We Study Billionaires - The Investor’s Podcast Network - BTC187: Home Heating and Bitcoin Mining w/ Alex Busarov (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey, everyone. Welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. We have Mr. Alex Bussaroff, the founder of HeatBit. Alex has pioneered combining Bitcoin mining with home heating and air purification. We'll discuss the journey of creating HeatBit, its challenges, and the heat by computing principles. I have no doubt you guys are going to love hearing this.

Starting point is 00:00:24 Alex is just one heck of an engineer and deep thinker. And so with all of that, let's go ahead and jump right. into the interview with the knowledgeable Mr. Alex Bussaroff without further delay. Celebrating 10 years. You are listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. Hey everyone, welcome to the show. I'm here with Alex. And boy, I'm excited to have this conversation, Alex. I've seen the hardware. I've been around the hardware. You and I've had quite a few conversations historically. And I am thrilled to have this conversation. So,

Starting point is 00:01:10 for our audience to hear this. So welcome to the show. Thank you. I'm glad you said you've seen it. You've seen it working, but you didn't say that you've heard it because it was actually quite quiet. So I'm pleased. I'm going to pass it to our engineer it. It is quiet. And for anybody that's wanting to know, so first of all, this is a mining rig that heats your house. And, you know, it looks like a traditional, almost like a Dyson air filter that you'd put in the corner of your room for people that haven't seen it or know what we're talking about. and you're talking about how loud it was. On the website, you have it listed that it's 40 decibels,

Starting point is 00:01:45 which is the equivalent of somebody, for people that don't know with 40 decibels, this is the equivalent of somebody whispering of how quiet this is. So this is equivalent to how loud a Dyson is, correct, as far as sound goes? Yeah, exactly. The way we've thought about building our devices,

Starting point is 00:02:04 like the trio, which used to be called Mini, but that's another story. happy to cover at some point. It's going to be a home device, a premium home device, primarily. So it's going to fit all the expectations. And people expect that if you're heating your room, you kind of need to be able to sleep in that room sometimes, right? So you need to be able to sleep next to it.

Starting point is 00:02:23 So it cannot be loud. And actually, the whole way that heat bit started, it started with a bit of a noise. It was 2020, I was getting bored in my flat in Shanghai. We were on the lockdown. The COVID started, right? I bought myself a toy, which happened to be an ant-miner S-9K, and it's to play. It wasn't to mine professionally in any capacity.

Starting point is 00:02:45 It was just a toy for me. And I turned it on in my bedroom and I go really loud. So they go up to 80 decibels. And for people who don't know with the scale of the decibels, 40 and 80, it's not like 80 is double or 40, right? It's just number is the double. But as soon as the noise, 80 is the noise that if you expose to 80, to an extended period of time, it can actually damage your hearing.

Starting point is 00:03:09 So, kind of, I got the ant minor, and turned it on, it got really loud, and then they got really hot. And then immediately the idea popped out that, well, if it wasn't that loud, it would actually be a brilliant heater. And then, you know, the whole thing actually started. I love it. I'm just going to, if people are watching this on YouTube, I am pulling up the website so that they can kind of see what this looks like, because it's really slick. Like, I don't know who your designer was when building this thing, but I'll tell you what, you guys had your act together. And so, yeah, people on YouTube, you can see it's very cylindrical.

Starting point is 00:03:45 Pretty much, you know, if you went and bought an air filter, it looks like that. It's about the same size as an air filter that you'd put in the corner of your room. Very sleek, very sleek. But yeah, so you're able to heat. So you're looking at this very early days. And you're saying, I'm just, you know, I need to heat this room. room anyway. So why don't I just turn that in the money? It's basically the premise or the idea, right? Okay. Go ahead. Yeah. A lot of people have this misconception. I want to clear it on

Starting point is 00:04:17 every podcast, any public speech that I do. Sometimes people think that if it's a heat or mine, then some electricity or some electric energy is going to go into heating and some is going to go into mining, that's incorrect. Whatever goes into mining turns into heat. It's just the law, the energy doesn't disappear in changes fall. So electric energy becomes heat. Whether you use regular coil, whether you use silicon chip, does it really matter? Percentage-wise, is they're hearing that, Alex, not to interrupt you, but when they're hearing that, they're saying, okay, so the energy is plowed through the five nanometer chips, which is what you're using, and it's converted, that energy is converted into heat. What percentage?

Starting point is 00:04:58 of that is turned into heat? 100%. A hundred percent. Overall, if like the more technically engineering client people would say, well, it's not technically 100 because there's a fan, there's vibration, there is light, etc. First, there's going to be a very tiny amount of that. But secondly, that also becomes heat at some point as well. Wow.

Starting point is 00:05:19 So it's just all gravy then. It's really what you're getting at. It's just like all heat. Yeah. It's just smart. You're using, think of it. you're using a valuable resource energy for two things at the same time. That's kind of smart.

Starting point is 00:05:34 So then the argument to the person who's hearing this is, well, you've got to heat your house for most people that's five, six months out of the year or whatever it might be. And so if you're going to burn that energy to create heat, why not do it and mine Bitcoin and make money while you're doing it is the argument, correct? Yeah, yeah, exactly. Nothing else. There are different ways to think about it. Some people, you know, less Bitcoin and clients, they would think about it as,

Starting point is 00:06:03 oh, I can get some subsidy or, you know, cover part of my electric bill. And that's fine. You know, depending on your power rate, you'd have somewhere between 30 to almost 100% of electricity bill covered. But then some more of the more Bitcoin and client people would think, well, I'm just getting free sets, which is also an okay way, an okay way to think about it. It makes sense, you know. It's just one of those things that just makes sense. What was one of the challenge in the early days?

Starting point is 00:06:31 So you get this idea. And then it's like, all right, now I have to actually start building this thing. And talk us through some of the early days of Heatbit and some of the challenges that you faced with some of the early prototyping. So we actually went through a lot of the prototypes. At some point, the way that you develop hardware is that you have a new prototype every week or so, like with some incremental changes and some of the bigger changes. the first version that worked on, it didn't even work as a prototype.

Starting point is 00:06:59 Like, it would just overheat. The second kind of concept, which also had like 100 different iterations, it was based on an used antminer S9. And we had so many problems with it. It's unbelievable. So starting from the fact that it was the COVID times, things like the supply chain wouldn't really work because some of the ships would not go,

Starting point is 00:07:22 some of the planes would not fly. And it's just, where do we get all the components, you know? And that led to a lot of delays. Plus, with hardware, even if you find a small problem, the time to fix it can take like three months. Even if it's small, because first you find out the problem, then you fix it, then you test it. And then you change your molds. Then you change your production process. Then you change your logistics.

Starting point is 00:07:44 Like, it's very different from software, I tell you. Yeah, the hardware is hard. I think that's why it's all hardware. And given the weight of those things, and, you know, I carried it. in a lot of places I would call it heavyware sometimes as well yeah but the other challenge in terms of I mean in jokes aside in terms of big challenges

Starting point is 00:08:02 a hard thing is access to chips yeah so that's something that took us quite a long time and that's one of the reasons we would build on and used hardware at first as kind of a proof of concept we're like we're just going to build it we're going to bring something to the world we if we have to use

Starting point is 00:08:17 second hand we'll use second so that's when we had the S-9s so access to chips is a big thing getting access to chips. A lot of the chip manufacturers would not sell the chips. I've spoken to pretty much all of the chip or my manufacturers, like 90% of them, all the biggest ones. Because I lived in China, I've spoken to some that you probably never heard of. I don't know if you've ever heard of EBang. Yeah, guys like that I spoke to. Somehow, you know, the community is actually so tight that you can get access to the founders and the CEOs fairly easily. But still, no one would sell

Starting point is 00:08:52 the chips. But then we found the way and we managed to actually get the latest generation brand new chips, one of the major supplies. And so that's how we built the trio. I think apart from that, it's the safety, right, because it's, it's not just a mine. Mine is an industrial device, right? And it's in the warehouse. You have maintenance. You have like people overlooking at 24-7. That's one environment. When you build a home heater, it's a very different environment where you have like cats and dogs, you know, with pet hair, you know, you have kids running around and it's very different robustness that you need and very different safety requirements that you've got. So these are the kind of things to look out for and that's something that we work

Starting point is 00:09:35 on loan as well. One of the things that I'm really blown away with is this five nanometer chip. So this is size-wise for people. This is like what they have in iPhone 14s, very advanced lithography process in order to create a five-nanometer chip. Do you see, obviously, Obviously, I think your connection like what you just said in China helped you be able to secure and procure that. Do you find that with AI and everything that's taking place that gaining access to these types of advanced chips is going to be difficult for miners moving forward? Or do you think that the demand is going to drive because there's going to be such a large

Starting point is 00:10:13 demand for Bitcoin miners in the future? Walk us through some of that supply demand dynamic with respect to the chips. So you've got, the structure of the market is that you've got the companies that design the chips. And there are quite a few. You've got the companies that actually manufacture the chips. And this kind of lithography, 5 nanometer and smaller, there's only two places that make them. There's a couple more of apps that are coming online in the US in the next few years. But right now, there's just one in South Korea and one in Taiwan.

Starting point is 00:10:45 And they have, you know, they're busy. They have companies like Apple, like Bitmain, like many others, competing for the production time. I imagine, I don't know, but I imagine when Block is developing their 3 nanometer chips, they are having to compete with guys like Bitmain and Apple and many others for the same fab. So that's not an easy task. And, you know, thank God Block is doing that so that they could kind of provide and sell the chips once they come on the markets to help guys like us build more devices. I think that's going to be wonderful.

Starting point is 00:11:20 That's a big thing that they're doing for Bitcoin mining. When it comes to AI, I'm not an expert on AI chip. I actually don't know what kind of tech they use. But the AI chips are very, very different in terms of complexity compared to ACCH chips. But AC chip is a very small chip, like the one that we use is about 5 by 5 millimeters. It's very small. And it does just one thing, very, very efficiently. Whereas AI chips are a lot more complex.

Starting point is 00:11:48 and they tend to be bigger in size, and I'm not sure they compete for exactly the same thing. We see some of the miners now going into AI, and they're like, oh, we have the power supply and we have the energy contracts, like we can do AI. Let's see if that works. I tend to be a little skeptical at first, because my belief is that right now in AI,

Starting point is 00:12:10 it's much more about the cost of the chip rather than the energy, whereas in Bitcoin mining is the other way around. It used to be the cost of the hardware, it used to drive the whole cost of mining, Right now, it's more and more the cost of power. Yeah, these are slightly different industries. Yeah. My understanding on that front is they just don't have the infrastructure to plug the GPUs into once they get their hands on the GPUs.

Starting point is 00:12:31 And so there's an opportunity for some of them to pay huge premiums to just get them plugged in and get them turned on and doing their thing. Okay, on this question, I'm really curious. So when you look at it holistically, from the idea that you had over there in China to do this, to now, what were a couple of the most surprising lessons when you look back at it that you just had no idea or that was just like, oh, my God, I totally missed this before I took that first step to start working on this super hard or complex problem? One thing that actually, I think there's one positive on one next, one positive surprise, one more negative surprise.

Starting point is 00:13:12 Positive surprise, people started buying the devices and they're expensive devices. and they're expensive devices. They were like $1,000 each. I'm talking about the older Prophal Console version, even. They started buying it, and they started kind of spreading the word and supporting us very early on, way before we had the device. And I was very surprised. Like, the amount of trust that people put to us, the strength of the community,

Starting point is 00:13:39 that was incredible. I thought, wow, this is amazing. Yeah. Obviously, the, getting the money so we could use the money to, develop devices was helping, but there's something, you feel some sort of a duty, you know, like when people put so much trust to you, you're like, well, we're going to make it work. And then we had that with the first device and kind of the device didn't work very well. Now once, but now we're like, oh, we've built a second one with like 20 people on the team

Starting point is 00:14:07 instead of five people on the team last time. And now it was brilliant. So we're like, okay, now we're kind of fulfilling our duty to the community, actually bringing a good device to the market. So this trust and support of the community was a surprise. It was an amazing surprise. That was super, super strong. Now, you know, three, four years later, we see people coming and seeing the trios,

Starting point is 00:14:30 like you've seen the trio, right? You've seen it. It's kind of cool. We've had people when we're in New York. We had people like Frank Corva coming and posting it, Alice Glasting coming and like, oh, you know, this is so cool. You know, you tweet about it. Just now, one of my colleagues,

Starting point is 00:14:45 was in Norway the forum, Schmatjek Dorsey, and he was like, I know about you guys, you do cool stuff. And it's so cool, like the support of the community. It's amazing. And second part, which I think was more of a negative surprise, is anything that could go wrong will go wrong. And then there's going to be even more things that you didn't think that could go wrong and they will still go wrong. So we were developing the trios and we were about to start shipping them, we had an early version, like an early prototype, and we shipped it to one of the YouTube influencers. And parts of the physical structure, so like the part at the bottom, there's kind of a cone that holds most of the structure. It was 3D printed. And in 3D printing,

Starting point is 00:15:34 because you print in kind of layers, the strength of the structure is very, very different compared to extrusion or any kind of proper industrial process. And as it shipped, the thing broken half, right? There's the metal part of the case on one side, metal part of the case on the other side, and there's plastic in the middle, it broke and half. So, the YouTuber, and you know, thanks to him, he didn't go like really, really

Starting point is 00:15:57 public with this. Yeah. Because he supports us and he's like, hey, guys, I want you to kill him. So he pulls this, he started the recording, like proper unboxing. He opens the box, takes out the device, and then the top part is okay, but the bottom part is kind of hanging on the

Starting point is 00:16:13 wires, and I go like, oh my God. But how could we don't test it? We tested it. Yeah. We threw it and it was okay. But I guess people at UPS threw it much harder than we did at the fact. I don't know what they did. So, and you're like, yeah, that's difficult. And then it takes you, like I said, it takes a long time, right?

Starting point is 00:16:35 You're like, you know, is it difficult to fix? Not really. You just change the structure slightly, make the walls a little thicker. But then it takes two, three months to actually make it happen because testing, testing again, industrial process. Yeah, and then at the end, the engineer, the guy who did all the hardware instruction, I think he obviously got a few kicks from the team for, you know, this happening. At the end, he was the one testing the devices in China.

Starting point is 00:17:02 He came to China to the production plan and what he did, he kind of stood on his, like this, he kind of stood on his hands on the trio and was kind of shaking on it with his feet lifted off the ground. So his whole weight was on the device. And he was like, now it works. You see, now it's so strong. He was so proud. I think we've even posted it on Twitter. Like, the guy was so proud of it.

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Starting point is 00:21:35 Back to the show. Those are the stories that when you're going through it, It's just so painful, but when you look back at the entire experience, like, you just can't build something new that's never been done before without going through these trials and tribulations that just test you every moment of the way. So thank you so much for telling us that, or telling us that story. Anyone doing hardware they should know is going to be hard. That's right. You're going to be ready for this pain.

Starting point is 00:22:02 Yes. So unlike some devices where you're maybe you're just building something that's mechanical or physical, there's a huge software component to this. And if the software isn't online, well, then you're not making money. It's just that simple. I mean, it's a huge component of what you built. Walk us through your thinking from a design standpoint of how, because, you know, most people, they're going to buy this, they've never mind anything before. They don't know how to do this. So you have to make it turnkey. So talk us through your design process as you thought about software? Well, first of all, there's actually quite a few software components to it, because generally for any app, you can have two sides. You have a mobile app and you have the server

Starting point is 00:22:45 side. For us, there's also the software that runs on the device itself. And within that, there's actually a few places, one, two, three places where server is running, where software is running. The miner itself, then there's the mining software, then there's the control software on an orange pie, it's like a raspberry pie kind of thing, just a little smaller, all the connectivity and all the kind of main controls, talking to the mobile app. And then there is the special software that runs, that controls the energy use, not of the miner, but of the device itself.

Starting point is 00:23:18 So there's a lot of different kind of software that needs to talk to each other. But from the user side, if you look at it from the user side, we thought, well, let's make it plug and play. Let's make it. So we thought, well, if there's someone who is the minor, has a mine, and wants to do a DIY heater, they probably know what to do. They probably don't need us. You know, hopefully they do what they're doing. So we thought, well, let's make it black in place. So someone could plug it in, you know, connect to just like any other smart device, just start using it.

Starting point is 00:23:47 Why not? And that's how we built it. People kind of plug it into the power socket and connect the device to Wi-Fi and then they press the button that can start mining. So that's how we built it. Then we'll show it to the community. We started getting feedback and they'll like, Like, I think about half the people asked, can I use my own pool? And at first, I didn't quite even understand, like, why is it so important? It was in the early days, I think, you know, I didn't educate myself enough. I didn't quite understand yet why that was so important. And one of the people, and I asked and one of the people very generally said, well, there's kind of a political aspect to it.

Starting point is 00:24:26 Right. If you choose your own pool, then in a way you can vote for how Bitcoin is developing. We're like, well, then yeah, it makes sense. And we're going to build it. Right now, it's not implemented yet, but we have it on the product roadmap so that they could start with automatic plug and play and you don't even need to choose the pool. But once you learn more about what the pool is, maybe create your own pool account, then you'll be able to switch to whichever pull you like and mine towards any pool that you want, or solo mine for that matter. That's going to happen. That's how the process actually looked.

Starting point is 00:24:59 on that kind of voting political powerpiece, we realized that we're actually doing something bigger than just smart energy use. At first, for me, the way it started was from the angle of energy. I had quite a bit of background in energy, and I'm like, wow, you know, it's a valuable resource and we're saving so much of it. Essentially, we're making zero energy mining.

Starting point is 00:25:22 Like, there's mining and, you know how Bitcoin was, if Bitcoin was criticized, it's either because the price has dropped and someone is unhappy, or because it uses energy and someone is unhappy about that. And we're like, well, but we're kind of taking that away. And it doesn't use any extra energy this way. It's still as secure because it's secured by the same energy, but it's not marginally, no extra energy that Bitcoin mining uses and the kind of application of a building.

Starting point is 00:25:46 So like, well, great. But then, kind of educating myself more, talking to more people, learned a lot more about the decentralization aspect of it. And in a way, or at some point, this could be even more important, actually. So if you think of Bitcoin as a system, is that valuable because it's that decentralized. There's no central control party. And it needs to be decentralized in many layers. There's layers like the mining pools, but then, you know, people are doing that.

Starting point is 00:26:15 I've seen the ocean pool, the demand pool. There's this, you know, a few, few others that are coming out with great solutions for that. But then there's the physical centralization that's happening around the, the big miners. And it can kind of become a problem, right? Especially as the large mining operations, they tend to get bigger because of the economies of scale, right? The bigger you are, the easier it is to raise money on NASDA. The more money you have, the better price you can get from Bitmain or whoever else. And then you just become a bigger and bigger and bigger mining operation. And they understand that. I recently saw Fred Thiel talking about this and Fredtel's CEO of

Starting point is 00:26:53 marathons. He did talk about, like, well, yeah, centralization mining is not good for the industry, and we need to do something about it. What we realize, sorry, it's a little long, but what we realize is we can make mining physically distributed. When it's, when it's big industrial mining operation, by default, the more centralized it is, the better economies of scale they get, like the bigger warehouse, but energy price and energy contract, et cetera. But you don't need like a megawatt of heat. You need a kilowatt of heat for a room. You don't need more. So by default, it's going to be physically distributed. And that becomes very, very important because if you have the physically distributed hardware, then you can have truly physically distributed system.

Starting point is 00:27:38 And then, you know, whatever layers you have from the hardware all the way to how the system operates overall, the hardware is kind of the base for it and the mining is the base for it. And with centralized mining, there's so many issues that you could have from things like, the government crackdowns we've all seen in 2021 and the mining in China just disappeared in a matter of few weeks, then you could have things like control and censorship of transactions. Someone doesn't like some of the transactions and what Bitcoin transactions get sensitive. And then there are things like, and actually what people don't talk about that much is the miners tend to get very leveraged. Maybe not all of them.

Starting point is 00:28:19 Yes. But what the open do is like they have, they take the, They sell the equity, get some of the money, then to buy the equipment. They take a loan, which is done in US dollars. And that loan kind of depends on Bitcoin price. Now, if the Bitcoin price goes down, some of the miners could go bankrupt. We've seen what happened to go scientific a couple of years ago. And then what?

Starting point is 00:28:41 The thing that secures the Bitcoin network could just disappear? That doesn't sound very comfortable, right? For someone who believes in the network. So this leverage and the. centralization of the mining becomes a single point of failure from many angles. But then you split this and people are going to hit their homes. Then I'll turn it off. The irrespective, like, Bitcoin price goes to $1,000 tomorrow.

Starting point is 00:29:07 People will still hit their home. They will still support the network. The network will still be there. Whereas at, you know, not $1,000, like even at $10,000 per Bitcoin, I would guess most of the miners will be out of business pretty quickly. I mean, the big money is. Yeah. In fact, an interesting point recently came up with the conversation.

Starting point is 00:29:26 We were talking about how people get introduced to Bitcoin. And if you think of it, most people get introduced to Bitcoin through the price. Like, well, I can make money on that. I'm going to buy it. And then, you know, it grows and I'm going to sell. And that's how people start. Speculators. Yeah.

Starting point is 00:29:43 It starts with speculation. And I think it's something people going to learn like, oh, this is actually much bigger than I thought. And then, you know, they go down the rabbit hole and then, and become the maxis and they never saw. What I realized is when people get introduced through the price, there's a pretty big churn, speaking the marketing terms, because the price is volatile. It goes on, people are happy to stay, and maybe they sell a leaf.

Starting point is 00:30:05 Or if it goes down, they're like, oh, Bitcoin is bad poison and it's terrible, and I lost money on it, and they hate it, and they talk about it. That's just because the price went down. So in terms of an introduction, price is maybe not the best way. It leaves a lot of people who get unhappy and they leave the community. What we realize is with the kind of way that we introduce people, there's a bit of orange billion. How many people have a heater? There's a few billion people who have heaters.

Starting point is 00:30:31 A lot, let me put it this way. A lot more people have a home heater than people who have Bitcoin. Yeah. So far. We're probably going to change that. If people get introduced through like a home miner, price doesn't matter. If they heat with a, you know, heat's a minor. then if the price of Bitcoin goes up, well, great.

Starting point is 00:30:50 If it goes down, then they make a little less, but they still make free assets. So they still cover part of their energy bill. So either way, it's a positive scenario for them. So there's much less of this trend. I would think that for you, it would be really hard to, because this is the typical question I would suspect you get from somebody. All right. So I buy one of these things and I put it into my room and it's 30 degrees outside.

Starting point is 00:31:14 Like, how much money am I making? or some type of question like that or like, how much of my house does this heater heat? How do you handle that question? Like, how do you come back? Because when we're looking at it, there's so many variables. Like the price of Bitcoin right now is a let's just call it $70,000. Next week, it could be $5,000, $10,000 difference. So when you're having these conversations, there's so many dynamic variables at play here.

Starting point is 00:31:40 Is it 30 degrees outside or is it 50 degrees outside at your house? right? So like all these things really kind of play into how you would respond to this. So how do you handle that question? When I started mathematics, a lot of the size, when there's too much complexity, you kind of try to package together and set it aside. And that's how you actually solved it, you know, something that looks very, very complex. In a kind of similar way, think of it in terms of the scenarios and having the scenario, which is always better. And this, I can frame it as comparing it to a Dyson. Let's say you thinking of getting a Dyson as a then you can get a Dyson, you'll pay about $800 and then you'll use X amount of energy to get X amount of heat.

Starting point is 00:32:23 Now, if you get a heat bit, you're going to spend the same amount of money. You're going to use this X amount of energy, it's the same amount of energy as the Dyson to get X amount of heat, the same amount of energy as the Dyson. But you guys get sets on top. Now, if you put it this way, then in this scenario, when you think of getting it in Dyson, then the price of Bitcoin, the mining difficulty, you know, what is going to be in three years, five years, et cetera. It doesn't really matter. You're any way, you're better off. Now, if you're not thinking of getting a Dyson,

Starting point is 00:32:52 you're thinking of getting a cheap heater like for 50 bucks, then you're probably going to be better of getting a cheap heater for 50 bucks and buying some Bitcoin. Because people often challenge me this way, well, I could get a cheap heater and I would make more or I would get more Bitcoin this way. It's like, yeah, sure, but you're going to have a cheap heater that not something that looks good, comfortable to use, you know, pleasant, etc. And I think that's fair enough.

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Starting point is 00:36:28 can be found in the income fund fund's prospectus at fundrise.com slash income. This is a paid advertisement. All right, back to the show. One of the things that you guys did was put in air purification as part of the trio. Talk us through the design decision, how you guys came up with the idea to do that as well. This is like, I think, a good lesson as most of the startups learn that sometimes a problem can become a feature. It was a problem. We're like, well, there are pretty high-end electronics in size.

Starting point is 00:37:00 There's a lot of the airflow that gets through. same with any industrial miner. And at some point, with all the dust and hair and whatnot, it gets clogged, right? So then it becomes a problem because the air doesn't flow and then it will overheat. Now, in an industrial setting with big miners, you have something called maintenance, right? Someone would come in, would open it up and kind of clean it with a brush, and it works again. Now, it's something that we don't really want to make our users do because people don't like doing that. I hate cleaning even my vacuum cleaner.

Starting point is 00:37:32 I have to, so I do, but I don't like it. And so we're like, well, that kind of sucks. We need to do it in a different way. Oh, why don't we put an air purifier? Because then it will not get clogged. It's kind of easier. And, you know, the problem with the hair and dust is solved. And then I'm like, wait.

Starting point is 00:37:48 But then it becomes an air purifier as well. And there's an additional, additional value that we can bring to the user. Because, you know, as long as we put in a good air purifying, then we're like, okay, let's use heap of filter. and the proper things. And that's how essentially a problem ended up being a major feature of. And I love these kind of solutions when you have something negative when you turn into something positive for yourself, for the users, for whatever.

Starting point is 00:38:18 When I saw you in New York, I was complimenting you on just all the engineering that you took on. And your response to me was really made me smart because you were just like, oh, yeah, I'm not really an engineer. and I'm like, are you kidding me, dude? Like, look at what you've accomplished. Why was that your response? It just didn't make any sense to me. I'm just like, you are such an engineer.

Starting point is 00:38:39 When I'm looking at many of engineers, I've personally worked with through the years. Like, this is off the charts from an engineering standpoint. Why would you respond that way? I think I may be kind of an engineer at heart. I mean, by training, I studied philosophy in economics, right? It was philosophy of students, to be fair. So we did a lot of science stuff. but I never had an engineering degree.

Starting point is 00:39:01 I think whatever I learned, I know I kind of learned by myself. But I think it's still fair to say that I'm not an engineer when I compare myself to the engineers on our team. It's me who can think of the concept, who can challenge in ways that kind of make sense, or at least I hope to believe that they make sense.

Starting point is 00:39:18 But then on our team, we have guys who, like, they built the power turbines previously. The same guy who was jumping on the heat, but he's the one who built power turbines. And, you know, But when I compare my engineering capacity to his, I'm like, I shouldn't really call myself an engineer, you know, in respect of this guy and many of the others on the team. So I think, you know, again, framing.

Starting point is 00:39:40 You're too humble, sir. You're too humble. There's a lot of people that listen to this that are younger in college that want to start their own company. From an entrepreneurial standpoint, what advice can you give that person that you've learned through this and just other life experiences as a builder? I think a few main ones. From the personal standpoint, try to do something that you actually like. I was just messaging our team

Starting point is 00:40:07 on some of the things that were achieved over the past few months, and I was telling them, I love to build things and I like to see them work. And I was telling them how it's not necessarily, it's not all about the money. It's not like growing the capitalization of the company. The money is necessary and there should be a business model

Starting point is 00:40:26 because that can sustain the business and it can make it grows and more people use what you built. But what I'm excited about at heart and our team is excited about as well as building something that people use. And that excitement goes a long way. So start with something that you're excited about. And it could be anything, right? Maybe it's something about social media.

Starting point is 00:40:46 Maybe it's something about Bitcoin. Maybe it's something about hardware. Just if you're genuinely excited about something, that's really, really good. And it's going to drive you a long way. And two, I would say, and this is where most of the startups fail, is when people build something and maybe build something hard and build something wonderful, but people don't use it or people don't pay for it. Now, if people don't pay for it, maybe it's still okay.

Starting point is 00:41:14 But the problem with that is that if people don't pay for something or you don't have a business model to whatever you have built, then it's hard to scale it. It's hard to get the resources. Again, payment and the money, it's the resource. to make it work on a bigger scale. So you can't get the resources to grow it and to get more people to use it and make even the thing even more wonderful

Starting point is 00:41:33 because you need to hire the engineers at sample. You can't just build everything yourself. And if you hire people, you need to pay them salaries because they need to eat something and they have families. And so there's got to be a business model to it. And the advice would be to try and test it

Starting point is 00:41:48 as early as possible. Ideally, before you invested much in building, when you're reasonably certain that it's going to work and you can't build it, then start testing it. Speak to your friends, speak to your family, go on Reddit, share the idea. Don't be afraid that someone is going to copy you. It's not hard to copy an idea, but it's hard to execute it quickly. So if you have a great idea, if you start sharing it, you're probably going to get more people who are kind of trying to support you.

Starting point is 00:42:16 Maybe you'll find some co-founder or whoever else, and it's going to get easier to build rather than if you're like, oh, I think it's too valuable. I'm not going to share. No, share it early. That's kind of how we, I would start working with our CTO. Our CTO was never, he never had a job interview with us. He actually started as someone who was helping conduct the technical interviews for the engineers that we were hiring.

Starting point is 00:42:37 But then he's, he's a mining himself. He'd been mining to like 2010. And he liked you so much. He ended up working as a CTO just by default. He's like, oh, oh, guys, I see you have a problem. Let me help you with this. And then he ended up being the CTO without ever having a discussion or, a contract or I was at some point I was I was even getting a little worried I'm like

Starting point is 00:42:58 why is this guy so helpful I was getting cautious and like not sure that's good maybe we shouldn't share all the plans but then yeah he was just generally very very very helpful and he had like working in CTO for like six months without us even paying him just because he like they yeah wow and then we're like hey you know you've been working so much, you know, how about we make it official and like, yeah, sure. And he's like, if you want to pay me, pay me, pay me. I'd work for free, but if you want to pay me, I love stories like that. I have a kid. That's when you just know you have a person who's there for all the right reasons. Like, he was there because he loved what you were doing and

Starting point is 00:43:39 just brought that expertise. And I love your advice also on just getting out there and not being afraid to share your idea because you're so right. The execution and the work that it requires to build something like this is if people could peer into your day to day from 2020 to now, they wouldn't believe the amount of work and effort that it took to get it to here, right? So, yeah, amen to that point that you made. I want to ask you on your philosophy major. If you had to go back and redo your major, would you pick the same major? And if you would, what was it, what was the thing that you gained by majoring in philosophy

Starting point is 00:44:20 that you hold dear with you now? Philosophy is a very broad thing. Very often people have a misconception that philosophy, they mix it with something kind of like history of philosophy. Philosophy is not about studying who said what at one time,

Starting point is 00:44:35 right? It's studying different concepts and discussing them, trying to see what works, what doesn't. And then there's just so many different areas that there's a lot of things to choose from. The one way to think about it

Starting point is 00:44:47 and would be that every major science kind of started as philosophy and then branched out, right? So when Adam Smith was writing about economics, he didn't really write about economics, he would consider himself a philosopher. And then, you know, because of the crew, they're like, well, let's just branch it out and, you know, people call it economics. And all things started this way.

Starting point is 00:45:05 I'm not sure the mathematicians would agree, but the early mathematicians would also be like, well, I'm a philosopher. And then because mathematics got so big, kind of it, you know, it branched out as well. The study that I did was mostly philosophy of science. So it's things like, how does science develop? Does it go this way? It doesn't go that way.

Starting point is 00:45:24 What do we consider truth? There's different ways to think about this as what is true. It could be something that, you know, there's a statement that kind of corresponds to reality, but then it kind of begs the question. Okay, but what is reality? If you've seen Matrix, you're like, you know, what is reality there? Or it could be another theory would be. So that would be the correspondence theory of truth and you would have something like

Starting point is 00:45:45 coherence theory of truth, which is like, well, reality doesn't matter. matter because who knows what reality is, but if you have a set of statements, which is kind of critical mass of those statements, then you have an extra statement. If it fits those, then it's true. If it doesn't fit, it's false. The kind of stuff that you discuss, and it's very, very conceptual, but it teaches you to think from very different angles and slice and dice any situation in very different ways, which helps you to uncover interesting thoughts or solutions with any kind of problem. And the second thing, it teaches you to think and express yourself in a more or less clear way.

Starting point is 00:46:25 I think this is what philosophy degree really brings you. I think it can be stepping stone to a career in academia or a lot of people who study philosophy can become very good lawyers, I think, because again, they can take the situation, kind of slice it in different ways and argue their way through. Yeah, my philosophy was philosophy of science, but did a lot of things like logic. and there's just so many levels of depth to it. And my degree wasn't just an undergraduate degree, right? There wasn't anything too advanced.

Starting point is 00:46:53 But even in logic, we would think that, you know, there's true and false, then there's something that gets a little bit more complex with like, or how many objects are there, maybe it's for all of them, something is true. Then you have things like, oh, imagine that there's not just one world where certain logical statements interact, but there are different worlds. and then the sort of set of logical statements here doesn't necessarily correspond to set of logical statements here. You know, here A is true and B is not true.

Starting point is 00:47:22 Here, both A and B are true. And that's okay. But then you have like, we would call it, this world can see this world. So that means if something is true here, it needs to be true here as well. But it doesn't work the other way around. And then you have always like logical structures

Starting point is 00:47:38 and you think, oh, but this is kind of crazy, right? Why is this relevant? But then you realize that having all this discussions and logical structures, it gives rise to some of the other things. Like, you know how AI and Generative AI, it kind of really got possible with the mathematical inventions that came out not that long ago, right? There's iterative learning that they use. Yeah, it's not that long that people came up with.

Starting point is 00:48:07 So on one hand, there are these people who do this very, very basic science. and they kind of look crazy to an average Joe. But then it does give rise to the wonderful pros like ChachyPT that we use now. Yeah. Same with philosophy. You know, I found interviewing a lot of people on finance some really impressive people that have,

Starting point is 00:48:28 like Bill Miller is a perfect example of like this really impressive investor with an incredible track record. And he was a philosophy major. And it was just, I've seen this really interesting dynamic. One other thing that I've noticed with people that have this philosophy background, they're often just really objective and unemotional in the way that they can deal with different points of view. A lot of people just get very

Starting point is 00:48:55 emotional if you're pressing on a counter opinion or a different point of view than maybe one that they hold dear. And people that I've, at least the few people that I've interacted with that have this background that you speak of, they just, they're able to do. deal with it in a very unemotional kind of way and kind of really kind of put themselves in that vantage point to really try to uncover what the truth is or some maybe different vantage point of the truth, not necessarily call it truth, but they're just trying to understand what it is. And I just have a lot of admiration and really have learned a lot from people with this background. So that's really helpful what you laid out there.

Starting point is 00:49:34 Okay, last question I got for you. In this space with the Bitcoin home mining, what is one of the biggest misconceptions that you find people have? Or even a frustration that you hear an argument over and over again and you're just like, you just want to hit the top of your head and be like, come on, man, like, what is this? I think there's the small one that I mentioned that sometimes people think like, oh, heating uses energy and then mining uses extra energy. That's just not right. It's the same energy. But I think we talked about that already.

Starting point is 00:50:05 There's one kind of interesting discussion that I had recently talking about the orange billing and how people get introduced to Bitcoin and how they think about the price, etc. Kind of caught thinking in the discussion that people talk about the price and price of Bitcoin. And I was thinking, well, if Bitcoin is money, then there's no price of Bitcoin. It should be price of Bitcoin. It should be an affix rate. And the argument goes, well, if it's an asset, you know, like gold, like Apple shares, like real estate, then there is a price because the value of the asset is determined and communicated in terms of the price of money, right?

Starting point is 00:50:49 The monetary price, you know, and dollars and euros and whatever. But then if it's money, people don't talk about the price of pounds, price of dollars, price of UN or euros or anything else. They talk about the FX rate. And this is just, I think, an open discussion, an interesting discussion to have is whether we should be talking about the Bitcoin price or should we really be talking about the Bitcoin exchange rate, Bitcoin FX rate. Because if it's money, then it should really be the price. It should be like, well, a thousand sats is, you know, X dollars, the FX rate. You know what I mean? Yeah, no.

Starting point is 00:51:22 I kind of, you're thinking. One of my favorite framings is just when you're comparing it to physical things. So, like, I'm looking at the price of Bitcoin relative to. a house over the last, call it four, eight years or whatever frame that you want to look at it. And when you're, when you view it through this lens and you just take whatever Fiat currency that you're used to hearing and talking about and just remove it completely and say, well, how much corn could I buy four years ago with Bitcoin versus today? And what you find is that the price on everything desirable, everything physical,

Starting point is 00:51:54 desirable thing is just collapsing at an exponential rate. And it's something that I think is very difficult for people that are looking at the space very superficially. They're just kind of showing up and they're speculators like you were describing earlier. And the dollar is just the dollar, the euro, the yen, whatever fiat currency we want to bring up is just, it's like water to a fish. And it's really hard to get people to kind of look at it through some other type of physical thing that you're comparing it to. And you're just looking at it and you're like, everything just keeps getting. cheaper. If you're a Bitcoiner that truly denominates all of your retained earnings in Bitcoin, you're just looking at the world and you're like, it just keeps getting cheaper. It just keeps getting cheaper and cheaper every day.

Starting point is 00:52:39 Yeah. And there's different aspects to it. So there's different drivers, you know, as a comics would say, of why is getting cheaper. So right now, one of the primary drivers was just the growth of the Bitcoin system, right? That there's more people getting into Bitcoin, we'll be out buying. I think it's been more behaving a bit more like an asset, right? And just because there's more demand for the asset, the price, in this case, you know, called price was growing. And in that sense, everything else, a ton of corn or a house would be getting much, much, much, much cheaper in Bitcoin over the last whatever, five, seven, ten years. And at some point, there's going to be a plateau of this effect, right? There's, you know, there's going to reach some sort of a critical mass. There's more people

Starting point is 00:53:23 have Bitcoin. There's not new people necessarily coming in. So it's going to be a lot of less of this speculative growth of the asset, and kind of becomes more of money, hopefully people really start thinking of it there, money at that point. But then there's another effect that will play a bigger role by then. Even if they say, you know, everyone has Bitcoin, you know, everyone, everyone uses Bitcoin as money around the world.

Starting point is 00:53:45 The price of things will still get cheaper. And that's just called progress. We as civilization, we tend to learn and we tend to improve things. and make things better and more efficiently. Right. The productivity of our work in the last, what, even 300 years, has gone up many, many times just because we have the machinery, we have the electricity, right?

Starting point is 00:54:12 We know how to manage things better. And if the productivity increases, then, and if you have stable money, you know, like Bitcoin in a concept that I'm talking about, then the prices should actually be reducing. because, well, you know, for the same price. The technological efficiency gains, yeah. Exactly. And the technology efficiency, it kind of goes one way.

Starting point is 00:54:34 It doesn't go the other way. So overall, even by the time Bitcoin is the money, there's still going to be an improvement as a decrease in prices in Bitcoin terms for everything that we consume. And it kind of makes sense at that point, you know? I know Dallio, Ray Dahlio talked about this pro. productivity efficiency and the number that he stuck on it was 2% annualized. But who knows what that reality is if you have a sound hard money that isn't being lost,

Starting point is 00:55:07 and I think that's what's going to make the realization of this kind of tricky to fully know what the productivity efficiency gains are. Because if the money was never lost, then I think you could really stick a number to it over, call it 20, 30 years once it was fully materialized as the money that the settlement layer that everybody's using. Maybe we'd actually figure out what that percent is, that growth rate, that efficiency rate is probably a better way to put it. From my early economics courses, I think they talked about 2, 3 percent a year in general.

Starting point is 00:55:40 Yeah, that's the number I've heard. Yeah, I think it would depend on the economy, right? You have more developed economies where it's harder to grow very fast and you have economies that are from like agricultural society, more industrial society, they can move a little faster. Yes, it's a vector. Yeah. Yeah, very interesting stuff. Alex, I've loved this conversation. For people listening to this, the website is called heatbit.com. You can go there, check it. I'd highly encourage you to go

Starting point is 00:56:05 check this thing out. This is one of the neatest things ever. Having seen it in person, it is sweet. I really hope that you guys continue to really do wonderful things here. And I can only imagine what you have on the horizon and what you're dreaming up next. But, Alex, thanks for making time and coming on the show. Did you have anything else that you wanted to highlight? Well, yeah, to check out our website, check out our Twitter. We try to answer any of the questions that people might have. We really want to, it's not just about selling the devices for us. I think it was kind of becoming clearer during the call.

Starting point is 00:56:40 We do want to help decentralize the network and build the much better system this way. There's other teams who are going to be doing similar things and will compete in some ways can help each other and others. And all together, I think, we'll have a very decentralized base layer on the hardware layer that will make the monitor system a lot more valuable for everyone to use. So I'm really looking forward to making that happen. And I want to say thanks for your invitation to join the podcast. It's a pleasure to speak to you.

Starting point is 00:57:16 And, yeah, if I can be of help going for basically, let me know. Thank you so much. And I love your final point there about decentralizing. the network and making it stronger because of things like this that you're building. I think it's such an important point. So, Alex, thank you for making time. And I'm sure we'll chat here in the future. Sounds good. Thank you. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I'd love to have you as a regular listener. If you enjoyed the show or you

Starting point is 00:57:52 learn something new or you found it valuable. If you can leave a review, we would really appreciate that. And it's something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening. And I'll catch you again next week. Thank you for listening to TIP. Make sure to follow Bitcoin Fundamentals on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only, before making any decision consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted

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We Study Billionaires - The Investor’s Podcast Network - BTC187: Home Heating and Bitcoin Mining w/ Alex Busarov (Bitcoin Podcast)

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