February 8, 2025 • 73 mins
Bob Burnett is heavily involved in the Bitcoin mining industry, including being founder and CEO at Barefoot Mining and Board Member at Ocean.
We talk about Bob’s experience building personal computers in the 1990s and early 2000s in Japan, how those lessons apply to Bitcoin mining hardware today, and the manufacturing and geopolitical challenges and considerations for Bitcoin mining.
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Links:
Barefoot Mining -https://www.barefootmining.com/
Ocean (Bitcoin Mining) -https://ocean.xyz/
Bob on X -https://x.com/boomer_btc
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
My advice to anybody that's a head of state of a small to
medium sized country is you better get some hash rate inside
your borders and you better start controlling some blocks
because if you don't, your viability and economic
sovereignty are at stake. The the tariffs, I don't believe
(00:23):
we'll have any long term meaningful impact on the, the
mining industry in the US. There could be some short term
pain because you know, it may take six months to work it all
out, but there's no long term. Hello, I am Cody Ellingham and
this is the Transformation of Value, a place for thinkers and
builders like you where we ask questions about freedom, money,
(00:45):
and creativity. Today I'm joined by Bob Burnett,
who is heavily involved in the Bitcoin mining industry,
including being founder and CEO at Barefoot Mining and a board
member at Ocean. We talk about Bob's experience
building personal computers in the 90s and early 2000s in
Japan, how those lessons apply to Bitcoin mining hardware
(01:06):
today, and the manufacturing andgeopolitical challenges and
considerations for Bitcoin mining hardware.
I would like to know what you think.
Send me an e-mail at Hello at the Transform ofvalue.com and I
will get back to you. Now, if you enjoy the show,
please consider sharing this episode with a friend who you
think might like it. You can support my work directly
(01:26):
by streaming sets to the show's wallet or donating through my
website. Otherwise, onto the show.
But you know, Bob, I'm from a little place called New Zealand
and I am based in Japan at the moment.
And when we met our mutual friends from Ocean, they
mentioned you had a bit of experience with Japan.
Could you tell me a bit more about that please?
(01:46):
Yeah. Well, my roots go back to the
personal computer industry, so way back.
So I started working in that industry in 1986 and was on the
design team of of what I would consider to be the world's first
(02:08):
laptop with some dispute, honestly in the personal
computer industry. But at a minimum, very, very
early days of the personal computer.
And at that time a lot of the key technologies came out of
Japan, the early LCDS, DRAM battery technology, all those
(02:33):
sort of things were coming out of Japan.
And I started going to Japan probably 19891990.
I started working a lot specifically with two companies,
Mitsui, which is one of the larger, it's a Kiratsu there,
(02:54):
one of the larger trading companies.
And also with Sanyo Electric specifically to Tori Sanyo.
So it's Tori prefixture on the Sea of Japan side.
And so we had a relationship with them where I was at the
time, I was with a company called Zenith and then later
with a company called Gateway where I was the chief technical
(03:16):
officer. And so I spent a lot of time
there. I, I lost count.
I don't know, I've 7580 trips toJapan, maybe maybe more over
over my career, but the early days I what really left an
indelible mark on me because to be real honest about it, like,
(03:42):
like I was, I was born and raised in the US and I can't
speak to the culture of a New Zealander, but you know, in the
US there's I think a bit of an arrogance that often gets kind
of built into people from the US.
(04:02):
And so I had this chip on my shoulder.
I think for a while, especially in those early days, I was out
of school. We had this kind of perception.
We get beaten in the US, like American made products are the
best products. And maybe you have that same
thing in New Zealand. I don't know.
But you know, we, it was kind ofingrained in US and in the very,
(04:23):
very first couple products I worked on, we, we built and
designed them in the US, manufactured in the US.
And I remember it was in that time period, right in the, the,
the late 80s, early 90s when I got assigned to work on a
project in partnership with Sanyo in Japan.
(04:44):
This is my very first trip. And what from a professional
standpoint, it ended up being one of the most important pieces
of my career because what happened was I had been called
into my boss's office. He told me, hey, Bob, you're,
you're on this project and we'resending you to Japan to work on
(05:08):
this project because we're not going to build it here in the
US. It's going to be Co designed and
manufactured there. I immediately started pushing
back like, well, what no, no, no, we, we, why don't we do it
in the US? And he basically gave me an
ultimatum, as he should have. He said, well, you know, do you
want this opportunity or not? Because it's being done there.
(05:31):
And either you can work on it oryou can find somewhere else to
work. OK, I guess I'll, I'll
acquiesce. So I flew to Japan and, you
know, saw Tokyo for the first time briefly, was very impressed
by it. But then I flew to Tutori, so I
don't know if you even know where that is.
(05:52):
It's a small Tutori city's a small town.
At the time it was probably 8090thousand people.
And as we were driving from the Tutori airport to the factory,
the town was nice and quaint. And we pulled up to the factory
and my host, I remember distinctly saying to me, he
said, hey, this is where the Japanese built the tanks in
(06:15):
World War 2 for World War 2. Well, that's kind of a strange
thing to tell me. I think he was just trying to
break the silence. And, you know, and I was a young
guy. I was probably 26 at the time,
which in the Japanese culture, especially then, young people
did not have positions like I had.
(06:36):
It was very unusual. Anyway, we pulled up to the
factory and it was kind of unimpressive on the outside.
It was very kind of rundown, needed paint job, didn't look
that nice. And I, I had all these
trepidations, got out of the carwith this big entourage,
(06:57):
including the president of Sanyo, and they opened the doors
to the facility and it was like walking into Taj Mahal.
It was the most beautiful thing I had ever seen, bright and
clean. And again, this is a this is
(07:17):
almost 40 years ago, 35 years ago, they already had robotics
in this factory. They had a production line
making rice cookers, another production line making car
radios, another one building computers, like just and it was
massive. And we started walking through
(07:38):
the facility and one of the first things that I noticed was
that everybody on the productionline was just laser focused on
what they were doing. Nobody even looked up.
And, and if you think about that, the president of the
company is walking through the production line with an
(07:58):
entourage, including A at the time, a blonde haired young
American, which is unusual thingthere, but nobody, nobody change
their focus. And it impressed me immediately
because if I had done the same thing in an American factory,
the factory would have stopped and the quality would have
(08:21):
plummeted on everything being built.
But they they didn't. And then we got to a production
line in the back of the buildingand there were about 18 women
all lined up in a row, all in lab coats.
Very neat, all very small, maybe5 foot two or shorter, very fine
(08:41):
fingers. And as I got to that place, one
of the ladies stepped forward and she said, you know, Mr.
Burnett, it's a pleasure to haveyou here.
We will be building your laptop on this production line.
And she gave me this beautiful speech in perfect English and,
(09:03):
and then she gave me a tour of the production line, everything
that would happen, the the wave soldering machines and the
assembly and all that just was blown away.
And then as I was leaving that area with my host, I said, boy,
I am super impressed that you have the leader of the line
being somebody that speaks English.
(09:25):
And he said, no, no, no. Everybody on that line speaks
English fluently. They all have four year degrees
and they've all been selected, you know, for their physical
traits to build your machine. So they had all these tiny women
because we had like a, we were going to have like a million
little screws and solder connections and all that.
(09:45):
And if you didn't have really fine dexterity, well, in the US,
like that just doesn't exist. Like, and, and so again, I was
just, I was blown away by that whole thing.
And so the rest of the day was fantastic.
And I remember I, I went back tomy room, I checked into my hotel
(10:07):
room and I sat on the edge of the bed.
And as I sat on the edge of the bed, I got really mad, really
mad, because it was the realization that I had been lied
to for at that time, the 26 years of my life, and I had been
taught to think that I was superior and that they were
(10:32):
inferior by default. And the truth of the matter was
they were way better at buildingelectronics products than we
were and a lot more capable. And it changed my life to the
point where I said, well, I, I can win in this industry if I
align with these people, becauseall the American companies and
(10:54):
European companies think they can do it better and they can't.
So my experience in Japan, if there was a place, if I could
not live in the US, Japan would probably be my first choice of
places. So that's a lot of rambling.
(11:16):
So I'll. I don't know.
That's great. Thank you for sharing that
story. And if I could share my
perspective, you know, New Zealand's a very small country
and we're sort of actually in between a lot of different
things. We've got Australia, China, the
United States. And so I've always, I've never
really thought of New Zealand assort of, you know, having
perhaps this, this thing going on, you know, and a lot of
(11:36):
people leave New Zealand. I mean, we certainly have pride
in our country, but it's, it's interesting because, yeah, this
this idea of sort of nation state and, and kind of, you
know, I hope we can get into this later talk about some of
this tariff stuff and, and sort of what it means, especially
with that same attitude towards China potentially.
And you know, if you, if you do actually go to China and you see
(11:57):
maybe in a way what you saw in the 90s in Japan, I, I feel like
if you go to Shenzhen or some ofthese places, you feel that it's
just the level of infrastructureand it's a very humbling
experience, but it's also quite a, quite a connecting thing.
You realize you can't build in asilo.
You have to connect with other parts of the world.
So that's very interesting, but I did want to ask you as well,
(12:19):
Bob, this time in the early 90s,late 80s, this would have been
around the time of the the Japanese bubble bursting and the
in the beginning of a recession.And I think that left a huge
impact on Japan. Do you have any commentary just
on that experience of that time and sort of what you what you
saw around you? It was very painful for Japan.
(12:41):
And it's interesting what you say about China because what was
happening at that same time is the Japanese had this
incredible, this incredible capability, but what actually
ended up happening that really hurt them before the bubble was
(13:03):
the yen got super strong. So I can tell you that when I
first started doing business in Japan, we were buying goods with
American dollars for 100 and forty ¥145.00 per dollar, OK.
That was the range in that time period.
In parallel, over in Taiwan and Korea, those countries were
(13:27):
starting to make massive investments in chip fabrication,
LCD fabrication. They were starting to pump out
lots of high quality engineers and they were trying to convince
people like me to leave Japan. Well, what ended up happening
(13:47):
was by about 1995, the the yen had gotten so strong.
I'm going off the top of my head, but I believe we hit
something like 80. So we started these
relationships and suddenly the, the power of the dollar and our
ability to purchase it just got enormously expensive.
(14:10):
And so we decided because of this economic disparity to start
giving companies in Korea and Taiwan a chance.
And it was a little rough, but they learned very quickly and
they, they, they got up to speedwith, you know, quality and
(14:32):
design to get it on par or very close to on par with Japan.
And then the whole Japanese thing just crumbled like on, on
the heels of that, that they hadthis really strong currency.
They could no longer really afford to be a manufacturer.
(14:53):
These other countries had come up with great design and
technological capabilities. And then the whole Japanese
bubble burst. Their economy went in a
tailspin. It really hasn't recovered
since, frankly. Yeah.
Well, it's interesting. Money plays a big role in this
and obviously it does talk aboutBitcoin in a little bit.
(15:14):
But just on the point of Taiwan,I have spent a little bit of
time there and it's quite interesting.
You see a similar thing where ifyou go sort of say from Taipei
on the on the western side, you can pass all these sort of
factories and I'm very unassuming, kind of, they look a
bit rundown sometimes actually. But on the inside, the
manufacturing, the world's, you know, graphics, GPU's and all
(15:38):
sorts of high tech stuff and I just sort of, as you say, it was
like that inside, outside difference is quite amazing.
Yeah, yeah, you, you learn very quickly the, you know, the old
adage, don't judge your book by its cover.
That, that, you know, as a youngman, I, I learned that the hard
way. And thank God, at least I
learned the lesson. And I, I, I, you know, I guess
(16:01):
that's the part I'm happy about was I stayed open to it.
And so, you know, I, while I jumped on Japan early, I also
jumped on Taiwan early. And so like we, we were, I was
very much involved with companies like Quanta and
Foxconn. And some of these in those very
(16:24):
early days when they were still like they were pre IPO, they
were just getting started. I was one of the first people in
the world to work with those companies and they've they've
obviously become powerhouses. Yeah.
Well, jumping into the Bitcoin pace and I thought maybe we
could start with mining because this is something you've got a
lot of experience with. But in terms of the situation we
(16:47):
have and maybe we can tie this in a little bit with what is
happening right now with this tariff situation, but we have a
huge amount of the Bitcoin mining equipment being
manufactured in China. We've got maybe a centralization
risk around manufacturing, though there is maybe some
efforts to address that. Overall, how would you address
(17:09):
and maybe a little bit about sort of your background with
Barefoot and your other Bitcoin mining companies, but how would
you address this overall situation with Bitcoin mining
hardware and what those supply chains look like, especially
with your experience with computers in the past?
Good question. So the first one is let's talk
about the tariffs first. I, I, I don't worry about the
tariffs too much. We actually dealt with that back
(17:31):
in my personal computer days a lot.
And they're usually fairly easy to work around.
And without violating any privacy things, I can tell you,
I know that that the makers of alot of the Bitcoin equipment
have already moved some final assembly operations inside the
(17:55):
US. So you can largely avoid them by
bringing in things in the component parts and doing the
final assembly in country. So and and you can do so without
too much of a change in the coststructure.
So I don't think it, I don't think the tariffs will have any
(18:17):
long term meaningful effect. Yeah.
If I if I can just pull on that.So that's interesting.
So it's a consumer final, consumer products get slapped
with the tariff, but if you manufacture in country, there's
ways to get around that. Is that what you're typically?
Typically, that's true, yeah. And we used to do, we had the
same, we had the same issues back in the personal computer
(18:38):
days. And that's what we would do is,
yeah. Well, just as an aside, sorry, I
am, I'm just trying to remember.With New Zealand, there was
quite a protectionist economy, say in the 1970s, nineteen 80s.
And I remember there was a period where televisions and
motorbikes were getting manufactured in New Zealand, but
they were basically just puttingthem back together.
They took them apart in Japan and put them back together.
So maybe that sort of echoes what you're.
(18:59):
Saying exactly the same thing. So they'll, they'll sometimes it
depends on the situation. Sometimes they'll just send it
in as a kit, as you said, they they'll assemble it, test it,
make sure everything works, put it into a kit form and then send
it, send it out. Somebody will, you know, put the
screws back in on the other sideand in a fairly low tech, like a
(19:24):
low tech way. And if you design the product
from the beginning, knowing thatthat's what you're going to do,
it's even easier, right. So that's that's the the tariffs
I don't believe will have any long term meaningful impact on
the the mining industry in the US.
There could be some short term pain because, you know, it may
(19:47):
take six months to work it all out, but there's no long term.
Yeah. Now the other piece that you
asked about though is really important.
So we, I believe we, when I say we, I'm talking about the
Bitcoin community, the Bitcoin ecosystem.
I believe we have, we have several risks, but one of the
(20:08):
risks is that we don't have really great separation of the
supply chain I talked about. So if if I can't contrast it
again to the personal computer industry, which is you know,
where, where I spent my 1st 20 years of my career.
We had Intel making the CPUs andwe had alternatives like AMD and
chips and technology, and we hadother people that we could buy
(20:31):
the CPU from. We had different people we could
buy graphics processors from. I worked for a system
manufacturer and I designed systems so I could use my
creativity and I could use whatever goals and objectives I
had to design a certain form factor to hit a certain cost
(20:54):
target. I had all these different things
I could do, but there was a lot of creativity.
And hence that's why we have, you know, even today you have
Dell or you have Toshiba or you have Lenovo or you have these
different, you know, they're taking for the most part the
same bucket of components, but they can assemble them design
(21:18):
wise however they want. And we don't have that in the
personal computer industry or inthe, the, the mining industry.
Today. What we have is we have 90% ish
of every system is based on a chip designed by Bitmain, which
(21:39):
they do not publish any data about those chips.
So like if I design with an Intel chip, I will get a book
called a data book. It probably would be 200 to 300
pages thick of deep technical details about what every pin on
that chip does, what its timing is, what its voltage
(22:02):
requirements are. I'd know all of the instructions
set within the chip and how it worked and then I could build
whatever I want out of that chip.
Bit main doesn't work that way. They you must buy a complete
system from them. So we don't know for sure what's
really going on inside those chips.
We don't, we don't, we have to play.
(22:24):
It's kind of a weird thing. Bitcoiners are one of our
mantras is don't trust verify, right?
That's what we say, 'cause it's the the fundamental tenant of
the transaction. Yet the hardware that's running
and supporting the whole infrastructure is closed source.
(22:45):
We don't know anything really about anything going on inside
it. So it's that really bothers me.
And like I said, somewhere between 80 and 90% of the stuff
comes from bit main. And then we really only have
realistically, we have the microBT what's minor products and
(23:06):
then the out like the Avalon series from Canon, but that
that's really all we have. So to me, one of the most
important things in making sure Bitcoin stays secure in the long
run is changing that timeline. That's why one of my other
projects, by the way, isn't is the design of a new ASIC.
(23:29):
It's a group called M Fivers that I've been working with for
a year and a half with it's actually X Intel and Samsung
guys and and myself as an advisor.
And we're, we're designing our own ASIC in the model of Intel,
where we will design A chip and anybody can buy that chip and
then design whatever system theywish around that chip, trying to
(23:51):
bring that PC kind of ecosystem or supply chain to to the
Bitcoin. OK.
So with that in mind, you mentioned earlier the KDET 2,
which is I guess you could say the way Japanese companies work
together in this kind of interlocking way, right, where
they have shareholdings with each other and they kind of
(24:12):
collaborate. Yeah.
Is that what you'd say? That's correct.
I'm just wondering what the Chinese situation.
We know in places like Shenzhen,there is a slightly similar kind
of collaborative thing going on where everything's available in
that region and it sort of comesand comes together and
effectively these, you know, ASIC miners, there is a little
bit of other stuff. There's the control boards,
(24:34):
there's the power supplies, there's other aspects.
In that situation, how much importance do you think there is
on the ASIC itself versus the other components which are maybe
a bit simpler compared to say the way a personal computer
comes together? Like is there much involved with
other companies sort of in that orbit that would contribute
components well? There's some engineering
(24:54):
required to do a Control Board well, and but that actually
there is actually an aftermarketfor that.
So you can buy aftermarket products from Brains, from Epic,
from some other companies and you can actually replace like
for instance, the bit main Control Board in most models
with one from somebody else. So luckily that part is OK.
(25:15):
So the answer to your question is the ASIC is really the
problem, the actual chip. And like I said, as an industry,
there are two issues with that. The first one is that it's a
black box. We really don't know what's
happening inside that chip and whether whether it's malicious
(25:45):
or, or what would be the right or or a case of bad engineering.
There's always a risk because we're so dependent on one
company and one set of logic that's integrated into those
chips and it's not open source. So we don't know what's going
on, that something bad could happen.
(26:05):
Yeah. And go, go ahead.
Oh, sorry. I was just going to say, do you
know in terms of the, it's a bitof a historical moment, but the
covert ASIC boost, do you know sort of how that fit fitted into
this piece with bit main? Was that actually on the chip?
Well? The, the, the story there was,
(26:27):
you know, that they, they being bit main could essentially have
designed the, the chip we have to boost in a way that only
their firmware activated it whenthey were running it for
themselves. And therefore they had a
(26:47):
material competitive advantage as a minor versus everybody
else. It is a great example of what,
what I'm just talking about though, right?
That that, you know, something similar could could happen in
the future. And I think a healthy world
(27:08):
would be one in which we have 567 legitimate makers of the
ASICS and those ASICS in and of themselves will have different
trade-offs. And so if so, the companies that
want to be in the system business could then one, have a
competitive landscape where the,the, they could talk to the six
(27:34):
or seven different vendors and, and actually negotiate with them
for the best price and the best fit for what it is they were
trying to accomplish. So, and, and I think that's
important for us to commoditize this space because what happens
in Bitcoin mining is pricing of the of the systems themselves is
(27:58):
not really a cost plus business,which is where most electronics
ended up commoditizing to. It's a market driven price
because we have, we have a very limited supply and you know, bit
main and micro BT will look at essentially hash price and float
(28:20):
the price of the equipment almost on a daily basis based on
the hash price. And that's not how a mature
market works. You know, a mature market works
really on a more of a cost plus basis and the feature
advantages. And if we if we don't get some
(28:45):
new ASICS out into the marketplace, it there's nothing
to incentivize creativity and there's nothing to incentivize
price competition. And that worries me a great
deal. It's like imagine there was only
one company in the world making personal computers or all the
(29:08):
laptops in the world. And so when you wanted to buy 1,
you know, at you essentially hadno choices.
You know, you had only one that could work.
But I think we know too, what's really important in mining going
forward is we want everything from bid X type products that
(29:28):
are geared to the the whole miner and, and maybe consume 30
watts to enterprise solutions using hydro cooling, you know,
individual unit might run at 10,000 watts.
All kinds of other specialized applications like I, I believe
(29:50):
over time I may do it myself, but over time I could see
everything from a pet bed to keep your dog warm at night.
That's based on an ASIC or your hot water heater, grain dryers
and people, people trying to heat warehouses.
I mean, all these would result in somebody designing a
(30:12):
completely different system. But if you can't buy the bare
chip itself, it doesn't really work.
I've got a question about that. So you mentioned this cost plus
model and then the market model.And I was at a a seminar
recently talking about manufacturing in Japan and sort
of how that industry has evolved.
(30:33):
And I don't know if I fully agree with the thesis of this
person's talk, but basically they said Japan doesn't make
stuff anymore in the sense that it makes the machines that makes
the stuff. And so a lot of the hardware in
China is actually Japanese manufacturing equipment, for
example. And the, the presenter talked
about this idea of the smile curve and the idea that the
profits live on one side at the design stage, you think, you
(30:57):
know, design of the iPhone, and then at the other side with the
retail and sort of everything inthe middle ends up being kind of
commodity pricing. And I'm just wondering with all
of that in mind, how does that relate to something like ASIC
chips, which have this direct connection to money in the sense
that if you have the Asic's, youknow that that's that's an
(31:17):
access point to getting Bitcoin,which has a monetary value.
Like is, is there something different about ASICS compared
to what we know about with commodity, other commodities?
That's a very interest. First of all, that's a very
interesting observation. I hadn't thought of that, that
that does make, that does make these machines very unique
compared to almost anything elsein the world.
(31:39):
That said, you know, in ASIC, inthe real, I should say in the
real world, but in in the world in general, the reason that you
design an ASIC is because you have a high volume need for a
very defined and repetitive task.
(32:00):
OK. And so there can be some
intelligence in it, like for instance, if you're driving your
car and the the headlight control and the sensing that
maybe a car, there's an oncomingcar and you should turn the
brightness down or direct the, you know, direct the headlight
to a lower angle. That would be something you
(32:22):
would do with an ASIC. So almost every piece of
electronics has an ASIC in it, if it has high volume at all,
everything from a rice cooker toATV to a whatever.
They, they all probably have several Asic's doing different
functions. So our ASIC, when I say
(32:43):
Bitcoin's ASIC is something thatruns the a double shot 256
equation to help us produce blocks.
That's that's what that one is doing.
It is largely commoditized already.
(33:04):
The problem is in our case we must use the very latest
technology. So if you're entering today, you
must enter using like the three nanometer process like and which
is only available from TSMC and Samsung.
(33:24):
And we have to compete with NVIDIA and Broadcom and Apple
and, and Tesla and companies like this to have access to
those fabs. Usually what happens in an ASIC
is you're following the technology curve.
So if I was designing that headlight control mechanism,
(33:46):
I'm, I'd be going to the guys who have the 15 or 30 nanometer
stuff and I would, you know, I'dbe asking them to design this
ASIC for $0.75 for me that they kick out on that process.
But Bitcoin has this unique thing of having to be at the
very front end because we have to hit we're, we're, we're doing
(34:12):
a phenomenal number of operations in a small amount of
time. We need the very fast switching
and we have to have the most power efficient stuff, the best
joules per Terra hash. So you know, you have to today
you have to have three if you'rehave it, if you have an ASIC
that's coming out, let's say a year from today, you're going to
(34:34):
need to have two nanometer. Well, it's, it's hard to get in
line and it costs a lot of money.
Like I can share with you that for our project, if we're
blessed enough to get to the finish line, which it's not a
given, we're hopeful, but we're probably going to need 30 to $50
million of capital raised to getto that point to buy the right
(34:58):
places in line to, to, to get everything in order.
So that's that's the big barrierto entry in this world is you
got to have some pretty deep pockets to throw a lot of money
at something that might fail like it might not work too.
(35:20):
Well, in that sense then, so there's the fabrication
facilities and like you got to get in line.
There's only a few of them. What does that landscape look
like? And how does it also relate to
the the design of the chips themselves?
Like how much is involved there?And then if you've only got a
few places you can go to to get it made, like what are those
(35:41):
negotiations? What does that landscape look
like? OK, so architecturally, like
what we're doing is I have to becareful what I say, we'll just
say we we believe that this the algorithm and the methodology to
to run this, you know, we think there's still a few tricks to be
(36:04):
played. OK, So that basically we could
we can perform this operation faster in our chip than others
can do it in their chip. That's one thing.
The second thing is we believe we have some technology that
will allow us to have a higher yield.
Because that's the other thing is when you're building these
(36:25):
chips, if they're done in such away that a small flaw in the
chip means you throw the whole thing away, there's no way to
repair, right? It either works or it doesn't.
So we, we have some technology that we think even when there
are small flaws, we can have thechip self correct itself and
(36:46):
work around that and still be functional.
So design wise that's really important.
Now, of course, getting in line to get the latest stuff, like if
we're trying to work toward 2 nanometer right now, you have to
have relationships and credibility with either TSMC or
(37:08):
Samsung. Those are the only two games in
town. Maybe Intel will get in place.
But that's partly why whether that's me with my background or
some of the other guys in our project which were executives at
Samsung and Intel, you have to have those.
I would never discourage anybody, but I would just say
(37:31):
like if if there were just a couple real bright engineers out
there that said, hey, I think wecould design an ASIC.
They're going to have a really difficult time unless they
getting getting to the finish line, unless they align with
people that have the appropriaterelationships with those
companies and the credibility toget there.
(37:56):
And so, I mean, there are otherslike both block and block stream
in our industry are designing chips now.
I don't, I don't think either one is doing it from the
perspective of trying to become the Intel of the industry,
meaning, you know, they're goingto just sell the chips.
I think they have the objective to more cell systems or have
(38:20):
partnerships where the systems are built but not have a general
market for the chips. But even that, I applaud it and
I encourage it because it still helps break this monopoly that
we have. So which I think is very
important. Well, that's interesting cuz
Intel, their whole thing was Intel inside, right?
(38:41):
And so you could have a system any yeah, you know, in any
computer manufacturer OEM could have Intel chips and work with
them. And so it did become a
commodity. But I'm curious when it comes to
ASICS, I know with like CPUs, you get the binning, we've got
different grades of of CPU. How does it work with ASICS?
(39:03):
Is it an on off situation or do you get to grade the chips
themselves? There's still a yield some some
chips that may work. We're probably seeing something
like that, for instance, with Bitmain.
So when you look at the S 21 line as an example and you have
product options from let's say 180 Tera hashes to 270, that is
(39:26):
most likely the same chips with different yields that they can
certain chips when pushed hardershow failure.
So they have to, you know, but, but but maybe still operate at
the low end of the threshold. So they'd rather not throw it
out if they don't have to. But yeah.
(39:47):
Yeah. So same thing with Intel.
OK. And so you think so the
opportunity here then is a commodity ASIC that has an open
spec, a data book that any systems manufacturer could pick
up? And integrate in their own way
and different form factors. You you think that's the pathway
here for this market to mature potentially?
(40:09):
Yes, yeah. OK.
And I guess at at the moment though we still have the the
reality of these a couple of manufacturers that are
dominating the space. Do you think it's AI mean?
Obviously yourself and others are working towards
alternatives, but is it a matterof scale?
Like the market for these machines is still too, too small
(40:31):
for it to be able to to to sell commodity basics into the
market? Or is there something else at
play that you think is sort of the inflection point for this?
Yeah, very good question. The the market for mining
servers is still relatively small.
You know, it's, it's measured inthe it's a little hard to say,
(40:54):
but you know, maybe it's 2 1/2 or 3 million units annually is
the top side of the demand curvecompared to let's say 100
million in the PC market. Now the good news is that in
terms of the ASICS, though, a machine like depends on the
(41:15):
design, but the but a machine might use on the low end 1:00 to
5:00, but on the high end it could use several 100.
So in terms of the actual numberof ASICS that get consumed by
let's call it those 2 million units, it could be a couple 100
million actual ASICS. So it's still not that, that
(41:39):
big, but it's big enough, you know, to to at least be in the
game and and get get room. We, we've always, the
interesting thing about this market though is it's always,
it's almost always been supply limited.
So in periods in the bull marketwhere demand gets really high
(42:08):
and we may be on the cusp of that again, we'll see.
But we've never been able to fulfill all the demand that was
there. And, and that's caused some of
this insanity in the price of the mining equipment.
That's the thing I was talking about before where the, the, the
hash price and we saw in the last cycle if you were buying an
(42:29):
S 19110 thousand $12,000, but this is that cost plus thing I
was talking about that machine should have cost.
I mean, let's say a fair price 1800 to $2000.
And I have this article I wrote.It's a couple years ago.
(42:49):
It's called Miner's trilemma. And one of the things that I say
in the miner's trilemma that my,my theory on the miner's
trilemma is this, that if you'rebringing up a mining company or
a mining site, three things haveto come together.
You have to have access to energy at a, at a, in a
(43:11):
consistent source of energy at agreat price.
You have to have access to the mining equipment and you have to
have capital. And the miner's Trilemma says
that at any point in time, one of those 3 will always be hard.
So you're always going to fight headwind on one of them.
So we're in the middle of a bearmarket, like the bear market
(43:31):
that we had in let's say end of 2022 and most of 2023, we, the,
the equipment was not expensive,the energy was available.
Nobody wanted to capitalize the market now.
And then if you back up to the previous cycle before that,
right after the China mining ban, what we had was we had lots
(43:54):
of money. Energy was so, so in difficulty
and the equipment was insanely expensive.
And you know, we're, I think we're going to shift toward that
direction again. We'll see how severe.
But like one of the things I talked to my team about and my
advice to anybody out there is be very careful if you're in
(44:14):
mining because the point that the money gets too easy to get
is probably the point at which you have to not take it and not
invest in mining. We're not there now because
you're going to overpay for either the energy or the servers
at that point. If the money's too easy then and
anybody can get it, then it'll drive the price of that other
(44:37):
stuff too high. I'm curious this, I was reading
about the the trilemma just before and I find it quite
interesting because what happensif we move on from that model?
As you say, maybe there's a maturation of the ASIC market,
there's a diversification of system manufacturers and they
just become commodities. Does that move us into a
(44:58):
different area where energy is just this main challenge and
everyone's trying to find cheap energy and it maybe changes the
nature of that trilemma? Do you foresee that maybe taking
place in the coming? Years, it's possible, it's
possible we could be sitting here 5 or 10 years from now and
and and the trilemma representeda a moment in the history of
(45:20):
Bitcoin and and is not the long term.
On the other hand, the part I just said, which is really the
most important part, the moment that the money is too easy is
probably the signal to stop and wait for the money to get hard
again. I know it sounds funny, right?
(45:41):
Because like for me as I'm, we have projects all over the place
and I spent a lot of time in thelast couple years talking to
investors and talking to people about being part of this and
it's a hard sell. Well, if it gets too easy, I
(46:01):
could easily to, to get the money, I could fall into the
trap of taking too much money ata time when global hash rate
will RIP to the point that I will have a hard time giving
people an appropriate ROI on that money.
So that's, I think that's, I don't know if that's going to
(46:23):
happen or not. We'll, we'll see.
But as your Bitcoiner, as you know, you know, global hash rate
has really continued to RIP. And I have a theory as to why.
And I think it's actually a, a bad thing that I think, you
know, we've actually, well, I can, I'll give you the short
version of it. It's because of the public
(46:45):
mining companies and they've actually had, even though
they've had really shitty operating performance, that's
the truth of the matter. They've they've done very
poorly. The market has continued to
reward them with capitalization and continue to let them take
debt. And so they've continued to
(47:06):
expand operations that really aren't making money.
And that's led to the hash rate growing and they kind of get
rewarded for it because the market instead of rewarding
operating performance has rewarded growth and and that's a
dangerous thing. Do you think that's symptomatic
(47:27):
though, because that's quite common in the entire stock
market. I mean, that's it doesn't really
matter what your business is doing as long as you're growing
and, you know, see this with a lot of tech companies.
Is this like a lot a symptom of something larger or?
Yeah. Well, I think you're exactly
right. But here's what the problem,
what the market doesn't understand is that no matter
(47:50):
what we do, Bitcoin will produce53,000 blocks per year.
It's not like that additional capital turns into more
customers like like, or actually, I'm going to do a, a,
either a, this is my show old man yells, or I'm either going
to do an episode of that or an article.
So you know how, how we have this adoption curve, you know,
the, the, the early adopters, the, you know, the late
(48:13):
adopters, etcetera, that whole curve.
Well, if you think about that, if you think about that with the
personal computer, the cell phone, like those sort of
things, what you have is as you go further into the curve, you
have a market that gets bigger and bigger and bigger, right?
Well, in Bitcoin, it doesn't work that way.
We have a fixed release of the subsidy.
(48:35):
We have a fixed number of blocksper year.
And at least as it pertains to mining, as the market matures,
it changes nothing about the output of the industry.
Every other industry, as it, as it matures and gets further into
that curve, you have this reallybig market that emerges.
But Bitcoin doesn't really have that.
(48:59):
So it's just more people fighting for the same pie,
right? Yeah, and it's interesting as
well because just yesterday, theother day, we had the the men
pool, you know, clear, clear. And, and it's like, well, yeah,
now there's questions there as well around sort of what that, I
mean, that comes and goes, but it, it doesn't, it just sort of
came out of nowhere it seems. And now we're back to having,
(49:22):
you know, we've got 2020 blocks or something ready to go.
But it's it's very interesting because as you said, it doesn't
really map onto existing paradigms for businesses.
Yeah, and that's we have so muchto learn, right.
We've never we've never experienced absolute scarcity
before. We've never had like a network
(49:44):
because you, you may know, I speak a lot about block space,
block space care, scarcity, geopolitical ramifications and
some of that stuff. And that's why even though the
mem pool has cleared, to me, it changes nothing about how I feel
about the long term, where I think, you know, block space
will become one of the most precious commodities in the
(50:06):
world and that we may literally see wars be fought over control
of block space because it it beyond the economic reward of
producing block space comes control, comes power and.
Yeah. Well, I mean I've heard you'd
speak about this with others and, and it's very fascinating
(50:28):
to me because then that that's avirtual thing in the sense of
the block space is scarce. But then you get into the
physical of the the fabs and thefoundries and these kind of key
locations at a couple of very specific pinpoints on Earth and
sort of that mapping of, yeah, you know, war's been fought over
the virtual block space. And then the physical access to
(50:49):
ASIC manufacturing is very interesting.
Yes, yes, yeah, it is. And you know, I don't, I don't
want to go down the, the, the that rabbit hole too deep.
But, and I have, I have spoken afair amount of it, But I would
say this, you know, if you're, especially if you're a smaller
country, my advice to anybody that's a head of state of a
(51:11):
small to medium sized country isyou better get some hash rate
inside your borders and you better start controlling some
blocks because if you don't, your viability and economic
sovereignty are at stake. Yeah, that's fascinating.
(51:33):
I'm Bob. I'm, I'm very interested in the
opportunity for New Zealand in particular.
Got some friends who are mining,I'm doing a bit of mining myself
and you know, I'm not sure if you're aware we have a lot of
hydropower, you know, really, really interesting grid mix.
We're not connected to any othercountries.
It's an island. So there's some real
opportunities there as an exportindustry.
(51:54):
Instead of sending milk and and apples outside, we can actually
be sending hat, you know be selling Bitcoin and we it also
has ramifications for the currency.
You know, a lot of New Zealand'sBitcoin has brought with the US
dollars, basically, and it's probably, you know, for the,
yeah, you know, for people to purchase it.
So, yeah, as you said, very interesting geopolitical, yeah.
(52:17):
Yeah, I'll add one more thing tothat just to since you bring it
up. So I'm, I'm going off the top of
my head, but let's say New Zealand represents 1/2 of 1% of
global GDP. Forgive me if I'm, if I'm off,
but you know, given what you've just said, it's a
technologically advanced nation and it has all this energy
(52:38):
infrastructure. So if think about this in a
ratio, if my number was right, if it's half of 1/2 of 1% of
global GDP, if New Zealand goes out and gets 2% of the world's
hash power and takes control of the block template for that,
then they're going to have a really valuable.
(53:01):
It's not the Bitcoin that becomes the valuable commodity,
it's the control of the blocks. And they can go to other nations
who are under served like they they have underdeveloped it.
And they could charge a King's ransom for access to block
space. Yeah.
(53:23):
Now that's, that's fascinating. Bob, I just wanted to circle
back to something else. Given all your experience with
the personal computing world andyou know, been working in this
space for a long time, what has your experience been with sort
of the old school tech executives and sort of that
maybe that generation who were working in the 80s and 90s?
(53:43):
What has their response been to Bitcoin in your interactions
with them? Largely disappointing, frankly.
You know, I think a lot of them,I'll say this, OK, I think a lot
of them don't even know what they did with personal
computing. I talked about this recently.
(54:05):
If you think about what we did with a personal computer, what
we did was we decentralized computing power.
So prior to that, the world ran on minis and mainframes, right?
And so if you wanted computing power, it was a permission
system. You got access to run your
software only when somebody elsegave you permission to do so,
(54:31):
and your data was completely permissioned as well.
OK, So the personal computer wasthis massive empowerment and,
and from there, my opinion from there came the Internet and from
there which was the decentralization of information.
And from there we have Bitcoin, the decentralization of money,
(54:56):
right? So there I think there is a
direct linkage. This is the DNA of one fed the
other, which fed the other, right.
I think a lot of the personal computer guys don't realize that
that's what we did, and a lot ofthem did well financially and I
think have fallen into kind of the same ways of looking at the
(55:18):
world that a lot of others do, which is just they're
complacent. They don't see the problem.
So that's been disappointing. There are exceptions to that,
though. I think like Steve Wozniak from
Apple been a massive Bitcoin supporter.
He gets it. Michael Dell appears to get it.
(55:41):
I have a few of my old Gateway compatriots that get it that
have participated with me and been investors in some of my
projects. So I'm grateful for those
people. But you know, we're probably
talking about 5 or 10% of them that get it versus most that
don't. Yeah, that's interesting because
I, I just wondered, there seems to be, I mean that generation
(56:02):
certainly with a lot of success and, and, you know, perhaps well
capitalized that there could be real opportunity there, as you
say, Michael Dell and, and, and that it's, it would be exciting
to see maybe more people come out of the woodwork and kind of
be part of this movement becauseit still feels, I don't know
about you, it still feels sometimes like it's sort of
under, under the radar, especially if you start talking
(56:25):
to people outside of Bitcoin, you know, they don't even know
that this is even taking place, that mining is even a thing.
So it's kind of like in one sense we're early, but it's sort
of, yeah, sort of where to from here, I guess.
Yeah, I write a monthly article for Financial Advisor magazine
(56:47):
in the US. It's a Bitcoin newsletter and I
just, I wrote the January issue and my advice to the financial
advisor community was I think we, I think we are no longer
early and it's not quite too late.
Like we're, we're at kind of an interesting point.
(57:08):
I mean, I guess it never is too late, but the opportunity to,
for Bitcoin to be transformativefor people.
And this is, this is more from like a wealth creation
perspective. I think that that could start
going away. And, and part of that is I, I, I
(57:28):
was doing this research. Now you may know this, but glass
node produces a stat, it's called coin life.
So it's, how long has that UTXO existed?
And in early 2022, so 3 years ago, coin, the average coin life
of the entire UTXO set was 3.853point 8, five years.
(57:52):
It's now five years. So in the space of three years,
the average coin life has increased by a third to five
years. So and then you can see other
metrics like, you know, we've lost 1,000,000 coins on the
exchanges over the last year. So you see those sort of things
(58:15):
and you go, well, it's not that you're too late, but there may
be nothing to buy like because nobody's selling.
And as you know, we're, we're waiting for 1.2 million more to
come out. But there are, there are 120
years to come out. Like they're, they're, they're,
it wouldn't shock me if we sit here in the next decade.
(58:39):
We talked about the mem pool clearing.
What about the exchanges clearing?
Like what, what, what, what doesthat look like?
That's kind of the opposite of the mem pool clearing, right?
But but I could see that happening.
I could see there being nothing for sale.
That's fascinating. And I guess I mean, obviously a
lot of people listening to my show Bitcoiners and I think
(59:03):
we're seeing in rapid succession, I guess the no, I
wouldn't say the narrative, but new ways of thinking about
Bitcoin and Bitcoin mining in particular are emerging very
rapidly. You know, things like the bit X,
you know, I've got one in the corner there.
And you know, that's kind of a new idea.
And it's very interesting, you know, radically open source, you
(59:24):
know, to sort of get this into everyone's houses.
There's ways of thinking about these things.
And I wanted to ask you, Bob, what do you think is something
that is most, most misunderstoodabout Bitcoin mining amongst
Bitcoiners? I'm amazed at how many people
don't really understand things like block space in the mem
(59:49):
pool. Like that for instance.
There is no mem pool, there's noa mem pool.
Every node has its own mem pool.So and the and we've already hit
on it the finite nature of the block space.
These sort of things and also that the, this is, this is goes
(01:00:13):
back to the geopolitical implications that blocks are
created by the miner and the miner can pick whatever
transactions he wants to go intothe block.
That, you know, you could, you could offer a transaction to the
(01:00:36):
network. You I could send you a Bitcoin,
Cody and I could put in an enormous fee.
I could put in a half a Bitcoin fee.
And there's no guarantee that anybody ever picks it.
And so we live in a world where I think a lot of people
(01:00:57):
oversimplify the game theory andthe economics around this, and
they just think because the highest fee is being offered,
that I think some people just think, well, you move to the top
of the queue. There's one mem pool and you
move to the top of the queue andit goes, But if I'm a miner and
(01:01:21):
you're a miner, we're two different miners and we're doing
what's called our own block template creation.
We're not abdicating into the pools.
We can pick whatever we want based on whatever criteria we
want. So I can pick the transactions
of me and my friends. I could pick the oldest ones, I
could pick the ones that have anodd transaction ID or an even
(01:01:44):
transaction ID. I can, I can do whatever I want.
So this is a massive amount of power, which is why I'm saying
small countries need to be minors because I hate to say it,
it's something that kind of makes Bitcoiners cringe.
But the day will come when dozens of major countries will
(01:02:07):
have hash rate and a lot of hashrate and they're going to pick
and create blocks based on what serves them best.
They probably are not going to be very motivated by the block
reward. They're going to be motivated by
the power that comes from being able to pick the blocks.
So if this is what may be a bad example, if the US wants to get
(01:02:33):
foreign aid to Belize right now,they, you know, in today's
world, they don't even think about the transaction, but in
the future world, they'll control blocks and and they'll
put that transaction in and they'll make sure that it's
prioritized. They don't care how much the fee
is. Or maybe that there was a
different transaction that couldbe more.
(01:02:55):
No, they whatever reason they need to get money to Belize or
Ukraine or Israel or New Zealandor whatever.
So it's going to be a very different world and Bitcoiners I
think would do well. You mentioned having a bid ax.
You know, I really recommend people go get a small piece of
(01:03:19):
mining equipment and run it. Start out by connecting to a
pool, but later on, as you get more advanced, run a node, run
what's called a Datum server andstart doing it yourself.
That's the point at which you really are mining.
And you'll learn so much about the way Bitcoin really operates
(01:03:41):
if you do that. Yeah.
Yeah. No, I spent a bit of time
talking with Luke from Ocean when they visited Japan and it
was really incredible to understand because I think that
was just about the time they announced the Datum stuff.
And yes, it's really quite powerful because just again the
other day we saw Foundry get however seven or however many
(01:04:04):
blocks in a row. Yeah.
Which is kind of interesting. And one, just as you were
speaking, Bob, sort of somethingthat struck me was if we were to
map this onto the, the legacy world, it almost reminds me of
sort of the open oceans and the roles of navies to protect
shipping and something like the Suez Canal or the Panama Canal
and these kind of legacy things.You know, the, the Navy that
(01:04:28):
protected these shipping routes,you know, that was a cost and
but it was paid to main maintainthis kind of ability to transact
commerce. And so it's sort of, it's
interesting because like, what does that mean for, Yeah,
there's say the block rewards and the, and the transaction
fees. Like maybe it doesn't even
matter because people just want to make sure like, you know,
(01:04:49):
their blocks, their transactionsget processed.
And so similar to the Navy, theywill, you know, pay to make sure
that it's, you know, the nationswill pay to make sure it can be
done. Yeah, it is a very appropriate
analogy. And I would say it's a direct
analogy between the physical world and the digital world, and
(01:05:12):
that you're a blockade. For instance, if you don't have
your own Navy, a blockade can beput up and you're screwed,
right. Yeah.
So. Yeah, and we saw that, I mean
and literally block blockade, I mean you had saw it as the Suez
Canal in the 50s I think with Egypt and you've seen it with
all sorts of things historically.
(01:05:35):
That's an interesting, I mean that's very interesting
geopolitical game theory thing. Because I, one thing I sometimes
wonder is if we as Bitcoiners, we sometimes think a bit too
much sort of the hard engineering of it and, and kind
of in this, this world of, of kind of computers and, and kind
of Internet. But actually when the state does
get involved and it sees it as avaluable thing, I mean, it will
(01:05:56):
do what it has to. And money doesn't really mean
anything anymore. It's sort of, you know, they can
use force and they can requisition machines and all
sorts of things, so. Correct.
And it's not just the nation states too, it's the banks and
the financial institutions too that.
But I don't necessarily love everything.
I'm just telling people how I think it plays out.
(01:06:18):
I mean, I like it, but I think it's how it plays out and I
don't think it's anything we cando to stop it.
There's that phrase Bitcoin is for enemies too.
Well, I think most Bitcoiners would look at central banks and
and Wall Street firms and nationstates kind of as the enemy.
But if, if, if the world starts the hyper Bitcoin eyes, even to
(01:06:39):
a certain degree, it's not like we can exclude them.
If we do that, we are are guiltyof the very thing we're trying
to solve. So I think if you look at an
organization like Citigroup as an example, big, big bank or
we'll use Mitsui and you're in Japan and you know, I worked
(01:07:01):
with Mitsui before. It makes perfect sense for them
to be big miners because if, if,if they want to provide economic
flow for the companies and the customers that they serve, the
(01:07:22):
only way for them to do that is to control block space.
And so I, I expect them to be there.
A part of the reason I, I want to say one other thing too, part
of the reason I encourage peopleto have a bit X or, you know,
small to medium sized organizations like mine.
We can still have at least some percentage of the blocks of the
(01:07:42):
world that fit and adhere to thespirit that kind of exists today
that I think a lot of Bitcoinersare attracted to.
But it might only be 20% of the blocks.
It might be 30% of the blocks. And again, that block space is
going to become extremely precious.
(01:08:04):
Yeah, yeah, it's interesting. I mean, again, the analogy with
the the oceans as you've got these sort of pirate self
sovereign people doing their ownthing and then you've got nation
state navies, you've got merchants, you've got all sorts
of people. And again, our friends over at
ocean may be good analogy. Everything's in the open ocean.
So yeah, it's, I mean, interesting.
I'm very interested in the history of of this kind of
(01:08:26):
stuff. You know, you look at the
theories on warfare and kind of how these things play out.
And I, I certainly think there'sthings we can learn from the
past. And as you say, blockades, you
know, what would that mean? Empty blocks.
No one gets their transactions and could be disastrous.
Sure. But Bob, I do appreciate your
(01:08:49):
time and sharing what you're working on.
It's fascinating to learn about this stuff. 2025, though, what's
what's on your radar? Have you got anything you're
looking forward to that you wantto share?
Well, I've got a lot on my platethis year from the direct mining
perspective. We'll be bringing up several new
sites. I'm really working especially on
off grid stuff where we, we actually just brought up one
(01:09:12):
using anaerobic digestion a few weeks ago, so connected to a
dairy farm where we've got a couple MW operation, you know,
using the methane from a dairy farm.
We've got several stranded gas projects that we're bringing up.
I think that'll be probably our main emphasis this year is all
(01:09:35):
the stranded gas stuff, working on a block space forwards
project where people would be able to buy block space in the
future. So if you knew you needed access
in let's say the first week of June, that you could come to a
minor and pre buy kind of like you're going on vacation.
(01:09:56):
You don't book your hotel room when you arrive at your
destination. You book it weeks ahead of time
to make sure that you get a spotand you are comfortable with the
price. So I think block space will
follow that same paradigm. So those are a couple other
things that I'm working on for 2025.
(01:10:18):
Yeah, or at some point in the future, I'd love to hear more
about the the Block Space Forwards project.
Maybe when? Sure, you have to come back and.
Yeah, more progress because thatbecause that sounds really
interesting because I think there we've seen, I know Luxor
and a few others have started doing other things with forwards
contracts and some of these financial instruments, but
(01:10:41):
having it more broadly in Bitcoin, these kind of ideas
could be really interesting. Well, you, you're right.
The the development of derivatives market is very
important and I applaud anybody that's made an attempt here.
The the problem with the derivatives to date is there's
not a natural market for them. Meaning when I say natural
(01:11:02):
market, what I mean is there's aproducer of a good and a
consumer of a good. So if you have something like a,
a block, a hash price derivative, what you have is you
have really just the, the, the miners who are trying to
essentially buy insurance and you have speculators and
(01:11:23):
traders. But when you have a block space
forward, it actually results in a full deliverable.
In other words, when somebody buys a spot in the first week of
June, as an example, they buy 1010 thousand weight units of a
(01:11:43):
block in the first week of June that must be delivered.
So it's the same as like with corn or apples or something like
that, right? If you, if you're selling a
forward, the producer eventuallymust deliver the forward and the
buyer must actually take delivery.
So I think that that's part of the reason why I'm so excited
(01:12:05):
about that project is that it's the first time in this space
that a true natural market emerges.
Yeah, and I can see a lot of implications for things like
lightning channels and these kinds of things as well.
Oh, absolutely, yeah. That'd be exciting, but that
might be an episode for another day, Bob.
But if people want to follow youand they want to learn more
(01:12:27):
about what you're doing, or theywant to hear you talk more about
Bitcoin mining, where can they go, Bob?
I'm predictive on Twitter, Boomer, under score, BTC.
I have a little show I do calledOld Man Yells.
You can find that on all the podcast platforms and YouTube.
And if you wanna learn about what we do at Barefoot Mining,
(01:12:47):
Barefoot mining.com. Cool.
Thank you very much. Thank you for listening.
I am Cody Allingham, and that was the transformation of value.
If you would like to support this show, please consider
making a donation either throughmy website or by directly
tipping to the show's Bitcoin wallet, or just pass this
episode on to a friend who you think may enjoy it.
(01:13:08):
And you can always e-mail me at hello@thetransformationofvalue.com.
My advice to anybody that's a head of state of a small to
medium sized country is you better get some hash rate inside
your borders and you better start controlling some blocks
because if you don't, your viability and economic
sovereignty are at stake. The the tariffs, I don't believe
(00:23):
we'll have any long term meaningful impact on the, the
mining industry in the US. There could be some short term
pain because you know, it may take six months to work it all
out, but there's no long term. Hello, I am Cody Ellingham and
this is the Transformation of Value, a place for thinkers and
builders like you where we ask questions about freedom, money,
(00:45):
and creativity. Today I'm joined by Bob Burnett,
who is heavily involved in the Bitcoin mining industry,
including being founder and CEO at Barefoot Mining and a board
member at Ocean. We talk about Bob's experience
building personal computers in the 90s and early 2000s in
Japan, how those lessons apply to Bitcoin mining hardware
(01:06):
today, and the manufacturing andgeopolitical challenges and
considerations for Bitcoin mining hardware.
I would like to know what you think.
Send me an e-mail at Hello at the Transform ofvalue.com and I
will get back to you. Now, if you enjoy the show,
please consider sharing this episode with a friend who you
think might like it. You can support my work directly
(01:26):
by streaming sets to the show's wallet or donating through my
website. Otherwise, onto the show.
But you know, Bob, I'm from a little place called New Zealand
and I am based in Japan at the moment.
And when we met our mutual friends from Ocean, they
mentioned you had a bit of experience with Japan.
Could you tell me a bit more about that please?
(01:46):
Yeah. Well, my roots go back to the
personal computer industry, so way back.
So I started working in that industry in 1986 and was on the
design team of of what I would consider to be the world's first
(02:08):
laptop with some dispute, honestly in the personal
computer industry. But at a minimum, very, very
early days of the personal computer.
And at that time a lot of the key technologies came out of
Japan, the early LCDS, DRAM battery technology, all those
(02:33):
sort of things were coming out of Japan.
And I started going to Japan probably 19891990.
I started working a lot specifically with two companies,
Mitsui, which is one of the larger, it's a Kiratsu there,
(02:54):
one of the larger trading companies.
And also with Sanyo Electric specifically to Tori Sanyo.
So it's Tori prefixture on the Sea of Japan side.
And so we had a relationship with them where I was at the
time, I was with a company called Zenith and then later
with a company called Gateway where I was the chief technical
(03:16):
officer. And so I spent a lot of time
there. I, I lost count.
I don't know, I've 7580 trips toJapan, maybe maybe more over
over my career, but the early days I what really left an
indelible mark on me because to be real honest about it, like,
(03:42):
like I was, I was born and raised in the US and I can't
speak to the culture of a New Zealander, but you know, in the
US there's I think a bit of an arrogance that often gets kind
of built into people from the US.
(04:02):
And so I had this chip on my shoulder.
I think for a while, especially in those early days, I was out
of school. We had this kind of perception.
We get beaten in the US, like American made products are the
best products. And maybe you have that same
thing in New Zealand. I don't know.
But you know, we, it was kind ofingrained in US and in the very,
(04:23):
very first couple products I worked on, we, we built and
designed them in the US, manufactured in the US.
And I remember it was in that time period, right in the, the,
the late 80s, early 90s when I got assigned to work on a
project in partnership with Sanyo in Japan.
(04:44):
This is my very first trip. And what from a professional
standpoint, it ended up being one of the most important pieces
of my career because what happened was I had been called
into my boss's office. He told me, hey, Bob, you're,
you're on this project and we'resending you to Japan to work on
(05:08):
this project because we're not going to build it here in the
US. It's going to be Co designed and
manufactured there. I immediately started pushing
back like, well, what no, no, no, we, we, why don't we do it
in the US? And he basically gave me an
ultimatum, as he should have. He said, well, you know, do you
want this opportunity or not? Because it's being done there.
(05:31):
And either you can work on it oryou can find somewhere else to
work. OK, I guess I'll, I'll
acquiesce. So I flew to Japan and, you
know, saw Tokyo for the first time briefly, was very impressed
by it. But then I flew to Tutori, so I
don't know if you even know where that is.
(05:52):
It's a small Tutori city's a small town.
At the time it was probably 8090thousand people.
And as we were driving from the Tutori airport to the factory,
the town was nice and quaint. And we pulled up to the factory
and my host, I remember distinctly saying to me, he
said, hey, this is where the Japanese built the tanks in
(06:15):
World War 2 for World War 2. Well, that's kind of a strange
thing to tell me. I think he was just trying to
break the silence. And, you know, and I was a young
guy. I was probably 26 at the time,
which in the Japanese culture, especially then, young people
did not have positions like I had.
(06:36):
It was very unusual. Anyway, we pulled up to the
factory and it was kind of unimpressive on the outside.
It was very kind of rundown, needed paint job, didn't look
that nice. And I, I had all these
trepidations, got out of the carwith this big entourage,
(06:57):
including the president of Sanyo, and they opened the doors
to the facility and it was like walking into Taj Mahal.
It was the most beautiful thing I had ever seen, bright and
clean. And again, this is a this is
(07:17):
almost 40 years ago, 35 years ago, they already had robotics
in this factory. They had a production line
making rice cookers, another production line making car
radios, another one building computers, like just and it was
massive. And we started walking through
(07:38):
the facility and one of the first things that I noticed was
that everybody on the productionline was just laser focused on
what they were doing. Nobody even looked up.
And, and if you think about that, the president of the
company is walking through the production line with an
(07:58):
entourage, including A at the time, a blonde haired young
American, which is unusual thingthere, but nobody, nobody change
their focus. And it impressed me immediately
because if I had done the same thing in an American factory,
the factory would have stopped and the quality would have
(08:21):
plummeted on everything being built.
But they they didn't. And then we got to a production
line in the back of the buildingand there were about 18 women
all lined up in a row, all in lab coats.
Very neat, all very small, maybe5 foot two or shorter, very fine
(08:41):
fingers. And as I got to that place, one
of the ladies stepped forward and she said, you know, Mr.
Burnett, it's a pleasure to haveyou here.
We will be building your laptop on this production line.
And she gave me this beautiful speech in perfect English and,
(09:03):
and then she gave me a tour of the production line, everything
that would happen, the the wave soldering machines and the
assembly and all that just was blown away.
And then as I was leaving that area with my host, I said, boy,
I am super impressed that you have the leader of the line
being somebody that speaks English.
(09:25):
And he said, no, no, no. Everybody on that line speaks
English fluently. They all have four year degrees
and they've all been selected, you know, for their physical
traits to build your machine. So they had all these tiny women
because we had like a, we were going to have like a million
little screws and solder connections and all that.
(09:45):
And if you didn't have really fine dexterity, well, in the US,
like that just doesn't exist. Like, and, and so again, I was
just, I was blown away by that whole thing.
And so the rest of the day was fantastic.
And I remember I, I went back tomy room, I checked into my hotel
(10:07):
room and I sat on the edge of the bed.
And as I sat on the edge of the bed, I got really mad, really
mad, because it was the realization that I had been lied
to for at that time, the 26 years of my life, and I had been
taught to think that I was superior and that they were
(10:32):
inferior by default. And the truth of the matter was
they were way better at buildingelectronics products than we
were and a lot more capable. And it changed my life to the
point where I said, well, I, I can win in this industry if I
align with these people, becauseall the American companies and
(10:54):
European companies think they can do it better and they can't.
So my experience in Japan, if there was a place, if I could
not live in the US, Japan would probably be my first choice of
places. So that's a lot of rambling.
(11:16):
So I'll. I don't know.
That's great. Thank you for sharing that
story. And if I could share my
perspective, you know, New Zealand's a very small country
and we're sort of actually in between a lot of different
things. We've got Australia, China, the
United States. And so I've always, I've never
really thought of New Zealand assort of, you know, having
perhaps this, this thing going on, you know, and a lot of
(11:36):
people leave New Zealand. I mean, we certainly have pride
in our country, but it's, it's interesting because, yeah, this
this idea of sort of nation state and, and kind of, you
know, I hope we can get into this later talk about some of
this tariff stuff and, and sort of what it means, especially
with that same attitude towards China potentially.
And you know, if you, if you do actually go to China and you see
(11:57):
maybe in a way what you saw in the 90s in Japan, I, I feel like
if you go to Shenzhen or some ofthese places, you feel that it's
just the level of infrastructureand it's a very humbling
experience, but it's also quite a, quite a connecting thing.
You realize you can't build in asilo.
You have to connect with other parts of the world.
So that's very interesting, but I did want to ask you as well,
(12:19):
Bob, this time in the early 90s,late 80s, this would have been
around the time of the the Japanese bubble bursting and the
in the beginning of a recession.And I think that left a huge
impact on Japan. Do you have any commentary just
on that experience of that time and sort of what you what you
saw around you? It was very painful for Japan.
(12:41):
And it's interesting what you say about China because what was
happening at that same time is the Japanese had this
incredible, this incredible capability, but what actually
ended up happening that really hurt them before the bubble was
(13:03):
the yen got super strong. So I can tell you that when I
first started doing business in Japan, we were buying goods with
American dollars for 100 and forty ¥145.00 per dollar, OK.
That was the range in that time period.
In parallel, over in Taiwan and Korea, those countries were
(13:27):
starting to make massive investments in chip fabrication,
LCD fabrication. They were starting to pump out
lots of high quality engineers and they were trying to convince
people like me to leave Japan. Well, what ended up happening
(13:47):
was by about 1995, the the yen had gotten so strong.
I'm going off the top of my head, but I believe we hit
something like 80. So we started these
relationships and suddenly the, the power of the dollar and our
ability to purchase it just got enormously expensive.
(14:10):
And so we decided because of this economic disparity to start
giving companies in Korea and Taiwan a chance.
And it was a little rough, but they learned very quickly and
they, they, they got up to speedwith, you know, quality and
(14:32):
design to get it on par or very close to on par with Japan.
And then the whole Japanese thing just crumbled like on, on
the heels of that, that they hadthis really strong currency.
They could no longer really afford to be a manufacturer.
(14:53):
These other countries had come up with great design and
technological capabilities. And then the whole Japanese
bubble burst. Their economy went in a
tailspin. It really hasn't recovered
since, frankly. Yeah.
Well, it's interesting. Money plays a big role in this
and obviously it does talk aboutBitcoin in a little bit.
(15:14):
But just on the point of Taiwan,I have spent a little bit of
time there and it's quite interesting.
You see a similar thing where ifyou go sort of say from Taipei
on the on the western side, you can pass all these sort of
factories and I'm very unassuming, kind of, they look a
bit rundown sometimes actually. But on the inside, the
manufacturing, the world's, you know, graphics, GPU's and all
(15:38):
sorts of high tech stuff and I just sort of, as you say, it was
like that inside, outside difference is quite amazing.
Yeah, yeah, you, you learn very quickly the, you know, the old
adage, don't judge your book by its cover.
That, that, you know, as a youngman, I, I learned that the hard
way. And thank God, at least I
learned the lesson. And I, I, I, you know, I guess
(16:01):
that's the part I'm happy about was I stayed open to it.
And so, you know, I, while I jumped on Japan early, I also
jumped on Taiwan early. And so like we, we were, I was
very much involved with companies like Quanta and
Foxconn. And some of these in those very
(16:24):
early days when they were still like they were pre IPO, they
were just getting started. I was one of the first people in
the world to work with those companies and they've they've
obviously become powerhouses. Yeah.
Well, jumping into the Bitcoin pace and I thought maybe we
could start with mining because this is something you've got a
lot of experience with. But in terms of the situation we
(16:47):
have and maybe we can tie this in a little bit with what is
happening right now with this tariff situation, but we have a
huge amount of the Bitcoin mining equipment being
manufactured in China. We've got maybe a centralization
risk around manufacturing, though there is maybe some
efforts to address that. Overall, how would you address
(17:09):
and maybe a little bit about sort of your background with
Barefoot and your other Bitcoin mining companies, but how would
you address this overall situation with Bitcoin mining
hardware and what those supply chains look like, especially
with your experience with computers in the past?
Good question. So the first one is let's talk
about the tariffs first. I, I, I don't worry about the
tariffs too much. We actually dealt with that back
(17:31):
in my personal computer days a lot.
And they're usually fairly easy to work around.
And without violating any privacy things, I can tell you,
I know that that the makers of alot of the Bitcoin equipment
have already moved some final assembly operations inside the
(17:55):
US. So you can largely avoid them by
bringing in things in the component parts and doing the
final assembly in country. So and and you can do so without
too much of a change in the coststructure.
So I don't think it, I don't think the tariffs will have any
(18:17):
long term meaningful effect. Yeah.
If I if I can just pull on that.So that's interesting.
So it's a consumer final, consumer products get slapped
with the tariff, but if you manufacture in country, there's
ways to get around that. Is that what you're typically?
Typically, that's true, yeah. And we used to do, we had the
same, we had the same issues back in the personal computer
(18:38):
days. And that's what we would do is,
yeah. Well, just as an aside, sorry, I
am, I'm just trying to remember.With New Zealand, there was
quite a protectionist economy, say in the 1970s, nineteen 80s.
And I remember there was a period where televisions and
motorbikes were getting manufactured in New Zealand, but
they were basically just puttingthem back together.
They took them apart in Japan and put them back together.
So maybe that sort of echoes what you're.
(18:59):
Saying exactly the same thing. So they'll, they'll sometimes it
depends on the situation. Sometimes they'll just send it
in as a kit, as you said, they they'll assemble it, test it,
make sure everything works, put it into a kit form and then send
it, send it out. Somebody will, you know, put the
screws back in on the other sideand in a fairly low tech, like a
(19:24):
low tech way. And if you design the product
from the beginning, knowing thatthat's what you're going to do,
it's even easier, right. So that's that's the the tariffs
I don't believe will have any long term meaningful impact on
the the mining industry in the US.
There could be some short term pain because, you know, it may
(19:47):
take six months to work it all out, but there's no long term.
Yeah. Now the other piece that you
asked about though is really important.
So we, I believe we, when I say we, I'm talking about the
Bitcoin community, the Bitcoin ecosystem.
I believe we have, we have several risks, but one of the
(20:08):
risks is that we don't have really great separation of the
supply chain I talked about. So if if I can't contrast it
again to the personal computer industry, which is you know,
where, where I spent my 1st 20 years of my career.
We had Intel making the CPUs andwe had alternatives like AMD and
chips and technology, and we hadother people that we could buy
(20:31):
the CPU from. We had different people we could
buy graphics processors from. I worked for a system
manufacturer and I designed systems so I could use my
creativity and I could use whatever goals and objectives I
had to design a certain form factor to hit a certain cost
(20:54):
target. I had all these different things
I could do, but there was a lot of creativity.
And hence that's why we have, you know, even today you have
Dell or you have Toshiba or you have Lenovo or you have these
different, you know, they're taking for the most part the
same bucket of components, but they can assemble them design
(21:18):
wise however they want. And we don't have that in the
personal computer industry or inthe, the, the mining industry.
Today. What we have is we have 90% ish
of every system is based on a chip designed by Bitmain, which
(21:39):
they do not publish any data about those chips.
So like if I design with an Intel chip, I will get a book
called a data book. It probably would be 200 to 300
pages thick of deep technical details about what every pin on
that chip does, what its timing is, what its voltage
(22:02):
requirements are. I'd know all of the instructions
set within the chip and how it worked and then I could build
whatever I want out of that chip.
Bit main doesn't work that way. They you must buy a complete
system from them. So we don't know for sure what's
really going on inside those chips.
We don't, we don't, we have to play.
(22:24):
It's kind of a weird thing. Bitcoiners are one of our
mantras is don't trust verify, right?
That's what we say, 'cause it's the the fundamental tenant of
the transaction. Yet the hardware that's running
and supporting the whole infrastructure is closed source.
(22:45):
We don't know anything really about anything going on inside
it. So it's that really bothers me.
And like I said, somewhere between 80 and 90% of the stuff
comes from bit main. And then we really only have
realistically, we have the microBT what's minor products and
(23:06):
then the out like the Avalon series from Canon, but that
that's really all we have. So to me, one of the most
important things in making sure Bitcoin stays secure in the long
run is changing that timeline. That's why one of my other
projects, by the way, isn't is the design of a new ASIC.
(23:29):
It's a group called M Fivers that I've been working with for
a year and a half with it's actually X Intel and Samsung
guys and and myself as an advisor.
And we're, we're designing our own ASIC in the model of Intel,
where we will design A chip and anybody can buy that chip and
then design whatever system theywish around that chip, trying to
(23:51):
bring that PC kind of ecosystem or supply chain to to the
Bitcoin. OK.
So with that in mind, you mentioned earlier the KDET 2,
which is I guess you could say the way Japanese companies work
together in this kind of interlocking way, right, where
they have shareholdings with each other and they kind of
(24:12):
collaborate. Yeah.
Is that what you'd say? That's correct.
I'm just wondering what the Chinese situation.
We know in places like Shenzhen,there is a slightly similar kind
of collaborative thing going on where everything's available in
that region and it sort of comesand comes together and
effectively these, you know, ASIC miners, there is a little
bit of other stuff. There's the control boards,
(24:34):
there's the power supplies, there's other aspects.
In that situation, how much importance do you think there is
on the ASIC itself versus the other components which are maybe
a bit simpler compared to say the way a personal computer
comes together? Like is there much involved with
other companies sort of in that orbit that would contribute
components well? There's some engineering
(24:54):
required to do a Control Board well, and but that actually
there is actually an aftermarketfor that.
So you can buy aftermarket products from Brains, from Epic,
from some other companies and you can actually replace like
for instance, the bit main Control Board in most models
with one from somebody else. So luckily that part is OK.
(25:15):
So the answer to your question is the ASIC is really the
problem, the actual chip. And like I said, as an industry,
there are two issues with that. The first one is that it's a
black box. We really don't know what's
happening inside that chip and whether whether it's malicious
(25:45):
or, or what would be the right or or a case of bad engineering.
There's always a risk because we're so dependent on one
company and one set of logic that's integrated into those
chips and it's not open source. So we don't know what's going
on, that something bad could happen.
(26:05):
Yeah. And go, go ahead.
Oh, sorry. I was just going to say, do you
know in terms of the, it's a bitof a historical moment, but the
covert ASIC boost, do you know sort of how that fit fitted into
this piece with bit main? Was that actually on the chip?
Well? The, the, the story there was,
(26:27):
you know, that they, they being bit main could essentially have
designed the, the chip we have to boost in a way that only
their firmware activated it whenthey were running it for
themselves. And therefore they had a
(26:47):
material competitive advantage as a minor versus everybody
else. It is a great example of what,
what I'm just talking about though, right?
That that, you know, something similar could could happen in
the future. And I think a healthy world
(27:08):
would be one in which we have 567 legitimate makers of the
ASICS and those ASICS in and of themselves will have different
trade-offs. And so if so, the companies that
want to be in the system business could then one, have a
competitive landscape where the,the, they could talk to the six
(27:34):
or seven different vendors and, and actually negotiate with them
for the best price and the best fit for what it is they were
trying to accomplish. So, and, and I think that's
important for us to commoditize this space because what happens
in Bitcoin mining is pricing of the of the systems themselves is
(27:58):
not really a cost plus business,which is where most electronics
ended up commoditizing to. It's a market driven price
because we have, we have a very limited supply and you know, bit
main and micro BT will look at essentially hash price and float
(28:20):
the price of the equipment almost on a daily basis based on
the hash price. And that's not how a mature
market works. You know, a mature market works
really on a more of a cost plus basis and the feature
advantages. And if we if we don't get some
(28:45):
new ASICS out into the marketplace, it there's nothing
to incentivize creativity and there's nothing to incentivize
price competition. And that worries me a great
deal. It's like imagine there was only
one company in the world making personal computers or all the
(29:08):
laptops in the world. And so when you wanted to buy 1,
you know, at you essentially hadno choices.
You know, you had only one that could work.
But I think we know too, what's really important in mining going
forward is we want everything from bid X type products that
(29:28):
are geared to the the whole miner and, and maybe consume 30
watts to enterprise solutions using hydro cooling, you know,
individual unit might run at 10,000 watts.
All kinds of other specialized applications like I, I believe
(29:50):
over time I may do it myself, but over time I could see
everything from a pet bed to keep your dog warm at night.
That's based on an ASIC or your hot water heater, grain dryers
and people, people trying to heat warehouses.
I mean, all these would result in somebody designing a
(30:12):
completely different system. But if you can't buy the bare
chip itself, it doesn't really work.
I've got a question about that. So you mentioned this cost plus
model and then the market model.And I was at a a seminar
recently talking about manufacturing in Japan and sort
of how that industry has evolved.
(30:33):
And I don't know if I fully agree with the thesis of this
person's talk, but basically they said Japan doesn't make
stuff anymore in the sense that it makes the machines that makes
the stuff. And so a lot of the hardware in
China is actually Japanese manufacturing equipment, for
example. And the, the presenter talked
about this idea of the smile curve and the idea that the
profits live on one side at the design stage, you think, you
(30:57):
know, design of the iPhone, and then at the other side with the
retail and sort of everything inthe middle ends up being kind of
commodity pricing. And I'm just wondering with all
of that in mind, how does that relate to something like ASIC
chips, which have this direct connection to money in the sense
that if you have the Asic's, youknow that that's that's an
(31:17):
access point to getting Bitcoin,which has a monetary value.
Like is, is there something different about ASICS compared
to what we know about with commodity, other commodities?
That's a very interest. First of all, that's a very
interesting observation. I hadn't thought of that, that
that does make, that does make these machines very unique
compared to almost anything elsein the world.
(31:39):
That said, you know, in ASIC, inthe real, I should say in the
real world, but in in the world in general, the reason that you
design an ASIC is because you have a high volume need for a
very defined and repetitive task.
(32:00):
OK. And so there can be some
intelligence in it, like for instance, if you're driving your
car and the the headlight control and the sensing that
maybe a car, there's an oncomingcar and you should turn the
brightness down or direct the, you know, direct the headlight
to a lower angle. That would be something you
(32:22):
would do with an ASIC. So almost every piece of
electronics has an ASIC in it, if it has high volume at all,
everything from a rice cooker toATV to a whatever.
They, they all probably have several Asic's doing different
functions. So our ASIC, when I say
(32:43):
Bitcoin's ASIC is something thatruns the a double shot 256
equation to help us produce blocks.
That's that's what that one is doing.
It is largely commoditized already.
(33:04):
The problem is in our case we must use the very latest
technology. So if you're entering today, you
must enter using like the three nanometer process like and which
is only available from TSMC and Samsung.
(33:24):
And we have to compete with NVIDIA and Broadcom and Apple
and, and Tesla and companies like this to have access to
those fabs. Usually what happens in an ASIC
is you're following the technology curve.
So if I was designing that headlight control mechanism,
(33:46):
I'm, I'd be going to the guys who have the 15 or 30 nanometer
stuff and I would, you know, I'dbe asking them to design this
ASIC for $0.75 for me that they kick out on that process.
But Bitcoin has this unique thing of having to be at the
very front end because we have to hit we're, we're, we're doing
(34:12):
a phenomenal number of operations in a small amount of
time. We need the very fast switching
and we have to have the most power efficient stuff, the best
joules per Terra hash. So you know, you have to today
you have to have three if you'rehave it, if you have an ASIC
that's coming out, let's say a year from today, you're going to
(34:34):
need to have two nanometer. Well, it's, it's hard to get in
line and it costs a lot of money.
Like I can share with you that for our project, if we're
blessed enough to get to the finish line, which it's not a
given, we're hopeful, but we're probably going to need 30 to $50
million of capital raised to getto that point to buy the right
(34:58):
places in line to, to, to get everything in order.
So that's that's the big barrierto entry in this world is you
got to have some pretty deep pockets to throw a lot of money
at something that might fail like it might not work too.
(35:20):
Well, in that sense then, so there's the fabrication
facilities and like you got to get in line.
There's only a few of them. What does that landscape look
like? And how does it also relate to
the the design of the chips themselves?
Like how much is involved there?And then if you've only got a
few places you can go to to get it made, like what are those
(35:41):
negotiations? What does that landscape look
like? OK, so architecturally, like
what we're doing is I have to becareful what I say, we'll just
say we we believe that this the algorithm and the methodology to
to run this, you know, we think there's still a few tricks to be
(36:04):
played. OK, So that basically we could
we can perform this operation faster in our chip than others
can do it in their chip. That's one thing.
The second thing is we believe we have some technology that
will allow us to have a higher yield.
Because that's the other thing is when you're building these
(36:25):
chips, if they're done in such away that a small flaw in the
chip means you throw the whole thing away, there's no way to
repair, right? It either works or it doesn't.
So we, we have some technology that we think even when there
are small flaws, we can have thechip self correct itself and
(36:46):
work around that and still be functional.
So design wise that's really important.
Now, of course, getting in line to get the latest stuff, like if
we're trying to work toward 2 nanometer right now, you have to
have relationships and credibility with either TSMC or
(37:08):
Samsung. Those are the only two games in
town. Maybe Intel will get in place.
But that's partly why whether that's me with my background or
some of the other guys in our project which were executives at
Samsung and Intel, you have to have those.
I would never discourage anybody, but I would just say
(37:31):
like if if there were just a couple real bright engineers out
there that said, hey, I think wecould design an ASIC.
They're going to have a really difficult time unless they
getting getting to the finish line, unless they align with
people that have the appropriaterelationships with those
companies and the credibility toget there.
(37:56):
And so, I mean, there are otherslike both block and block stream
in our industry are designing chips now.
I don't, I don't think either one is doing it from the
perspective of trying to become the Intel of the industry,
meaning, you know, they're goingto just sell the chips.
I think they have the objective to more cell systems or have
(38:20):
partnerships where the systems are built but not have a general
market for the chips. But even that, I applaud it and
I encourage it because it still helps break this monopoly that
we have. So which I think is very
important. Well, that's interesting cuz
Intel, their whole thing was Intel inside, right?
(38:41):
And so you could have a system any yeah, you know, in any
computer manufacturer OEM could have Intel chips and work with
them. And so it did become a
commodity. But I'm curious when it comes to
ASICS, I know with like CPUs, you get the binning, we've got
different grades of of CPU. How does it work with ASICS?
(39:03):
Is it an on off situation or do you get to grade the chips
themselves? There's still a yield some some
chips that may work. We're probably seeing something
like that, for instance, with Bitmain.
So when you look at the S 21 line as an example and you have
product options from let's say 180 Tera hashes to 270, that is
(39:26):
most likely the same chips with different yields that they can
certain chips when pushed hardershow failure.
So they have to, you know, but, but but maybe still operate at
the low end of the threshold. So they'd rather not throw it
out if they don't have to. But yeah.
(39:47):
Yeah. So same thing with Intel.
OK. And so you think so the
opportunity here then is a commodity ASIC that has an open
spec, a data book that any systems manufacturer could pick
up? And integrate in their own way
and different form factors. You you think that's the pathway
here for this market to mature potentially?
(40:09):
Yes, yeah. OK.
And I guess at at the moment though we still have the the
reality of these a couple of manufacturers that are
dominating the space. Do you think it's AI mean?
Obviously yourself and others are working towards
alternatives, but is it a matterof scale?
Like the market for these machines is still too, too small
(40:31):
for it to be able to to to sell commodity basics into the
market? Or is there something else at
play that you think is sort of the inflection point for this?
Yeah, very good question. The the market for mining
servers is still relatively small.
You know, it's, it's measured inthe it's a little hard to say,
(40:54):
but you know, maybe it's 2 1/2 or 3 million units annually is
the top side of the demand curvecompared to let's say 100
million in the PC market. Now the good news is that in
terms of the ASICS, though, a machine like depends on the
(41:15):
design, but the but a machine might use on the low end 1:00 to
5:00, but on the high end it could use several 100.
So in terms of the actual numberof ASICS that get consumed by
let's call it those 2 million units, it could be a couple 100
million actual ASICS. So it's still not that, that
(41:39):
big, but it's big enough, you know, to to at least be in the
game and and get get room. We, we've always, the
interesting thing about this market though is it's always,
it's almost always been supply limited.
So in periods in the bull marketwhere demand gets really high
(42:08):
and we may be on the cusp of that again, we'll see.
But we've never been able to fulfill all the demand that was
there. And, and that's caused some of
this insanity in the price of the mining equipment.
That's the thing I was talking about before where the, the, the
hash price and we saw in the last cycle if you were buying an
(42:29):
S 19110 thousand $12,000, but this is that cost plus thing I
was talking about that machine should have cost.
I mean, let's say a fair price 1800 to $2000.
And I have this article I wrote.It's a couple years ago.
(42:49):
It's called Miner's trilemma. And one of the things that I say
in the miner's trilemma that my,my theory on the miner's
trilemma is this, that if you'rebringing up a mining company or
a mining site, three things haveto come together.
You have to have access to energy at a, at a, in a
(43:11):
consistent source of energy at agreat price.
You have to have access to the mining equipment and you have to
have capital. And the miner's Trilemma says
that at any point in time, one of those 3 will always be hard.
So you're always going to fight headwind on one of them.
So we're in the middle of a bearmarket, like the bear market
(43:31):
that we had in let's say end of 2022 and most of 2023, we, the,
the equipment was not expensive,the energy was available.
Nobody wanted to capitalize the market now.
And then if you back up to the previous cycle before that,
right after the China mining ban, what we had was we had lots
(43:54):
of money. Energy was so, so in difficulty
and the equipment was insanely expensive.
And you know, we're, I think we're going to shift toward that
direction again. We'll see how severe.
But like one of the things I talked to my team about and my
advice to anybody out there is be very careful if you're in
(44:14):
mining because the point that the money gets too easy to get
is probably the point at which you have to not take it and not
invest in mining. We're not there now because
you're going to overpay for either the energy or the servers
at that point. If the money's too easy then and
anybody can get it, then it'll drive the price of that other
(44:37):
stuff too high. I'm curious this, I was reading
about the the trilemma just before and I find it quite
interesting because what happensif we move on from that model?
As you say, maybe there's a maturation of the ASIC market,
there's a diversification of system manufacturers and they
just become commodities. Does that move us into a
(44:58):
different area where energy is just this main challenge and
everyone's trying to find cheap energy and it maybe changes the
nature of that trilemma? Do you foresee that maybe taking
place in the coming? Years, it's possible, it's
possible we could be sitting here 5 or 10 years from now and
and and the trilemma representeda a moment in the history of
(45:20):
Bitcoin and and is not the long term.
On the other hand, the part I just said, which is really the
most important part, the moment that the money is too easy is
probably the signal to stop and wait for the money to get hard
again. I know it sounds funny, right?
(45:41):
Because like for me as I'm, we have projects all over the place
and I spent a lot of time in thelast couple years talking to
investors and talking to people about being part of this and
it's a hard sell. Well, if it gets too easy, I
(46:01):
could easily to, to get the money, I could fall into the
trap of taking too much money ata time when global hash rate
will RIP to the point that I will have a hard time giving
people an appropriate ROI on that money.
So that's, I think that's, I don't know if that's going to
(46:23):
happen or not. We'll, we'll see.
But as your Bitcoiner, as you know, you know, global hash rate
has really continued to RIP. And I have a theory as to why.
And I think it's actually a, a bad thing that I think, you
know, we've actually, well, I can, I'll give you the short
version of it. It's because of the public
(46:45):
mining companies and they've actually had, even though
they've had really shitty operating performance, that's
the truth of the matter. They've they've done very
poorly. The market has continued to
reward them with capitalization and continue to let them take
debt. And so they've continued to
(47:06):
expand operations that really aren't making money.
And that's led to the hash rate growing and they kind of get
rewarded for it because the market instead of rewarding
operating performance has rewarded growth and and that's a
dangerous thing. Do you think that's symptomatic
(47:27):
though, because that's quite common in the entire stock
market. I mean, that's it doesn't really
matter what your business is doing as long as you're growing
and, you know, see this with a lot of tech companies.
Is this like a lot a symptom of something larger or?
Yeah. Well, I think you're exactly
right. But here's what the problem,
what the market doesn't understand is that no matter
(47:50):
what we do, Bitcoin will produce53,000 blocks per year.
It's not like that additional capital turns into more
customers like like, or actually, I'm going to do a, a,
either a, this is my show old man yells, or I'm either going
to do an episode of that or an article.
So you know how, how we have this adoption curve, you know,
the, the, the early adopters, the, you know, the late
(48:13):
adopters, etcetera, that whole curve.
Well, if you think about that, if you think about that with the
personal computer, the cell phone, like those sort of
things, what you have is as you go further into the curve, you
have a market that gets bigger and bigger and bigger, right?
Well, in Bitcoin, it doesn't work that way.
We have a fixed release of the subsidy.
(48:35):
We have a fixed number of blocksper year.
And at least as it pertains to mining, as the market matures,
it changes nothing about the output of the industry.
Every other industry, as it, as it matures and gets further into
that curve, you have this reallybig market that emerges.
But Bitcoin doesn't really have that.
(48:59):
So it's just more people fighting for the same pie,
right? Yeah, and it's interesting as
well because just yesterday, theother day, we had the the men
pool, you know, clear, clear. And, and it's like, well, yeah,
now there's questions there as well around sort of what that, I
mean, that comes and goes, but it, it doesn't, it just sort of
came out of nowhere it seems. And now we're back to having,
(49:22):
you know, we've got 2020 blocks or something ready to go.
But it's it's very interesting because as you said, it doesn't
really map onto existing paradigms for businesses.
Yeah, and that's we have so muchto learn, right.
We've never we've never experienced absolute scarcity
before. We've never had like a network
(49:44):
because you, you may know, I speak a lot about block space,
block space care, scarcity, geopolitical ramifications and
some of that stuff. And that's why even though the
mem pool has cleared, to me, it changes nothing about how I feel
about the long term, where I think, you know, block space
will become one of the most precious commodities in the
(50:06):
world and that we may literally see wars be fought over control
of block space because it it beyond the economic reward of
producing block space comes control, comes power and.
Yeah. Well, I mean I've heard you'd
speak about this with others and, and it's very fascinating
(50:28):
to me because then that that's avirtual thing in the sense of
the block space is scarce. But then you get into the
physical of the the fabs and thefoundries and these kind of key
locations at a couple of very specific pinpoints on Earth and
sort of that mapping of, yeah, you know, war's been fought over
the virtual block space. And then the physical access to
(50:49):
ASIC manufacturing is very interesting.
Yes, yes, yeah, it is. And you know, I don't, I don't
want to go down the, the, the that rabbit hole too deep.
But, and I have, I have spoken afair amount of it, But I would
say this, you know, if you're, especially if you're a smaller
country, my advice to anybody that's a head of state of a
(51:11):
small to medium sized country isyou better get some hash rate
inside your borders and you better start controlling some
blocks because if you don't, your viability and economic
sovereignty are at stake. Yeah, that's fascinating.
(51:33):
I'm Bob. I'm, I'm very interested in the
opportunity for New Zealand in particular.
Got some friends who are mining,I'm doing a bit of mining myself
and you know, I'm not sure if you're aware we have a lot of
hydropower, you know, really, really interesting grid mix.
We're not connected to any othercountries.
It's an island. So there's some real
opportunities there as an exportindustry.
(51:54):
Instead of sending milk and and apples outside, we can actually
be sending hat, you know be selling Bitcoin and we it also
has ramifications for the currency.
You know, a lot of New Zealand'sBitcoin has brought with the US
dollars, basically, and it's probably, you know, for the,
yeah, you know, for people to purchase it.
So, yeah, as you said, very interesting geopolitical, yeah.
(52:17):
Yeah, I'll add one more thing tothat just to since you bring it
up. So I'm, I'm going off the top of
my head, but let's say New Zealand represents 1/2 of 1% of
global GDP. Forgive me if I'm, if I'm off,
but you know, given what you've just said, it's a
technologically advanced nation and it has all this energy
(52:38):
infrastructure. So if think about this in a
ratio, if my number was right, if it's half of 1/2 of 1% of
global GDP, if New Zealand goes out and gets 2% of the world's
hash power and takes control of the block template for that,
then they're going to have a really valuable.
(53:01):
It's not the Bitcoin that becomes the valuable commodity,
it's the control of the blocks. And they can go to other nations
who are under served like they they have underdeveloped it.
And they could charge a King's ransom for access to block
space. Yeah.
(53:23):
Now that's, that's fascinating. Bob, I just wanted to circle
back to something else. Given all your experience with
the personal computing world andyou know, been working in this
space for a long time, what has your experience been with sort
of the old school tech executives and sort of that
maybe that generation who were working in the 80s and 90s?
(53:43):
What has their response been to Bitcoin in your interactions
with them? Largely disappointing, frankly.
You know, I think a lot of them,I'll say this, OK, I think a lot
of them don't even know what they did with personal
computing. I talked about this recently.
(54:05):
If you think about what we did with a personal computer, what
we did was we decentralized computing power.
So prior to that, the world ran on minis and mainframes, right?
And so if you wanted computing power, it was a permission
system. You got access to run your
software only when somebody elsegave you permission to do so,
(54:31):
and your data was completely permissioned as well.
OK, So the personal computer wasthis massive empowerment and,
and from there, my opinion from there came the Internet and from
there which was the decentralization of information.
And from there we have Bitcoin, the decentralization of money,
(54:56):
right? So there I think there is a
direct linkage. This is the DNA of one fed the
other, which fed the other, right.
I think a lot of the personal computer guys don't realize that
that's what we did, and a lot ofthem did well financially and I
think have fallen into kind of the same ways of looking at the
(55:18):
world that a lot of others do, which is just they're
complacent. They don't see the problem.
So that's been disappointing. There are exceptions to that,
though. I think like Steve Wozniak from
Apple been a massive Bitcoin supporter.
He gets it. Michael Dell appears to get it.
(55:41):
I have a few of my old Gateway compatriots that get it that
have participated with me and been investors in some of my
projects. So I'm grateful for those
people. But you know, we're probably
talking about 5 or 10% of them that get it versus most that
don't. Yeah, that's interesting because
I, I just wondered, there seems to be, I mean that generation
(56:02):
certainly with a lot of success and, and, you know, perhaps well
capitalized that there could be real opportunity there, as you
say, Michael Dell and, and, and that it's, it would be exciting
to see maybe more people come out of the woodwork and kind of
be part of this movement becauseit still feels, I don't know
about you, it still feels sometimes like it's sort of
under, under the radar, especially if you start talking
(56:25):
to people outside of Bitcoin, you know, they don't even know
that this is even taking place, that mining is even a thing.
So it's kind of like in one sense we're early, but it's sort
of, yeah, sort of where to from here, I guess.
Yeah, I write a monthly article for Financial Advisor magazine
(56:47):
in the US. It's a Bitcoin newsletter and I
just, I wrote the January issue and my advice to the financial
advisor community was I think we, I think we are no longer
early and it's not quite too late.
Like we're, we're at kind of an interesting point.
(57:08):
I mean, I guess it never is too late, but the opportunity to,
for Bitcoin to be transformativefor people.
And this is, this is more from like a wealth creation
perspective. I think that that could start
going away. And, and part of that is I, I, I
(57:28):
was doing this research. Now you may know this, but glass
node produces a stat, it's called coin life.
So it's, how long has that UTXO existed?
And in early 2022, so 3 years ago, coin, the average coin life
of the entire UTXO set was 3.853point 8, five years.
(57:52):
It's now five years. So in the space of three years,
the average coin life has increased by a third to five
years. So and then you can see other
metrics like, you know, we've lost 1,000,000 coins on the
exchanges over the last year. So you see those sort of things
(58:15):
and you go, well, it's not that you're too late, but there may
be nothing to buy like because nobody's selling.
And as you know, we're, we're waiting for 1.2 million more to
come out. But there are, there are 120
years to come out. Like they're, they're, they're,
it wouldn't shock me if we sit here in the next decade.
(58:39):
We talked about the mem pool clearing.
What about the exchanges clearing?
Like what, what, what, what doesthat look like?
That's kind of the opposite of the mem pool clearing, right?
But but I could see that happening.
I could see there being nothing for sale.
That's fascinating. And I guess I mean, obviously a
lot of people listening to my show Bitcoiners and I think
(59:03):
we're seeing in rapid succession, I guess the no, I
wouldn't say the narrative, but new ways of thinking about
Bitcoin and Bitcoin mining in particular are emerging very
rapidly. You know, things like the bit X,
you know, I've got one in the corner there.
And you know, that's kind of a new idea.
And it's very interesting, you know, radically open source, you
(59:24):
know, to sort of get this into everyone's houses.
There's ways of thinking about these things.
And I wanted to ask you, Bob, what do you think is something
that is most, most misunderstoodabout Bitcoin mining amongst
Bitcoiners? I'm amazed at how many people
don't really understand things like block space in the mem
(59:49):
pool. Like that for instance.
There is no mem pool, there's noa mem pool.
Every node has its own mem pool.So and the and we've already hit
on it the finite nature of the block space.
These sort of things and also that the, this is, this is goes
(01:00:13):
back to the geopolitical implications that blocks are
created by the miner and the miner can pick whatever
transactions he wants to go intothe block.
That, you know, you could, you could offer a transaction to the
(01:00:36):
network. You I could send you a Bitcoin,
Cody and I could put in an enormous fee.
I could put in a half a Bitcoin fee.
And there's no guarantee that anybody ever picks it.
And so we live in a world where I think a lot of people
(01:00:57):
oversimplify the game theory andthe economics around this, and
they just think because the highest fee is being offered,
that I think some people just think, well, you move to the top
of the queue. There's one mem pool and you
move to the top of the queue andit goes, But if I'm a miner and
(01:01:21):
you're a miner, we're two different miners and we're doing
what's called our own block template creation.
We're not abdicating into the pools.
We can pick whatever we want based on whatever criteria we
want. So I can pick the transactions
of me and my friends. I could pick the oldest ones, I
could pick the ones that have anodd transaction ID or an even
(01:01:44):
transaction ID. I can, I can do whatever I want.
So this is a massive amount of power, which is why I'm saying
small countries need to be minors because I hate to say it,
it's something that kind of makes Bitcoiners cringe.
But the day will come when dozens of major countries will
(01:02:07):
have hash rate and a lot of hashrate and they're going to pick
and create blocks based on what serves them best.
They probably are not going to be very motivated by the block
reward. They're going to be motivated by
the power that comes from being able to pick the blocks.
So if this is what may be a bad example, if the US wants to get
(01:02:33):
foreign aid to Belize right now,they, you know, in today's
world, they don't even think about the transaction, but in
the future world, they'll control blocks and and they'll
put that transaction in and they'll make sure that it's
prioritized. They don't care how much the fee
is. Or maybe that there was a
different transaction that couldbe more.
(01:02:55):
No, they whatever reason they need to get money to Belize or
Ukraine or Israel or New Zealandor whatever.
So it's going to be a very different world and Bitcoiners I
think would do well. You mentioned having a bid ax.
You know, I really recommend people go get a small piece of
(01:03:19):
mining equipment and run it. Start out by connecting to a
pool, but later on, as you get more advanced, run a node, run
what's called a Datum server andstart doing it yourself.
That's the point at which you really are mining.
And you'll learn so much about the way Bitcoin really operates
(01:03:41):
if you do that. Yeah.
Yeah. No, I spent a bit of time
talking with Luke from Ocean when they visited Japan and it
was really incredible to understand because I think that
was just about the time they announced the Datum stuff.
And yes, it's really quite powerful because just again the
other day we saw Foundry get however seven or however many
(01:04:04):
blocks in a row. Yeah.
Which is kind of interesting. And one, just as you were
speaking, Bob, sort of somethingthat struck me was if we were to
map this onto the, the legacy world, it almost reminds me of
sort of the open oceans and the roles of navies to protect
shipping and something like the Suez Canal or the Panama Canal
and these kind of legacy things.You know, the, the Navy that
(01:04:28):
protected these shipping routes,you know, that was a cost and
but it was paid to main maintainthis kind of ability to transact
commerce. And so it's sort of, it's
interesting because like, what does that mean for, Yeah,
there's say the block rewards and the, and the transaction
fees. Like maybe it doesn't even
matter because people just want to make sure like, you know,
(01:04:49):
their blocks, their transactionsget processed.
And so similar to the Navy, theywill, you know, pay to make sure
that it's, you know, the nationswill pay to make sure it can be
done. Yeah, it is a very appropriate
analogy. And I would say it's a direct
analogy between the physical world and the digital world, and
(01:05:12):
that you're a blockade. For instance, if you don't have
your own Navy, a blockade can beput up and you're screwed,
right. Yeah.
So. Yeah, and we saw that, I mean
and literally block blockade, I mean you had saw it as the Suez
Canal in the 50s I think with Egypt and you've seen it with
all sorts of things historically.
(01:05:35):
That's an interesting, I mean that's very interesting
geopolitical game theory thing. Because I, one thing I sometimes
wonder is if we as Bitcoiners, we sometimes think a bit too
much sort of the hard engineering of it and, and kind
of in this, this world of, of kind of computers and, and kind
of Internet. But actually when the state does
get involved and it sees it as avaluable thing, I mean, it will
(01:05:56):
do what it has to. And money doesn't really mean
anything anymore. It's sort of, you know, they can
use force and they can requisition machines and all
sorts of things, so. Correct.
And it's not just the nation states too, it's the banks and
the financial institutions too that.
But I don't necessarily love everything.
I'm just telling people how I think it plays out.
(01:06:18):
I mean, I like it, but I think it's how it plays out and I
don't think it's anything we cando to stop it.
There's that phrase Bitcoin is for enemies too.
Well, I think most Bitcoiners would look at central banks and
and Wall Street firms and nationstates kind of as the enemy.
But if, if, if the world starts the hyper Bitcoin eyes, even to
(01:06:39):
a certain degree, it's not like we can exclude them.
If we do that, we are are guiltyof the very thing we're trying
to solve. So I think if you look at an
organization like Citigroup as an example, big, big bank or
we'll use Mitsui and you're in Japan and you know, I worked
(01:07:01):
with Mitsui before. It makes perfect sense for them
to be big miners because if, if,if they want to provide economic
flow for the companies and the customers that they serve, the
(01:07:22):
only way for them to do that is to control block space.
And so I, I expect them to be there.
A part of the reason I, I want to say one other thing too, part
of the reason I encourage peopleto have a bit X or, you know,
small to medium sized organizations like mine.
We can still have at least some percentage of the blocks of the
(01:07:42):
world that fit and adhere to thespirit that kind of exists today
that I think a lot of Bitcoinersare attracted to.
But it might only be 20% of the blocks.
It might be 30% of the blocks. And again, that block space is
going to become extremely precious.
(01:08:04):
Yeah, yeah, it's interesting. I mean, again, the analogy with
the the oceans as you've got these sort of pirate self
sovereign people doing their ownthing and then you've got nation
state navies, you've got merchants, you've got all sorts
of people. And again, our friends over at
ocean may be good analogy. Everything's in the open ocean.
So yeah, it's, I mean, interesting.
I'm very interested in the history of of this kind of
(01:08:26):
stuff. You know, you look at the
theories on warfare and kind of how these things play out.
And I, I certainly think there'sthings we can learn from the
past. And as you say, blockades, you
know, what would that mean? Empty blocks.
No one gets their transactions and could be disastrous.
Sure. But Bob, I do appreciate your
(01:08:49):
time and sharing what you're working on.
It's fascinating to learn about this stuff. 2025, though, what's
what's on your radar? Have you got anything you're
looking forward to that you wantto share?
Well, I've got a lot on my platethis year from the direct mining
perspective. We'll be bringing up several new
sites. I'm really working especially on
off grid stuff where we, we actually just brought up one
(01:09:12):
using anaerobic digestion a few weeks ago, so connected to a
dairy farm where we've got a couple MW operation, you know,
using the methane from a dairy farm.
We've got several stranded gas projects that we're bringing up.
I think that'll be probably our main emphasis this year is all
(01:09:35):
the stranded gas stuff, working on a block space forwards
project where people would be able to buy block space in the
future. So if you knew you needed access
in let's say the first week of June, that you could come to a
minor and pre buy kind of like you're going on vacation.
(01:09:56):
You don't book your hotel room when you arrive at your
destination. You book it weeks ahead of time
to make sure that you get a spotand you are comfortable with the
price. So I think block space will
follow that same paradigm. So those are a couple other
things that I'm working on for 2025.
(01:10:18):
Yeah, or at some point in the future, I'd love to hear more
about the the Block Space Forwards project.
Maybe when? Sure, you have to come back and.
Yeah, more progress because thatbecause that sounds really
interesting because I think there we've seen, I know Luxor
and a few others have started doing other things with forwards
contracts and some of these financial instruments, but
(01:10:41):
having it more broadly in Bitcoin, these kind of ideas
could be really interesting. Well, you, you're right.
The the development of derivatives market is very
important and I applaud anybody that's made an attempt here.
The the problem with the derivatives to date is there's
not a natural market for them. Meaning when I say natural
(01:11:02):
market, what I mean is there's aproducer of a good and a
consumer of a good. So if you have something like a,
a block, a hash price derivative, what you have is you
have really just the, the, the miners who are trying to
essentially buy insurance and you have speculators and
(01:11:23):
traders. But when you have a block space
forward, it actually results in a full deliverable.
In other words, when somebody buys a spot in the first week of
June, as an example, they buy 1010 thousand weight units of a
(01:11:43):
block in the first week of June that must be delivered.
So it's the same as like with corn or apples or something like
that, right? If you, if you're selling a
forward, the producer eventuallymust deliver the forward and the
buyer must actually take delivery.
So I think that that's part of the reason why I'm so excited
(01:12:05):
about that project is that it's the first time in this space
that a true natural market emerges.
Yeah, and I can see a lot of implications for things like
lightning channels and these kinds of things as well.
Oh, absolutely, yeah. That'd be exciting, but that
might be an episode for another day, Bob.
But if people want to follow youand they want to learn more
(01:12:27):
about what you're doing, or theywant to hear you talk more about
Bitcoin mining, where can they go, Bob?
I'm predictive on Twitter, Boomer, under score, BTC.
I have a little show I do calledOld Man Yells.
You can find that on all the podcast platforms and YouTube.
And if you wanna learn about what we do at Barefoot Mining,
(01:12:47):
Barefoot mining.com. Cool.
Thank you very much. Thank you for listening.
I am Cody Allingham, and that was the transformation of value.
If you would like to support this show, please consider
making a donation either throughmy website or by directly
tipping to the show's Bitcoin wallet, or just pass this
episode on to a friend who you think may enjoy it.
(01:13:08):
And you can always e-mail me at hello@thetransformationofvalue.com.
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