What Bitcoin Did - THE RISKS OF BITCOIN MINING CENTRALISATION w/ Bob Burnett

Episode Date: April 16, 2025

Bob Burnett is the Chairman and CEO of Barefoot Mining and board member of Ocean. In this episode, we discuss why the future of Bitcoin mining is about much more than just hashing, how control of block space could determine who holds true economic power in a Bitcoinised world, and why building from the bottom up — starting with energy production — may be the only path to sovereignty. We also get into complacency amongst bitcoiners, the issue of centralised mining pools, why financial institutions and nation states alike are waking up to the strategic value of block space and the future financialisation of block space. FOLLOW: Danny Knowles: https://x.com/_DannyKnowles & https://primal.net/danny Bob Burnett: https://x.com/boomer_btc THANKS TO OUR SPONSORS: IREN: https://www.iren.com/ RIVER: https://river.com/wbd CASA: https://casa.io/ LEDGER: https://www.ledger.com/ ANCHORWATCH: https://www.anchorwatch.com/

If I'm a nation, I'm a lot less concerned about building a treasury of Bitcoin than I am about solidifying my economic sovereignty in the long run. And I get that by controlling block space. Because if you wait, if you wait for it, you'll be too late. We have to stay vigilant. And this certain amount of paranoia, I think, is really important. What Bitcoin did is brought to you by our lead sponsor and Massive Legend, Iron, the largest NASDAQ listed Bitcoin miner using 100% renewable energy. Iron are not just powering the Bitcoin network.

They also provide cutting-edge computing resources for AI, all backed by renewable energy. So whether you're interested in mining Bitcoin or harnessing AI compute power, iron is setting the standard. Visitiron.com to learn more, which is iriR-E-N.com. So I think we're at a very interesting point in Bitcoin in that there's so much good news. Yep. And strategic Bitcoin reserves, some corporate adoption, the ETFs. And what I detect is some complacency and comfort that bothers me.

I don't think we're safe. I don't think the problems are all solved. I don't think we're immune from attack or from even being wounded severely. We may have reached the point where Bitcoin won't die. But will the Bitcoin that we want live, like those are two different things. I completely agree. And this is something that, so first of all, like I've heard many times before, people say like the biggest threat to Bitcoin is complacency. And that's something I totally agree with. And this is why I've really struggled to kind of round out my ideas of whether all this, like, you're not going to stop this nation state adoption. So that's irrelevant. But whether it's a good thing, whether that's going to mean we get the Bitcoin that we want, I'm still not sure where I am with that.

It's really a dilemma. That's probably not the right word. But yeah, you kind of feel it on both sides and, you know, probably talk about it a little more depth later. But I think you're right, we can't stop nation-state adoption. And I think, we'll probably talk about it in a little bit, I don't think we can stop nation-state adoption even in control of the chain itself. What we have to do is find a path to create a section of the ecosystem that maintains all the things that we hold near and dear immutability and borderless and censorship-free and all that. Yeah. Because the big boys are coming and it's not just the nation states. It's the big financial institutions.

And I think they're on the cusp of realizing that it's not just owning Bitcoin that's important. It's the ownership of the network that is important. Yes. And the heart of the network is in mining and in block creation. And this is why what you're doing at Ocean is so important. And we will get into all this. But thank you for driving all the way over here for this. I appreciate it.

Thanks for having me. I love seeing you. Life's pretty hard for miners right now. It is. Is hash price just about all time lows? It is. So how are you guys getting on at barefoot? Well, I think what it does is it pushes one, the Darwinian component, right?

You know, we're going to see fallout. Yeah. Now, will that be big, big boys falling or small guys falling? you know, hard to say. I mean, what I will say is I think the small guys, the, the nice thing about being smaller, and you've probably heard me talk about rabbits and horses and elephants and that sort of stuff before, is that we're more nimble. So we can pivot, I think, more quickly.

For me, survival in this world will come down to energy production. Yeah. Not finding low-cost energy, but producing your own energy. Oh, interesting. I think that that is really the only path to being sure that you have the economic structure that will survive. That's interesting. And that's what gridless are now trying to do in Africa, isn't it? They want to go and actually own the energy infrastructure at the source.

And then you can kind of put my, co-locate mining there for now. And maybe in 10, 20, 30 years, maybe there's no mining at that site. Right. But you just keep moving on, moving on, moving on. So I think what happens, and I know there's a lot of topics will probably hit, is I think you build your mining organization from the bottom up, not the top down. Yeah. And let me explain that for a second. I think there's something I call the minor stack. Okay. So it starts at the very bottom. There's kind of two components in the foundation. One is energy production and one is ASICs, the chips. Okay. And then you go up a step and you have the system production, not the chip, but the system production. Then on top of that sits the kind of operational efficiencies and like those sorts of things, to hash, to be a hasher. And then the next level up is the block creation

itself. And so you kind of build this thing up. And I think what's happened is what most most people think of as mining is just hashing. It's kind of the middle piece. That's the hardest area to build differentiation and build value. Okay. So we have almost everybody focused in this one area. And I'll explain why in a second, but I think everybody's been focused there and they miss a couple things. That, one, that's not mining. In fact, I think I'm getting somewhat vigilant about saying,

saying for organizations that only do that, we have to stop calling them minors. So these are the people that will hash with a pool that they're not controlling the block template of. Well, they kind of sit in the middle. They don't produce energy. They build an operation, big or small. They hash for a price.

So they, I like the word abdicate. Because I think traditionally a minor, the role of a minor, of a miner is to run a node, manage a mempool, create block templates, construct the Coinbase transaction, receive Coinbase payments. By Coinbase, I'm sure you know, but I'm not talking about the company. I'm talking about the actual payment of Bitcoin from the block itself. And they hash. And what's happened is we've migrated right or wrong. I shouldn't say right or wrong wrong wrongly we've wrongly allowed the pools I'm not saying they were necessarily malicious in the way that they approached it but we've we've gotten to the point where the

pools are doing everything but the hashing and there aren't that many pools and I'm sure we'll talk more about that later but the the organizations that are just hashing they're really what they're doing is is I call a mercenary hashers They're performing this function that sits really in a kind of the middle ground of this mining stack that I talked about, adding very limited value, in my opinion, probably the least amount of value is being added at that point in the stack. And they're letting the pool take control. And so by doing so, there's a tremendous amount of power and responsibility that now becomes the traditional pool's job. Now, at Ocean, we're doing something a little different. But the pool is creating the templates.

So people... Before we do that, I just, because I want to get into the pool, I don't want to end up to disrupt, like going back and forth too much. I did just want to touch on one thing. You were talking before about you think we're going to start seeing some fallout in the mining industry. I mean, people said that around the Harvingham. There was a couple of consolidations, but we've not seen real big fallout. We've not seen many companies go bust. What do you think it would lead to that?

Is that people who are kind of missing the full stack and are just doing the hashing? Do you think they're the ones that are likely to struggle? Ultimately, yes. I can't predict what will happen tomorrow. Tomorrow, but I can say that, we'll back up a little bit. So I think if you ask somebody, what has been the role of the minor for the last 16 years? Most people would probably reply, it has been to produce Bitcoin. The issuance came through the miners, right? They were working for the subsidy.

And I think a lot of people's perspective about the incentive structure of miners, you know, what incentives do they have? You'll hear a lot of people talk philosophically about these natural equilibriums. Like, hey, if, if X happens, then don't, and it starts looking bad, don't worry, because why will happen to make it all better again? Yeah. You know, like this beautiful, constructed thing. And it is a beautifully constructed system.

But I think it only, that. equilibrium only works in in a fairly small controlled environment where the incentive is is so simple like the subsidy we're at the point now where the subsidy is dwindled right we're at 6% of the original subsidy and going less relevant and we all know what's coming yeah right and so the output mining process will shift from producing Bitcoin to producing block space. So that is the product. Hence, that's why I say, maybe it fills in a blank from what I was saying before, if all you do is hash and you abdicated the power to do the other function that is really

the key value, what do you, what are you, what function are you really? performing. Yeah. So I think what's happened is holistically, if we look at the big, known, bigger name companies that have performed that function, they're pivoting away from Bitcoin. So this is like them issuing debt to buy Bitcoin rather than mine Bitcoin. Is that what you're talking about? That would be one example. The other example would be, hey, let's convert our access to energy, grid-based energy, to a place that will pay us more money for it, like AI and HPC. And what about demand response? Would that fit into that as well? Or do you think that's just a natural? Well, I think that's a natural thing. I think one of the interesting things about

mining is I think we oversell those types of things. And I'm very much a contrarian. Do you think we oversell them because it's so good for the narrative? Oh, it's wonderful for the narrative. Yeah. And I'm not saying it is untrue, but it can only be true to a certain extent. So, like, let's look at a couple numbers. I think these are good numbers for people to have. Global electronic energy consumption is about 30,000 terawatt hours.

That's everybody. Yeah. Everything, all the lights, all the cameras, all the, whatever, right? I believe the Bitcoin network is consuming about 200 terawatt hours annually. Okay. Okay. So we're 0.6% of global energy consumption. Mm-hmm.

Secondly, the entire Bitcoin network last year in dollar terms produced about $14 billion. Okay. So... This is subsidy plus fees. Subsidy plus fees about $14 billion. All of us shared, all of us participating in this has been shared $14 billion of revenue. we can't buy enough energy to, on a global basis, affect all the grids. We can't even do it for the U.S. Can we do it when we have such a massive concentration in Texas?

Yes, we can make a material impact on that. Yeah. But I think we, like I said, I think we oversell it because we can't balance all the world's grids. We can't be baseload and curtailment and all this. for everybody. We can just do it. We can do it in select places. It will have a positive impact on humanity. So all that is true. But again, I think it's highly oversold. However, and I'm going to try to visually describe a chart here. Okay. If we go back to that 30,000 terawatt hours of energy, of electricity. Yeah. Excuse me. Now, imagine an X-axis, which is the

price of that energy per kilowatt hour. And the y-axis is the amount of energy consumed at that price. What you'll find is it's roughly a bell curve with 15 cents per kilowatt hour at the middle. Mm-hmm. Okay. So given that, now you move to the lower left corner, the origin, okay, that would be where it was zero cost energy. Well, and there's a little bit, like you said, like in demand response, you could actually say, well, there's, or there's points where energy is actually negative on the grid, right? So that, but, but anyway, in mining and hashing, actually probably a better way to say, in hashing, there's a number between four and five cents per kilowatt hour at a commercial level.

If you're not at that level, you're out of business. Yeah. Today. Yeah. Okay. So when you think about the bell curve, we're really far from the middle. So my estimate, and it's very hard to get a real number, but my estimate is that maybe, maybe there is 1,500

terawatt hours of energy available at the right price. And we're using 200 already. We're using 200 of it. We have to fight HPC, high performance computing, traditional heavy industry for that amount of energy. Yeah. Okay. And all the low-hanging fruit is largely taken. Now, will new energy come onto the grid? Sure. Sure. Will there be some additions there? Sure. But to go out and build a 200 megawatt, a 400- megawatt kind of facility, it gets really, really hard to find those kind of spots on grid. Mm-hmm. So you asked me earlier, how.

we compete. We compete or survive, I think is actually how you asked, but how do we serve, which I guess surviving and competing are the same thing in our world. We can go out. So, for instance, we have access to natural gas wells. Often we own them. We own our own our own hydroelectric facility. We have an anaerobic digestion facility. Now, these might be one megawatt or three megawatts or five megawatts or half a megawatt, but we can achieve costs down, let's say, in the two to three cent per kilowatt range, potentially even cheaper, but only in that size by producing our own energy. And so that's how we can survive.

And it's by, because there are pieces out there, almost an infinite number, right? I mean, there's water flowing and natural gas. and cow shit, you know, whatever. There's an infinite supply of all that stuff. And we can build power production from that that competes. But we just can't do it at 50 or 100 megawatts. Individual sites. We have to build small sites.

And so that's what we're getting good at. That's my organization of Barefoot is, you know, how do we do that? Well, we learn how to manage a whole bunch of different small sites and produce our own energy. This episode is brought to you by Anchor Watch. The thing that keeps me up at night is the idea of a critical error with my Bitcoin called storage. This is where Anchor Watch comes in. With Anchor Watch, you're protected by their time-locked multi-sig vault and with your own A-plus rated Lloyds of London-backed insurance policy. You get to hold your keys, Anchor Watch holds the risk. Whether you're worried about inheritance planning, wrench attacks, natural disasters or your own mistakes, you're protected

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And if you're saying that like small scale, it makes sense to go and do these operations, large scale, does it not make sense that are now kind of doing both Bitcoin mining and AI compute and high processing compute power? Like, is that a way that those larger miners are going to survive? I think it's... Because the demand is different all the time for all of those different industries, right? Yeah. Yeah.

And if I happen to be running one of the big companies, I would have pivoted hard toward the AI side. Yeah. But I'd also say that I'm probably not a real bitcoiner. Yeah. And that's okay. That's their prerogative. I would say I'm not here to call out specific people or companies, but I think there's a lot of companies out there that aren't real bitcoinsers

that are Bitcoin companies. companies. They claim to be Bitcoin companies, but their complexion will change a lot. Yeah. But do we need the miners or the hashers to be Bitcoiners? Is that important? The hashers, I think it's helpful. But we also, we need a large group of real miners. Yeah. Because I think what's going to happen, and I don't want to, again, jump too far forward, is that these, especially the public companies, but there are a couple bigger private ones, too. They are going to be targets for acquisition. I guess that's, I'm not a, I'm not a big fan of them.

I'll say that. You've made that very clear. But, you know, to those out there that own stock in them and have been waiting, I think the positive thing I could say to those people is I think they will become acquisition targets and they will become acquisition targets from the financial services community. Okay, who are you thinking that? Because one potentially obvious one,

because these are very efficient operations generally, like Bitcoin mining is an incredibly competitive industry. Do you think the potential acquires are people like Google? It's possible, but I think a more likely candidate is Bank of America or Citigroup or Wells Fargo or BlackRock. And what's their incentive to get into this? To control block space.

Okay, so this kind of goes full circle to where we're going to get to. Yes. So maybe that's a perfect point to kind of go back and get into pools to start with. So is this like your biggest concern in terms of Bitcoin mining centralization? Pool centralization? It would be 1A. 1B is probably at the chip level. Yeah.

But it would be 1A, yeah. Okay. So why don't we start with you just giving us kind of like an overview of the current situation with the mining pools? All right. Well, I think I described before. First, as a community, we've largely abdicated the responsibility of mining. Yeah. You know, the purpose of a pool originally is to share and mitigate risk.

Mm-hmm. Right. And so, and the pools do accomplish that mission. Over time, though, what has happened is they've taken on more and more responsibility. And the community that has been providing hash has been more than willing to do so. And the reason they've been willing to do so is so they have more reliable payouts. Is that the big driver? I think more reliable payouts.

I think they also have less. legal exposure. It's a real convenient thing to say in a court of law, in a world where maybe a government is attacking you because there's a transaction that can be traced. I didn't put this North Korean transaction in the port. Right. Yeah. Iran bought nukes from North Korea with this transaction and you happen to include it. You know, that there's a great way of for the, hashers to say, well, hey, wasn't me, go go go talk to the pool. Yeah. Of course, as you said, consistency of revenue.

Mm-hmm. You know, if you think, I think most mining companies are like mine that we run on a, for a large part, a one-month cadence. Yeah. Meaning our cash flow, we have to have consistency in 30-day windows. Keep all the operations running. Keep all the operations running properly. And however, some of the mining infrastructure, energy being are big costs, of course, right? Especially when you're on grid.

But some mining organizations actually have daily payment requirements, depending on where you are and what your grid relationship is. Some people are buying every single day. And that kind of pressure really forces you into something that mitigates it. So what happened was these things kind of migrated. And so now the pool decides what transactions go in the block. And we can talk about it more if it's interesting. But it's a great power. If you look at the MMPL, which I know as we're sitting here today in late April, is empty.

There's not much of a decision to make. But we've certainly seen times in the last two and a half years. Like in the last two and a – this is a very interesting. In the last two and a half years, block utilization. is over 99%. Wow. So for a two and a half year period, we've been full. Yeah.

Well, Memples, yeah, like you say, didn't empty until quite recently, really. Right. So the importance of the transactions in terms of miners' revenues is obviously getting more and more important. Yeah. We're getting things like Stratton v2. You guys have datum. So is this just a, I guess, like a demand thing where as fees do get more important,

miners are going to be more incentivized to have the most expensive fees in the blocks. And so they're going to start pushing to use things like Stratbv2 so they can control that. Yeah, but it's a lot bigger than that. Okay. You tell me the story. Okay. So this is what I was talking about before, about maybe people thinking about these certain equilibriums. So we have to look at incentives.

Now, if you think about mining as an industry of itself, and you just think about that. in a box then you'd say yes the proper way to answer the question is that way but if you step back and now let's think forward in time you know we're both committed bitcoinsers we believe there is a point in time we can argue about what that time frame is where maybe bitcoin is the base layer of global money it's the final settlement layer for everything um there are 330 million corporations in the world Let's imagine a world where 10% of those have a Bitcoin treasury. Let's imagine every country having some form of strategic reserve or wealth fund that holds Bitcoin.

Well, in that world, the block space becomes insanely valuable. because there's only 53,000 blocks a year. There's roughly 4,000 transactions that we can cram in there. That means there's 200 million base layer transactions that can occur. Now, if 33 million companies even just want once a quarter to move Bitcoin into their treasury or out of their treasury, that consumes half. Now, could they be batched together and all this? Yes, they could. But just to give you an idea.

The direction where this is going. The direction. Access to these 200 million transactions becomes insanely important. Yes. Okay. So now imagine you're a financial institution. Now, that could be somebody from the traditional world, like a Wells Fargo or Bank of America, or maybe it could be an emerging one.

Maybe strategy becomes a bank. Maybe Coinbase becomes a bank. Now, you want to attract businesses to bank with you. Well, I believe part of the value proposition for those types of financial institutions. If I'm a big company, I'm General Motors. If I and I am strategy as a bank, I'm going to go to General Motors, I'm going to say, I want you to do all your banking with me. And part of my value proposition to you is that I'm going to give you 2,000 base layer transactions a year for free.

But you're going to custody with me. You're going to get your Bitcoin loans from me. You're going to do these things with me. We're going to monetize you elsewhere, but this thing you get for free. Yeah. Yeah. Because it's so what I'm saying is, you know, let's zoom out and look at, you know, what is the incentive. the incentive for the bank, they don't give a crap about the fee.

Yeah. They care about the relationship. And so that changes the whole mindset, right? As soon as you think that way, you go, well, these are going to be completely different behaviors. If they have access to block space, for instance, a use strategy, let's say they have 1% of the world's hash power. Well, that means every day they're going to get about one and a half blocks. Ten a week, we'll call it ten a week. So their algorithm for building a block will probably look something like, hey, are there any transactions from our customers?

Pick those first. Pick those first. Are there any of ours? Yeah, pick those next. Maybe there's a secondary. level that maybe the premium customers get get it for free but there's other smaller retailish like customers maybe they get a preferential treatment and maybe they even get a discount and then if we haven't filled it up maybe then we'll go look at the broader mempool at the broader mempool yeah right

so it changes the dynamics quite a bit um i've i've i've talked about this a little bit but i say if I'm a country, I'm going to have the same set of behaviors. If I'm, I use Israel as an example. So Israel has about one half of one percent of the world's GDP. They're very controversial nation, obviously, right? And it pivots whether they're in favor or out of favor at any time. And even who you speak to in any country? Yeah, exactly, right?

So if I was them, and I think they're pretty good about it, I would be paranoid. And I would say, hey, if they can envision a world, even if it's a low percentage chance, where the West suddenly rejects them, and they don't have the U.S. and Australia and the UK and countries like that as friends, how do they survive?

Well, if they go out and acquire, let's say, a quarter to half a percent of the world's hash power, Yeah. Now. That should equate to... Yeah, they... Can they get three or four blocks a week? Well, okay.

If so, then they can buy wheat from somebody. They can, you know, buy cars from somebody else. Like they, regardless of it. So it's really a path to economic sovereignty. So if you think about it at the nation state level, controlling blocks is a preservation of economic sovereignty. And I would go so far as to say, if you don't have long-term economic sovereignty, you probably have no sovereignty as a nation. For sure.

Right. And so this, I said this to you earlier. And again, I know it's a bit controversial, but I would say, if I'm a nation, I'm a lot less concerned about building a treasury of Bitcoin than I am about solidifying my economic sovereignty in the long run. And I get that by controlling block space. Interesting. this may be a bit of a tangent, but do you think that means we'll see a financialization of block space? I know there's people working on things like block space futures at the moment, or I think there is at least, do you think for someone like strategy to guarantee 2,000

transactions a year to GM or whoever, we need those kind of financialization of block space? And is that then also a risk, or do you not think that's a risk? That's an inevitability. Great question. I'm actually working on that. Okay. So I've been working on it for two years. Because, one, I saw this. So I said, well, if block space is scarce, and I believe it, this is a hard concept. So as Bitcoiners, for the first 16 years, block space has been available whenever we want for free and for all intents. Essentially, right? So and even that, some of these things I know are very controversial.

say, well, we have a value proposition to the community about self-custody, which obviously I'm hugely in favor of. But we can't do it for everybody. The math doesn't work. If there's 200 million transactions a year and there's 8 billion people, well, that's 40 years just to get them Bitcoin, you know, and so that math doesn't really work. So, I think that we're at a point where the financialization of block space is inevitable. Because like any scarce resource, an example would be, you know, if you want to go to Times Square on New Year's Eve to see the ball drop, are you going to book your hotel room now here in April? or are you going to show up in New York on December 30th and try to find a hotel room?

Yeah. Like it doesn't work that way. So like any scarce resource, I think block space is the same way. If you're a consumer of block space, that's what you want. Now, if you're a seller of block space, like the hotels, they want to fill the hotel up. And so if they know, they'll jack their prices up, Yeah.

For the last week of December, of course. But they would rather have a full hotel at maybe slightly less than the full market opportunity and know that they're all booked. And miners will be the same way. A real miner, right? A real miner meaning somebody that creates block space. So because also as well, if you think about it in Bitcoin terms, anybody that's, whether you're a hasher or a miner, you have had extremely predictable cash flow. And in Bitcoin terms, because you know if you have a certain percentage of the world's hash rate,

you know what the subsidy is, and the subsidy is 98% of the block reward, you know what you're getting. Well, fast forward even 10 years. Well, the average block reward since the beginning is 0.335 per block. 0.335 Bitcoin per block from the beginning till now. So by that, assuming that that stays the same, we're only in the third halving, we're three halvings from the fees being 50% of the revenue. Yeah.

Okay. But again, you don't know what blocks you're going to win and we'll probably have a lot of variability in that fee structure, just like hotel rooms have a lot of, lot of variability, right? So the miners are going to not only want, but almost have to have a marketplace where they can sell forward. And I think users are going to do the same thing. They want to block it in. So I think block space is the next great commodity. So think of it as a commodity. It's a commodity. And I think it's the next great commodity. I think there'll be a

massive market for it. So just to kind of take this back, a little bit. So your concern here on sort of minor centralization is not really anything to do with minus having too much control or pulls having too much control and attacking the chain. It's the, or at least directly attacking the chain, it's more on the censorship side. That's my number one concern. I mean, I think there's always some risk of somebody trying to reorganize the chain or those sorts of things. But I think censorship is the real problem. Yeah. But I did gloss over because I have a tendency to do that.

Thank you for bringing me back in line. I don't want to overlook that, though. We're at a very interesting point. We're at a point right now where Foundry has 30% of the hash rate. And Poole plus its proxies. And I can come back and explain that, but just think essentially Ampoole has maybe 40-ish. percent control are at a point where we got 70 percent of the network being processed through two organizations. They decide what transactions go in. They also are in the position for protocol change

signaling. So, you know, I mean, obviously there's a relationship between the nodes and the miners about whether something becomes active. But the miners initiate. It's usually. It's usually, usually initiated through the mining, right? So Segwit or Taproot or those sort of things are, you know, signaled through those. So we're letting almost the whole decision get made and initiated by two parties. Either can either is big enough to probably veto it. Yeah. You know, or collectively they could decide it. Like it's, it's a very dangerous, very non-democratic way of looking at it. But here's the real thing. Jameson Lopp has a great tool.

It's on GitHub. And what it shows is that how many, if I send you money right now, how many blocks should I wait? I'm going to buy your car, Danny, right? Say it's one Bitcoin to buy your car. So it's a big transaction. When should you give me the keys? Well, so this is funny because like historically,

people always said an hour, like six blocks. But I did see Luke recently tweet that he thinks the real time is something like 800 blocks. Correct. Which is nearly six days. Correct. And I don't understand that. So can you explain that to me? Okay.

So you're correct. And Luke was doing math very similar to what Jameson does in his tool. And when somebody has 30% or 40% or 45%, then even though they don't have 51%, which is often thought of as the magical number, yeah. It's still possible for them to force a reorganization, right? So, and the way, it would be risky.

A lot of people would say it's economically unviable. Yeah. But I'll go back to the incentives. I think maybe the incentives aren't economic. And so I think that's where a lot of this stuff falls apart. Okay. So basically what could happen is they could say, let's just pretend we're on block number one million.

Okay. A block gets produced by the network outside of the big guys. And they don't like it for some reason. And Poole doesn't like it for whatever reason. they could wait and try to mine, remind that block. I think you should explain how this exactly works because I'm not sure I fully understand.

All right. So block number one million has been produced. Let's say by ocean. Okay. And so. And because it's one million, like there's tons of ordinals. People like fees are really high. Well, actually, that's probably, I hadn't thought of that.

I was trying to do that for simplicity's sake, but you're probably right. It's probably a magic number, fees are through the roof. So that's a great example. Yeah, let's say for some reason that there's a thousand Bitcoin in fees sitting there. So ocean mines it. Okay. And you go look at Mempool. And you see the ocean tag buy it.

But Antpool doesn't. doesn't have to accept it. Their node could say we're rejecting that. We're going to keep trying to mine the same, that same block, one million. Okay. And let's say somebody else, let's say demand pool's out there now. Okay, demand pool got one. They got one million and one. Okay. And pool could say we're going to ignore that one too. We're still trying to mine number one million. Okay. You could go on and on and on. Okay. And let's say Annpool's having this amazing run of bad luck. Okay. But they just keep trying to mine. But now they have to mine not only number one million. They have to catch up to the chain. They have to mine one million, one million one million one, one million two, one million three. Because longest chains all that matters. We'll come back to that. It's not exactly true. Okay. But for this purpose, we're going to we're going to use that. So eventually, if they could mine, And let's just keep it simple. They get to the point where the chain is now on $1,010,

and they catch up and mine $1,011. And they present to the network 11 blocks, all mined by Antpool. And they steal the fees from all the ordinal inscription bullshit. and then they, and maybe they disregard certain transactions, maybe including the one where I bought your car, and now that one's not confirmed. Now, would it likely get picked up and actually conclude?

Probably. Yeah. Probably. So I don't want to overly scare people with this. But we are at a point now where most of the wallet construction is set up for two to six. Yeah. And most people's behavior is.

set up for two to six. Yet we have the ecosystem at a point where those are far from the reliable numbers. So short-term my advice would be, if I'm buying your bike for $250, don't worry about it. $250 with a Bitcoin. But if I'm buying your car, if I'm purchasing several hundred thousand dollars of goods from a supplier in China or something like that. That transaction should be waiting a long time. Now, I'm probably not with Luke at 800 right now. Although mathematically, he can support that. It's just, as everyone goes by, it's a lower and lower probability.

He's trying to give you at like a 99.9% confidence number that it cannot longer be done. Interesting little tidbit. I think it's the technical thing about what chain is viable is actually what chain has the most proof of work, not the longest chain. It would tend to be the longest chain, but it's a mechanism that says probably more deeper than we want to go. No, I'm interested, because I don't know if I fully understand this. So why would the longest chain not have the most proof of work? Okay. Let me see if I can come up with an example. Let's say, let's say the scenario we were talking about occurred. Okay. So chain A is the one where ocean mined the millionth block and continued on. And chain B is Ann P. Marching along. Yeah. Okay. So you have 60% of the network hashing to chain A.

and 40% hashing to chain B. Yep. So now let's say that something catastrophic happens, like there's a grid failure in the US. So instead of 60% of the hash power on chain A, it drops to 1% of what it was. And so now Antpool has a massive. amount of the world's hash. Because they may have fewer miners in the U.S. there elsewhere.

Right. Yeah. I'm assuming it's maybe, you know, okay. So if what they did was they said, oh, what we're going to do is in this period of great weakness, we're not going to just try to go back to a million. We're going to go way the hell back. Maybe we'll start at the Genesis block. Like, and we're going to try to reorganize the entire change. entire chain okay well what would happen is and maybe they haven't done the math please take the anybody out there that's a i haven't done all the math i'm giving them this just communicating conceptual yeah you know they could try to reorganize the whole chain but with a much lower difficulty level like so so they're rebuilding the whole chain but with a much lower difficulty level

and they could also do some manipulation of time stamps and some stuff like that to try to fool the network. So what would happen, though, is they could have built a longer chain, but that had less proof of work attributed to it. So what we want in the way the network is now built is it's technically not the longest chain. It's the chain that has the most proof of work associated with it. So you're basically looking at how much work went into each block

along the way, not just the longest one. So in that example, that wouldn't work because even though other chain shorter, it would have more proof of work, so that would be the valid chain. Yeah, I see. At least for a while, right? Yeah. Makes sense. Okay, there's one thing I want to just pick you up on, which I think is worth explaining more, which is antpool having close to 50%, including their proxies. Just for anyone listening who doesn't know what their proxies are, do you want to explain how, like, F2Pool and these things kind of fall into the same bucket? Okay, so this goes back to the way miners get paid. So,

Miners, hashers, even I screw up my truck, the has largely wanted consistency in payment. Okay. But if you're a public company, that's a pretty important thing too. Because I think if you're a public company, imagine going to your quarterly announcement and saying, well, we had really bad luck this particular, you know, and I think that that's one of the key reasons why, in other words, by being bad luck, meaning they didn't win as many blocks as they expected.

Yeah. By the way, my hats off to the marathon guys, which I don't 100% agree with them on everything philosophically, but they are a real minor. They create their own blocks. They do those things. So, you know, my hats off to them for that. And they take that risk. But, you know, one of the things that happens is when you get to a certain size, that risk.

starts to get pretty small. Because you're going to win blocks. Because you're going to win a certain amount of blocks. And yeah, there's some variance. You might have good ones and bad ones, but the variance goes away. So what has happened, though, is that a method called FPPS, full pay per share, came about. And what it means is that the pool basically says, we're going to pay you every 10 minutes. Every time a block its mind, whether we win it or not, we're going to pay you for the work that you put into it.

you put into it attempting to mine the block. Yeah. Okay. So your share of that. Okay. And they have a formula for determining what that number should be. Just like very quick side point. Do all the pools offer the same amount?

Um, our stats say no. Okay. That they're very black boxish. Yeah. Okay. So you, to my knowledge at this point, none of the FPPS pools will tell you like what, if I start hashing one of my machines to that pool,

and I do use them to a small degree. I'm not 100% ocean. Part of it is so that I can collect data, by the way. But there are other reasons. I don't hate all the people in all these places, right? That they, in determining what the payout method, it should be, there's two components. So one is, what is the formula?

The formula typically is, let's look back at the previous day, the previous 144 blocks. We're going to throw out some of the high fee ones and some of the low fee ones and then average the rest. Okay. So that's partly the formula. But the second side is, but nobody knows for sure. Like they don't publish we're throwing out these ones

from the high and the low. Okay. The second thing that they don't publish is what percent of the pool are you? So you can only guess. So I think I'm one half a one percent of the pool. And my payout should be about X, but you don't really know. So which I find fascinating because in a Bitcoin world, this is partly why I say I don't believe there's a lot of true bitcoinsers in a lot of the management because we're

inherently don't trust verify people right i think that's an inherent attribute at least of the you know and and so their entire income stream is kind of in this trust don't verify trust don't verify now i know that at points in times they are so big companies are able to go in and do some audits and do some things but it just It's very unbitcoiny, in my opinion. So what happens, though, is now imagine you are a pool. So this payout method occurs. The risk is entirely on the pool. So if you're a small pool, you still have this luck factor.

Are you going to win or are you going to lose? But you owe the money. And mathematically, almost some of the suffer. we were talking about before, you'll find that the amount of Bitcoin that you need to have in reserve as a pool is phenomenal because you can have a massive run of bad luck. Yeah. And you still have to pay all the folks, right? You know, I've been in Vegas and watch guys lose like 12 or 15 hands of black check in a row, right? We've probably all seen. Yeah, same thing happen with mining. Yeah, same thing can happen with mining. And there are cases,

you know, for instance, Titan Pool and Poolin both ran into this problem where they ran out of money. Interesting. And went belly up. And so now the way that that's been mitigated, to get to the answer to the question you asked me a minute ago, is the way to do that is to have essentially the equivalent of the Federal Reserve a bank of last resort. So if you're a small pool, what you can do is, is, is, is. if you have a big brother like Antpool that will sit behind you and say, well, if we don't win some on a certain basis, back us up.

You back us up. And so what is clearly happened because we can manage this is we can see that those relationships exist. There's about 11 pools that all are running ant pool templates. So what happens is they're running the same templates. the coin-based transaction is paying the money to a common place. So whether you're using pool A, B, C, D, when that pool wins, the money goes to the same place,

and they have the same templates, which are all can be tied back to Anpool. So that lets us know that Anpool is controlling that amount. This episode is also brought to you by Ledger. If you're serious about protecting your Bitcoin, Ledger has the solution you need. Their hardware wallets give you complete control over your private keys, ensuring that your Bitcoin stays safe from hacks, fishing and malware.

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CASA have options for all Bitcoiners from a 2 of 3 multisig to a 3 of 5 and a private client option for absolute best in class security. CASA also do inheritance which I very recently set up and it really couldn't be easier. My inheritance plan has gone from a vague treasure map for my wife to a rock solid security plan that I have total confidence in. To find out more about CASA, go to CASA.io, which is cA-s-a-o. And so of the big pools, obviously we don't need to get into them all, but who are the ones that are essentially the proxy pools? Is it like F2Pool, brains?

Well, the big ones would be, well, AMPPOL, Binance, BTC. Dot com. Brains is in there. I'm trying to remember some of the other ones off top of my head. But it makes up close to 50%. 40-ish. Yeah. Okay.

And so you laid out this sort of future scenario where there's the incentive for certain transactions to be in blocks and block space is obviously incredibly scarce. To bring that to like a today example, we've seen Pools try and do like OFat compliance in blocks. Foundry tried this, I believe. Marathon did. Marathon, sorry. Okay, Marathon tried this.

That was like pretty politically within Bitcoin. unpopular and they got a lot of pushback and stopped doing that. Do you think this will get to a point where even with a lot of pushback, we won't be able to stop these balls from doing this kind of thing? Yes. I think it will be very difficult. The monetary incentive is too strong. Well, the monetary incentive is too strong, but even more so, I think it comes back to risk.

It's just like I talked about before. Yeah. If you're, I think in the current administration, I mean, it's hard. It's really hard to say. I mean, I, I, I, this is speculation. It's very, you know, but if, if your foundry, at some point, I would expect somebody to knock on your door and say, one of us now. Yeah, yeah.

And the truth of the matter is that the economic loss is probably trivial for a long time. Interesting. It's probably a small list. So the economic incentive doesn't go away. But the threat. That's real. is real, right? So they, unless they structure themselves completely differently.

Now, I do think what's going to happen though is, like ocean is set up completely differently. Yeah, we should talk about the payouts the ocean do with tides. Yeah. So with tides, if you're a minor of any size, even a moderate one, you get your payment directly from the Coinbase. So part of this too is like chain of custody. Again, kind of that whole trust thing too.

So if you're in a big pool, like a foundry, they're paying you. But where the money comes from, nobody knows. Yeah. Okay. When you're with Ocean, you're getting a payment directly from the Coinbase transaction or it's actually Virgin Bitcoin. Which by the way, I found a private. market for that. It's small, but there are people that will pay a premium for that Bitcoin.

I can believe it. I mean, I think they've existed in the past, too. I don't like the idea of them. Yeah. Because it kind of creates this strange incentive where you have almost like black market and white market Bitcoin. Oh, it does. Yeah. I mean, it's a little bit of a fungibility issue like as well. But I'm sure it exists. I can totally believe it. I get approached. I don't want to say every day. My phone's ringing off the hook. But I get approached from people that say, hey, can I buy a couple of Bitcoin from you? But I want some that I know came directly from, that has no history other than your payment from the Coinbase transaction.

And they're doing that because presumably they don't want to be associated with North Korea or Iran, whoever it is. It's not because it's just non-KyC Bitcoin that they're trying to buy. I think they're trying to minimize the paths to themselves. Okay. You know, that history, they just, they want no history. I don't know all of their incentives. Yeah, I don't know all of their incentives.

It's the idea of like coins that North Korea just as an example of touch being like dirty Bitcoin, that's the part I don't like. If it's more on like a KYC point, I don't mind that nearly as much. Yeah. Yeah. But I mean, there's a great way for North Korea to wash, which is to become a minor. So what they do is they take their Bitcoin, put in a, in a. transaction that pays themselves almost all fees. They don't broadcast it to the world, so nobody else can pick it up when they

finally win a... Yeah, and then when they win a block finally, they pay it to themselves through the Coinbase transaction, right? So it's probably the ultimate wash technique. So the way Tides works is this. If you contribute to Ocean, you contribute hash rate to ocean, then you earn shares. And your shares and everybody else's shares are public at all times.

You always know what percent of the pool you are, what percentage of the hash you have, and also what's called the share percentage. So you get paid in simplistic terms, when you work on a block, you're going to get paid out for that block over the next eight blocks that are won by ocean. And so you always know at current time what share of the next block you are entitled to

and what percentage of the current hash rate you are. So you can audit these numbers. Then when you get paid, you're going to get paid directly from the Coinbase transaction. But you only get paid when we want a block. So you do have to take the risk. And on the early days of Ocean, which we're about 18 months in now, being public, it was hard. Yeah. It took a while for you guys to win a block. Yeah. Well, actually, we won one right away.

Oh, okay. In fact, I won it. Oh, really? Yeah. So I was a little sideline. And full disclosure in case it hasn't come out already. I'm on the board of directors at Ocean. I'm an investor in Ocean. I'm very active with the ocean team. But I was the first company to sign up to contribute hash rate to it.

And so I lit up first. I think it was only like 20 or 30 petahash, a tiny amount that I lit up. And amazingly, we want a block like two days after. I mean, statistically, I think it was supposed to be like 18 days till we won one and we won one right away. Huge payout, by the way. It was really good. Yeah. Because there was nobody else there.

It was almost like mining us. It was almost like a solo block. Yeah. You know, so it was wonderful for us. But you always, so there's always that transparency that you know. And then we get the coin-based transaction. What it also means is Ocean is not in the chain of custody. You're not trusting Ocean to pay you.

You're trusting the Bitcoin network to pay you. Yeah. And without going into too much of it, I think, you know, where Ocean is as well is, you know, we want others to create the block template. we are there as a sharing mechanism, the true spirit of mining, which is to share risk. That's it. Yeah.

We want you to create your own block template, which, in fact, we give you a discount if you do. The fees are 1% if you control your own template, create your own template through datum or 2% if you use one of the ones we have. Oh, that's cool. I didn't know you did that. I'm just curious, from day two where you won a block, how long did it then take you to win the next one? We won another one like three or four days later and then it was like a month. Oh, okay, okay.

So it all averaged back out. Yeah, yeah. But, but we, you know, those, the first year was hard. Yeah. Because like during the having, we had our worst run of luck. Like the two weeks preceding the having when fees went nuts, we like won nothing. And that's just purely down to look. Just luck, yeah.

It's just luck. But now what's happened is we've grown to roughly six and a half X of hashes. Nice. Which puts us a little less than 1% of the world's hash rate. It's just enough to expect one block a day, though. Okay. So now, and we might win three in a day and then go two days without. Average out.

Yeah. Yeah. So it's provided that, at least from my perspective. now, it's really helped. And with tides as opposed to FPPS. Is the payout smaller or larger? Or does it work out very similar? My statistics, I've been running a controlled study

for actually a preceded even ocean. It goes back over two years where what happened was, I was running on different pools. And I'm not here to call out any pool, but I was running on these different pools, which all claim to use FPPS, but in this black box that I told you about. And that's, and what I was finding was, I was making different amounts of money with the same amount of hash saying, why is this happening? And I better understand this. So I, what I did was, I took 10 units, identical units. They're actually S-19-J-Pro-120s,

to the same container, same internet connection, same everything, put them right side by side, and then connected those to different pools. And I started saying, well, let me see what the actual payout is. And so I've been running this study consistently since then. And then when ocean launched, I put 10 of the same right beside, right beside those. So my statistics have shown, it's almost from the beginning, which by the way, includes some massively good luck at the beginning, like I said. But then some bad look. But then some bad luck.

But we were, and I'm going off the top of my head. Well, it's a double digit. I'll just say that. It's a double digit percentage improvement of ocean compared to all the others. Wow. From the beginning. Now, if I measure, I review this every week with my team. We measure 30-day, 60, day, 90, day, 180-day.

The band gets much tighter. But it's normally you get more paid out through ocean than you would do using one of these other pools. Yes. Interesting. Yeah. So why do you think more people aren't using that then? I think there's several reasons.

We'll talk about the big guys first. So the big guys, there's still this variability, number one. Number two. You'd have thought most of the big guys could probably weather that variability, though. Well, amazingly, yes, but I don't think they... Because most of them have a lot of cash in the bank. Yeah. Yeah, they do.

They do. But I think that's still one problem is they're scared of variance. Two, they have concerns about how the... Taking on the responsibility of, like, template creation, like, and what exposure that presents to them. I think that's a fearful thing. Yeah. We didn't talk about it today, but I was a C-suite executive in a Fortune 200 company.

Yeah. And I've been in the meetings where, and I was the technology guy, right? You know, so I'm, it's usually the technology guy and the marketing and sales group. We're tend to be aggressive. Yeah, butting heads. budding heads with the finance and legal guys on the other side who are very conservative. And depending on who's in charge, like who, you know, it's kind of like the politics to a surgery. It is politics, frankly.

Yeah. And the conservatives and the liberals almost like, you know, and the power swings in an organization. But I have a feeling in most of these big organizations. They're led by finance kind of people. Yeah. And they just don't want the risk of, you know, like ocean. Because now there's absolutely no control, by the way, because you're part of a pool that could mine anything. Yeah.

Right? Because that's ocean, pretty much all of us are very like anti-spam, anti-inscriptions. You know, we would be. But you do mine them. What we, yeah, because what we say, and like I said, Luke, Luke, who's the CEO and founder is very much supportive of this, and I am too. I would say we believe that block template creation is essentially analogous to the First Amendment. Yeah, I would agree with that.

And so you combine with the ocean and you can speak however you wish. And we would rather you speak about something even that we are completely philosophically opposed to and express it through your template creation, then have you abdicate that responsibility and let some centralized organization speak for you. You personally, being someone who's against ordnals and inscriptions, do you mind them? No. You exclude those from all of your blocks. Correct.

How do you kind of justify that to the business when you're leaving revenue on the table? Because I've run the numbers. It's trivial. Okay. Interesting. So one thing that I want to touch on before we close is to get back to the nation state thing. Because Trump obviously came out and said he wants to mine all the Bitcoin. I'm curious what you think, first of all, I mean, you can probably throw that comment away. But more generally, what do you think the U.S. is going to do? Do you think they'll want to step in and actually control some hash rate? Or do you think they're just going to allow companies in the U.S. to kind of flourish and do it that way? I think in the short term, they will let the market go. I think a point will come. I think it will come faster than probably others think. But where the nation-state control over block space becomes more prevalent.

But I think it will come because I used Israel as an example. They're going to be announcements. Like, Israel is controlling block space. I'm quite confident Russia already controls block space. Iran controls block space, North Korea control blocks. And I think as the idea that blocks are being produced by these other nation states comes out, that it will, to a certain degree, some of what I believe is consistent with what Jason Lowry believes. We're not the same.

I'm looking at it very much from a Bitcoin and economics perspective. looks at it from, you know, like the Hash War kind of perspective. But there is an overlap in this thought process. And I think that whether it's coming from the DoD or whether it's coming out of Treasury or someplace like that, it will happen. Like they will realize they need some control. I also think what will happen as these nation states come up

in mining, they probably won't broadcast it, And you'll probably see, when you look at the Mempool and you see the block, you know, who won the block, you're going to start seeing an increase in unknown. Interesting. And that at some point. That's the signal. At some point. Yeah. Well, they will go from being unknown to being known at some point.

Well, yeah. And well, I think you'll start to see that maybe they're including a lot of transactions that weren't broadcast. that were out of band in those. And I think, you know, forensically, you know, there's some guys that love doing that stuff and I appreciate their work. And I think we'll kind of uncover some of that. But like Russia has been very, very straightforward

that they are using Bitcoin for commerce, for trade. And, you know, some of my thoughts about this solidified around when Biden kicked Russia off of a hundred percent yeah that was the clearest indicator that they need to use something that is not u.s treasuries right and what else is there are they going to start shipping gold around the world you can't do that very covertly but it's not but this is the the difference it's not it's not so much owning the bitcoin it's controlling it's contracting it's contract because you could own all the bitcoin in the world but if you have no control over the block creation you can't move it

yeah so you we can't guarantee you you can't guarantee you you can move at the right time. Yeah. Yeah. So I think that's what changed. And the complete fuck up by the Biden administration is, but it's classic politician stuff not thinking about second and third order effects is, you didn't hurt Russia and force them into this.

You just signal to the 220-ish countries around the world that on a whim, this could happen. This could happen to you. Yeah. And the thing about Bitcoin, as you well know, is that, you don't overnight just become like a major minor. That's why my advice to, if I was giving advice to nation states,

it would be go step up and go get probably at least a quarter of a percent or even a tenth of percent is probably enough to have some level. And be absolutely sure that you can on a moment's notice control that block space. Yeah. Like that's like the bare minimum. as a Bitcoin or I don't like it. Yeah, I was going to say, what would your advice be as a Bitcoin? I know as a Bitcoin or I don't like it.

But my advice also, this is kind of sitting on two sides of it, my advice to big financial institutions is exactly the same. Like you better have access to block space and control it so that your viability as a financial institution is stable as we try. transition into this Bitcoin world. Because if you wait, if you wait for it, you'll be too late. Like you're not going to be able to go from zero to a quarter of the world's hash rate, a quarter of a 1% of the world's hash rate. Five years from now, 10 years from now, 15 years from now, we'll have X Zeta hashes. You know, it just won't be something you can scale. And if you're in trouble, like, because you're economically boycotted from

from the rest of the world, and you're 18 to 24 months away from having any reasonable amount of hash rate, you're screwed. Yeah, that also raises another interesting part, which I know you spoke about right at the start, is what happens to hardware? Because the vast majority of that is manufacturing China and Taiwan. I know maybe sort of back end of last year, there were rumors that some of that was being stopped at the border here.

I'm not sure if you know anything about that or why that was happening. Yeah. But and then also like a second part of that, do you think tariffs are going to make that that trade of like A6 from China to the U.S. much harder? And then how does that kind of then escalate again? Yeah, there's a lot there. The issue last year was about a specific chip. It wasn't the, there was a chip that was going on some of the control boards from a banned company. Okay.

So it really wasn't a mining specific thing. Okay. But it just so happened that Bitman. and microbt were on several models using this chip. And so that caused that problem. The tariffs have been an absolute pain in the ass. Yeah. Have they basically just stopped shipping?

Yeah. I mean, they, well, they've been in Windows. So, you know, we, there's limited amount of supply in the US that was already here in front of the tariffs. that got gobbled up. I'll say, you know, we went out and bought some a little ahead of where we were going to just because of that. We knew we needed it in like 60 days. Yeah.

And I hated it because I were careful with our cash. We don't want to use our cash too soon. And we went out and, you know, bought some stuff we wouldn't have bought for a few months. And did you pay a premium on that as well? Was the demand high? No, but that's probably just relationships. Okay. You know, that at this point, we had good relationships.

And, and but, but certainly the, the, that's the lot, if this thing continues on, then that will be big. The, the market for used equipment suddenly got a little more. I can imagine, yeah. Um, appetizing. Um, the long term, if, like, we're not even 100% clear. We just had a conversation yesterday, as of yesterday. still weren't 100% clear whether or not the tariffs would be in effect.

Trump's come out and said it shouldn't affect chips and computers. Okay. Are what we use computers or not? And I think so, but I don't know. I think so too. That's a whole different topic depending on time we could go into. So we're not sure. So we're kind of sitting here in this quandary.

We have some expansion opportunities and we don't know what to do. because they're U.S. based. In the absence of that, there's a wonderful opportunity outside the U.S. And I think that if Trump's objective is to mine all the Bitcoin, which is a terrible objective, but if it is, then he's creating the opposite effect right now. And then if China wake up to this idea, maybe they've already woken up to this idea, that they need a certain amount of hash power. Do you think there could also be kind of

of global trade wars in the sense that they may be like, don't send this to the US until we've got what we want set up? Or do you think that's probably going too far? I don't think we're there now. I think that could happen in the future. And we do have that problem. Like the ASIC issue, ASIC specifically meaning the chip. Yeah.

One of those things I'm also kind of vigilant about is in terminology is the ASIC is, you know, the ASIC is the chip. And I like the term system or server to describe the entire unit that performs the hashing function. Well, those chips at the end of the day, right now what we have is we have a world where essentially the designers of the chips and the producers of the chips are all overseas. We're hopefully at a point where we're going to see.

more Western design stuff. Brains, for instance, I have a great relationship with the brains guys. They've just come out with their little kind of prototype that they've announced that they have a chip. I've been working for a year and a half with a group called M-Fivers, which is a group of X Samsung and Intel guys. And we've been working to develop our own ASIC. And, you know, Block and Blockstream have initiatives.

I think these are really, I'm rooting for everybody, by the way. Yeah. You know, kind of. There were rumors of Intel doing something as well a few years. Well, no, they did. They absolutely did. And we've actually seen the chips and played with systems based on them, but they pulled out. But then they can do, yeah.

Which had nothing to do with Bitcoin. It had to do with problems inside their own organization. Okay. And Bitcoin is still tiny. Of course. tiny, tiny thing. And they just, they're in a bad situation. They had a cut cost.

And it's unfortunate because they could have really helped. But right now, like even the chip I'm working on, we ultimately, right now, we have no choice, but to rely on either Samsung and or TSM to build the chips for us. So now, in the space of the next five to seven years, the hope would be that we would be that we would have some US options. But it's not just US fabrication that's necessary. Like I can say this about our chip. Like the new machines come out have A6 that are largely built on three

nanometer technology. Yeah. We've gone seven, then five, then three. So the next iteration is two. And so if you're where we are as a company, you skip three. You're trying to get three out because we're a 2026. six-ish come-to-market thing, we have to be at two. Yeah.

So we have to leap to leap to that. So then the question is, well, not will new fabs come up in the US, but will new fabs that are at the absolute bleeding edge come up? And that's, I'm not so sure of. Yeah, they did spin up a chip manufacturer pretty quickly, didn't they? Was it in Arizona or somewhere like that? Yeah. I think are you talking about the Intel facility?

And then there's a TSM facility. It was a TSM one I was thinking of. supposed to be going up in ohio okay um are they behind taiwan though that's i i don't know for sure i'm not sure where they are but you know the those you know what we'll need is if if in 2026 we have the two nanometer stuff i'm not sure we're even going we're probably at one and a half yeah um in 2028 or something like that so and then there's nowhere to go though presumably once you get to one like what else can happen well Um, we'll see.

I mean, I, I started doing, so Moore's law, which is what this is based on, you know, as an old guy in the computing industry, you know, in 1986, we were concerned it was running out of gas. I'll put it that way. Like, so 40 years ago, we were already buried. Like, is it running out of gas? Where could it possibly go? Um, sub 100 nanometers was like, wow.

Like, you know, like, I mean, that's where we were, you know, our minds were blown. by that sort of 70 nanometers. Like, I remember this sort of stuff happening and keeps going. I mean, I don't know. I wouldn't bet against it at this point given history. Fair enough. Well, Bob, this has been amazing. If we had to like summarize this conversation,

what do you want people to care about? Because you obviously talk about this a lot. Like, what do you want people to leave this with? I think the first thing I said, today was about complacency, that we have to stay vigilant. And this certain amount of paranoia, I think, is really important. I call it 10th man mentality, which comes from the movie, World War Z is a zombie movie. And there's a great scene.

It's a great movie. Yeah. Do you remember the 10th man? I don't remember exactly what that was. So what happens in. in the movie is Brad Pitt, who's kind of the main character, is a United Nations agent. Yeah.

And so he's trying to find where is the virus coming from that's causing the zombies? He finds out that Jerusalem has had a massive wall built around it. And they've got no zombies. So he flies to Jerusalem. And he speaks to the head of Israeli security. He says, well, how did you know to build the wall that kept all the zombies out? And the guy says, well, it's because of the 10th man. And he explains that during the 1972 Munich Olympics, the Israeli Security Council had warnings that there might be an attack.

And the entire council kind of disregarded them as frivolous. And then there were other major incidents, wars and bombings and things. that in Israel's history they had neglected. Mm-hmm. So they created what's called the 10th man, and the 10th man is that the Israeli Security Council had 10 people in it. And so the procedure was if nine members,

if the Security Council was presented with a threat and the first nine members all disregard it instantly, it's imprudent on the 10th, to fight to fight for even if he thinks it's not a threat too like he has to be the devil's advocate and build a case as to why why they should take the threat seriously so and he was of course the 10th man and he advocated for building the wall and it at least for temporarily saved Jerusalem yeah until they got over the wall yeah until they got over the wall which yeah whole different thing but the the um the point is

is like I've I did a little my my my little show it's called them old man yells I did an episode on this I said I I I've I've taken upon myself to make sure I always try to be the 10th man and so when everybody else is happy I'm the one saying don't don't don't be too confident don't you know to try to try to be the contrarian not not to bring people down because I mean very optimistic I'm very very optimistic about. I'm very optimistic about. Bitcoin, but it doesn't just happen. Right? And, you know, interestingly, this movie, not that, you know, World War Z, which is actually a zombie movie, but I absolutely love it. There's a second learning in there, which is if you watch the movie, what you'll find is the way that they fight the virus, do you remember this? Like, what happens is they find that the virus only seeks healthy hosts.

That's right, because they're walking past the ill people in the hospital. Right. Yeah. They can beat the virus by giving people a disease and they become immune to the zombie virus. And so it's kind of a lesson on Achilles heel, too. Like your weakness might come out of left field. Like it might be something you completely didn't see. Like the fact that a virus seeks a healthy host is actually it was ended up being the downfall of that. And sorry for. anybody who hasn't seen the movie. Yeah. Completely erected. Spoiler alert. But I think that that's very important. And so if we look at like the word hoddle, okay?

It's a battle cry within our community. But I think even that has, there's a bit of danger in the word huddle because I think it implies buy Bitcoin, sit and do nothing and you're going to get rich. Yeah. If everybody hoddles and takes that approach, though, it's a non-participatory approach to Bitcoin, then we get nothing. Right? Like, Bitcoin requires participation. And I would be of the mindset that, you know, you have to use Bitcoin a little bit too. For sure. You know, I want you to huddle. I want you to have a big stash. But I want you to use it. You know, participate in the network. do something for the network.

Because I think we should think of Bitcoin, much like we think of being citizens. If you're a citizen of a country and you don't vote, you don't run for office, you're unwilling to serve in the military, you're going to turn the other way whenever anything bad happens, you're just going to kind of ignore it

and pretend it's all hunky dory. Eventually that society and country will collapse. So I think it's the same with Bitcoin Like, you know, we have to participate. We have to be vigilant. We have to be willing to voice our opinion. Otherwise, it will fail. I love that.

I totally agree. Okay. So where do you want to send anyone? We've got old manials, barefoot, and ocean. I'm Twitter at Boomer BTC, boomer underscore BTC. And, you know, that should do it. I really appreciate the time, Bob. Thank you. That was great.

Thank you, Danny.