler, smarter crypto cold storage solution today at https://amazon.com/arculus --- 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 sponsored by Arculist. Stay tuned for more information on them later in this episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of Wall Street's podcast, where two times every week I talk to your favorite personalities from the world of Bitcoin, finance, music, trading, art, sports, politics, basically anyone with a good story to tell. One of the main narratives in the crypto space over the last year has been crypto mining with regards to energy and very much with regards to what happened in China last year.

A lot of that FUD, fear, uncertainty, and doubt has been cleared, paving the way for miners in other countries to really grab the hash rate and start running with the industry. So I have the CEO today of Gem Mining. His name is John Warren. in other countries to really grab the hash rate and start running with the industry. So I have the CEO today of Gem Mining. His name is John Warren. John, thank you so much for joining me to talk mining and all things crypto. Thanks, Scott. Happy to be here. So first of all, why did you start Gem Mining? You could have done anything that you wanted to in the world. You decided to become a Bitcoin miner. I mean, my background as a Marine infantry officer and then came out of there and no

one wanted to hire me because they said I had no skill sets. So then I started ultimately what turned out to be a multi-billion dollar originator geared towards lending for real estate investors. And when I had a couple of friends in mining and when I started really analyzing, I sold the previous company in August of 2019. And when I started looking at the actual miners and the arbitrage that they produce, I mean, the yield is just unbelievable. It just comes in a different currency, which is BTC. And that's kind of how I started because I said, wow, these yields are unbelievable. I compared it to a mortgage and it came in the form of BTC. And quite frankly, my opinion of BTC has changed dramatically as my opinion has of the dollar. And I now believe in

the BTC a lot more than the dollar. So that's how I got into it. It's funny. I think a lot of people start down the rabbit hole for profit and then find their way to the actual importance of Bitcoin. That's how I was. I started as a trader in 2016, 2017. I was just trying to make more dollars. And then of course, through the crypto winter, really started to do my diligence and understand why Bitcoin was so important. It's a very familiar sort of path, I think, that we hear. But it was already 2019 for you, right? And so that means that you also started for profit not so long ago, saw, as you said, that arbitrage opportunity.

Can you talk about that arbitrage opportunity that's available to miners? I think a lot of people aren't aware of that. Yeah, I mean, when I talk about the arbitrage, I'm really talking about the difference of profitability for the mining compared to just investing in the currency. I mean, depending on when you invested straight in the currency, you could have done super well, but if you had investing in the currency. I mean, you know, depending on when you invested straight in the currency, you could have done super well, but if you had invested in the mining,

you would have ended up with so many more BTC than you would have if you had just invested in the straight currency. And that's really based on, I would say three things. One is access to cheap power. Number two is quality miners. And three is having the software and the hosting team to monitor and make sure the miners are being productive. So the arbitrage is great. I understood. So you mentioned the fact that with time over those last few years, obviously your opinion of Bitcoin has changed alongside the opinion of the dollar. Talk more about that, please. Well, I mean, I just, you know, initially, when you didn't know much about BTC and your whole world is, you know, institutional capital

from Wall Street or sovereign wealth funds to grow an originator based on, you know, normal interest rates and things of that nature. You're so closely tied to the dollar. You hear about BTC and say, well, it's this fictitious currency invented out of thin air, has no intrinsic value. But then since then, you can really see how the dollar just keeps getting manipulated. What is the dollar tied to anymore other than the government's backing, which to me means nothing now? I see the Fed. I mean, I think you had a good story a couple of weeks ago where they were talking about the Fed manipulating everything. And I think that is the case. And then you have Treasury just printing

dollars. You have multiple stimulus bills that continue to dilute the dollar even further. And then you have this huge inflation rate. And, you know, a lot of people talk about, you know, taxes and how things are not fair, but inflation hits the middle class and the poor classes more than any tax. And it just destroys the economy and it destroys our middle class, which I really think America is built on. So, you know, that's how I feel about the dollar. And then when you look at the BTC, I really think I look built on. So that's how I feel about the dollar. And then when you look at the BTC, I really think I look at it as digital gold. It's finite.

There's only gonna be 21 million ever created. You cannot manipulate it. The algorithm was created so well to where prices increase, more miners come online, the difficulty increases or decreases. So I just have a lot of faith in that system and the logic. Everything I've done in my career where I feel like I've been successful is really predicated on logic and reasoning. And I think BTC really is the currency of logic and reason. I agree. It's interesting to hear that perspective. You're obviously a Marine. So a lot of people, you made the claim, obviously, that the dollar is backed by faith in your

government, which people have very little of now. But there are a lot of people would make the argument that the dollar is backed by the strength of the United States military, right? And so I guess coming from a Marine, that's a pretty strong statement that you don't have much trust in the dollar. Well, I mean, I just, I'm 42 now. I think where the country was growing up and where it is now, we've lost a lot of our core principles. So I think the dollar is just continuing to erode what America has been predicated on, you know, to where we grew up, which is sad. Yeah, it is. I think it's hard not to agree with that sentiment. So talk a little bit more about your actual mining operation, where you're located, how many miners you own, how that runs.

Talk about the business a bit. I mean, it's been an amazing run. It's been so much fun to actually do it and be involved in a super fast moving industry. But we really started looking at this in August or I would say August of 2020. And our background, you know, we have a lot of opportunity zone funds. We've done a lot of real estate in the opportunity zones. And we initially looked at could you do a Bitcoin mining fund geared towards opportunity zones? And ultimately, the returns are so good. And the tax incentives for opportunity zones really don't matter that much since it's considered regular income when you mine. But we started looking at this when BTC was, I think, 12,000. And then it continued to climb. And again, I just looked at it as a yield producing asset

and brought institutional capital in over time. So right now I think we've deployed over $300 million worth of miners and we got some of those miners, you know, in January we were paying probably $4,000 for the top of the line miners. So, you know, today that might be a $10,000 miner. So, you know, we were able to ultimately get 32,000 miners with hosting and, um, we're just kind of off to the races with that, but it's been a great ride and, uh, we'll continue to grow. And, you know, I think, uh, it's an immature market with the miners that we may want to get into later. But it's been a good ride. And this is all hosted domestically in South Carolina, correct?

No, actually, we don't have one miner hosted in South Carolina. We're headquartered in South Carolina. But unfortunately, our legislature and governor don't realize that we have the highest tax rate in all of the Southeast. And when you really look at where to place miners, it's not advantageous to place a lot of them here. So our miners are in South Dakota, North Dakota, Kentucky, Georgia, and North Carolina. Right. So all domestic and not in South Carolina. I had that wrong, obviously. Well, we are headquartered here. So our bodies are here, but not our miners. Makes perfect sense. And you talked about the fact, the price that you

were paying for miners and what they're worth. And that's sort of a little discussed topic, I think, by people who don't maybe understand the mining industry. Of course, you're mining the Bitcoin that has the yield opportunity, but you obviously also have this equipment that appreciates in a bull run massively. And I believe there's some tax benefits to depreciating that equipment once you own it. Correct. So there's a lot more here than just mining Bitcoin. Yeah, I mean, it's definitely the definitely tax incentives to doing that. And, you know, it's been amazing run to just in that short year that we've been doing this, seeing the difference in how the industry's changed when we came online, you know, in January of 2020, China was the behemoth, right? Like over 50% of the hash rate

was in China. And then overnight, and you could see it with the difficulty rate just crashing, China turned off. And, you know, when we got into this, it was, it was harder to find the miners, but hosting was super easy to find. And then China went offline, and it was almost a reverse, you could get and still can get miners, you know, very, very easily, but it's very hard to find places to plug them in. So the hosting now is a premium. And then you saw the same thing happen with Kazakhstan. Before China, I think Kazakhstan was at 6% of the global hash rate. After China, it was 18%. And then again, like overnight, Russians shut down the internet. And then Kazakhstan is gone. And really what we've seen is North America, and to a large

degree, the United States has really become the epicenter of Bitcoin mining in the world. And how important is that? It's interesting coming into the China ban, which at the time felt like just another one of their 15 bans and reversals that we've suffered through the last decade. But many people viewed China's dominance in mining as a huge threat to Bitcoin, right? Centralization in China, controlling the hash rate. What if China made a move to basically take over the network? So people wanted hash rate out of China, but then when it happened, then it was viewed as a negative that China was going offline and it was crashing the market.

It seemed like we had sort of this bipolar view on what was happening. What's your take on what happened in China and what that meant moving forward? Yeah. I mean, I think there are certain critics out there that no matter what happens in Bitcoin, they will say it's a negative thing and it shows the doom of Bitcoin, right? But it's still here. And I think ultimately what is lacking from the most important thing that Bitcoin really needs, it really needs institutional capital to come into play. And that will make it acceptable for all institutions to take it. It'll make it acceptable for investors to invest in it.

And you're starting to see some of that. You know, hedge funds, I would always say, are the first movers of any industry in terms of investment. And ultimately, this whole industry, like most industries, are probably predicated upon I would always say are the first movers of any industry in terms of investment. And ultimately, this whole industry, like most industries, are probably predicated upon capital investment, capital infusion. And I think where we're headed with it being in the United States, the more the United States adopts it from a capital markets perspective, the better Bitcoin is going to be. So I think moving out of China is a huge deal. Institutional capital does not want to go put miners in China if they're afraid

of the government coming in and taking the machines. So I think we're on the right path to really develop in the infrastructure and especially the capital markets infrastructure to really grow BTC. It's interesting because institutional capital is something that we've obviously been sort of conjecturing about and talking about for years in crypto. In 2007, everyone said the institutions were coming and then quickly realized that it was very much a retail driven sort of speculative bubble at that time. Well, now we do have institutions, companies putting Bitcoin on the balance sheet, quite a bit of venture capital, obviously pushing into Web3 and other spaces. But shouldn't institutions, based on what you said, be looking at mining more heavily than they're even looking at buying Bitcoin?

It's a bigger opportunity, right? I just don't think they understand it. And I think also when you look at the capital markets, the publicly traded miners and the publicly traded markets of the miners themselves, it's a very immature market. I don't think it has a lot of advanced analysis, you know, and what we've seen over the past year, I would say if you took, you know, January of 2021, you had all these miners go out in 2021 to be publicly traded. And initially the market's like, well To tell you, hey, I'm going to leverage up. I'm also not going to really pay for the miners so that I can tell you this ridiculous number of miners that I have coming online because that's going to shoot my stock up. And you also had, to a large degree, you had a lot of management teams with no capital markets experience.

They were experts in BTC and technology and the mining, but they didn't realize that, hey, when you promise the market something, at some point, the market is going to write that down and then they're going to hold you accountable. And what you've seen over the past three months is a crash of the publicly traded miners because the market has said, wait a minute, you told us you were going to have X number of miners on and you don't now. Oh, by the way, for you to get those miners on, you're going to have to dilute all of your shareholders and do another huge equity raise. And by the way, even if you can pay for the miners, you don't have an ability to host the miners. And I think the market came back too hard and started undervaluing the miners. And I think the market came back too hard and started undervaluing the miners.

And I think now, you know, my CFO likes to call 2022 the year of reckoning, where hopefully you're going to start really differentiating the quality miners from the pretenders, because there were a lot of business plans that went public. And I call it business plans because they didn't have any miners. And they had this business plan and got a $2 billion valuation because they went public through a SPAC or went public through an IPO and snuck in. And I think 2022, you're going to really find out who the quality miners are and who are the pretenders. That makes sense. Just looking at the charts, it almost looks like buying and selling mining stocks is like a 10 or 25x leverage play on Bitcoin's price, right? Yeah. And I think the mining is tied right now, the value of the miners

is tied way too closely to BTC, but that probably gets into where there's not a lot of hedging. The best industry maybe to compare Bitcoin mining to is just the energy industry or the oil industry or any type of commodity. All of those companies in the more mature markets, they all hedge their production. And right now, there's not a ton of hedging going on. And again, part of that is because there's not a fully built out capital markets for this industry yet. So I think as the market matures, you're going to get many more Bitcoin miners who go to market and say, hey, we're going to hedge our production. Earnings are going to be much more even. And I think that's going to help the industry as well. Right. I mean, it's been reported pretty widely that miners also hedge by shorting CME futures,

right? And maybe some of them aren't the best traders in the world. So that could have certainly an effect, as you said, maybe they're technologists and Bitcoin specialists and not exactly traders who know how to manage. But that is a pretty common strategy for miners to really avoid having to sell their Bitcoin, right? Is it just short the future, continue to mine, and it's kind of sort of a guaranteed yield in between. I think it's hard though to really pull that trigger when you think BTC is going to go to the moon. If you're super long, it's like, well, why would I hedge it? But I think ultimately the market and institutional investors, they're going to value companies more if they have, I would say, at least some hedging involved to where they have more stable earnings. For sure. And how much does minor selling at this point in the market affect the price of Bitcoin, would you say? Certainly in the past, that was a

huge metric. People like to look at, you know, minor wallets, obviously sending to exchanges, inflows and outflows. Is that still a big part of the market now and moving the price? The one thing I have not gotten my head around since being in this industry is the price of BTC. I mean, I believe everyone that tells me they understand the price, I just don't believe them. So I think there are a lot of factors that go into price. I think it'll be really interesting going into the halving event this time to see whether or not BTC goes into the winter as everyone talks about. I think the more the miners hold, there's a positive of having all these miners publicly traded because when they're going into a halving and they need to change out

all of their miners for the next generation of miners, I think they're going to be able to do it by other means than just huge liquidations of BTC. And I think hopefully that will stabilize the price more than it has in the past where almost every having event was this nuclear meltdown of BTC value, but it was also predicated on everyone was having to sell their BTC to upgrade their miners. And I think this go round, you may not see that. So we'll be monitoring, but I have zero predictions on short-term BTC price. Yeah.

And there's no reason to make them, obviously. And I think anyone who makes grand predictions about Bitcoin price ends up generally looking like a fool, because as you said, it's almost impossible to predict. But there is a lot of analysts view hash rate and price to be tied together. But there's this chicken and egg scenario where nobody can determine which one is leading. And so to me, that makes the whole thing very difficult to even look at or use. Does a drop in hash rate mean a drop in price or is a drop in price that's causing the drop in hash rate? And can one predict what's going to happen with the other?

And I think that's the greatest example of how the algorithm is so perfectly made to where you can't game it, but also it takes into account price and hash rate. The institutional capital, we're mainly backed by all institutional capital. And the main concern I would say over the past two months was what's the global hash rate going to do? You know, it's going to go to 400 and, you know, you try to explain to them, it cannot go to 400 without the price continuing to rise because you're going to have so many miners drop off at a certain point of hash rate because they can no longer mine profitably. So I think that's the one thing missing from a lot of

the analysis that we see. Obviously, one of the biggest narratives has been around energy. I believe you guys are 92% carbon neutral. I think that the move to the United States has largely dispelled a lot of the myths or issues with the energy debate. But that was really, I mean, Elon Musk talking about it, Elizabeth Warren talking about it. That was part of the big dip, I believe, last summer. So what are the misconceptions and I guess the actual truths about Bitcoin mining and energy? Yeah, there's a great article in Newsweek, I don't know, maybe a month ago. And I think the title was Bitcoin, the most misunderstood industry in the world. And I really

believe that. And, you know, the way I look at the misconceptions, one would be energy usage impact on the environment, and then the illegal activity stemming from Bitcoin. So we just take those one at a time. In terms of energy, Bitcoin, the miners actually do use a lot of energy, but you have to look at Bitcoin industry, you have to compare it to other industries as well. And I think everyone wants to judge BTC just super harshly of, well, it uses a lot of electricity. Okay. Let's put things in perspective. I think it's only less than 1% of all the energy in the world is geared towards BTC. Mining is less, BTC mining, energy consumption is less than mining for gold or for copper. So I think that just kind of

immediately dispels a lot of the rumors. I think the other thing that BTC provides and electricity companies are seeing this is grid stability. And you saw this maybe three weeks ago in Texas, right? And going back two years ago in the winter, when you had this huge peak of electricity needed for consumers, they could not, the energy companies could not provide that amount of energy because their base load was too low. And what happened was, you know, it was like four to six days of no power blackouts and several, you know, tens of people died because they froze to death. And now what you saw two weeks ago was you had this huge influx of miners, which allows the grid to increase the overall power. And then in times of huge peak, when they need more power for consumers, all they have to do is cut off the miners and the miners are more than willing to agree to contracts that allow that. And you've

seen it and it's a huge benefit for society. And I think you're going to see more and more of that, especially the more we go to renewable energy, when things of that nature, because it's just not as stable and, you know, Jim mining, you know, I think just not as stable. And, you know, Jim mining, you know, I think we're now up to 97%, you know, percent carbon neutral. Again, you have to look at this in the context of other companies, you know, what's the US banking footprint for carbon? I would say it's abysmal, right? I'm sure ATMs alone and keeping the lights on in bank branches probably outpaces Bitcoin. Yeah. I mean, like, and let's take some of the, what you would consider the most environmentally friendly companies out there. Let's take Patagonia, right? Their goal is to

be carbon neutral by the end of 2026, I think. Okay. So we're already 97% there. So who's more environmentally friendly, right? But they don't want to tell that story. So I think that's a huge misnomer. And then you get into the illegal actions caused from Bitcoin. I've seen numbers from like 2 to 70 billion of illegal activity tied to BTC. But what is it for the dollar, right? I mean, the dollar is used for more illegal activity than anywhere. It's not the currency's fault for that. It's the individual

bad actors. So I think those are a lot of the misnomers. And I think they're going to get dispelled. But we as an industry have to start doing a better job at telling that story. Yeah. It's like Bitcoin exists in a vacuum and is never compared to anything else. Sort of, as you said, there's these sweeping clickbait statements. Bitcoin uses more energy than the country of Argentina, blank, put it in there. But isn't it more important to not talk about how much energy something uses, but where that energy comes from? I mean, I always laugh that Elon Musk said, you know, we need to make sure that Bitcoin is energy efficient as if his cars aren't electric, right? Electricity isn't the problem. Electricity is not the problem. It's where the electricity

comes from that everyone needs to discuss. And that's completely left out of the Bitcoin conversation. Well, I mean, and they hold Bitcoin, you know, to a different standard. Like I'd like to know from Musk, hey, where does all your charging station energy come from? Right. I mean, and they hold Bitcoin, you know, to a different standard. Like I'd like to know from Musk, hey, where does all your charging station energy come from? Right. I mean, if it all comes from coal, it's probably not that carbon efficient. So, you know, to bash Bitcoin miners like Jim Mining, who are 97 percent carbon neutral. I don't know what the charging stations for Teslas are, but it would be hard to be more efficient than where we are right now. Right. And if you're using energy that's being completely wasted, that should not count on your bill, so to speak. It just shouldn't be counted.

Talk about carbon neutrality in mining. I don't think anyone would naturally be able to jump to how that's done. What does that mean to be carbon neutral as a miner? Is it by buying carbon credits? Is it the electricity you're using? How do you do that? Yeah, I mean, there are two ways. It's number one, the electricity that you're using. The vast majority of our electricity comes from nuclear or hydro, which is considered clean. And then we do have some carbon offsets for the other. So those are the main combinations of how you get to carbon neutral. That makes sense. And I've always found it interesting that miners are able to go to the

source of energy and set up shop there as opposed to just arbitrarily choose a place and have the electricity come to them? How big of a part of the industry is the location of your operation? I would say it's huge. I mean, there are certain states that are very, very favorable to the miners. They recognize the benefits of grid stability. They recognize the benefits of coming into a rural area and increasing the overall power that's allotted for the entire community so that the rest of the community can grow and they can attract different industries there. But ultimately, it has definitely become a huge negotiation and really a search for the right power sources in the right states. So we have a team that does that.

There's nothing worse than trying to read through a power contract. I would highly discourage any of your listeners from having to do that. But that's just where the industry is right now. Next time I need to punish my six-year-old daughter, I'm just going to hand her one of those and tell her to get through it before she... She will study so hard if that's the punishment. Yeah, I would imagine. So we've had a lot of talk of late about regulation in the crypto industry. Most of that has been obviously focused on whether things are securities or not, what exchanges can do, really not on the mining side.

But how much risk is there of some heavy handed or aggressive regulation affecting the mining industry in the United States? You know, I think some, you know, I think regulation has a dirty word, especially from my background. I'm a limited government guy, but I think a lot of it is just disclosing, you know, know your own user, you know, KYC things of that nature. I think that can actually benefit. What we need to do is have enough disclosure to where the huge banks are allowed to get involved with BTC. And that will, you know, on a huge scale benefit, all of the BTC miners, the adopters. It'll just help the industry in general. So I think a tiny bit of regulation can help. I think the scary thing is

you're having people try to regulate it who have zero idea on capital markets, have zero idea. I mean, look at who's in Congress, look at who's in our state legislators. For the most part, it's people that can't make it in the real world. And then they want to try to regulate the real world. So, you know, I think we've got to be really careful about who does this type of regulation. And I would much rather it be through elected officials that you can, you know, hold them accountable at the ballot box, because ultimately, you know, 90% of them only care about the ballot box and getting reelected and they will go whichever way they want or you want after that. But I think, you know, the scary thing is when you have things like the CFPB

and all these different non-elected bureaucrats start regulating things, that's when trouble happens. Yeah. And it seems like crypto is actually becoming a hot button issue that politicians have to pay attention to for the first time. And I think that maybe the infrastructure bill sort of triggered a lot of that. People saying, hey, there's a real constituency out here that cares about this deeply, tens of millions of people. And if I don't take a position on crypto, I might actually not get reelected. And that's not something I saw happening so quickly. So do you think that we're going to see a lot more pro crypto politicians? I mean, to me right now, it feels like your reputational risk is being on the opposing side, not on the pro side. I think you're going to start seeing both

sides develop and hopefully it does not come down to just party lines because I've seen a lot of Republicans come out, you know, in favor of BTC, but I've also seen some Democrats. I know that there's a lobbying effort in Congress right now to try to get, you know, kind of like a tax, you know, they used to have this statement to where people would come out and sign it. I will not increase taxes no matter what. They're also doing that for Bitcoin. And I think they're going to start pressuring people to say, hey, I will not try to end Bitcoin or do anything that imperils Bitcoin.

So I think you're starting to see a lot of pressure from that as well. But I mean, it's hard to attack Bitcoin when you have this huge inflation. And I think the politicians that do attack Bitcoin, they're just trying to distract, right? I mean, like they passed a $2.1 trillion stimulus. They support the Fed buying all these bonds that manipulate the markets. And that's causing our economy to tank. And that's causing huge inflation and it's killing the middle class and the lower classes. And what do they do? They just try to distract. Who's to blame? Bitcoin is to blame. And I think, you know, again, we've just got to educate people better and talk about, hey, this is a huge alternative. This is a way to

preserve capital. You know, when you have huge inflation, put it in BTC, at is a huge alternative. This is a way to preserve capital. You know, when you have huge inflation, put it in BTC, at least a portion of it, you can keep your savings without losing it. We all believe and know that cryptocurrencies are the future, but it's still very scary to be your own bank and have to secure your assets. Most of the traditional hardware wallets are hard to use. They're clunky and people lose their private keys. It's not really that efficient. And that's where the Arculus key card comes in. I absolutely love this thing. I've transitioned largely to using it for most of my assets. It's literally just a card that you tap right on your mobile device. You can send,

receive, swap, buy and sell crypto with that simple action. It's literally amazing. There's no cords. There's no charging. There's no Bluetooth. The only person that has access to your crypto is you. You guys have got to try it. And guess what? You can buy it right on Amazon. Go buy your Arculus on Amazon now. Yeah. And I don't think we've done a great job of educating people on that. As much as we've seen some mainstream adoption and awareness, I think that most of that is coming from speculators who are excited about meme coins and NFTs, right? And maybe not paying attention to the importance of Bitcoin as an inflation hedge and a part of your actual portfolio. So what can we do to educate more people, the mining industry in particular? What can you guys

do as a group to educate more people to the importance of this asset? Well, I think you're starting to see it. I think a lot of the miners, a lot of the industry experts are really going on mainstream shows, CNN, Fox News, you name it, but different various political points, they're going out there and telling the story of BTC. And I think the more people hear about it, you know, they're going to see that it's much more democratic than the dollar per se. It's, you know, everyone has an opportunity to purchase it. You know, they're not fees associated with it. You know, if I, if I go to my, my bank or, you know, where I house my, my BTC, I'm not getting charged a $3 and 50 cents, you know, junk fee to pull it out. So I think, you know, there's a lot of freedom

and democracy. I think one of your last listeners talked about how moral it is. And I think people are starting to see that. And I would add democratic. I think moral and democratic. I think the challenge is getting people to care about being moral and democratic, maybe. But maybe I'm a bit of a pessimist. Well, I think they care when it affects their pocketbooks. Yeah. And so do you think that people are having any sort of real awakening as to how their pocketbooks are actually being affected by monetary policy and the Fed? I mean, until early 2020, right, March, obviously, when this sort of historic printing started again, you could say it started in 2008, but really ramped up. I don't think you ever heard your average person ever talking about inflation or hedging or even thinking about their money or the dollar. Is that something that's just among us because we're so deep down this rabbit hole?

Or are you seeing other people talking about that coming to you guys with an interest in hedging and getting exposure? I think with the inflation, I think you have hyperinflation that is being downplayed. I don't know how they come up with 11% because almost every item I buy is anywhere from double to 30%. You know what I mean? And that's real money and it may not affect certain people, but you know, I was having a conversation with a friend. I don't understand how a family that makes $50,000 with two kids, I don't know how they make it anymore because the price of food, I mean, it's just astronomical. I think someone told me a pound of bacon is $9.

So, I mean, I think we have hyperinflation and I think there is nothing more, there's no more of a greater regression tax than inflation. And it is crippling the heart of America. And they can tell you it's not that bad. You know, hey, you know, I see different politicians come out and say, hey, your Thanksgiving dinner only increased by 26 cents. And I'm just thinking, where are they buying that turkey? You know, that's just not believable.

And I think people are realizing that. And I think that directly impacts BTC. Yeah, I agree. And what's even more interesting, maybe the bigger crime that people don't really talk about is not even the fact that inflation is so bad, because at least we can see that they're printing money. We know inflation is bad. It's the fact that they arbitrarily decide how to calculate inflation to keep the numbers looking low. It's like, oh, it's January. We better decide a new way to determine the inflation numbers.

Right. Just change the way you look at it and the number will be lower. Yeah, exactly. It's really, really scary. How can your average person get involved in mining? Obviously you talked about the way that mining stocks that are publicly traded have been behaving. So maybe that's not the ideal way. Well, I think it's really hard right now

because of different regulation. You know, we're a privately traded company right now because of different regulation. We're a private company. We're not publicly traded. So for us, we would only be allowed to take accredited investors' capital. But ultimately, we've really gotten to where we only take institutional capital at this point. So really, the best way is to invest in the miners. And I do believe right now, there are some amazing high quality publicly traded miners out there that are way undervalued.

I also think some are undervalued and may not be around in a couple of years. So I think right now for the average person who's not an accredited investor, it's probably the publicly traded miners. Is there any risk to Bitcoin mining becoming centralized in the United States? I don't think so. I think the adoption, you know, you're going to have the United States, you're going to have Canada. I think you have cleaner energy, you know, and I think you've

seen this throughout time. Ultimately, you know, oftentimes new technologies start in America and get farmed out to other places. And I think you're kind of seeing that now. It's true, but it does feel like America has not necessarily been leading as far as new technology. And I think a lot of the proposed regulation or the way that we view the cryptocurrency industry certainly could put America very far behind in this space, at least. It'll be interesting to see, you know, there are a couple of, you know, there's one, one huge mining manufacturer that really dominates the industry, but you have different, yeah. I mean, Bitmain, Bitmain's the main deal.

They almost have a monopoly and I think you're starting to see a lot of other mining companies, you know, Intel is thinking about doing things in mining. And I think the more of that we can see happening is going to be great for America, but it's also going to benefit the industry as well. How big of news is that? It seems that maybe it's because we're in this sort of bear market and people are talking about Ukraine and Russia and inflation. But to me, one of the biggest stories that Intel is making chips, right? They're going to be much more energy efficient. And we're talking about a future where they're

making chips that could effectively be 50 or 100 times more powerful, right? I mean, this is Intel, right? They're going into Bitcoin. I think it's a huge deal, but I think it's an even bigger deal when the machines come to market, right? I mean, we've heard this before. There've been iterations of different companies saying they're going to revolutionize the manufacturing of ASICs and it just hasn't happened. So, you know, Intel, no one has more credibility than those guys. So if someone's going to be able to do it, it's Intel. And I hope they do. Is there anything else that you guys mine besides Bitcoin and why or why not? You know, we have a hundred Ethereum miners that we're just opportunistic about doing, but it's almost a distraction. So we rarely tell anyone that we actually do Ethereum because then the next question is, well, what percentage,

what do you see? Why do this? Why do that? So we just tell everyone we're a Bitcoin miner. And if we go public, we'll sell those 100 rigs. So we don't even have to disclose that we have any Ethereum miners. Won't those become obsolete very soon too, if Ethereum actually makes the move to Ethereum 2.0 anyways? Yeah, I would say so. So maybe we should sell them or give them away now. Yeah, exactly. Get rid of them. Hot potato. But I will say they're very profitable right at the moment. They are. Is there a reason that you don't mine other altcoins or other assets? Is it just a focus on Bitcoin? Is it because of a belief in Bitcoin versus other things? Why don't you touch those others? I think Bitcoin from a adoption standpoint is so far ahead of others.

I think if you were really trying to, if you really cared about your IRR on a very small scale, you could justify getting into the other coins and you can switch your machines to mine for coins and then convert it to BTC. I know a lot of miners that do that. But ultimately, we're all institutionally backed moving forward. And it's just a clean, simplistic investment thesis of mining Bitcoin. And it's easy to convey. And I think it allows us to raise more capital and be very, very laser focused on what we do. Is there a certain Bitcoin price where people have to start worrying about minor capitulation or them going offline or any problem with the mining industry? Or is it at a point where it's so efficient that really the

price doesn't matter? Are you talking about high price or low price? Low price, I would say. Well, let's talk about both. Let's talk about both. But that's always been a narrative in the past is certainly when it was a less mature is like, at what price is this whole thing going to crash? Because miners are going to have to capitulate, go offline, sell their coins to cover their losses. I mean, I think you have the publicly traded miners and you have the very large private miners like Jim Mining. I would say that we have such efficiencies that BTC has to go solo, you know, to where we would turn off our miners. I just don't see that happening. I don't know what that number is, probably $5,000. So you have a ton, you know, you would have all the, we have all S19s, you might have S17s, S9s, all of the older models turn off.

But again, because of the algorithm, when that happens, the difficulty rate is going to drop and then the price may be down, but you're going to mine so many more BTC than you otherwise would have. So I think we're, I think BTC is stable enough. It's here to stay. I'm not that concerned with the day-to-day pricing of it. So if you were a small miner in that situation, the game would be just to survive long enough to see price go up again, because you would see this massive benefit from that drop in how much Bitcoin you would have mined. Is there a price on the top side where it becomes an issue or a risk? Well, I mean, you know, the higher the price tag,

you have every machine in the world turn on. So the difficulty rate goes through the roof. But at the same time, you know, the price of mining or the price of BTC continues to climb. So I go back and forth. What's the ideal, you know, scenario and, and especially for the miners, you know, you can make an argument, Hey, you want BTC price low. If you're going to hold it just so you can purchase all your miners, get them up and running because the machine prices drop and then you want it, you know, later on to go through the roof. So, yeah, I do a bit of mining and I bought most of them right when China went offline when they were cheap and just seemed like a great opportunity. And so,

yeah, it's interesting that maybe you cheer for certain dips if you're trying to get into it, because you get cheaper Bitcoin and cheaper miners. So what is the distant future? Well, not so distant and distant future look like for you as a company? Are you guys looking, is it strictly about scaling to more miners and growing in that regard? Is it about more fundraising? How do you really scale to make this a huge, huge operation? I mean, I think it's continuing to build your mining fleet, but for us too, it's getting into self-hosting, you know, for the most part. We got into it early to get a huge ROE. We put all of our capital into owning the miners and outsourcing the hosting.

So we didn't have this huge expense, this huge capex of building these data centers. But now, you know, we know, data centers are a premium. So, you know, we've got, you know, up to 500 megawatts secured for our future mining. And then I think the technology's changed to where I think the industry is headed towards the liquid immersion to where you're going to get, you know, up to 30 to 50% more efficiency out of the miners. And what that means is if you have a hundred terahash miner, you put it in liquid immersion, you're going to get up to 150 terahash out of it. And I think that's going to bring efficiency for a lot of the large scale miners. And I think that technology is going to be a game changer. Talk about that technology because I'm pretty deep down this rapid hole and I've never heard someone mention liquid immersion. Yeah, so liquid immersion, it's actually been around for a while, but not really geared towards miners. So if you look at the mining, those computers, the number two things that can shut them down, they're dust and heat. And, you know, that's why, is there any mining operations in Florida? No. Why? Because of hurricanes and because of heat. But with you put them fully submerged in this mineral oil

and it protects them from heat. It cools them. And then you no longer have an issue with dust either. And you can really supercharge them. And again, at a minimum, you're getting a 30% boost of efficiency, which means you're mining 30 percent more and i think that yeah that is a it's a little bit more cost but the miner itself costs the same amount right it's just yeah the miner used same cost for the miner a little more capex up front to get the liquid immersion technology a little bit more for the energy but but long-term you're going to, you're going to get a much, much higher IRR on those machines. And if you had air cooling. Wow. That's fascinating. And something that I'd actually never, never even heard of really,

really cool. So where can people follow you after this conversation? Keep up with what Jim mining is doing. You can follow us on Twitter at Jimining or go to jimmining.com. And where can people find you? I'm on Twitter, jwarrensc and on LinkedIn as well. Well, thank you so much for taking the time. You definitely dispelled a lot of myths and broke down a lot of, I think, misconceptions and questions people have about the mining industry. And also thank you very much for your service, of course. Thanks.

Thanks for having me.