The Last Trade E044: Bitcoin Mining’s Next Epoch with Bob Burnett

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I'm a little I Rd. dogged it hard yesterday to and from Houston up at 5:00 AM, in the car by 5:45, Houston by 9, back in Austin by 7:15 at night. That one will take it out of you. We did me and Cam did that a few months ago and you go there in the morning and you get back. It's nice to be home, but it's also, it's just rough just being in a car for like 6 hours in the day and then meetings in between it. Was rough when it was energizing the empower. Yeah. Conference is good. I like these guys. Do you feel? Empowered. Yeah. I feel energized. It was good. I got to see Steve Barber. Whenever you get to see Steve Barber, it's a good day. Oh yeah, that's one of my favourites. You know what I always liked though? I miss it. When I was younger I I lived in Chicago and I had an hour and a half commute every each way, every day. I did that for seven years. It's a horrible way to live, by the way, Horrible way to live. But what I will say is it it really gave me a lot of time to think you know And so I I I always found the drive time to like to be good for mental clarity and and I don't do it very much anymore although I I live in Naples FL now and and much like between Houston and Austin you know it's it's roughly a similar distance from where I live to Miami and I have to go to Miami a lot for you know Bitcoin related stuff. And that that drive, there's a place called Alligator Alley in Florida, it connects the southern, you know the southern part, there's nothing there, right. So, so I always just kind of zone out and I have a lot of lot of mental clarity comes to me through Alligator Alley. And there a sound, Jesse. It's between Houston and Austin when you get to the ranch, the the stretch of Rd. that's just a bunch of ranches, hundreds of cattle, wildflowers blooming. It's a beautiful ride home. Yeah, and the Alligator Alley. They've got the alligator farms and and fan boat tours and stuff like that, huh? Oh, yeah, yeah, yeah, yeah, yeah. Those I don't have. I have them right in my backyard, though. I have my. House you're not in Alligator. Yeah, well, I I'm still fascinated by them. When you when you get up close to an alligator, I mean there's something just kind of mesmerizing about it, 'cause they are just, you know, we have a couple. So I live, it's in a golf course community, but I have a lake right behind the house and we have several alligators living in there. One's about an 11 footer and whenever that bad boy comes out and he's kind of just takes command, he just lays on the bank and it's it's just awesome like the the the power of those things and. It's drastic. It reminds me of when I used when I used to live in Charleston, SC. We used to have Gators all throughout our development and we were bad kids. We used to go fishing. If we got bored fishing, we'd pull out the slingshot and shoot rocks at the Gators. It was bad. Just to irritate them up, yeah. You got to be glad that was a one way interaction there Marty. Well, you learn. You learn quick. You run in zig zags, Yeah, yeah. If the Gators come at you, they can't turn, so you gotta you just you get horizontal. It's the it's very Darwinian too, like, so you know, only only the quick and smart survive. That's a great segue into the topic of this conversation, which is mining only Only the quick and smart survive. You know what? That that is great. That is a great segue. Yeah, that is a great segue I think. Yeah, building on where I came from yesterday, the Empower conference thrown by digital outcatters who are doing really cool things in the energy sector and they're attuned to what's going on in Bitcoin mining. So they throw this conference annually. I think this was the 3rd annual Empower conference trying to get the energy sector and the Bitcoin mining sector together to cross pollinate some ideas and give updates on where everybody is. And I think I was only there for one day out of the two day conference yesterday. And I think that was one of the the larger themes is that we're heading into a new paradigm for the mining industry, particularly the publicly traded miners where historically they've been able to raise money by ASICS announced PRS that they have more ASICS that are going to grow their hash rate and their stock price has appreciated from that. It seems that now that the market has other options and the equity in the equities markets to get proxy Bitcoin exposure that that strategy is probably not going to be as successful as it has been in the past. Especially when you consider how competitive the market's gotten. That we have another halving on the way. And that equity analysts are becoming more Privy to the actual economics of of mining operations and the fact that just raising money, buying ASIC futures orders and announcing that may not be the best strategy from from a profitability standpoint. So with that in mind, Bob, what are your thoughts on, on where we are now in the mining sector, particularly for the publicly traded miners? Yeah. Well, to your point Marty, I think all you have to do is look back at the last handful of years and you look at the big, the financial performance of the bigger companies, you know Riot, Marathon, Clean Spark, that class of minor. And what you'll just see is all these companies bleeding red year after year, but they even in the best time. So if you look at like 2021 which should have been just an absolute bonanza, you still see red in terms of operating profit. And you know, as you said, I think it was it was a game of leveraging access to cat capital for them and then getting this insane market reaction to any news that they put out because they were acting somewhat as a a proxy for Bitcoin for those who who maybe couldn't get in in other ways. And the EF TS changed that. So I think this focus to like hey businesses are are are meant to make money whether you measure that in Fiat or you measure that in Bitcoin, they they have to do something positive and they haven't been doing something positive. And I think part of that is we were, we were kind of joking, we're talking about being fast and smart. Well, I remember going back in that time period because my, my company Barefoot Mining, we've been doing this since 2017 and I remember having that that philosophical discussion with myself and some members of my team and some of my close friends like you know should we consider going public. And for those of you who don't know my background, I was at Gateway, the personal computer company. I was the Chief Technology Officer there and I helped take Gateway public. You know we became a Fortune 200 company. And so I know what it's like to sit in the C-Suite of a of a big public company and I just personally didn't want to do that anymore. It's a terrible place to be and it incites or incense behaviors that I don't think you can get away from that force you into this high time preference mode of operation that goes completely against the ethos of Bitcoin, right? You know, so, and you might say it might be easy for an individual to say that no, they're real bitcoiners, they're Bitcoin, Maxi, whatever. But the truth of the matter is they signed in blood to adhere to a different ethos, which is they have to serve their shareholders and they get very beholden to 90 daytime cycles and what analysts think and not what's. And that was really best for for the long term of their company or the long term of Bitcoin. And I kind of operate from the ethos like, hey, I'll I'll do what's best for Bitcoin in the long run in the belief that it ultimately comes back to me. So you know, we talk about a lot, a lot about economic incentives in Bitcoin and how it has those, but I think the the time horizon is also part of it. So you know I do what I think is best for the long run and I'm willing to forgo the short run for the long run. And that's true for me and it's true for the company. But this thing about being fast and smart, I I think the the big miners also have a problem. And and the problem is that if if we were going to go put up a new site and say we had our, we had our choice of doing 1100 MW site, are we going to try to do let's say 52 MW sites? Most people would say, well let's just go about build the 100 MW site, the one site more efficient, you know, blah blah blah. But doing so means you're probably looking at maybe a 12 to 18 month horizon to get something like that done between, you know, finding the energy, raising the capital, all the all the approvals, acquiring all the the Transformers and the servers and all that other stuff that that's a lot to put together. And so you raise all this money and then the return on the money doesn't come for a long time and the Bitcoin world can change dramatically over that time period. So what I'm about for, for barefoot is we decided that doing small things quickly is a much better approach than trying to do big things slowly. And so, you know, we're we're all about like, hey, if we find an advantageous energy situation and it's 300 kilowatts, bam, we'll go do it. You know, 'cause we probably can do it in a matter of weeks. If it's a MW or two megawatts like that's our sweet spot like do do do small things quickly where we can get money into play. We can start generating Bitcoin quickly for the investors. We start creating returns quickly and by the way we are forced to be cash flow positive and profitable almost from the beginning. By definition, because we don't have the, we don't have the big bags from an IPO or or or a new stock issuance or something like that. That's really. Just to jump in, like Bob and I were catching up early in the week and he was telling me the story and I was like, hey, I think we knew it. We had the luxury by not being close to mining but being close to you and the gigas of the world and understanding this natural order of congruence with with everything is you have to generate cash flow, you have to have a natural order of growth from a first principles perspective. And Bob, you made the point of it's from a long term Bitcoin like altruistic. And I think a lot of people align with that in the sense of if you do good in the space, it comes back to you. But then it's also from like a first principles to get to that other side, you have to be thinking in the short order of like how do you do good for for yourself as well. And Bitcoin in the sense of you have to produce value at a lower cost in the markets returning it to you so you can stay around. And so then I think there's something to, and I'm glad you talked about the gateway background and seeing that because that alludes or signifies you. You know it was looking at your LinkedIn, I think 1991 to 2004 like there's a lot of learnings from the, the the older markets and traditional tech and the growth that was seen there that I think you're bringing to what you're explaining because what you're describing doesn't get told to the general pop populace of the market from a larger perspective. And just like that, they're not naturally organic fundamental driven businesses on the large scale miners. And so I think there's a lot of your background that you're bringing to this that is important to discuss. And also just like from people building, whether it's minors or just like anything financial services custody, it's like this notion of you got to kind of produce value at a lower cost in the market. We'll give you because of that, that cost of capital changes, we've seen it change. If you're caught offsides, that liquidity dries up and now you're looking at effectively unit economics that don't make sense. And this is like the tail of the past 20 years when you look at we work all the way down. Yep. Yeah. And I think the small scale, quick deployment approach, I think it's becoming very apparent in the Bitcoin mining world that not maybe it's not very apparent. It's apparent to me at least that this is advantageous because when you think about it, when you deploy the capital, whether that's the get a six or get infrastructure, that's when the clock starts ticking on the opportunity costs 'cause you could deploy that capital into Bitcoin directly. And when that talk, that clock's ticking at the price is going up. If difficulties going up, if hash rate's going up, you are missing out on the the opportunity cost is increasing throughout that time. So the the name of the game is to shorten the amount of time between that capital being deployed and those ASICS being up and hashing. Absolutely, absolutely 'cause you guys all well know, but you know comparing what I can mine today versus what I can mine six months from now, almost by definition today is more valuable than the day six months from now, right. So like we use typically a four year cycle in our models as we're looking at it, but we also. So in other words if we're if we're doing a new site and we basically always believe in investing in new technology. So you know like over the last six months or so everything we bought has been an S19K Pro, I'll use the bit main models, but an S19K Pro or better like up to S 21200, it's like you know everything's been in that range. We don't, we don't you know and we're expecting three to five years of operation out of those machines and then you know with the expectation of about four. But the best day is the first day we turn it on typically, right. So that's the most profitable day and certainly dealing with the having that's been a big rush to get in front of in front of the having you know the the other thing about small too that I that I didn't mention is I think a lot of people probably perceive that only only people doing big things can get the great deals on energy you're talking about empower and you know all that and obviously the energy the relationship between the energy sector and and the Bitcoin miners is very important. But there are a lot of small opportunities out there that I understand that Riot or Marathon probably wouldn't even think about. But like I'll give you an example. I've talked about this one publicly before is our home base is in South Dakota. We know that area really well. About a year and a half ago, we were aware of a company leaving a building in an industrial park and it was a, it was a building that had a lot of refrigeration in it. So a new company moved in and then the new company ironically was a burrito company. So they were making burritos, the ones that you get like in 7-11 like that you throw in the microwave, right. They they the guys that make those. So we we suspected that they were going to use less power than the previous tenant. And so we went and talked to the landlord and it was true talked to the landlord and the burrito guys and they had about two 2.2 megawatts of excess power there. So he said, hey, how how about we drop a couple containers on the backside of your building? You won't even know they're there. And you know this is by the way energy in the, we'll just say 4 cent range, right? So decent, decent price per kWh and you know we were able to to work that deal. We've been mining there for a a year and a half and nobody knows we're there. We're we're adding value kind of to the industrial park and that that local area and it's it's probably something that most all the big mining companies would just ignore that sort of thing, right. But for us that's almost the ideal thing. We go in, we deploy quick, quickly, no one really even knows we're there. I don't know if you've ever heard me talk about what I call horse class sites, but that's what I I call those are kind of these small to medium sized commercial sites, horse class sites, because they're they're they're still big and powerful but we're still mobile. Like if there's ever a problem, we can get it up and go without without too much trouble. Versus an elephant site, which is what I would call a you know, a A50, a hundred. Several 100 MW site, you know they're big and powerful but they take forever to to grow and they're they're also easy to hunt. And you know I I think that when you look at like the the Biden tax proposal which which came back if if I assume you guys are aware of that in the 2025 budget they're trying to put that that 30% tax in. You know you're very exposed to you know community activism eco eco activism and terrorism. There's a lot of different vectors I think, upon which those, those bigger sites are going to have to fend and protect themselves that the smaller guys won't have to worry about. Yeah. The energy arbitrage opportunity that is out there, if you're willing to do it, because I think that's the problem that the elephant sites don't want to solve, is it's really a logistics problem because that's what my personal miners are in a hash Hut on a stranded natural gas well that's producing like 21 MCFD, it's a 600 kilowatt hash Hut or 300 kilowatt hash Hut. It's even smaller and it just sits in the middle of Appalachia mining Bitcoin using generator, using a generator that's converting the natural gas to electricity. And we simply like that is one example of an opportunity where there's hundreds of thousands of stranded natural gas wells out there and there's people that have liabilities on these wells where they need to maintain them. And if they don't maintain them, they get dinged by the EPA. So we're able to come in and say, hey, we'll maintain our well for you if you just let us use the gas for free. Maybe we'll pay your land lease for the year which is very cheap and and is very low cost energy and allows us to mine and a small scale in a remote area. But if you were trying to scale that operation up, it's just a logistics problem. How can you if you're doing many of those types of operations? It just comes down to how can you maintain all the generators and work the geographic distribution of your of your operations. Yeah, that that's that's the downside I should say the downside, but that's the that's the trade off. The trade off, yeah that's the probably the right way to do it. And by the way we're we're looking you know right now I've got a deal I think we're very close to initiating in Pennsylvania about an hour and a half out of Pittsburgh doing the same thing. It's about 600 kilowatt project. We'll throw a couple upstream hash huts with the, with the, with the, with the generators and you know off we'll go and you know we're looking at something a little bigger in Alberta right now too that's a couple megawatts. And as I said there, there are thousands and thousands and thousands and I think to a certain degree it's a lot easier like for instance Ryan was was a a public thing this week. They they were. They were I don't forgot the name of the county but you know they were trying to do a bigger project and got rejected by the the county commissioners and they had had a lot of pushback from the local community and I don't know where they'll go from there. Maybe they can overcome it. I certainly I'm not wishing I'll on anybody but those are those are hard problems right. You know when you keep trying to build these elephants and and now the miners you know for for the last couple years I think we were pretty much the only game in town out searching for big energy. Well now like we're we're running into it like even in South Dakota right now we're talking to this is on our on grid side we're talking to the energy company that we work with a lot mid American energy and you know they're seeing massive massive requests from the AI community for for you know double digit to several 100 MW requests but they don't have by the way they they're they don't have that laying around but now the now the Bitcoin community is going to have to fight the AI folks and also probably all the EV charging stations and all that there's going to be a lot of competition for this energy. So I think only the we would go back to that. You know, if you're if you're fast and you're smart then, and you're willing to do these small ones, then then I think you'll still find plenty of places to be successful, but it's going to be harder and harder to chase the big ones. It's it's interesting to me that, well, first of all, Marty, I love that somehow the way you framed what you were talking, you know, your Hut and Appalachia just sort of reminded me that like, we've done this before. This is, this is like moonshiners with copper stills in wherever they're wherever. It makes sense to have a small time operation. Like there's a model for this that has worked in the past. Granted it was for different reasons, but it's kind of funny to think about and and Bob as you're talking about like the you know the advantages of small scale versus just going like the monolithic route. I was thinking, I was trying to think about like what are the the IT seems to me that that mining will ultimately is ultimately A barbell sort of outcome where you have just pure economies of scale on on the large scale side, the monolithic riots of the world. But then there's also advantages or or reasons why someone might do very small scale mining and small to medium scale mining. Whether that's somebody who's set up like a, you know a couple miners in their in their garage either for ideological purposes because they want to contribute or because they're going to heat their home with it. And and so the heating applications in particular I think are very exciting on on that other end of the the barbell, the smaller scale because you can when you're adding the the economics of you know getting two birds for one stone of being able to heat something like you know growing flowers in a in a greenhouse or something like that while also mining Bitcoin in in getting that use out of the same energy. That makes it possible for the economics to make sense on the small side when in any other industry like larger wins out because of economies of scale and there's no sort of two birds, one stone phenomenon that's possible. I guess first of all, do you see that as as one of the advantages for smaller scale mining? Do you guys think about or or will you start thinking about how to you know get a heating applications out of your installations as well or maybe it just doesn't make sense? And then are there any other advantages that you see to small scale mining that make it so that you know the barbell will happen? 1st, in terms of the multi use, yeah, I think that'll be very, very important and very, very common. I think in this next cycle it will become a lot more common certainly. But I think by the end of this one and we start looking at the next having right that that that those the market will drive some of those efficiencies. We've done a little of it already. For instance we have we worked with a a greenhouse in Northern Florida, a commercial grower and what we did is we we worked with him because he has he's just far enough N where he needs on occasion either heat or dry air and and So what we did is we worked with him. We've got some what we talked about Steve, I don't think maybe that was before I started, but Steve Barber, you know we had a, we've got some of his black boxes scattered around the outside of this guy's greenhouse and then he has the choice of you know either venting them into the atmosphere or venting them into the greenhouse depending on his condition. And so he's mining all the time. He's got a little little bit of solar and a little bit of on grid and kind of mixes those together to create the energy and then we vent in. So you know the economics of running there even though in that case the on grid parts a little bit more expensive than you'd normally see. He doesn't view it that way, right. He's, he's growing flowers. I think he's the biggest provider of poinsettias like French with Easter coming up, biggest provider of poinsettias to like Target and Publix and things like that. And so if you see one of those in a Target, there's probably a little bit of Bitcoin in that poinsettia, right, because because of that a little. Bit of Bitcoin error. Yeah, yeah, help make that poinsettia happen. And I I think those are, that's a cool little story, right? But you know we're you know we've talked to people and and we'll see if these come together. The guy that we're we're potentially working on the stranded gas up in Alberta with is also a grower he he grows a lot of the Peppers and tomatoes and things like that for a lot of the grocery stores in in Canada. But you know there are people like car washes in northern climates the the using mining to warm the the water you know inside the car washes before you know at at the start of the car wash cement water. I I don't know a lot about cement but you know I've talked to some people said yeah we need, we need warm water as part of the cement mixing process. So these sort of things are like coming to the forefront and like things I haven't been involved with in the past, but are pretty cool, right? I think I think the topic of a lot of this for individuals, and I'd personally never been too like fascinating because it's such a whole rabbit hole in itself as the mining is just a decentralized component of it, right? I think like this Nate, this similar Riot reminds me of almost like a Coinbase in the world. It's like a huge target for a lot of reasons and that are also not naturally organic whether it's Coinbase because of SVB and the banking situation or however they got to their size that eventually they'll start to look at themselves and like man, I don't really like being this big for a number of reasons similar to Bob what you just described whether it's via the target on the back from the tax perspective, government perspective, drone attacks, whatever it is, it's just a a not natural organic way. I think long term we'll look back similar to custody and and minors that are this size and scale and probably wouldn't, won't make sense. And just purely from a Bitcoin perspective and the decentralized component of hash rate being further out onto the edges is healthier for the industry. And like kind of on that thread, Bob, what's fascinating, I'm curious that I have no idea is like your background seeing the tech boom and growing gateway. Do you see any similarities or things that have either helped you, like as you navigate this whole field, like not just mining, but just Bitcoin in general and the maturation of the industry? So I'm just always fascinated with how, like, I think what happened in the 90s is there's similar corollaries to what we're seeing here and we can learn from them and kind of not either make the same mistakes or actually like, you know, expand on what the first versions of things were built in the early 90s. And I think there's just like a lot to learn from. There's a book called EE Boys that talks a lot about the very first iterations of technology companies that you can kind of see if you squint like similar concepts that have happened here in Bitcoin. I'm curious if you thought about it in that way. Yeah, absolutely. The first thing that comes to mind is the cyclic nature and how companies respond to the cycles. So little little history. So in the PC market, if you go back to let's say the the the early 90s, we could kind of as an industry see that this thing was about to skyrocket. You know the, the exponential part of the curve was starting to lift. You could just feel it, right. So what happened though was it ended up being the point where a whole bunch of PC companies got wrecked. Why did they get wrecked? Well, they got wrecked because let's just say as an example, I don't, I don't have the exact number, but it's something like this previous year, let's say it was 199470 million PCs were sold globally and the next year we're expecting 90 million. And now if you look at the, the a lot of the major companies in the world, they all saw that we we all had a good feel that this was going to happen. But almost every company perceived that not only would the industry grow, but that their market share would also grow. So they start sending signals into the supply base that they're going to, they're they're they're ordering memory and hard drives and CPUs and these things like that which have fairly long lead times not unlike you know buying a new bit my machine or something like that in scale, right, that hey, I was, I was 8% of 70 million but now I'm going to be 10% of 90, right. But this is happening almost at every single company, every company deciding they're going to grow 1234 percent market share on a on 20% growth. Well, what ends up happening is the the supply base sees signals actually more for like 100 million and of course maybe we get to the the 90 million but but we don't get to 100. And so this massive saturation of supply came in and a lot of companies even in this bull run got wrecked because they were stuck with this massively overvalued industry. It's very similar if you think about, you know, what happened to our world. Well, in our world the especially the public, public miners especially filled with all of this cash from the the public markets went and way overbought the supply and they got wrecked at core, core actually literally going bankrupt and a few others going bankrupt, you know, through the same thing. So it's funny, but I've had this talk with my my team. One of the things I've said is we have to be very careful once the bull run really starts, once investors start contacting us and try start trying to throw money at us, that might be the point when we have to pull back a little bit. We have to really watch the price of the mining equipment and make sure that we don't get caught up in it and start chasing high prices. We may have to, In other words, we may have to pause and just write out what we have at the point that the market seems the best counterintuitive. But it's another reason it's hard, I think, for the public guys because they're getting shareholder pressure and analyst pressure if they're not expanding in the middle of the bull run, which is actually probably the worst time to be really expanding. It's so profound. It's because it's a tail all the time. Liquidity drowns companies and I think about it like which you just mentioned in a similar vein is almost like Lightning companies and that there's something there. But then when the market takes off, if you take on too much money or you deploy too much in the Lightning, it's like is the infrastructure or is it really ready for adoption. So you take that money, you hire the people and then you look around, you're like, wait, I don't know if the market was ready to start using this yet. How do we figure it out versus like the slow and steady and staying around owning more of your company? And that's just one example. I think you know, AI is another application, but like these cycles continue. Like railroads was a good example of it, right? They've laid a bunch of tracks, didn't know what they were going to use. And then the infrastructure gets picked up by the second and third people through the door that it's already been laid and now you can see all the best practices. And really fascinating. That's exactly what happened last cycle. I mean he I mean in the peak of 2021 bull madness I think a six were selling for $140.00 a terahash. At their peak they fell all the way to $12.00 a terahash over the course of the preceding 2 years. And the other like Bob the other comment like these publicly traded miners are pressured to expand at the top of the bull market. If they're not doing that, the analyst sting them and then on top of that when it would be advantageous for them to lock in some profits on the Bitcoin treasury, maybe sell some to to bolster their cash balances, They can't do that either and like Core is a perfect example, They had I think 30,000 Bitcoin and they were forced to liquidate half of it at 25,000 or 21,000 instead of tipping off half of that at 6065 and. It's fascinating. 'Cause it's in the. Bob, the pain and that we're saying they're completely like controversial or not said. And they're so rooted in pragmatism and prudence that it's that's how far we've gotten away from, like, fundamentals. Yeah, I think some people don't want to hear it. I think, you know and you know one of the things I say is like, hey, you know, one of the beauties of Bitcoin is it's free, right? And it's, it's a freedom based thing. So if you want to own stock in a public miner, then own stock in a public miner, that's that's not for me to say, but I will say this, you know, ask your, if you're a bitcoiner, ask yourself whether or not they are a net positive or negative for the ecosystem as a whole. You make your own decision. I have, I have my opinion, you make your decision. But Core, like Core is a great example and I've done a little bit on this. But you know the highlights of Core are they went public in January of 2022, they raised $200 million, 11 and and as they went public they were, they were essentially the biggest miner in the world. Eleven months later they were bankrupt with a billion, almost a billion and 1/2 in debt. So you know that that's probably the like the gross, I mean that exemplifies probably just the the gross mismanagement and and gross I I don't even know what to call it like it, it's just so catastrophic. But it it also tells us that you were asking Mike about the like lessons. Well, in the early 90s there were probably 150 legitimate personal computer companies. As we as we left and went into the next decade, there were only like 6 that mattered, like the and and they weren't even, some of them weren't even the ones that started like. So again, I don't wish it all on anybody. I don't want to come off that way, but don't be shocked if Riot or Marathon or Clean Spark or, you know, pick your big one. Some of those or many of them don't exist a couple years from now. Don't be shocked because that's true in like almost any market like this. That's technology driven that requires very a lot of nimbleness. It requires, you know, continual improvement, like those sort of things. Those industries turn over quickly and they become, it's very Darwinian. I'd be interested to get your perspective on this because it seems that it's becoming abundantly clear as time goes on and the competition within the mining industry becomes even more fierce, margins become more compressed, that vertical integration and optionality in terms of revenue stream becomes way more important for larger scale miners. And that's been the big question that's been thrown out there for many years. I remember we were talking about this at Great American Mining is what happens first. Do do miners become energy companies or do energy companies become miners? Because the end state of this is getting the mining operation to the lowest cost possible, and the only way to do that is to actually own and vertically integrate from the molecule to the hashes that you're sending to the pool. Yeah, I I, I agree with that make a comment on it and then I'll say one thing that I want to throw one caveat though to what you've said. And so I I what what I built for our company which I mean we're not massive. I mean we're we're, I guess we're we're big enough to not be small, but you know not big enough to be big right. We're kind of that way but but this vertical integration thing I think is is critical. So I've I've built something to call it the minor stack and it starts with energy as you said. The bottom part of the stack is like I want to as much as possible I want to own the energy access or at least have control of it, right. That that we're we're working toward trying to be self sovereign as well, not only to be efficient but also to be self sovereign so that we're not permissioned in anything that we do because that I think that's that's very important too. So like in our example, the one that I'll I'll talk about publicly, I've talked a little about some of the things we're trying to do with like stranded gas, but we own a hydro, a small hydroelectric facility in South Carolina that we rehabbed and we we actually cut the cord back to the grid. So we we don't even have the ability to push excess energy back to the grid and that was a choice that we made because we wanted that level of sovereignty and independence, right. It probably cost us a little bit of money at times when we produce more than we have hash for, but you know, so be it. So owning, owning that energy at a minimum being not permission. The second one is ASIC and by ASIC I mean the chip. And so I'm, I'll be talking more about this publicly, but I'm I'm on the board of advisors and I'm working closely with a group of ex Samsung and Intel people to design our own ASIC and you'll probably see that in 2025 and my background I I, I build systems, right that's that's really what I do like I starting in 1986 that's that's what I've done. I've designed laptops and desktops and servers. And so our intention is once we have access to our own chip to build our own systems both for our own consumption as well As for the general market, Then there's so this is kind of the stack, right, the energy, the ASIC, the system. Then there's kind of the operational excellence, you know can can you, can you manage it, keep high up times, keep the machines operating at the highest efficiency possible, all that sort of stuff. I think a lot of lot of quote UN quote mining companies which are really hashing companies, we'll talk about that later, but they that's really where their focus is. Then the next one is block template creation. And I guess this leads to that you are not a miner until you create a block template. And because if you're just a hasher, you're connecting to a pool that creates the template for you. You're not even connected to the network. You're you're a hired gun, basically selling your hash to the pool, right. And then the last part is the pool. And I'm on the board of Directors. There's an investor in Ocean in, in part because of all that, right. So there's these six pieces of the stack, and my intention is to have at least some ownership or control over each of the six pieces of the stack. Both because I think I can save money, but also I don't have to get. If I do it right, I don't have to get anybody's permission to to be a minor. But before Barty jumps like I really wanted him to, I wanted him to hear the part about like the block space template creation you referred to because he he was alluding to energy producers and miners. But our previous discussion was sharing on like how financial institutions start to compete and maybe starting with like block space getting scarcer sooner than most people think about. Sure. Yeah. So I think there's you alluded to it Marty, the the, there's this certainly relationship between the energy companies and the miners. I, I, I, I, I do not mean to make that insignificant and certainly like you were just at the Empower conference, I had one of my guys there. It's very, very important. However, there's a second end of so you're you're looking at that end. The bottom of the stack I just talked about, well the top of the stack is important too. So and it's it's that if we look at block space, block space is absolutely scarce in any time window. So if you, if you do the math right, what you'll find is that there are about 53,000 blocks per year. There's basically nothing we can ever do to change that. And so that's what we're going to produce and each one has four million weight units and if you translate that, it's about 4000 transactions. So what that tells us is that the network at the base layer has about four or 200 million base layer resolutions and I don't believe some others believe it's slightly differently. I don't believe that that will materially change. I think if you go into you know whether it's CTV or some of these other things, I don't believe they materially change the transaction capability of the network. We're still stuck with the 4 million and I don't think they can actually strip the transaction size in a in a way that materially changes that output. So given that if we just use that 200 million a year number, I I believe those should be thought of as virtual real estate or a commodity. And that over the course of the next few years we're going to find that that is ungodly valuable, precious beyond belief and that there will be a massive fight for control over that. Right now block template creation is done at the pool level pretty much basically across the whole the whole world and six companies for Chinese companies you know which would include like and pool and F2 pool plus Luxor and Foundry on the US side. Those six control roughly 90% of all blocked template creation. I think that's very dangerous and bad for the industry. And I I mentioned I'm an investor in Ocean and and on the board. So I don't want to turn this into a pitch for them because I want this in lots of pools. But what we're really about, I think we've gotten caught up in a lot of the ordinals debate and there's a reason for that. But what Ocean's really about is moving block template creation back to the minor. I would say moving that that's really the most important thing. And so I'll just use a simple example. If I if I create the block template, if I'm a minor and I create the block template and I own 1% of the world's hash rate, then I will make the choices on 2 million of the 200 million transactions annually. And that's a very, very powerful position. I believe that financial institutions Swan actually being at the front of the line right now who've who've come out of nowhere to have literally 1% of the world's global hash, I think are understanding this. I think they will be followed by the black rocks and fidelities and I know that's a cringe statement, but I believe they are all going to chase block template control and the only way to control block templates is by owning miners. And so I believe that those that sector is going to aggressively move into mining. They will and and I believe they will look at it when they really start thinking about it, they will realize it's existential to their existence that if they don't control the block template, they do not control the priority, they do not control the cost structure. And so it's my belief that we're going to, well we'll see certainly see some energy companies trying to merge and move in and associate with mining companies. But I think it's going to be the financial services companies that really come in fast and hard and start buying up the miners public and private. Thanks for tuning in. If you're interested in exploring any of these topics further, or want to learn more about how we can help you secure a new or existing Bitcoin allocation, get in touch with our team at on rampbitcoin.com. We look forward to supporting you on your Bitcoin journey. And one other because I talked about this at Empower yesterday. One other thing we need to figure out too. It's not only block template, because that's been the big meme with Stratum V2, it's like, oh, the individual miners will be able to construct their own block templates, which is good, which is a net positive. But even in that scenario is Stratum V2. If it were to be massively adopted and individual miners were able to construct their own blocks transactions, somebody needs to broadcast that transaction. In the stratum V2 world, the pool still has power over that broadcast. So you can give individual miners the ability to construct their own blocks by the end of the day. That could get audited by the by the pool that has to broadcast transaction and they can make a decision like actually I don't want to broadcast this because it has some transactions that I don't like in it. Of course that has economic repercussions, but that I think is like the the weak point of the stratum V2 model is the transaction broadcast. Then I'll top and just to build on what you said about the financial institutions before, I have to hop off here. But yeah, that is something that everybody should be wary of. And I wonder you can go back to like first principles of why these institutions exist in the 1st place. They're an immagulation of the Fiat world where people can't save their money, so they're forced to interact with the black rocks, the vanguards, all these financial institutions, so that they can beat inflation. I just like, is it a race to hyper bitcoinize as fast as possible to destroy their business models because you you don't need them. If people can save in Bitcoin so that we they don't have as much power in the long run, I don't know the answer but. It's certainly part of it and and I guess you know only time will tell, but it's very clear that within the Bitcoin world, right, we have companies like Swan that are public and now have over 1% of the world's hash is is with you know, I guess, I guess you could at least call them one of the good guys, right. And and I do know them well, I don't want to, I don't want to disclose anything that's not public. But I can say this like if you're Swan and part of your business model is that you let people buy Bitcoin and you encourage them to self custody and you offer that service for free in a world where Bitcoin fees become ungodly, then that model breaks, right. So you could look at it potentially as existential to them in the way that they do business to be able to control the block template. Because then they could theoretically look at it like, hey, for people that buy Bitcoin from us, we can offer the ability to move Bitcoin into self custody at a more modest fee. Because we, you know, we can control the blocks in which that happens, right, 'cause they'll control at 1% of the world's hash, they're gonna control 1 1/2 ish blocks per day. Right. Do you think that's why they they do it though? Because I would say that's a flawed assumption if that's why they're getting into mining like the fact that that if you were think forward thinking people are gonna take delivery of the Bitcoin from a scalable perspective like it's from a theory, it's. No, I I think it's it's just an example, yeah, that the, the power of that position is much greater. Well, one, I mean, I'm assuming they're doing it right, they're making money right now, right. So I mean we'll start with that. I think that's the number one reason. But it gives them, it gives them also the, the ability to control this block space in the long run. That would be, I gave you an example of I think a small, a small piece of the decision, but I do believe this and I think we talked about this a little privately, Michael, and and that's that if we look at the block reward right now, OK, so we sit here today 4 minors, the block reward is 6 and a quarter of subsidy plus fees. The last year, those fees have averaged right around .4, OK. So we're at like six, we'll call it 6/6, and 2/3 is the average reward. We're 23 days away from that changing to 3.125 plus most likely in the short term still the .4, right? So the having changed one part of the equation but not the other, it means that the minor revenue, the mining company's revenues go from what would that be maybe 6% of 7? 8. Percent the you know and and so so you have you basically have the fees doubling So what I'm gonna say will be controversial but it's I I have some models that I've developed I'm I'm probably wrong but I hopefully I I'm not wrong by any order of magnitude. I believe as we exit the next cycle and we're staring at the next halving, we will have reached parity. Interesting. So, so, so if I'm right or close to right, what does that mean? That means that interestingly, as measured in Bitcoin, we exit the next halving at almost the same rate we we we entered this one, right? So, so in other words, because we we'd be at over six, right? That would be over six Bitcoin per block. If I'm right, it also means that in the next in the cycle that follows, because the 3.125 would drop to 1.56. Two, what would that be? Whatever that is right now we're at 2/3, right? So now we'd go into the next cycle at 2/3 fees. OK, so, so let's think about what happens in that world. One ramification of that is that as measured in Bitcoin minor revenue starts getting much more variable. So today we basically have a very fixed Bitcoin output. OK, so there's really not when, when, when we're running our models when we're thinking about the future, we don't we don't have a lot of variance in the Bitcoin output. But but you know we could see great variance block to block or day-to-day in the future. Right now if you're, if you're if you're in a situation where your revenue starts having great variance, what do you do you want to moderate that sum, right. So I think that's going back to the blockspace thing that we were talking about. I think what that leads to is a futures marketplace for blockspace where the miners, let's say me again, will pretend I have 1% if I have 1% of the world's hash rate. I don't, by the way, I'm not that big, but if I had 1% of the world's hash rate and I have 200 million transactions per year that that I will choose in my block templates, then that's like 180,000 a month. So think of me as a farmer now. So that's no different than maybe a farmer who produces. A certain amount of corn every month or something like that. Well, if if, if as I'm looking at sitting here in March and I'm looking at August, let's say, you know, would I be willing to sell 25% of my August output at a known price that is fair and profitable to me? Yes, I would to lock that in, right. So I think that's what's actually going to happen. And then the then there's a, there's a counterparty to that, the other side of that, which is the users of the block space. So if you were a company or potentially even an individual and you knew that in August you were going to have a lot of Unchained activity, would you like to just wait to see what the market offers you in August or would you like to lock in a known and fair price now I think for some percentage of the market they will want to do that. So and I'm I'm working on this by the way I I've mentioned mentioned this a few times before, but I'm working on that right now and we're going to, we're going to bring a futures marketplace for block space to market. It will happen this year and with with by the way all all contracts on the Lightning Network. So we're going to use the Lightning Network as the for the marketplace and for all the contracts. This makes, I'm glad Jesse's here hearing this because we had this conversation and I think there's gonna be a lot to discuss on this. But one thing Bob, I think it tracks, I think also the the idea of derivatives for it. Like I think generally it's been talked about from a hash rate perspective but not block space and block space makes a lot more sense. The one thing that so from the financial service perspective it's, it is to your point existential or their whole business model, our business model, anybody's business model. If you're moving around UTXOS, you have to pay those fees and so to get in the middle or figure that part out is important. The thing that I'm curious on how you make the leap, because I didn't think of it at the time, but now as you work through This is why would a financial service or institution get to make the leap from the block template simply from what would change now to then in the sense of like it's not their core competency and the bidding situation or how people they bid is effectively how they get, how we get UTX OS by paying the fees into the block. Why would it change in the future? Because everybody's competing for those UTX or competing for those fees. I'm I'm struggling to understand that leap and why the institutions would start to mine and do something that's not core to their business model from just like their competency, not execution around it. Does that make sense? Or not. I think I got your question. I'm I'm gonna try to answer it if I if I answer the wrong question let me know. But so if I'm, if I'm a financial, so, so if I'm a financial institution and I I want to, I want to make sure that all of my transactions are with a predictable time window and a predictable price, then I have two options. One is to own the mining operation or the 2nd is to own and participate in this derivative marketplace. OK. So if I'm a smaller guy, I'm probably going to pick the derivative marketplace. But if I'm a bigger guy, if I'm BlackRock or I'm Swan or I'm some some organization like that, I'm I, I believe we're going to see them wanting more absolute control over this. Now, I do want to point out something because some people might be afraid. What I view is that some people might say, well, are you going to disrupt the mem pool? Are you going to, you know, do? Is this going to make it harder to really see what's going on? And I've been vocal about it, like I think everything has to be transparent. We have to have transparency in all these things. Well, the more I thought about it and the reason, part of the reasons I support this is that today we know the present situation of the mempool and based on the transaction sitting in the mempool we can get a future look. But the future look is maybe hours, right? You can see hours ahead of what what might be out there. This is going to give us visibility days ahead and you know our our marketplace will make sure that that all the fees end up in the blocks and it's part of the Coinbase #1 and #2. You know that that it all is fully visible and you can separate those transactions that are part of the futures marketplace from those that are part of more the real time marketplace, which I got off of on a tangent there. I have no idea if I covered the question that you asked. No, it makes sense. I think that covers. It's like it's giving more control. At the end of the day, you still have the natural mechanism of the bed for block space via just fees, right, Like somebody will be able to because somebody's going to mind that that transaction if you pay a higher fee. So that's always exists no matter who, who who's out there. It's just that the financial institution, if they want better clarity or if they want to hedge out those fees, then they'll be able to participate in what you're describing just to have better clarity of their business model. Yeah. And you know and this part, this is the part that you know, I think we we probably all get a little uncomfortable with too is you know if if Black Rock goes and buys 10% of the world's mining capacity or control of it, they're going to control you know, 220,000,000 of the transactions annually. And you know what did they do with them? Are they, is it OFAC, is it You know, I mean there's a lot of that sort of stuff going on and you know we need, we need lots of pools. Like Marty, Marty talked about one issue which is you know could could you have situations where pools, even though you have a lot of hundreds or thousands of block template creators which we need, could you get in a situation where individual pools are enforcing OFAC compliance, rejecting block templates that are coming from theirs? I guess the only good thing would be that the there would at least be visibility to the miner that the pool was rejecting them and hopefully they could find another pool that they could work with that that wouldn't block them. I think we need pools in lots of jurisdictions around the world by the way I mean having having the top six be comprised of only US and China is not good. You know you know you know we've got what is the one there's one out of Japan in the top ten brains is obviously out of central Europe volcanoes trying to come up in El Salvador. But we need, we need these and you know I I think you know for those of us at Ocean, you know we, I'll just say we think about that a lot and making sure that you know we we keep a path so that that sort of stuff never happens to us too that you know. Yeah, we're it seems like there's a lot of, there's a lot of ambiguity and risks further out there. But I guess one of the things you you were pointing out Bob, that that actually gives me some comfort, gives me a fair bit of comfort is you walk through how the percentage of fees is growing relative to this block subsidy and and that's already happening and that will that that's pretty certain at this point like that we shift into a a fee a fee dominant incentive model for minors. It's already underway like and and that's good because you know one of the one of the classic FUD tropes that people always brought out is you know how how will Bitcoin survive when the block subsidy is gone. You know there's no evidence of a E market developing. Well there's an evidence it's right here if if actually I don't I don't know if you know this off the top of your head, Bob, but you you pointed out the the key data point of averaging .4 Bitcoin per block in fees and I wonder what that number was four years ago. I would guess I. Do know it. I do know it. It's actually interesting. Yeah. So I the all time number from the very if you take the average from the very beginning it's .335. OK. In the first half of 2023 it was it was .335. The we averaged in 2023.4. So we did. The second-half of 2023 lifted the overall average off of the base. However, remember that the this is what's interesting. The .335, it's been pretty consistent for 15 years. So even though the subsidy went fifty 2512 1/2, right that it stayed 3.335 for that in basically for that entire time. So we're seeing this lift now for the first time, and I can the reason isn't directly ordinals and inscriptions, but I think you had a question there or comment. Just I was going to point out that like the the math there means that even if it was to stay at .335 like and then that 15 year trend was just to continue going forward eventually the growth of of the total value of Bitcoin. All you need is a 20X in order for that .335 to now equal the current block subsidy in terms of economic value and that that means getting to $1,000,000 for Bitcoin. And there's pretty clear line of sight I think to do that based on you know, the current tailwinds and and demand dynamics playing out over the next 8 or whatever. So anyway I think that it's it's interesting that you know this conversation about what happens to mempool and how pools operate comes with like a lot of new questions and a lot of new ambiguities. But in that we're also you're sort of pointing out that the fee market is proving out and that's like that's such a huge win that that we check off one major box and then granted introduces some other big questions. But then you kind of have to fall back to the the assumption that free market will win out and that the incentives are sound and and will cause decentralization and you know, a lack of capture of of the market by you know BlackRock and OFAC or whatever was to you know sort of try to hijack it. Yeah, you know what's interesting? I'm glad you brought up the whole point about you know bringing this up again like what were the historical fees because like I'm I'm making a guess it's my my highest probability guess that we will exit that that we're going to see essentially like a what would that be like A78X jump in the fee structure between now and the end of the next having which by by the. It's not a massive stretch, by the way, because we've already seen in 2023 several periods where. Or it's jumped up like a preview of what's possible when the blocks are are fully. Pull right and and well here here's the thing OK the the issue is not actually blocks being full exactly because here's another stat I have AI have a a little team we we do we pull a lot of block metrics we we do it ourselves and because we we're looking for a couple metrics that that aren't available like glass and old for instance and all that they're they're great services but there's a couple things we look for that they don't have and like one of them or one one piece I can tell you is that in 2023 every single block was full. There were. I happened to know. It's off the top of my head. There were 147 empty blocks, which are, you know, a part of the mining process. If you want to dive in there, we can talk about that a little bit. But but you know, outside of those, every single block was full. It was like 3.98 million weight units average on the rest of the blocks. So there's like no space. Every single block was full. Whether the ordinals and inscription people were active or not, they were always full. And remember too, that the mempool is kicking out a whole bunch of transactions, right that that it's they're too long, they don't have the right fees, they're getting kicked out. And then there's a whole bunch of people who wanted to do things but would look at the market and say, hey, it's not, I'm not even going to try right now because it's too expensive. So the mempool is not truly a reflection of total demand. Total demand is always much higher than whatever the men pool reflects. So the question is not demand, but also the urgency of the demand. Right, yes. So we're at a point where the we're already already full. So now it's just the component of OK, you know how many transactions now reach that point of I can't wait, I have to, I have to do it like I had one I did earlier this week where it was we have different companies right. And I had AI had a move, I don't know, it was like 500,000 SAT's from one company to another company. Very non urgent, you know, I threw it in there at 4 SAT's for BV byte and the very lower end of the threshold. If it happens in a week, fine, I don't really care. That money is going to sit there for a long time. Yeah, there's, you know, but I have other things. Excuse me? No, sorry. I was I was going to say this is basically the beauty of the fee market and all the things we've discussed get solved literally because if there's if scarce and it's valuable then whoever takes you know OFAC and BlackRock and have 20% but the other 80% will get bid up to take those transactions. They can go to 50% of the hash rates blocked but eventually like that's where I'm it's less concerned. It's still concerning, but it's if six out of seven of the pools are not taking the transactions, another pool, just by definition of the pool, makes money by the the hashing and all the things associated with it. Another pool would step in to to mine or construct the blocks to take those transactions because the fees. Would, yeah. Yeah, that's true. But you know we, we, we really don't want like there are, there are there are 6 pools that doing about 90% and there's another about 9:00 that are that are active, they have enough hash rate, they win a block every week or two, right. So that's what we're dealing with today. That's not enough or it it's it's certainly not enough if the block template creation is not occurring at the minor level and the pool, the pool is just acting as the pool, not the cause. In reality the pool is the minor, right. On a technical basis, the pool looks to the network like the minor and the the miners that we call miners are just hashers who are giving their hash rate over to the pool and it's the discretion of the pool how to use it and they get compensated. And you know, I I'm not trying to say anything too alarming, but as a hasher you really don't even know what they're giving you. Like, they they could be giving you Bitcoin Cash or Bitcoin SV. I'm not saying that they are, but you really don't know what it is they're giving you, right? They they could give you any set of work. They could only send you empty blocks. They could, they could send you blocks full of stuff that you don't agree with philosophically and you really have no way of knowing what's what's in there, right. So, but that changes dramatically at the point you create the block template, which I'm very passionate about. Bob, one of the things but or go ahead. No, no, go ahead, I. Was going to go back to what what Jess is kind of the fees and some of those sort of things. So if you had a question there. No, no, no. It's more related to scarcity and block space. But we'll cover that and then oh, OK. So, well, yeah just kind of back on the fees. So I I'm, I'm probably at the the most aggressive edge of people predicting these sort of things in terms of where fees will go. But I want to just you know where where where Jesse was going was. If we look at it, we're we're we're at the having of we'll call it we're already in the 3.125 era. We'll be at 1.5 something. We'll be at .75. Well then we're going to be at .37. OK. So, so the question is not whether I'm right or wrong. Even in the worst case I believe we're only those would that be three more, three more halvings. So the question is whether it's a four year window or like a 15 year window, but that's that's basically what we're saying in terms of this period. Yeah, right. So, so I just want to like you like you said, you know, dispel the. Spell the FUD first of all, about security. Not a problem. Do not lose sleep over it #1 #2 This problem of the minor income becoming highly variable right is eminent as well, right? That's also there. So that is a very interesting like I've never thought about that that how that ambiguity is going to come up it's going to turn into it's quite frankly it's going to turn into a major new arena of Fudd. And and the debate of considerable debate I'm sure of is this is this a a mortal threat to Bitcoin If we have the these incentives at work that could cause the the fracturing of of the mempool. And you know like the the swan example of they could try to have habits so that they're pushing through in the 1% of blocks you know discounted rate for swan customers doing on chain transactions. And then would they want that to be visit with those transactions to be sitting visibly in a in a mempool or would they want their own mempool that they you know feed directly into the box that they're mining. You start to see the the potential for the fracturing of of the mempool as we know it, which is probably inevitable. But then it turns into just like kind of a higher level, the next level up of competition between not just competition but in the existing singular mem pool between transactions, but competition between mem pools and philosophies that ultimately are still competing and and settled on block space via the existing infrastructure of mining and the and the competition that plays out there. So it it'll be a very interesting like new debate and arena of Fudd. It's going to be the new hot topic as that starts to become, you know, clear that that's what's happening in Bob. I think you're just seeing around the corner four, maybe eight years earlier than everybody else. Yeah. And Bob, I think where this ties in, it's really fascinating that we're having a conversation about unpopular opinions. And one of them was just referencing what Jesse described in Block Space from UTXOS and everybody holding their keys and how it's just like not feasibly possible and working from a first principles perspective. I think you said like 10,000 SATS or whatever the number was and you try to send them out to every person on planet Earth, it would take 40 years. But just curious of like sharing kind of like that, like working through that logic, how you think about like what you just described the scalability of Bitcoin and how you know the different things that are coming to market play into that? Sure. Well, yeah, let's just, it's not an opinion, it's just the fundamental structure of what we have. And and by the way, I think it is the right structure and it promotes this layered approach. But let's talk about the base layer. So we've already established that there's 200 million transaction capacity annually. Well, there's 8 billion people in the world and there's 330 million companies in the world. So those entities all have to share that base layer. So one way to look at it is if every company in the world wanted to do one base layer transaction annually, we couldn't handle it. They we we only have room for one every roughly 2 years for every company. So that's number one. Number two, as you mentioned, if I want to send some Bitcoin to every person in the world, so everybody owns some Bitcoin, 8 billion / 200 million is 4040 years to accomplish that. So it's completely unrealistic to think that everybody's going to hold their own keys and it's just like literally impossible, right? And by the way, we're not even counting the fact that people are dying and being born over that 40 year period, right? So you wouldn't even get there in the 40 years. So it's it's not it's just not going to happen. The another way to look at it I I saw this stack some somebody else on on Twitter had done this one. But I I liked it too. Another way to look at it would be to say in the lifetime of each individual's if we exclude the companies there's about one KB of block space for every person existing in the world today in their lifetime. That's another way to another way to look at it again, assuming no companies participated and no nobody died or and was born like like you know so so you know it just means that that there's just not enough number one, everybody can't hold their own keys. I I talk about scarcity too. I think people sometimes don't understand scarcity, especially absolute scarcity. You know, we we talk about it with Bitcoin and how it it will ultimately drive this exponential growth in the price of Bitcoin. Well, it's going to have the same effect on block space. And I give an example that I think kind of visualizes it for people pretty well. And say if if I have an apple tree and it's the only apple tree in the world, and I produce 100 apples a day, if demand for apples is 95 apples per day, the price of apples is really cheap. I'm throwing 5 away every day. The moment 101 people want apples, price of apples really spikes. When 120 or 150 people per day want apples, it gets insanely expensive. When thousand people want it, only the the elite can afford apples. Well, I that's that's what's going to happen to block space will be the same way and you know it it I think it illustrates what will really happen at the at the base level and and you know Satoshi did something kind of interesting. So actually did more than one thing interesting, but so if you look at the very terminology of the block reward, the block reward is the subsidy plus fees, right. And I think most people think of the subsidy as this reward to the miners to keep them incented to mine early on. It's partially true, but I also believe it was to create user adoption. And so you could think of it as kind of like a free introductory period for users of Bitcoin. And we've had 15 years of this introductory period of access to essentially instantaneous access for free to the world's most powerful network, right. And the subsidy is going down. I think we're reaching that point where the free period is over. It's like, hey, you know, at a, at a health club, January is free, but you know, you got to pay starting in February, right. The health clubs always do that sort of thing, right? Or it's a dollar the first month in January, but not then it's 29 a month after that. Well that's where we are and and I think some people have have the mistaken impression that this free instantaneous access to the base layer is something that should be there forever. Well we're we're in year 15 of what I believe to be the next thousand years of money. So you know it's it's it's just this little period and and and we're witnessing this flip. It's such a beautiful Next. Yeah, sorry. It's just such a beautiful mental model to flip and in invert effectively because when Jesse was alluding to the block, besides like, I agree, I think everybody here agrees from fees. But like you know certain people believe that the fees won't get there. We have telemission all the crap that goes along with it and they're literally looking at it the wrong. Like the lens is completely opposite of what you just described. This is it. It's not the. It's not the de facto protocol for it to consistently be this block as the majority of value. It was to get to a certain place for them the transactions to make up the the majority of the value. Right. And it's literally called subsidy. Like I think that's lost on people. It is literally called subsidy. Yeah. And to talk about beauty from from Satoshi, that one in particular smacks me over the head every now and then of like what talk about two birds with one stone. How many birds did Satoshi get with that that design of the halving of of the subsidy because in one in one go he managed to to bootstrap proof of work and distribute coins fairly while introducing increasing scarcity as a mechanic for like for to to drive bitcoins monetization into the future where you know if you save now it gets more valuable in the future because they're making less of it in the future. So he's he's bootstrapped an entire incentive model for saving and holding and and as you point out it's a it's an introductory model to an eventual fee market development. So he managed to create this like, all right, here's a trial phase and then slowly transition into a fee market. And like all those things are packaged into this super elegant, oh, we're just going to cut the block subsidy in half every every four years. It's unbelievable how many birds with one stone that that accomplished. Yep, Yep. It it is. Like I said I'm, I'm continually impressed and I've been involved in this for since 2017 and you know these revelations still come at me. You know this this long like the beauty of that, the depth of that. You know I'm sure in the coming year something else will come and you know what I want. I want to say one thing not not to correct you Jesse, just say one thing. I think that you use the word slowly in the fee market. I this is this is where I differ from a lot of people but I just want to kind of go back to the the Apple example I gave. I I believe it's more like an exponential thing that fees will be exponential and that we sit on the cusp of this this massive explosion. And in fact, this is an interesting thing too. If you think about what a minor does or the product of a minor, right, Companies produce things. For the last 15 years, we have as a mining industry or community, we have produced a Bitcoin. And I mean that in the literal sense like we were, we were producing the Coinbase, which you talked about that, right. That's part of the whole thing was to produce the Coinbase. Well, that's almost over. I mean, I think you can, you can make an argument that it almost is like where, where do you want to draw that point? Is it this having the next one? But you say, but in essence it's over. So what do we produce now? Well, we produce block space. That's that's what miners do. Miners are in the transition of going from producing Bitcoin to Coinbase to producing block space and being compensated for that. So again, there's another fundamental Yep. Right. And to bring it, to bring it back to your to your apple analogy like you're right, it's so I say slowly but exponentially is probably more right. But then it's also kind of binary and I think you're you're pointing out how like we've lived in a world where there's been more apple supply than demand if you know if we make that parallel to block space. And now like the last couple year or two really we've lived in a in a world where there's 101 apples being demanded and 100 being supplied. And so it's been, it's it's sort of binary ultimately like there's, there's the the last 15 years where it's been more supply than demand and now looking forward there's probably more demand and supply and those are just they're night and day. It's it's a pretty binary situation where like what happens to the value of block space in a world where there's more supply than demand versus more demand and supply. It's a a light switch. Yeah, I was just saying we'll go ahead and finish that thought. And then I had one more before conscious of time, but wanted to ask something before. Yeah, I'm OK. By the way, don't don't worry about time for me. If you guys got to go, that's fine, but I'm fine. You know, we with this ETF, a lot of these, a lot of people talk about the multiplier effect on the ETF. You know, a dollar or you know, a dollar into the ecosystem has multiplier effect. I don't have any science behind this, but I would suspect there's something like that same thing that will occur as demand for block space goes up, that that each incremental unit of demand for block space has an inordinate impact on the fees associated with it. Yep. Interesting. Yeah, that that makes sense, Bob. I know this is like reverse order, but before we wrap, I'm curious, it's so fascinating how you think about it. Like, how did you get into Bitcoin? And then what made you choose mining? Because you seem very multidisciplinary. You come at it from different angles, like there's a lot of ways you could have had an impact. How did mining be the like area, the angle you attack it from? Well it it starts a little shit coin. Y like a lot of people but in a in a strange way didn't even start shit coining what what happened was I had somebody call me one day and he said he's he was an old gateway person had spoken to him for over a decade but he called me up out of the blue and he said Bob, I've got a group 2017 by the way 2017 he said Bob, I have a group we are putting up a large Ethereum mining farm. Can you? But problem is I can't. I can't get a professionally built system and I can't get the NVIDIA chips, you know. So would you be able to help me? So I looked at it as a system person, a computer person right. Except you know can can we design a professional Ethereum server not knowing much about it and it just so happens from way back in the gateway days me. So I was the CTO at at Gateway and Keith Thomas, who's the President at Barefoot, he was the head of Desktop engineering Gateway. Well, turns out we have pretty good relationships with NVIDIA. So we we called up NVIDIA and said hey if we build these systems will you give us chips because we needed 881070 or 1080 chips and everyone which at the time was kind of the pinnacle of the GPU world and they said yes. So we we ended up with an order for like 800 of these at was it like $6800 or something like that. It was like a $6 million PO. We just started a company that you would now know as barefoot mining to build these and these systems for this guy. So we did and we shipped them to him. We did pretty well on it. So then we said, well, we have this design. I wonder if anybody else would want to buy them, right, so we could get more chips. So we found a pretty decent market for those. But most of the people that we were that were interested in it were somebody that wanted five of them or three of them or you know, ten of them or something like that. And almost all of them said, hey, I'll buy them from you, I'm interested, but I don't have anywhere to put them. Can you host them for me? So that forced us to open a hosting operation and then we kind of saw how well these were doing vary Fiat looking at that moment, right? It's like, right, these are making a lot of money. Maybe we should take all the profits, pour it into our own equipment, which we did and started mining Ethereum for ourselves. So then after kind of going through several months of kind of getting all that in order and we're doing really well, I started to sit back and 1st I started looking at Ethereum, you know what is this thing really And I started to have concerns. I saw a massively complex system. I saw highly centralized signals. I saw this. They had already signaled that they were going to move to proof of or stake at some point. So I saw all these things that I didn't, I didn't like just again, more of a technical lens like this. This doesn't look good to me. And then in parallel started looking harder at Bitcoin and Silent. I have AI, have a economics background as well. I studied economics and and found Independent School as well as my engineering degree and and then I also in the early 2000s found Austrian economics just coincidentally. So I started looking at Bitcoin and you know the just the sound technical foundation and some of the early revelations of the beauty of the way that Satoshi had architected this thing started to appeal to me. And then I saw the Austrian principles kind of coming through all this and so we started pivot the company and away from Ethereum and to Bitcoin. So, so that was that was the the point for me of you know, getting involved and and ultimately landing, you know more firmly in the Bitcoin side of the equation. That's awesome. Yeah, that's. I think that's an interesting coming into altcoin story because I know Jesse shares his and everybody has their their own. But generally it's like they kind of stopped from there and then obviously like went to Bitcoin. But you could literally were like mining or helping to support and then realize it's like, oh, I found like this niche and understand how to build these systems, but I'm just building the wrong building the wrong circuit set up, yeah. Yeah. I can't help but find it interesting too that like you know you and and Wozniak you know are are both like earlier computer infrastructure engineering guys who both see the beauty of this this system of engineered money And and there's there's something to that that you know I I guess anybody who's early to computers has a pattern recognition or like a style of thinking where you just see things see the future playing out and lo and behold with Bitcoin we we see it. Quite a few folks like yourself who have seen this movie before and and are excited about this one too, you know? And and that that says a lot. Yeah, absolutely. I appreciate you putting me and Wozniak in the same sentence. That's how I praise. I, I appreciate that, but I'm not sure it's applicable. But what I will say is this that to the degree I have some vision or or ability to to to kind of you know see how technology is going to evolve and how it's going to impact society. I mean that was really my job when I was the Chief Technology Officer at Gateway that was what I was chartered with right. My my job was to direct where we were going to go with technology and and that meant trying to see where how how would people adapt how would business adapt like like so and it and you know it forces me and going back to my early days to like as an engineer. Yeah how how will this all come together. It's like when I was at gateway like I'll tell you a little story may find interesting. I have, I have a bunch of patents and my my favorite patent is a very simple patent and the patent was because it was roughly 2000, 2001 and probably people don't remember this. But Gateway wasn't just APC company. We we were the number one maker of plasma TV's in America in 2002 for instance. We had like like we we had we sold more plasma TV's than anybody in America in 2002 under our own brand that my team developed. So I'm real proud of that. But we also did digital cameras, we did MP3 players, all kinds of other consumer electronics devices. And so one of the products we were developing was a an early MP3 player and this is a a Ledger, but you know it was like this size, right. So it was ausb stick, MP3 player and we had got the first prototype developed. And I guess to to say that, you know, so we could see like what was happening with like like that music was moving from the CD. We had seen what Napster and you know, some Limewire. And if you're old enough to remember, like how music distribution was changing and that, you know, the future was people carrying around their music, thousands and thousands of songs and picking their own playlists and like all that, we, you know, that was part of what what we envisioned. And Apple hadn't come up with the iPod yet. So we were we were trying to scramble ultimately with the goal of hopefully having had the success of the iPod, which we didn't have. But But anyway, so we're we're developing this little USB stick device. And in the first prototype it, it only had, it had a play pause button so it could start and stop. And it has a button that would reverse you to the beginning of the track or a forward button that would take you to the next track. This is all I had, right? It doesn't. It didn't even have a display on it. OK, so so anyway, I'm out for a run and I had downloaded an audiobook in MP3 form to this this device I'm run. So I'm, I'm at a really good part of the book and I'm running along and I have a wired earbud in and my elbow catches the the cable and it rips the the, the device out of my hand. It goes flying, you know, tumbling down the sidewalk and the earbuds go another way. And I have to reassemble the whole thing, right? And I put it in and like shit the the audio book has kept playing the whole the whole time right. And and I missed like 90 seconds of this book. And remember I only have two options which were this is an MP3 rip of the whole book. My choices are go back to the beginning of the book or skip to the end of the book. I have no other options. I'm like shit, so I'm sitting there on the sidewalk and I go, I'm an engineer I I should have the force. I should have had the foresight to understand that the moment that the earbud pulled out of the device, I should have stopped the audio track. So it's so by the way. So if you have like earbuds and you're listening to music and you know when you take them out and the music stops and you put it in and it starts again, that's my patent. And so which by the reason I'm proud of it, I think I have, I have much more technical, much more intricate patents. But I'm really proud of this one patent because there are billions of people who have devices that get to use something that I invented every day, right. And so that's a kind of a cool thing when I even when I'm, when I'm on an airplane or in a restaurant or you know, whatever, and I see somebody listening to something and they take it out, I think, oh, you know, a little piece of my work kind of went into that. So and there's a very long winded, kind of tangential way of saying I think that there are people and like like Wozniak is is great and Jobs is great and Elon Musk is great. And you know, for me to even be in the same room as those guys are in the same class, you know, that's that's high praise. But I but I do think that there are people that can do that, that that have that ability to say I I can think of the 2nd order, the 3rd order, the 4th order, the 5th order. Effects of these things remove themselves from the present and bring it. Satoshi was absolutely marvelous at. It may have been the greatest of all time. I mean, I agree. Yeah and yeah. It's it's a perfect way to to wrap in the sense of like Bob that story is I think anyway I'm glad we met and hope to be able to get your guidance on how we think about our business building and feedback. But then in general, what personally really excited for this next epoch is mainly from like the operational execution and talent coming into the space with backgrounds that were experts in their own field found Bitcoin and now bringing all of that second, third or third order thinking and vision into this world that we kind of haven't seen yet. And so, yeah, that encapsulates it very well as hopefully there's other people coming in with very significant patents and things they've done that will port that over to Bitcoin. Yeah we we need it You know I maybe I'll I'll say one last thing which is you know I think we all have to be vigilant like like there's if we enter a bull run probably my greatest fear is complacency like that that you know we have to we have to innovate just because you know we shouldn't ever think that we won like we we you know I I I mentioned this earlier I think about Bitcoin from 1000 year perspective and I I may at times overreact to something that may seem like a trivial issue And the reason I I might react that way is that over time over 1000 year window there are going to be a lot of attacks and it it may be that we fend them all off but it may also be that a small one that we ignored that we didn't think was significant ends up being the one that defeats us. Just like Bitcoin got its very existence because the existing financial system and power system of the world ignored us for too long right. And then it came in and we now we attacked them. And we're now we're we're we're too big and too powerful to fend off. Well, let's not fall victim to the same thing that brought us our success. Perfectly said. Anywhere to share where people can find you. Sure, Barefoot Mining is our our company website. Boomer BTC Under score BTC at on Twitter I have a podcast called Old Man yells on. You find it on YouTube and Spotify and things like that, which is just me ranting about various things. Awesome. And then you'll be at Biblock Bib this year, right? I will be, yeah. I will be at Biblock Boom this year. I will be in Prague as well. If anybody's in Europe, I'll be in Prague in June. Awesome. That's where you can find Bob and then the Bitcoin. John meet up this Monday in Philadelphia with Lynn Alden. We're have some of our team down there and I guess it's up to over 100 people now are going to attend of RSVP. The the most I think was 30 to 40. So if you still want to attend, sign up. Yep, that's cool. Awesome. All right. Thanks guys. Thank you guys.