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CEO of Marathon discusses REAL NUANCES of Bitcoin with Fred Thiel

February 16, 2022

CEO of Marathon, Fred Thiel, shares key insights about Bitcoin. The conversation highlighted how miners are currently holding onto their Bitcoin, which is affecting its availability in the market. The CEO emphasized that this isn't a flaw but a feature of Bitcoin's design. Fred Thiel's extensive tech background and early involvement in the crypto space in 2016 led him to his role as Marathon's CEO. Energy efficiency and regulatory challenges were addressed, with the potential for Bitcoin to contribute to clean energy solutions. Amidst regulatory uncertainty, Bitcoin's status as a commodity provides a clearer regulatory stance. While the concept of Bitcoin as a global currency was explored, its journey towards adoption and impact on financial systems is anticipated to be gradual, paralleling the evolution of disruptive technologies. The conversation also drew parallels between technological innovation and survival in nature, highlighting the need for adaptation and progress in the Bitcoin industry.

00:00 Introduction

00:34 Fred’s Background

09:08 Applications outside of Bitcoin?

14:49 How do you look at this entire industry as a miner?

19:10 Highlights on the deployment of miners

23:53 What will be the next phase of the energy industry?

28:11 How will the USA react to the mining industry?

30:12 What are the common educational gaps for your line of work?

34:53 Future of financing in the industry

38:11 What is Fred most excited about?

44:03 Bitcoin, energy & money

51:45 One belief majority of the people would disagree with?

Transcripts are autogenerated. May contain typos.


miners aren't selling their bitcoin they're holding their bitcoin so that's impacting the available supply of bitcoin in the marketplace it's not a bug it's an actual feature of bitcoin you know you don't have 70 or 80 big holders of bitcoin that determine what happens in the bitcoin world you're seeing smart contract functionality being brought into the bitcoin one of my former ctos had gone all in in crypto in 2013.


it's very clear after speaking with so many people that we're still in such the early days he was one of the early investors in facebook and yahoo placed the billion dollar bid so fred thank you so much for coming on to the podcast when diving through your background it's it's really incredible because everyone has heard about marathon especially if they're in uh mining but i don't think a lot of people understand all the different facets that you have coming into it in your career it's almost like your background shaped you


perfectly to run a bitcoin mining company um and you're quite the futurist so um i think that everyone listening you're going to learn a lot and get a lot of value from listening to fred today well thank you setting a very high expectation [Laughter] well hey i'm sure you're going to meet it and blow everyone else away to dive right into it with the stuff that you're doing at marathon what really led you on this path to deciding to say hey i'm going to go and i'm going to run one of the biggest


mining companies in the entire world how did you land in the position that you're in right now well i've been in the tech industry for 40 years and i've kind of operated in every segment of it hardware software semiconductors internet data coms internet services online games was a very avid gamer for a number of years and ran one of the largest digital media companies in that space gamespy for a while and so i've always been kind of at the forefront of these little bit more disruptive technologies and i'm old


enough to have programmed on punch cards and ibm 360 mainframes where i got kind of my early day start even using acoustic couplers and telex machines all the way through the advent of the pc kind of the death of the mini computer if you would and then just saw the whole internet and datacoms business and a lot of the work that i did early on in my career was actually writing software and banks so i was very familiar with the banking space and my dad was a banker and my stepmom was senior economist at the oecd responsible for writing banking


regulations and so i kind of grew up in this environment where god you know this is a very inefficient industry and how do you make it more efficient and um long story short about 2016 uh i got very involved in looking at kind of crypto and what bitcoin could do one of my former ctos had gone all in in crypto in 2013 and was just kept calling me saying you listen you got to get you got to get in on this this you know this is for you this is the right industry and thought about looking at building an exchange crypto exchange for trading and


interconnecting a bunch of exchanges globally and this is very early days but coming from a kind of family where regulatory was kind of the dinner table conversation i thought well why don't i see how illegal is this and you know what i realized pretty quickly was in the u.s there was no way you could open a license exchange because nobody would give you a license i mean a bank wouldn't even open a bank account for you if you said the word crypto in those days so i went to switzerland worked with the folks at


finma there which is the equivalent of the financial regulator if you would and quickly saw that a u.s company in switzerland this is post ubs and and or credit suisse and the irs issues they just americans were kind of persona on grata in the financial market there because they didn't want the regulatory backlash and so went to lichtenstein and actually worked with a law firm there to get their first crypto law instantiated and then got the first licensed otc trading desk done there and it was early days when anybody trading crypto you


kind of had to look at them a little sideways and wonder okay now how are you talking about trading 100 000 btc and where are these from and kyc aml was kind of a little wonky fast forward to 2017 and maricopa who's the former ceo and former chairman of marathon who i've known for many many years said to me hey listen i'm stepping into this role as ceo of this company called marathon patent group and we want to do some bitcoin mining and i know that you know you're mr technology would you would you join our board so i got on


the board of marathon i joined in april of 2018 and worked with merrick on his kind of strategy of uh recapitalizing the company and uh positioning as a as a leading minor and my expertise being in scaling businesses and his expertise being in really you know the financing of businesses it was a great kind of teamwork effort you know fast forward to kind of last year and it was clear that now was time to just focus on scaling he had done an excellent job at getting the company financed and properly set up so it was


all about execution and so we decided to swap roles at that point and i stepped in a ceo he went into an executive chairman role and then he decided that it was time for him to retire at the end of last year which he did and uh that's kind of how i got involved in the mining business i think it's an exciting space in that we're on the one hand creating the next generation of financial systems and the role of miners is really that of being the securitizer if you would you know by processing our blocks and doing


it um the way we do it we're helping secure the blockchain and ensure the safety and security of data on the blockchain while at the same time effectively if you think about the bitcoin blockchain it's effectively the equivalent to what tcpip was to the internet and you know our perspective at least my perspective is we're kind of in 1997 in internet time we've got this thing called a netscape browser you can browse some websites but you still haven't really gotten to the point where you can write


content and share content or where you can effectively own things on the internet so you know 1997 if you think back to that time it was pretty rudimentary and that's where we are today uh in the world of blockchain and i think we're going to see with web 3.0 data separating itself from applications data will reside on the blockchain applications will run on servers on demand you if you think about how amazon aws or google cloud or microsoft azure run today they're this constantly on application married to


data architectures and the web 3.0 world that can change right you only have to turn on the applications when you need them and oh by the way on your customer data you could use a crm tool from a number of different vendors depending on what you want to do with your data right and your data is independent of the application so it's not going to happen next year it's not going to happen in the next two or three years but if you look at a lot of the money that the large venture firms are putting into the space today around


web 3.0 it's all really focused on this abstracting data from applications and building these next generation systems where companies and individuals own their data and as you look at the two primary blockchain ecosystems bitcoin and ethereum and the ethereum like blockchains the bitcoin blockchain is all about ownership and security if security is your primary concern then the bitcoin blockchain is where you want to build stuff and with lightning and the layer 2 systems that are coming online there's no limit really a


practical limit on transaction speed or you know low cost of transactions and you're seeing that with kind of the applications that strike is rolling out around the world and other people are doing there you're going to see a lot of identity management tools being built on the bitcoin blockchain and health data things like that the ethereum blockchain is all about innovation and programmability so that's where people can really innovate create these smart contract-based systems and do some really cool things but it's not a


network that's necessarily built on the same security premises that the bitcoin blockchain is built on and as you look at the world of smart contracts and a lot of these d5 businesses yeah you continually read about systems are being hacked you know there was a thing in the news this week about open c and people being able to do all sorts of shenanigans there so i think that's just the difference right kind of you've got this great sandbox in the ethereum world where all this really cool stuff is happening and then you've


got stodgy kind of bitcoin and the maximalist hate me for that but things move slowly on purpose in the bitcoin world because it's secure because it's fully decentralized there isn't a central governance organization you know you don't have 70 or 80 big holders of bitcoin that determine what happens in the bitcoin world like you do in other blockchain yeah we're super excited and i i love the innovation pace that's happening here i think there's some you know um jack dorsey's


doing some great things i think jack mueller is doing some great things there's a lot of great things happening in the space and so we're super excited you just brought us down an amazing rabbit hole that i want to dig further down with you uh regarding the web 3.0 right and talking about how you're seeing smart contract functionality being brought into bitcoin the tap root and as you mentioned it moves much more slowly but that's not a it's not a bug it's an actual feature of bitcoin and it gives you a lot of that


security and then you have the other end where you have web 3.0 on things like ethereum and it can move much more quickly but i guess the big question that i want to ask you is how do you view those applications being built outside of the bitcoin ecosystem now that you're seeing bitcoin come up to speed because bitcoin obviously it's much more slower moving but at the base layer you have much more security with bitcoin and that is going down to the ethos of decentralization and blockchain to meant to a large degree saying hey this is


great that we have this how do you think that these other cryptos fare now that bitcoin is implementing smart contract functionality and you're seeing developers go and try and implement with bitcoin as the base layer yeah i don't think it's a zero-sum game by any means i i think just like as you look at any technology there is a period of innovation and evolution where all sorts of things come up you know there's you can think of it as you know mutations the wrong word but the term of nature it really is


a type of morphing that happens and you get all these different things that start rising up and then eventually people start gravitating to the technologies and the platforms that make the most sense and then you get some sort of darwinism where eventually the ones that are less efficient you know won't survive look at the search engine world in world of the traditional internet right google wasn't the first search engine by far you had all sorts of search engines before that same thing in social media you had lots of things


before facebook and yet eventually one platform managed to kind of become the most relevant because it provided the closest to what the consumers wanted i think the difference between the world of blockchain and the world of the internet is that the internet is one internet and that was because there was no economic incentive around owning the internet it was a national security thing the u.


s started it with darpa and then universities leveraged it and there wasn't an economic incentive ever the economic incentive was all at layer two and above in the world of blockchain it's very different uh there are economic incentives in owning the governance token and issuing the governance token again in the world of bitcoin that's fully decentralized there isn't um an economic interest there but in the other blockchains there is and so as you have this kind of development that's going to occur there are incentives for companies to develop


their own layer 1 blockchains question is will they survive or not so i tend to find that development over the next three years will migrate to layer 2 and layer 3 and you're really going to have either the evm kind of ethereum world or you're going to have the bitcoin world but you're going to have all these bridging protocols between them and these bridging tools that will allow you to for example there's a protocol that's being built for settlement where it's a proof of stake model but it uses proof


of work leveraging the bitcoin blockchain's proof of work so not having to do double work as the independent control such that the proof of stake is truly managed in a way that can't be controlled and so i think you're gonna start seeing some of these hybrids where it's kind of proof of stake with a proof of work component to it which piggybacks on top of the bitcoin blockchain's proof of work so i think that's super exciting and we're gonna start seeing also the ability to where people are going to


just start the what i call the consumerization a little bit of bitcoin mining and crypto mining in general where you know other people are going to set up things in their garage and in their basement and um run various coins and mine various coins and you'll eventually start seeing this becoming a integrating to a core part of kind of infrastructure and ecosystems you know as power generation moves from central utilities out to community edge power generation so a community would have its own solar panels and battery storage


they may want to add a small number of bitcoin miners as a way to monetize excess electricity when they're generating more than they're consuming use that to pay for the whole solar infrastructure and then you know take that at a larger scale and you'll find cities wanting to do that and schools possibly doing it and so bitcoin mining starts becoming an integral part of the energy infrastructure system as a key financing tool for financing this renewable energy that we all depend on and you know the thing people forget


about the energy world is a it's not a zero-sum game there's lots of energy available if you just invest in it which is something bitcoin miners obviously are doing the other thing is solar and wind doesn't run 24 7. and so there are times of the day where you have free energy is being wasted because the grid can't use it because consumers don't want it industry doesn't want it and so mine bitcoin with that energy because otherwise you're wasting it you're essentially having to throw it away


effectively because you can't store it so i think we're going to see a lot of changes as proof of work really becomes just a function of home solar systems it becomes a function of some electric vehicles it'll just be a built-in function and that's going to be a real exciting time i think yeah when you talk with a lot of these miners you see that a lot of them are talking about mining and energy in this way and the people outside the industry are the ones really attacking bitcoin for its energy use but i don't think that


they really understand at its core what's happening when these miners come in and as you mentioned like many of the other miners big miners who understand how the energy sector works and understand how mining works you see that it's very good to help spur renewable development it brings me to this next point or this next question for you is where are we in this journey because as we see today it looks a lot different in mining than it did four years ago and i'm sure that four years from now the mining industry is going to


look a lot different we had the happening back in 2020 and so the next one's coming up in 2024 so there are so many different factors here and you guys as a very big player in this have a lot of different variables that you have to take into account so i'll leave it more so open-ended but how are you looking at this entire space as a minor and as a participant and understanding that you're dealing with all these market forces that are quite frankly out of any miners control how are you looking at it today uh in the


beginning of 2022. i think the environment has changed over the years for one thing miners aren't selling their bitcoin they're holding their bitcoin so that's impacting the available supply of bitcoin in the marketplace and since the having in 2020 obviously they're only 900 bitcoin minted a day or rewarded a day and so as a miner you know we're obviously constantly competing with our colleagues in the industry for those 900 bitcoin and you know in a little over two years from now 26 months we'll have another


having and then it'll be 450 bitcoin a day so we're very focused on growing our capacity as quickly as possible because we think growth is going to get harder and harder over time if you look at the expectations of global hash rate growth you take bedudus numbers for example they're expecting it to go from you know we ended 2021 at around 180 extra hash or between 170 and 190 so i'll use 180 as the average and you know the expectation is will be at 320 at the end of 2022. you know that's not


too far short of a doubling and then figure another 50 increase in 2023 and then you have a having in 20 early 2024 march of 2024 at this point so you're essentially looking at a three-fold increase in cost to mine between now and the happening and when the happening happens it'll double that cost so you know a 6x increase in the cost of mining if you are going to deploy a lot of miners next year then the rewards you're going to get are going to be that much less than if you deployed that um hash rate today so


we're very focused on as quickly as possible deploying as much capacity as possible such that the harder it gets to mine in the future we'll already have our miners in place we'll already have paid for them and will be able to benefit from that granted we have a very unique model in how we operate uh we don't invest in infrastructure we don't own the infrastructure and we're fully focused on being 100 carbon neutral so what that means is all our investment dollars are going into just minors we're


not buying facilities we're not tying down power in the traditional way and so unlike some of our competitors in the industry we have the ability to you know when our hosting agreements are up pick up our miners and move somewhere else and we personally believe that while 2021 was a year of many constraints there weren't many miners available to purchase and there wasn't hosting capacity available to put miners into 2022 especially the back half of 2022 you're going to see a huge amount of capacity come online both


hosting facilities and availability of miners and that's going to continue in 2023 we believe the power companies are going to play a bigger and bigger role in building and investing in hosting facilities even some of them doing their own mining you know i would say you know keep your eyes peeled to the news lines because more than likely over the next three to six months you'll see a number of power companies announced they're actively coming into this business and power being our single biggest input cost by


partnering with the power companies and them providing the hosting for us we think we're uniquely positioned for the long term and our cost today to minor bitcoin energy plus hosting is a little over six thousand dollars so 6x increase in that cost would be 36 000 so as long as bitcoin is trading somewhere north of 60 000 in 2024 we'll still have a very profitable business that won't necessarily be the case for some other miners whose cost structures don't provide for that low cost today so i


think you'll also see some consolidation down the road in this business hearing you talk through it it's really interesting how you guys take a very mathematical approach to this and a very pragmatic approach sometimes when you talk with minors who are a lot of times just getting into the business they won't take these things into account and it's crazy because it's something that directly affects your bottom line and so you want to understand where the hash rate's going and where the price might be going uh in terms of


the machines that you guys have online because you're not going and you're not investing in that infrastructure it allows you to take a more aggressive approach to actually scaling up purely with miners what are do you have any highlights or recent updates in terms of some of the deployments that you have going out and some of the areas in which you're focused on mining is it all in the u.


s or are you looking at any other countries around the world in terms of where you're placing those miners we made a decision to stick to north america at this point we're only in the u.s we're not in um in canada at all the reason being rule of law is really important to us you know we're public company last thing i want to do is put 500 million dollars of miners in a location where all of a sudden some jeeps roll up because there's a new government and they've decided they want to own my bitcoin


miners and there's nothing i can do about it so you've seen what happened in china you know last year they made crypto mining and all the crypto industry effectively illegal and so those miners got shut down kazakhstan is having power problems europe not for regulatory reasons is having some problems with energy because they decided to curtail their nuclear and their fossil fuel power generation rely on renewable a little too early and they hadn't built up enough capacity such that they could deal with shortage


of energy and now when they have the hydro is under producing and the wind isn't blowing enough they're having pretty big energy shortages in the us we don't have those issues we generate 14 more energy than we consume in this country and that's even before all of the new renewable energy that's coming online here this year and next year by people like nextera and constellation comes online and so you're going to see gigawatts of additional power come online in the u.s and energy if you


can't sell it you can't earn any revenue and so you know having customers like big bitcoin miners like ourselves is a huge benefit to the power companies because they now have one large customer who will more than pay for the cost of that infrastructure they're building but more importantly if the grid does need the extra electricity you know they can always curtail us and will voluntarily curtail such that they can take you know 100 megawatts 200 megawatts and put it into the grid as opposed to telling you as a


consumer hey i'm going to have to turn you off your air conditioner because it's 105 degrees where you are which you're not going to want so i think most people most consumers most voters would prefer that hey shut down the bitcoin miner when i when there's a shortage of electricity especially if the bitcoin miner volunteering to do it so and i think most of my peers in the industry are all generally speaking you know good citizens and want to participate but we like north america good rule of law


there's some great markets texas has an unregulated kind of power grid through airco you have other grid operators throughout the us who are great places we today mine kind of nebraska down through to texas and you know we'll continue to expand across the country wherever it makes sense we don't want to be too concentrated in any one area such that uh you know we suffer any particular regional outages or other things because of you know weather climate energy conditions grid technology regulatory


issues or whatever the bigger you get the more you have to worry about those types of risks where when you're small you don't and you know we're scaling from if you think about you know we exited 2021 nearing kind of 4x a hash of capacity and this time next year so january 2023 will be at 23 exahash i mean that's a huge jumping capacity and you know that's all based on the miners we have on order today so we'll have you know 199 000 miners and by the way people always ask me why couldn't we


order another thousand miners to make it around 200 000 there aren't any available we'll be one of the largest miners globally at that point and all doing it in the us and looking forward to kind of contributing to the bitcoin ecosystem as a great participant citizen that's great and it makes a lot of sense it's a lot easier to move 199 miners and 199 000 so you don't want to that would be quite quite the feat so going off of that and talking about your view of the energy sector it's


fascinating because one of the things that we've tried to do on this podcast is speak with a lot of people who understand energy who are active in the energy sector and get their views on it and one of the interesting things that i heard from someone who's in the mining space lee bratchard president of the texas blockchain council when those rolling blackouts were happening in texas the miners they were all doing exactly what you mentioned they were curtailing their load and they were contributing that to the grid and i


think it's like a virtual battery and it builds grid resiliency um so i think that that's something that's going to continue to happen but just going off of that going towards the next phase of this industry what do you think is going to be happening with the energy sector in this next phase right because you mentioned that they're moving towards possibly becoming minors but in this whole timeline is this something that's hap that you see happening in scale like over the next six months to a year or is


this something that is maybe like three to five years away you're going to see some energy companies putting their toes in the water this year actually in the next six months and you know i'll let them make those pronouncements themselves but you know we're very familiar with a number of them because we're partnering with them you'll also see as you look at the renewable energy space so there are two challenges one is renewable energy is intermittent right it basically there's this concept called


the duct curve which is in the middle of the day when consumers actually aren't using electricity most consumers use power from 4 pm until 8 or 9 pm at night because it's air conditioning heating it's washing machines dishwashers cooking etc most renewable energy is made during the day middle of the day and so that duct curve because it represents the belly of a duct on the demand normally the grid would shut down the power generator hey don't send us any more power so they could use that excess energy for bitcoin mining so that


it's not losing that value and return on investment from that bitcoin mining would help pay off the renewable energy deployment so they could deploy even more and then they take a portion of that renewable energy during the middle of the day and they use it for essentially making hydrogen green hydrogen the way you make green hydrogen is you use electricity and you take a water molecule you split it into oxygen and hydrogen and then you store the hydrogen and then when your renewable energy source goes offline because


there's no sun or wind you then spin up a turbine that runs hydrogen and you have very clean energy generation for the dark hours and that's a much better battery than lots of physical batteries because it's uh easy to store and you can turn it on and off as you want it whereas batteries are very expensive and when you're not using them they just cost a lot of money i think what you're going to see is the renewable energy companies are going to be doing bitcoin mining use bitcoin miners as a capacitor


for when the grid needs excess capacity they can take it away from the bitcoin miners and bleed it into the grid they'll use hydrogen for generating more consistent base load energy which will give them more of a 27 24 7 profile which will allow the rest of the power industry to start shutting down more fossil fuel because one of the key things is you need nuclear and you need fossil fuel power generation for that 24 7 base load which renewable can't do yet but renewable will be able to do it with the augmentation of energy storage and


hydrogen and so as that starts developing then what you're also going to see is this movement of power from central utilities out to the edge where communities start generating their own power which essentially brings us back to a world where the grid was originally designed for which is balancing energy load as opposed to transmitting energy load you know you can only send electricity 500 miles before it starts being highly wasted and in the us today arguably we waste upwards of eight percent of the energy we generate


through just load losses so not curtailment this is just loss of energy because you're sending it down a wire and you know that is enough gigawatts of energy to more than power the whole bitcoin mining industry globally which again you know the whole bitcoin mining industry globally uses less than 0.


2 of a percent of the electrical energy generated in the world so very very very small amount of energy and we're very focused also on deploying latest generation hardware so we're deploying s19 xps in the back half of this year so our fleet will be 50 50 x19s and x19 xps the xps are 30 more energy efficient than s19 uh jpros you know in that way we're also reducing the energy consumption from our mining operations and we're very focused as an investor in investing in technologies that will continue to bring bitcoin


mining to a net zero energy going off of that with the regulation that's going to be happening a lot of people are looking at it what's going to happen with regulation in the u.s what's going to happen in some of these other countries how is that going to affect the mining industry and and the sector as a whole how do you think in particular the u.


s is going to respond now that i mean we're talking about much more institutional capital coming in we're talking about really being at the beginning of this industry in many ways like 1997 for the internet you have a lot of people talking about how scary this could be if things are put into law they could limit this industry or if the u.


s makes a crazy move like china did what what do you think the possibilities are or how this will shake up in the u.s typically the best way to figure out what somebody's going to do is look at what the incentives are driving in an industry the bitcoin and the crypto industry today is a multi-trillion dollar industry if the government were to shut it down completely a you have to ask the reason why in the case of china in the case of russia in the case of countries where they've lost control of their own currencies you have to shut


down crypto because it's an easy way for people to put their value their assets into crypto and at that point it's outside of the current financial world that that government controls in the case of china for example it was the issue they wanted to be able to control people's assets and control currency and the minute people put money in bitcoin it's outside of the country you know instantly and so they needed to put a stop to that to control their currency because that's part of how they want to


control their economy in the case of russia today here's kind of some bluster about they're going to make it illegal same reason they need to control the economy if oligarchs and people put all their money into crypto russian government can't freeze it they can't seize it they can't do anything right it's think of all the reasons why bitcoin exists i was at a conference a couple weeks ago in switzerland the cfc conference the crypto finance conference and spoke and one of the other people


speaking was a senior member of the bank of england this official was asked the question is the uk going to ban crypto like other countries he said well you know there's you got to realize we have a very well developed economy and our financial systems are very well developed so we don't need to control currency flight like that in the same way you know we're more focused on protecting consumers and i think in the u.


s it's a very similar thing i think if the u.s had wanted to disallow people from holding assets in crypto like they did with gold back in the 30s you would have seen that long ago crypto isn't a threat to the us dollar bitcoin is an asset class that like art any collectibles will be a portion of people's store of value bitcoin is a store of value it's not a security it's not a monetary unit that is going to displace the dollar anytime soon so i don't think the us government feels threatened in that way what i think the u.s regulators are focused on however


is things that look act and smell like banks or securities should be regulated the same way those incumbents are regulated so if i'm raising money for a company in the traditional kind of equity world i sell shares of stock in my company to investors those investors need to have certain protections well if i'm issuing tokens to people that represent an ownership interest in my company or a right on royalty streams or whatever it might be those investors should have the same protections and so why do you necessarily need a different


regime of regulation for securities if one's digital and one's not so there's some logic in having a common regulatory framework stable coins and altcoins if i'm taking deposits from consumers and then i'm issuing them something else that's what a bank does it lends money against deposits well maybe those altcoin and stablecoin issuers should be licensed the same way banks are so that the consumers aren't harmed because as investors in stable coins and all coins we'd all love to


have the fdic insure them for us well but if they're not banks they can't do it so i think you're going to see a lot of regulation around altcoin coins some of the more creative instruments that are out there more from a consumer protection perspective and trying to create a unified regimen or regime for regulatory frameworks you'll see the white house has been there's been some noise lately about an executive order the white house will issue um not that i'm privy to it but my belief is that it will be very focused


on these things consumer protection and also defining who of the many regulators that exist in the u.s is actually going to be responsible for it because you know the sec is responsible for securities the cftc for commodities you've got the banking treasury etcetera you've got all these people who are responsible for different aspects of this and there isn't clear guidance especially when it's not clear whether a particular token is a security a utility coin or a store of value so yeah i think


the the one cryptocurrency if you would the one token that has the least to fear is bitcoin because the government has a very clear stance that bitcoin is property it's a commodity it's not a security it's something you own you pay capital gains on it the irs is a little check box on your 10 40 form where you you know do you own any any crypto do you want any bitcoin and i think you know bitcoin is here to stay and many other cryptos as well i think there's a lot of cleanup that has to happen but again it's like


any new industry you kind of let this darwinism happen and at some point the the regulators have to step in and create some order you know i'm not pro regulation from a government oversight perspective when it's done in excess i think the right amount of regulation to give people comfort so they understand how the market's going to operate and they know there are rules around the market and consumers can have protections only will adoption of crypto accelerate uh you know the fact that whether it's robin hood or whether it's


uh coinbase you can't call when there's a drop in the market because your trade isn't being executed whether it's stocks or crypto that's a consumer issue and so that needs to get fixed necessarily so i think you know good regulation light regulation and clarity will just make the institutional investors put more money into this business which will be great for everybody it'll give consumers a reason to hold some of their assets in crypto and you'll start seeing normal main street banks rolling out digital


wallets where people will be able to custody and buy and sell bitcoin and ether and whatever other cryptocurrencies make sense yeah that makes sense they want to protect being a consumer they don't want a random group with a white paper to go out and raise 10 billion dollars with a kitty coin or something they got to do their job and i guess it's going to be interesting to see who's in charge of regulating the industry and how that's all going to play out so in terms of minor financing where it is today and


predictions for the future obviously a lot more capitals flowed into the space you're seeing a lot of companies try and go public either via specs or just get access to those capital streams how do you see this playing out for the rest of the year and over the following years as the industry continues to grow becomes more competitive more institutionalized how is all this looking today and and over the next few years go back to the tech boom of late 90s again you know we talked about the internet in 1997. i took a company


public in 2000 that was in the internet of things space and i remember being on the road show talking to investors and they were saying you know you got to lose more money everybody in the internet is losing lots of money so you got to lose a lot more money to get more eyeballs and you know we weren't in the eyeball business and so i found it kind of funny because in 2001 when we did our secondary road show for that company and you know the internet crash had happened as opposed to there being 30 other people out raising money at the same


time as i was i was the only one and they were saying thank god you guys are profitable yeah what's happening now is you've got all these companies all these investor dollars chasing bitcoin mining you know there are arguably 23 24 publicly traded or on the 18 now listed and six more on their way whatever the number is bitcoin miners and they're not all going to survive long term you've got a lot of capital arguably you know somewhere in excess of uh 15 billion dollars that's gone into the space


in investment capital and as people continue to need capital to grow it's going to really be a kind of you've got to be a quality company with a good business it's going to be a lot harder for the company that you know has thousand miners today and is going to have says they're going to have 100 000 miners next year and is going to have to go out and raise money to do it because an investor is going to have a choice i can either go buy stock of one who's already public or one who's you


know got scale and stability and low cost or i can bet on somebody who says they're going to do it but they don't have orders yet for minors and they don't have hosting etc so i think you're going to start seeing a maturation of the capital markets and it's going to get harder for newcomers unless they have a unique angle on what they're doing you know free energy they've developed their own minor and so think about the constraints in this industry it's access to power access to


hosting access to miners and then what prices you're paying for that and if somebody has a unique spin on it then they'll be able to raise capital not unlike in the technology industry if i were to come up with a new way to do online search i'd have to prove to somebody that i'm 10 times better than google at it and that i could somehow be successful i think or the automobile industry which is a very mature industry you know if you're an upstart you know there's been very few upstart companies that have succeeded


tesla's you know a unique case for example of a company that's brand new to such a mature industry but they're leveraging a disruptive technology to do it and i think over the next three or four years larger miners will kind of become more and more established and you'll have like in any typical industry four or five large players a handful of medium tier players and then a bunch of small niche players and you know somebody will come up with something disruptive and eventually displace us who knows that's


the way these these markets work and i'm super excited to see all of the technology innovation that's going to be driven by all the capital that you know we're all generating as miners because we're not selling our bitcoin we're gonna do something with it we're gonna reinvest it and it'll all be in next generation technologies what are you most excited about right now that that you're seeing it could be mining related or tangential to to exactly what marathon's working on like what what technology


from the technologist himself are you most excited about uh that you see right now very excited about web 3.0 and by that i don't mean the metaverse what i do mean is the the abstraction of data from applications so you know today if you're using sap for your finance system the data is held by sap it's not held by you if you're using salesforce for your crm your data is held by salesforce if you're doing social media all of your content is being held by facebook and oh by the way they're


monetizing and making money on it and on you so by data coming down and residing on the blockchain you resolve a lot of problems for one thing i as the owner of my data can control who can use it and monetize it and i can choose to lend my data to or provide facebook with access to some of my data so i can have access to some of their services or i can have them pay me for my data because i don't want to use their services or i can tell them no you can't have access to my data so data ownership becomes very important


and the blockchain is a great way of doing that same thing applies to your healthcare data you know your medical records you go to a doctor you can give them access to view your data on the blockchain but they're never copying it or being able to hold it so when your data only resides in one place granted you know on the blockchain replicated millions of places all over the world can't be ransomware to ever because you can't re-encrypt the blockchain right that's the whole premise how the blockchain is secure so ransomware


disappears as a business completely you start doing things like okay this is something michael sayler's talked about and the folks at twitter are starting to talk about as well where basically okay if you want to communicate with me on twitter dm me on twitter or send me an email you have to have staked at least 100 satoshi and here's why if you send me a bunch of spam or you dm me a bunch of trash or you're trying to do something fraudulent you can lose that stake so imagine all these spam houses


that have they're sending you know millions of email accounts a day they're using they'd have to stake a lot of money and then if they're caught spamming they're going to lose those stakes and the financial incentive of spamming will disappear the financial incentive of trolling will disappear and so instead of having a central authority regulating that let me if i don't want to receive your emails guess what hand over those satoshi's i think we're going to see a lot more of that where as soon


as data moves down onto the blockchain users start getting control of their data you now have a real the user gets their power back and companies like facebook will have to deal with you the consumer to get access to your data if you want to give it to but the key thing is you'll be in control of your data data will never be in transit anywhere and it won't be able to be ransomware but i think that's you know that solves a foundational challenge that's really critical the internet today wouldn't be


what it is if it wasn't for the apple smartphone or the smartphone in general not just apple but android as well why this is the most ubiquitous human machine interface on the planet and 70 of what people do on facebook youtube whatever is all done on the phone so if you had to do that at your desktop it would never have blossomed into the industry that it is today and i think in the world of blockchain and crypto we're not quite there yet we don't have that key technology that all of a sudden makes this ubiquitous all over the place


and that will not be a hardware device i think it'll be software but you know that application that set of tools that transacting trading viewing etc across the broad internet think of it as what the netscape browser was to being able to read stuff on the internet google was to discovering it we're not there yet and that's what i'm excited about you know those are innovations that still have to come and uh you look at what you know andreessen horowitz and the big vc firms are doing you know they're putting


billions of dollars into coming up with what the next you know if you would fang stocks are going to be in the um fang as in you know facebook amazon apple etc are going to be for you know web 3.0 and i that's super exciting and crypto and blockchain obviously are core parts of that and bitcoin mining is a core part of that so that's what i'm super excited about and uh you know i've thankfully been in the tech world for long enough time to see a lot of change and uh i am very excited to see what's yet to come the most


interesting conversations i feel like are the ones where you're speaking with people who not only an understanding foundational understanding of how the system works how obviously markets work economics and the basic fundamentals of running a company but then who can take it that next level and start talking about okay what if we take this innovation here this innovation here how do they overlap how's this going to look and yeah it's it's very clear after speaking with so many people that we're


still in such the early days that 97 is is a stat that's been thrown around but also just when you look at how the mining difficulty works if every four years you have a having and this thing is the last bitcoins being mined in 2140 just given that much time to innovate with bitcoin it almost seems like this type of trajectory that we're on is almost inevitable just from where the incentives lie and having big miners like you guys coming in and help creating a more efficient system more sophistication in the mining


industry i think is really important because later on if you believe bitcoin is going to achieve a lot of the things that people talk about you need that layer one to be extremely extremely secure and tied to real world energy so i got two questions left the second to last one uh one i'm about to ask is going to be related to your views on bitcoin as money and then final one is uh what i like to call the peter teal question so [Laughter] this one first here though is in terms of bitcoin how do you view it in


relation to what it is is money a lot of people are talking about bitcoin being this extremely extremely disruptive innovation not just at the technology level but being the killer application for blockchain because it's tying energy to real-world money and it's being tied to real world money through energy through miners like yourself and everyone else around the world that are decentralized no single miner no single government no single entity can change it because it's a distributed decentralized system so


what what are your thoughts in terms of the implications of this technology and bitcoin in how humans relate to energy and money okay well sit down uh yeah brew a cup of coffee i could do a whole kind of doctoral thesis on this but high level everything that exists is a combination of energy and information molecular structures are just energy with information cellular structures are energy and then dna which is programming information if you would so everything that exists is a combination of energy and information


bitcoin is the most efficient way to convert energy into something portable that is fungible you can't take a tank of hydrogen and use it for a lot of things other than burning the hydrogen or whatever else other inert properties intrinsic properties hydrogen has but you can convert all sorts of energy into bitcoin and that bitcoin you can now use for all sorts of things you can use it to pay for food you can use it to pay for transportation you can convert it back into energy so your bitcoin is the optimal way to convert energy into


something fungible and portable that's how i kind of dumb it down i know the hard money experts but you feel i'm giving very much of a kindergarten explanation here but that's the way i explain it to people around the dinner table at thanksgiving it's kind of you know well what is bitcoin well think of it as it's essentially just energy in a very portable form and when it is in that form you can now use it for lots of things now bitcoin as a currency you know what are important characteristics


of a currency well people want currencies to be relatively stable because there's an understanding that you and i have about a dollar bill and what its purchasing power is and granted yes it's suffering from all sorts of inflation and its value is decreasing but it's not fluctuating 50 percent a day it's moving over the course of a year the dollar arguably is losing 15 a year in value in purchasing value so if everything were denominated in bitcoin and there wasn't another currency yeah then you could consider bitcoin a great


currency and i'm not saying it doesn't have the properties to be a currency or anything like that it's just today the way the regulatory frameworks operate and with the relative illiquidity there is in the market meaning that not very high volume is needed to move the price of bitcoin a lot and create volatility you know bitcoin is taxed like a long-lived intangible asset which means if i buy a bus ticket with a bitcoin i have to worry about the capital gains tax on that bitcoin compared to when i


bought it so there's friction today in our systems for using bitcoin as a currency which i think over time will be ameliorated however i think that the lightning network and stable coins are a great short-term step there meaning you can hold your assets in bitcoin and once a month you transfer some bitcoin into stablecoin and that's what you use for your spending and it's one taxable transaction a month and you're off to the races will the government issue a central bank digital currency i fully


expect most western governments to issue what we'll call a wholesale digital currency which replaces fedwire swift all of these interbank payment settlement systems it won't be a digital currency where you as a consumer open an account at the federal reserve for u.s you know central bank digital currency they'll let the banks manage that so the fed doesn't want to be dealing with consumers it's not structured to not designed to it doesn't have the governance rules and you know banks need to take deposits and do


lending they'll continue to do that the us dollar today is very digital as it is it's just the challenge is the value of the dollar because government can print as much of it as they want and they can issue debt the purchasing value of the dollar declines uh over time and so bitcoin being a very finite asset and it's the number of bitcoin that'll be available is a great store of value and i think that over time you'll see digital currencies becoming more the norm but that's going to take quite some


time you know today sweden so i'm swedish originally you look at sweden they're 97 cashless today i mean you can't buy a bus ticket with cash people look at you funny if you have cash and it's not because of any government regulation it's just people are very pragmatic and practical and you know everything's done on your cell phone in the u.


s we still have 30 of our economy in cash today even during the pandemic we still had 30 percent of transactions being done in cash retail and general purchases so um you'd think with all the e-commerce going on it would have all gone digital because you know credit cards effectively are digital currency it's just fiat-based so if you think of the world that way you can say that well 70 of our economy today which is being done digitally though in us dollars is being done in a us dollar stable coin called the us dollar right so we're 70


digital and then we have 30 that's done in this paper unit of this stable coin called the us dollar so what benefit do consumers have of having a central bank issued digital currency it's not really going to impact the consumer now will it impact banks and settlement and international transactions absolutely and so by settling trade digitally you shave time off you eliminate cost in the intermediaries but you know there's a whole ecosystem of companies and institutions who live because of that friction that they


create today and they will eventually have to evolve or be eliminated just by the advent of these digital currencies but i think bitcoin is a currency that we spend on a daily basis you need to change the tax regime for that to be practical and that's likely not going to happen soon though when you think about it the irs has spent a lot of money building tools to be able to look at money movements on the blockchain and i think is a pretty good handle on taxes so it wouldn't surprise me if within five years you saw bitcoin being


viewed more as a um you have to have a certain amount of it to be taxing on a capital gains basis if you're just you know if you're buying and selling less than ten thousand fifty thousand dollars a year of bitcoin equivalent uh you're not gonna have to declare it so that'll allow for more active use of circulation but again it comes down to practical what's the friction involved you know if i'm going to pay for something with my phone i can choose in my apple wallet to pay with a credit


card my debit card apple cash whatever as a consumer it's not going to bother me it's where do i want to hold my money i want to hold my assets in bitcoin because that's not going to lose value the dollar might but i can move money from bitcoin into the dollar once a month and get away with it so um i know some of the hard money maxis will hate on me for that but that's kind of my my thinking on that i i think these things take time you know in 2000 when the company i took public in the internet of things world i was sure that


by 2005 everything would be connected to the internet because it just made all this sense and here we are 20 plus years later and it's still not quite there we're getting there but it's still not quite there i think this is going to take time too a great answer i i i love digging into these types of things as well with minors because they just understand the energy side and it's clear that you've you've gone down the rabbit hole and i've really thought thought that through so um appreciate you sharing that final


question the peter thiel question what is one belief you hold to be true that the majority of people would disagree with you about i think that we have a tendency as a society and as a species to look at situation and project on the future an outcome which is unreal and i'm very optimistic about society i'm very optimistic about what we're going to do relative to saving the planet and climate change if you believed what the naysayers were saying about bitcoin and energy consumption a few years ago newsweek


even said by 2020 the bitcoin will use all the energy in the on the planet well you know we're at 0.2 of a percent of the global energy so got a ways to go before we get there same thing in the 1970s we're going to run out of oil by the 1980s and the planet won't have sufficient supply and here we are and we're still there's plenty of oil in the ground and we're actually moving away from oil the world will populate itself into non-existence well population growth is slowed dramatically and by 2050 we'll actually


see global population decreases based on current demographic trends you know so all of these disaster scenarios that people have and project i think the older you get the kind of developer realization that you know we adapt and evolve much better than people think and we solve problems through human ingenuity and so i i tend the one area where people would always argue with me is it's kind of this optimistic perspective i have on you know we will survive we will make it through this no matter how bad it is


we're going to figure out a way to do it because that's how we are designed as by nature to be you know humans are designed as survival machines just like a virus is a survival machine look at the pandemic you look at you know covid it went from a highly lethal disease to a disease that spread easily because as if it was killing off its hosts too much it wouldn't survive and so what it does is it ends up surviving by making itself benign instead of malignant and the common cold is a covid like it's a


coronavirus and it may have been something absolutely lethal sometime in the past and now every year you get a cold and so what so i think you know we will find a way to innovate and survive always through all these there is no financial crisis we won't be able to come out of will people get hurt yes that always happens but i think if you look at the greater good um we'll always find a way to resolve it so you know i i tend to be proverbial optimist if you would not to the extent of saying uh oh no matter what


things will be good no there'll be pain and there'll be trouble but we will always find a way to resolve issues whether it's an asteroid coming to hit this planet or whatever it might be i think we'll find a way to solve these problems that's one area where people will argue with me and i've spent more time in board meetings having these types of discussions with companies around the world over the years more times more often than not i'm proven right that's great i mean crypto


uh bitcoin they have the bitcoin maximalist the answer you just gave me makes it sound like you're a human maximalist in a way and uh and that's great i think the more people that take that approach and are optimistic that's what leads in my own personal opinion to a lot of the innovation that you see and the overcoming of challenges because people go and they take that approach and they find that solution and they see the silver lining and and without that there doesn't seem to be as much hope but when


people do have that type of view and i'm of that belief that you have people out there that take that type of approach you have the ability to do pretty much anything so thank you for for that answer thank you for coming on i really appreciate it i think that's a great cheery happy note to finish on thank you very much really appreciate it i'll i'll share one little piece of peter til trivia with you just because we share the last common last name and so uh there's always kind of a lot of stories


that go around about him and and uh if you think about when uh you know he was one of the early investors in facebook and yahoo placed a billion dollar bid and this is something he shared publicly so it's not a news story but he was advocating to mark zuckerberg yeah let's sell let's sell to yahoo for a billion dollars and mark zuckerberg said no you know i'm going to have to go build this company again if i sell it i don't want to do that and that ended up being a very successful outcome for all those


investors you know 100 x more essentially so even peter can sometimes be wrong in his beliefs but that's how we learn as humans it's we only learn from our mistakes our successes don't really teach us a whole lot very very true i'm glad that you had a peter teal star you're the first person that despite that question always being asked to actually have a story on peter thiel's chair great well i thank you so much for having me on and uh happy to come back anytime [Music] [Music] you