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Fred Thiel, CEO MARA, Talks Bitcoin Mining, Energy, & The Future! Ep.89

August 8, 2023

Fred Thiel, CEO of Marathon Digital Holdings, discusses the unique capability of Bitcoin miners to quickly power on and off, aiding grid operators in balancing energy grids. He highlights the misconception that energy grids remain constant, emphasizing the need for constant adjustments to match energy demand. Marathon is committed to sustainable practices and carbon neutrality. Thiel elaborates on MARA's funding, global expansion, and investments in advanced technologies such as blockchain and AI. He addresses market dynamics, the dollar's value, global hash rate, and their impact on the Bitcoin mining industry's future. The conversation provides insights into the intricate intersection of Bitcoin mining, energy management, and emerging technologies.

00:00 The Capability of Bitcoin Miners to Balance the Grid

02:17 Investing in Technology Companies

04:16 From Crypto Trading to Bitcoin Mining

06:20 From CEO to Employee Number Five

08:21 Expansion and Vertical Integration

10:24 The Future of Bitcoin Mining

12:34 Securing the Validity of Bitcoin with Mining

14:46 Mining Bitcoin with Renewable Energy

17:00 The Stranded Energy Dilemma

18:59 Bitcoin Mining and Energy Grid Balancing

21:04 Building Bitcoin Mining Facilities

23:06 Diversification and Geographic Expansion in Bitcoin Mining

25:07 Successful Deployment of Immersion Tanks

27:14 Controlling Each Aspect of the Bitcoin Mining Stack

29:27 Striving for Efficiency in Mining and Pool Communication

31:49 Financial Stability and Value Creation

33:50 Creating Value through Energy Efficiency and Sustainability

35:53 Marathon's Efficient Operations

38:13 Blockchain and AI Integration

40:17 Investment in Technologies for the Bitcoin Blockchain

42:23 Creating Value for Shareholders and Maximizing Returns

44:42 Authorizing Shares for Optionality

46:53 Seizing Opportunities and Remaining Liquid

49:16 The correlation between global liquidity and the price of Bitcoin

51:20 The Impact of Global Hash Rate on Bitcoin Mining

53:17 Potential Drop in Bitcoin Hash Rate

Transcripts are autogenerated. May contain typos.


uh Bitcoin miners have this amazing capability of shutting off quickly and coming back on quickly allowing the grid operators to balance and what very few people realize is the grid is not this constant amount of energy where uh you know the same amount of energy goes in and same amount of energy comes out at all times it varies depending on load you as a consumer always want electrons coming out of the wall the problem is generators can't put more energy into the grid than you're taking out and if you look at during the course of


the day there's a lot of variation to how much energy people are using and so the grid operators have to constantly balance the load on the grid and the generation that's going into the grid and it's really hard to turn on and off a power plant but it's really easy to turn on and off Bitcoin Miners And so welcome to the Roadshow podcast thank you so much for joining us I have the honor of being here today with Fred feel he is CEO of Mara they are setting the pace for the Bitcoin mining industry


they are the largest most energy efficient and most technically Advanced Bitcoin mining companies and they are also one of the largest folders of Bitcoin among publicly traded companies in North America very impressive right there Fred how you doing today I'm doing great thanks for having me on absolutely thanks for being here so you know Fred I'd like to begin with your background your background to bitcoin as well as Mara I know you were a director you have a strong background in crypto overall and blockchain please tell us about that


I'm sure I've been in tech industry for gosh over 40 years I started writing software for banks in London when I was in my was it 17 almost 18 um doing summer internships and I've pretty much worked in every segment of tech software Hardware semiconductors internet digital games digital media um iot kind of data comms uh you name it and um I've had the you know good fortune being able to take some companies public do a lot of M A sit on a lot of boards uh for a while I went to the dark side and ran uh the Investments


for private Equity Fund investing in technology buying software companies and uh also co-founded a venture fund um and I've spent a lot of time advising large private Equity firms uh NBC's relative to how to invest in Tech and I guess you could kind of say my specialty has always been identify Trends and then transform companies so that they can take advantage of them um back in kind of the mid teens in 2015 2016.


um started getting interested in Bitcoin um view you kind of viewed that Bitcoin had gotten enough velocity if you would and momentum that it was becoming more and more relevant um the problem with Bitcoin was that it was trading in these islands of exchanges in different parts of the world and it was really hard for people to really aggregate liquidity and you were constantly having to move money around and the banks made that very difficult so came up with a concept that became sprocket which was essentially to build


a uh an exchange whose order book essentially aggregated all the order books of other exchanges so you could trade in one location with one account one liquidity pool um then being the person that I am and having worked in banking uh kind of went and talked with the regulators and in the U.


S uh you know legal advisors told us ah maybe five years I don't know how many million dollars you're gonna have to have money transmitter licenses in 50 jurisdictions et cetera et cetera okay not going to happen in the U.S went to Switzerland which at the time Zoo uh had the crypto Valley had started they were very open to bitcoin and spoke with Finn mother the Swiss Financial Authority and they said yeah you know you could start something here but you're really going to end up having to have a banking license and as a U.S company you'll


never get a swift banking license okay so we went to the neighbor which was Lichtenstein which actually is a member of the EU as well which had certain benefits and uh talked with the FMA the financial monetary Authority there they said yeah you know crypto we don't have any laws about crypto so what would it take for us to be able to trade crypto they said well maybe we'll write this a crypto law and so we engaged with a law firm and they eventually wrote a crypto law which essentially treated the buying and


selling of Bitcoin and ether um as a foreign exchange and so you only needed a Forex license to do that so we got a Forex license and we started doing over-the-counter Trading um and then you know things went merely on their way until the FMA came to us and said You know guys you're getting too big you need to you need a banking license so uh it was decided that we kind of were going to hand that business off to some locals who had that ability so uh about the same time I had joined the board of marathon uh Marathon history I


mean it's been a public company for many years and gone through a lot of lives it started actually as a Vanadium Mining Company actually extracting minerals um interestingly enough and went into oil and gas uh had another iteration doing some real estate stuff and then um became a patent Troll and Marathon patent group was a company that acquired patents in a variety of areas and one of the patents that Marathon patent group acquired was an underlying patent for the basic technology of using voice a limited instruction set using voice to


control electronic devices what does that mean well that's basically Siri and Alexa and so Marathon patent group sued apple and after a long period of time Apple settled and paid a large licensing fee and then Marathon went and happily sued Amazon thinking they would get the same outcome well Jeff Bezos being who he is um that case is still dragging on uh needless to say uh Marathon started running out of money they went and had to get recapitalized and the people who kind of took over the business at that


point wanted to get into the Bitcoin mining business and so they asked uh a good friend of mine to become CEO that was Marico Komodo who I'd known for many years and he promptly turned around uh and said to me hey you know crypto could you join my board and so I joined the board in 2018 and then you know Merrick's Focus initially was fixing the balance sheet getting the company to a place where it could start buying Miners and Mining and company started some small mining efforts um and then in 2020 uh with the balance


sheet kind of fixed we were able to go out and start raising some money um and kind of you coincidentally you know Bitcoin was also an ascendancy really in that period it started ramping in 2020 into 2021 so we were able to raise quite a lot of money placed a huge order with bitmain which is the largest kind of Hardware provider in the space um and then promptly said about trying to find a place to put those miners uh which we did and uh fast forward to kind of early 2021 and Merrick decided he wanted to retire


um you know I had been scaling businesses all my life so the board kind of decided that well Fred you know you're a board member you know the business you know crypto why don't you become CEO and um they twisted my arm enough to convince me to go back into an operating role and uh so in April 2021 I was employee number five and um today we're 40ish people and we've gone from a very small amount of Bitcoin mining to being one of the largest miners in the world uh and super exciting uh you know I've


been able to build a great team that I'm very grateful for and uh you know we've been able to time the Capital Market cycle so we were able to raise Capital at very attractive rates and you know we're sitting in a position today where we have a lot of uh cash and Bitcoin on our balance sheet we have a lot of Bitcoin that we're generating I think you know uh I saw a chart uh that somebody published yesterday uh on the internet which showed we had won 180 blocks in the month of July which is great work for the team record number


for the company um and you know we're continuing to expand internationally we have a project in the UAE where uh in Abu Dhabi where we're now mining Bitcoin in Partnership there with the Sovereign wealth fund and uh that's exciting uh that project will be fully live um by the end of this year and we're also looking at other parts of the world both in the Gulf region South America Asia Africa Etc as well as in the U.


S and we'll continue to grow um we've also built a very vertically integrated Tech stack so not unlike Apple um who has kind of you think about Apple they have 19 18 market share on the smartphone business but they control 80 plus percent of the profits of the industry um we have our own mining pool we operate uh our we have our own firmware for bit main miners or on controller boards we've co-developed some immersion technology and continue to do a lot of development in that space and we also uh we're one of the initial investors in a


company called auradyne which is a us-based Bitcoin miner manufacturer um the uh you know founders of that company come out of you know nameplate excellent basic design companies like Palo Alto networks and others that teams that have designed some much more complex and much more complicated technology than what Bitcoin miners need but they really understand um and we were able to work with them to help them understand really what are the key necessities of a minor you know being able to control and operate minors


based on a Target price and profitability for Bitcoin uh you know Target electricity costs things like that so you can have the miner automatically tune itself based on market conditions which when you think about operating hundreds of thousands of miners like we do being able to have automation that does that for you makes operating your Bitcoin Farms much more efficient and less expensive obviously plus you're going to maximize your profitability because of the AI That's built in these systems um so together with uh Mayfield and


Celesta to Premiere Venture funds in Silicon Valley uh we did around and raised a little over 80 million dollars for the company and uh now it's off the ground they've built their first miners um and it looks very promising so we're super excited about that so I think a lot of differentiations between other miners you know you've got kind of people who are in the third party hosting and self-minding business like Riot or core and then you have people like you know clean spark ourselves who are pure play mining companies that


don't do third party hosting uh for other people and uh so I think yeah we're gonna see an interesting Market developer over the next year to two years as we go into the having and uh you know obviously depending on where the price of Bitcoin settles close to having um this industry May uh expand or it may shrink so it'll be really exciting to see that very exciting what a journey Marathon as well as you you bring a wealth of experience to Marathon and you've built quite an amazing company you and your


team is it's very impressive I love how you have an Investment Portfolio approach and also vertically integrated from the pools all the way today Asics I mean it's just amazing and I want to go into all of that automation is key we live in a world of declining productivity as well as increasing costs so we need efficiency and an innovation and it appears that marathon is all over that so very exciting and oradine I want to talk about that as well so before we get into all that I want to go back to the basics Bitcoin


tell us Fred what is bitcoin to you now Michael Saylor says economic energy people say freedom truth it's going to be a global Reserve asset currency give us your thoughts on what Bitcoin is to you please so Bitcoin to me is an asset that allows people to have full control of their financial Holdings it's fully decentralized it can't be debased um you know you can't do fractional lending using Bitcoin it has all of the attributes of a finite Supply asset uh where you as the holder can be in full


control of it even to the extent that you know not your keys not your coins you can hold Bitcoin uh in your own wallet that no third party can control so it's a huge benefit but Bitcoin to have any value requires that somebody is mining Bitcoin somewhere in the world and so we believe that what we do and what Marathon does is secures the validity long term uh of Bitcoin because by Mining and being one of the bigger miners in the industry and you know even though we're one of the biggest in the world we have


less than five percent market share most probably of the global hash rate today um what we do enables people all over the world to be able to hold Bitcoin use Bitcoin uh you know put their life savings potentially in Bitcoin lift certain people out of poverty provide unbanked people access to uh funding uh and all of the things that Bitcoin does for those societies by being a Bitcoin miner and being able to make sure that Bitcoin is Will continually be mined somewhere in the world we can ensure that Bitcoin will have value for the


long term and so that's our mission really is to we secure the Bitcoin Network and we make sure that Bitcoin will always be there yeah beautiful I actually got that right you have an amazing website I urge everyone to check out marathons amazing website I love the colors as well but your primary Mission your welcome is to enhance the Bitcoin Network by sustainably increasing your hash rate so I wanted you to just tell us about that some of our listeners may not be familiar with that how what tell us about that and how do you anticipate


doing that so we predominantly mind using uh renewable energy so we sit for example in West Texas on the grounds of a wind farm uh in a place called uh King Mountain and if you look at the videos on our website you'll see the windmills you know the big windmills right behind uh the containers that hold the miners um and so we're buying energy off the wind farm and then when the wind farm can't produce energy we're supplementing with grid energy when we do use grid energy any grid energy that we use that


has a carbon footprint to it we offset that with renewable energy credits so the goal for Marathon is to always operate all of our Bitcoin mining 100 carbon neutral so while we're procuring well over 50 percent of our energy from renewable sources uh what isn't we offset with renewable energy credits so unlike using carbon credits renewable energy credits are generated when you're creating energy using renewable means so you can get carbon credits by um for example not cutting down trees you can generate carbon credits and so


we view that as greenwashing but if you're actually investing in creating more sources of renewable energy and you're creating renewable energy then those offsets we think um essentially you're saying hey I made carbon free energy here you can use that to offset carbon energy so that allows us to operate fully carbon neutral from a perspective of our Bitcoin mining operations and as we continue to expand we're looking at more and more fully renewable sources Hydro is one area geothermal is another area we're looking


at one of the key areas we're looking at now is also landfill gas so if you think about landfills they generate a lot of methane gas that methane gas is 80 times more damaging to the environment than carbon dioxide if we can use that landfill gas to generate energy then we can use that to mine Bitcoin so we're taking something 80 times more damaging than carbon dioxide and removing it from the atmosphere if you would while producing granted some carbon dioxide but we also generate a huge amount of renewable


energy credits by doing that which can more than offset any carbon we're creating so we believe that our future is very much around identifying these types of stranded energy you know there's tons of geothermal energy stranded in Africa there's tons of hydro energy stranded in areas where they've built dams they produce energy but they're no customers to buy that energy there's tons of solar energy that's available that can't be sold because there aren't adequate amounts of


transmission capacity interconnect uh capacity and if you look just in the U.S today um and this has become a big issue from ferc which is the the Federal Energy regulator um that the the lead time today for an energy renewable energy project just to connect to the grid and you have to connect to the grid to sell your energy has gotten so long uh because of the paperwork in the bureaucracy that they're starting to strip out kind of uh many of the contingencies and conditions previously that existed because the


backlog had reached a point where almost 80 percent of renewable energy projects have a likelihood of being canceled because they were never going to get to financial viability because they would never get to connect and so we believe the best thing we can do for renewable energy transition in the U.


S and other parts of the world is to be a base load customer for those sites we can go partner with a solar developer if they can develop a solar site sell us all their energy until they get a connection to the internet and can sell the electricity and a solar site that has been built is going to get preference for interconnect over one that's just in planning stages because it's been financed and it's been executed so we provide a huge benefit to the renewable energy sector that way the other way we provide It Is by balancing the grid


again Bitcoin miners have this amazing capability of shutting off quickly and coming back on quickly allowing the grid operators to balance and what very few people realize is the grid is not this constant amount of energy where uh you know the same amount of energy goes in and same amount of energy comes out at all times it varies depending on load you as a consumer always want electrons coming out of the wall the problem is generators can't put more energy into the grid than you're taping out and if you look at during the course of


the day there's a lot of variation to how much energy people are using and so the grid operators have to constantly balance the load on the grid and the generation that's going into the grid and it's really hard to turn on and off a power plant but it's really easy to turn on and off Bitcoin Miners and so that's the role we play in the energy grid which is something again we're very focused on being able to do and proud to do it in Texas and North Dakota and other states love that Marathon truly thinking


outside the blocks absolutely this is amazing I mean we have all this wasted energy we have rolling blackouts we have so many issues uh nowadays so that's amazing that you're doing that and um you know it it's just key to soak up that excess and the fact that you're able to do that and convert and use it for Bitcoin mining is just brilliant just amazing I love that so that was a key concept that I want to talk about thank you so much for enlightening us about that you know marathon is decentralized just like Bitcoin how


perfect so I know that you have Fleet across the world so you're Diversified and you're decentralized with regard to location however you also Outsource and I love that to third parties could you tell us about that thinking was Marathon always like this or is this something you brought to the company how has that evolved and what do you plan for the future to continue decentralizing so this is part of a transition we started in early 2021 so if you think about um the challenge for Bitcoin miners is if you're going to build a brand new


site you have to first identify a location where you have access to power so you have to find a substation you have to negotiate with the power provider to get access to that substation and be able to put load on it um once you've gone through that whole process you then have to tie up some land where you can build your data center then you have to order Miners and then you have to order containers or build a building and so the process from start to finish can be as short as 12 months or as long as 24 36 months and we wanted


to grow very rapidly and so we wanted to operate with agility and be asset light meaning we wanted to essentially use other people who were going to go identify locations build sites and then we were just going to go plug our miners in and grow now you could say but that sounds economically sustainable long term well if you think about it you want to mine as much Bitcoin as you can before the next having and so time to mind the time it takes for you from when you invest a dollar until you're reaping Bitcoin out


of it it's super critical and so if the difference uh in the cost to mine a Bitcoin is you know a couple cents a kilowatt hour in times when the price of Bitcoin is going up that has almost zero impact and so if you can get time to Market by doing that um you can get ahead of everybody and that was our focus in 2021 when the market was on a chair it was just deployed deployed deploy as fast as we could and so then you go in the crypto winter of 2022 and of course the market now changes to one where you have to be very


efficient and so we started there looking for ways to increase our efficiencies so today you know as you mentioned we operate a portfolio approach we have uh Bitcoin mining facilities where we work with third parties we have who own and operate those sites we just bring our miners plug them in they charge us a fee for energy plus hosting we also have sites where we have designed and built the site together with Partners uh such as in UAE where we designed the full site uh both sites and we partnered with our partners in UAE


locally for Capital and they invested in the site and we've built that site there's now an operations team on the ground running that site and that's more one where we control the cost of energy and operate the hosting site and then we have things in the Middle where we have a third party operating a site but we control the PPA for the energy ourselves and we're controlling the direct cost of energy so by having that portfolio approach it's just like with Investments you need diversification because in


times of rapid growth you can use the agile acid light model in times of uh you know price pressure on bitcoin then you can use the owned and operated model and if you want to continue to grow quickly you can use the third party Capital model which is kind of what we did in UAE so we believe we have a very Diversified approach to it we also are Diversified geographically Texas North Dakota UAE for example and we'll continue to diversify over time so we're about 50 percent domestic 50 International and then we're also


starting to diversify the hardware that we use not just using bitmain machines but also beginning to use things like oradine and others and then you know different Technologies you know immersion single phase dual phase immersion uh as well as air cold and so we're super excited about what the future has in front of us um and we're also looking forward to contributing more and more technology to the industry very exciting I know back in February when I heard the news about Abu Dhabi and your expansion there was very


impressive could you give us updates on how that facility is is is going on over there sure so um we ran a pilot late last year with one megawatt of energy to see was it feasible you know we're talking about um ambient temperatures well over 100 degrees uh where in the U.S you can't run air cooled miners much above 90 degrees uh so it would have to be immersion plus you have high humidity which makes air cool even harder and so we went about designing a solution um where we could essentially build um immersion tanks that once you started


operations in those tanks they would use need very little human intervention to operate they would essentially have all of the Automation and iot capabilities so that you could remotely operate them that pilot site uh ran for over 100 days before a human being had to go back on site and touch anything so that proved to us that uh you know we had kind of cracked the code on it and then um we worked with our partners to negotiate an agreement signed that agreement in February and then went about locking up the actual physical


sites there are two sites one's a 50 megawatt site one's a 200 megawatt site um and tying up the power agreements and all the other kind of things that we would have to do now this is an example of a deal that went very quickly we signed that agreement in February we went live with the first miners mining in July so today the 50 megawatt site is all is virtually fully deployed and um operational the second 200 megawatt site uh has been all of the construction work's been done the containers are being delivered miners being installed


and uh that should start mining here roughly in the next 30 to 45 days and then that'll be fully complete by the end of this year so super excited about that project and how well that's come together granted part of it is because we have the right Partners uh on the ground uh there and um who had the right amount of influence and control over things uh and part of it was just you know we really designed and built a a top-notch facility and how that operates so we're very excited about that we're


already mining Bitcoin there and uh you know that appears to be a great success so absolutely very exciting for sure and absolutely It's always important about your Partnerships so that's always key so thank you so much for filling Us in I know a lot of people are interested to know more about that I want to talk about your vertically integrated technology which I find just fascinating and you know on your website you talk about it but if you could tell us more about it yeah you say that control of influence each aspect of the Bitcoin


mining stack from pool down to Asics could you tell us about that please sure so you know Apple again is a great example of that if you think about the Apple iPhone you know this iPhone uh everything from the cloud iCloud software the app Marketplace iTunes Etc all the way down to the operating system on the phone the chips the Asics and the phone a lot of the components all designed and owned by Apple when you do that you can create efficiencies and Integrations that you can't do when you're using third-party


products and here's why it's so important if you think about Bitcoin mining today the vast majority of miners use third-party pools those third-party pools have to support a broad array of miners all from old generation S9 machines up to the new generation machines and they have to support them so that they'll all interoperate well and they have to be able to support miners connecting new miners turning miners off hash rate coming on hash rate coming off they have to support the security aspect of being able to


validate that a miner that's connecting to the pool is the minor they say they are and that hash rate's not going off in different places and then mining firmware also has the firmware and the miner is designed for that minor to run as a standalone Miner so it has a pretty heavy software stack in it as opposed to just having the Bare Bones that it needs to be one minor in a huge Fleet of minors and same thing with the A6 the ability to control all the way down to a single Asic on a minor versus the whole Miner


so for us by being able to strip out all of the inefficiencies of third-party pools because we operate a private pool we don't have any third parties stripping out all the inefficiencies of the firmware in the miners so it only has the core pieces it needs and so when the miner and the pool communicate they're doing it in a way that's extra efficient compared to how third-party pools same thing all the way down to the A6 those little efficiency gains means the time it takes for us to do things is


infinitesimally smaller then third-party based products and that little tiny tiny tiny difference has a huge impact because in a race to win a block it's a nanosecond difference between when one Miner wins it versus another and so the only thing we're looking at is stripping out inefficiencies so we can have a better chance at winning each race for every block that's what having a vertically integrated Tech stack potentially gives us wow three key words there that are so important nowadays efficiency


streamlining and Innovation and that's key and we need that Automation and you're removing those inefficiencies absolutely amazing and I love how we discussed before how you leverage and you Outsource your third-party hosting however you operate your own mining pool called Mara pool so very impressive I love that now I want to go to your Bitcoin treasury you are one of the largest holders of all publicly traded companies in North America so you take Marathon takes a long-term view on bitcoin and what I noticed is that you


reinvest the commodity that you produce could you tell us about your thinking on all that and how Marathon views Bitcoin with this long-term View so we believe because we believe in Bitcoin that holding Bitcoin for the long term is very important by the same token no pun intended um we believe that like oil companies they produce oil they sell oil to fund their operations and then they Bank the profits for us the profits are the excess Bitcoin that we mine over and above our operating costs if you go back two years ago we weren't generating


enough Bitcoin to cover our operating expenses our energy costs our people and all that so we were it had to be in the marketplace where we were essentially taking Equity or debt and using that to fund operations today we produce more Bitcoin than it costs for us to run our business and so that excess Bitcoin we continue to add to our treasury on the balance sheet so we're not having to dilute our shareholders for operating expenses and we're able to operate virtually debt free the only debt the company has today is a convertible bond


that we um put in place at the end of 2021 which expires in 2020 at the end of 2026 which has a one percent coupon on it um which is very inexpensive debt for us to carry on the balance sheet um but that's the only debt we have everything else we have is ample amounts of cash and Bitcoin and today we have uh you know somewhere north of 300 million dollars uh of Bitcoin on the balance sheet and typically we end each month with around 100 million dollars of cash on the balance sheet so in a position where we can take advantage of


anything that happens in the marketplace um plus we have a very liquid stock which allows us to have the opportunity that if we need to we can sell Equity to be able to take advantage of situations but we're very focused on everything we do um really having a goal of does this create value for our shareholders right so you know whether we're expanding in a particular region you know we look at our whole group of stakeholders and you know stakeholders include more than just shareholders they include our employees they include our


partners they include the Societies in where we operate right are we doing things that can help the cities towns countries where we operate um be more efficient provide better services to their people and you know UAE is this great example of that um this is a country where though it's extremely wealthy um in Abu Dhabi in the winter time they only need a gigawatt of energy roughly to operate uh the Grid in the summertime though they need four gigawatts of energy and so you have this asymmetry in the amount of energy they have all this


capacity that they only use at Peak in the summertime they also desalinate sea water to make it drinkable water so their people have access to fresh water well how do they do that well they use the heat from the power generation which means that because water consumption is constant as opposed to electrical consumption they have to keep this power generation running all the time even though they're not necessarily selling the energy plus the government pays a subsidy for the electricity to keep the price low


for the population in the country so by being able to partner with us and mine Bitcoin with the excess energy they're able to do a number of things one they're not wasting the energy that they use that you creates the heat for the D cell they're using up all of that excess capacity in the winter time and in the spring and Autumn and parts of the summer the Bitcoin profits that they earn through the partnership allow them to compensate them more than what they're paying in the way of subsidies to their


population for the electrical cost and their grid operates much better and so huge benefit to the society and the population in the country and so you know that's what we try and do same thing with what we're doing in West Texas with uh you know the wind farm operator there that wind farm is able to sell us energy and be more profitable so they can lower the cost of energy they're selling to the grid and that lowers the overall cost of energy for people in the state of Texas if we weren't using the excess energy


they would have to sell at a higher price to be profitable marathon is creating value not only for its shareholders but for everyone one that does any business with them and any partnership and all the people in these areas very impressive sustainability social responsibility inefficiency at the core you know when you tell us that you're debt free except for this minor in basically almost insignificant bond that you talk about um you know we have Rising costs of debt and capital and we're higher for longer


most likely and to see a company that can run as efficiently as Marathon being basically debt free it's very impressive and uh thank you so much for sharing that Fred this is I have to say I've known quite a bit about Marathon but this is really um really enlightening and to all the listeners very impressive I want to talk about your Investments now marathon invests in the most Advanced Technologies and oradine which you mentioned earlier is definitely one of them extremely Advanced I have to say to be able to have their series their


raised during a bear market and um very exciting I wanna I wanna talk about how they leverage Ai blockchain and privacy to help create they're going to be an industry leader in my opinion what they've been able to do so tell us your thoughts with oradine and what you foresee for the future there so um you know obviously we're an investor in the company they have a product roadmap that we've helped them and we've provided input to their product roadmap but they're an independent company they're off doing


their own thing and uh you know we're super excited about the future and where they're going um they're very focused on looking at the convergence of AI and uh blockchain we believe that like many people if you think about these large learning models and AI there's an old expression in the computer industry garbage in garbage out if you give biased data to an AI Learning System it will have a biased approach to its knowledge and so there will come a time where people will want to be able to authenticate that the data


that went into the AI learning model was 100 true and isn't biased or isn't in any way hasn't been adulterated because there's an attack Vector with AI which is you essentially purposely feed an AI model incorrect data so it'll give an incorrect output um and this goes all the way down to AI systems that are used to control Factory processes and grids if you can cheat an ai's sensors meaning you can get an AI to think a water pump is working fine but it's actually broken and flooding


somewhere then it won't know any better and so more and more companies as time goes on we'll look to use blockchain Technologies to post sensor status Telemetry systems all sorts of data so that AIS will know this data is valid and can't be manipulated because it's on a blockchain so we believe that there'll be a huge need for blockchains that intersect with AI going forward in the future and one of the things auradyne is working on is looking at how that's going to happen they're looking around


things like zero knowledge proofs Etc and so Bitcoin mining is kind of one thing they're doing they're also doing a bunch of other things that I think are super exciting and you know hopefully we'll be able to benefit from those as we continue to invest in other Technologies you know we look at Bitcoin as being the most secure the most decentralized blockchain out there we think it has many advantages over ethereum from a perspective of security and also decentralization ethereum is a programmable blockchain


Bitcoin is not Bitcoin is more similar to what the internet is like you know the internet runs on TCP and oh by the way the Internet's been around for lots of years but most internet applications and devices still run on tcpip version four which has been around for decades even though we've since Advanced to version six and Beyond most things run on version four and the benefit is because the block Because the Internet doesn't change everything built on top of it can continue to advance and add value


We Believe Bitcoin and blockchain is the same way the Bitcoin blockchain the most secure most decentralized blockchain out there it does one thing really well which is it manages its ledgers its manages settlement and so you can build on top of Bitcoin whether it's with lightning other things at Layer Two and layer three all sorts of very impressive applications and with the Advent now of Tap Root and Tarot and these other Technologies you'll now start seeing smart contracts and side chains come to the Bitcoin ecosystem and


we believe because it's the most secure and the most decentralized financial institutions or institutions that need to ensure that the data that's on the blockchain will always be there can't be adulterated and will be secure are going to seek to develop and design stuff to run on the Bitcoin blockchain so we're very focused on investing in technologies that are the picks and shovels if you would what are the things that people are going to need to be able to use to better and more easily develop


Technologies and applications on top of the Bitcoin blockchain you know we're not going to come out with the next D5 application but we may very well come out with a tool set that lets you build one very nice you know I like to ask you Brad if you could share with us I understand that some things can't be shared but any investment vertically or horizontal integration that you're looking for for your next Acquisitions whether it be minors or anything else can you share where you're looking or what your thoughts are


um sure I mean the high level when you think about consolidation in this industry um the key driver what's of most interest to people uh is going to be access to low-cost energy and good power contracts uh if you buy a miner that is in financial trouble they're in financial trouble for two reasons they either have an upside down Capital stack they borrowed money at two high interest or they did something wrong financially by wrong I don't mean illegally it just means they mismanage their finances or they have you know bad power


agreements and so they can't mine profitably or they have old minors and a good power agreement the problem is if you think about it in the Bitcoin mining industry when the price of Bitcoin drops the value of all the Assets in the industry go down and the replacement cost essentially also goes down and so as we look at acquisition targets um it doesn't make sense for us to buy a company that has old generation miners running at poor power prices um with potentially management team that hasn't been able to execute well hence


they're in trouble and they need to go and be sold so we're only looking for really assets that will add value again it gets back to this comment I made about we're trying to create value for our shareholders and so you know where we look for things are access to power low-cost Partnerships that are critical access to technologies that are critical to make this industry more efficient more productive and get us towards uh lower cost energy so you know if you were to kind of ask me to wave a magic


wand I would say that the core technology I'm looking for is what's going to create zero cost energy for me because if I have zero cost energy then I can mine no matter what the price of Bitcoin is no matter what the global hash rate is and it doesn't cost me anything other than Capital to buy miners absolutely it's always about increasing those margins and if we can lower our expenses to barely nothing as you reference then it's all pure profit and absolutely that I like that strategy that Investment Portfolio approach once


again diversification and maximizing returns while minimizing risks so uh key points there thank you so much for that you know recently I think it was yesterday and AK came out saying how Marathon increased authorized shares from 200 million to 500 million could you I know some people had questions about that could you tell us any any plans you have with with those higher amount of authorized shares if you could tell us about that please sure um so you know one of the challenges um we and other minors in our industry


have is typically because the initial interest in uh Bitcoin miners from the stock market investors was predominantly from retail investors so we have thousands and thousands of investors many of whom don't vote on matters and so uh we have tried a couple of years in a row to pass increases in our uh authorized shares uh and uh because you need over 50 percent of your shareholders actually or shares shareholders representing over 50 of your shares um outstanding and issued to vote it can be very hard and very expensive you know


we have to hire proxy solicitors we have to print proxies so a lot of expense that's destroying value for our shareholders as opposed to creating value because we're spending money on something um that uh really uh could be better spent on investing in growth instead and so we said okay let's find a way to get the authorization to increase shares and let's get an authorization that's big enough so we have plenty of shares for the future so we don't have to go back to the mill every year


so think of it as optionality we wanted to have enough shares available so we have optionality doesn't mean we're going to use them in the short term the medium term and maybe not in the long term who knows don't know yet but it gives us optionality and if there's one thing you'll always hear me talk about is you know the one thing you never want to lose is optionality because that gives you the ability to take advantage of luck and luck is really manufactured it's opportunity meets preparation and


preparation part of preparation is optionality so we think that having the shares authorized gives us the options now midterm or in the long term to be able to do things uh and take advantage of situations in the marketplace to move quickly you know just if you go back to this convertible bond that we raised in late 2021 you know we were able to raise it at the peak of the market um you know again with a one percent coupon on it in a time when you know uh soon thereafter nobody could raise any capital for Bitcoin miners so being able


to time markets and do things requires that you're prepared and able to do it and that's why we want to be in a position where we have maximum optionality love that well said Fred um you know I actually said similar yesterday when I saw it it's important to remain liquid to seize opportunities and as a company increasing your authorized share so you have the capability should you need to seize any opportunities when the time is right like you did with that Bond very smart there and you have that capability so


optionality is key very well said I love that perfect that was great now um I want to go into the mining having okay A lot of people are confused as to what's going to happen next spring and I'd love to hear it directly from you CEO of the leading Bitcoin mining company Marathon tell us and our viewers what do you foresee that will occur during this mining period and what are your thoughts before during and after this having um well let me break out my crystal ball uh patterns and what so um I think a couple of things one is the


price of Bitcoin these days is driven much more by liquidity Cycles than it is by having Cycles you know the having cycle is a psychological event and it only impacts minors really if you think about Investors in Bitcoin today at maximum production the Bitcoin blockchain issues 900 Bitcoin per day in subsidies block subsidies that's 900 Bitcoin per day in a market where their trades anywhere from 10 billion dollars plus the Bitcoin a day so the supply the stock to flow kind of theory about new Supply coming to the market if miners


sold a hundred percent of their production it's only 900 Bitcoin a day it's not going to move the market hugely bigger events are the emotional events like uh you know FTX or the US government selling its Silk Road stockpile of thousands tens of thousands of Bitcoin um those are things that move the market so it's not the stock to flow at this point that I think in the last cycle was the last time sort of mining Supply really impacted the price of Bitcoin so it's all about global liquidity so if you think about global liquidity


we're going into a cycle now where the U.S fed will likely stop raising interest rates sometime this year uh likely start um easing maybe back half of next year or later but at the end of the day if the U.S stops raising and other countries and the economies keep raising you're going to start seeing a decrease in the value of the dollar when the dollar decreases that correlates to an increase in the price of Bitcoin especially as most investors in the US are looking at Dollar denominated Bitcoin anyway


so in other parts of the world as the value the dollar drops typically what ends up happening is the price of Bitcoin goes up there's a very high correlation between the price of Bitcoin and the value of the US dollar it's inverse it's a very high correlation between liquidity cycles and the price of Bitcoin and lots of economists and lots of chartists and Technical analysts have you know been tweeting about this over the past six months or so so if you look at these Global liquidity Cycles I think what you'll see is


um you know the uh if there is a mild recession or a sector by sector recession in the U.S it means the U.S is going to have to increase liquidity flows which would bode well for Bitcoin uh you can see that Bitcoin has be started decorating or dis-correlating from Equity markets um where traditional was very highly correlated as a matter of fact the volatility in Bitcoin is less than that of the NASDAQ today so it's becoming much more what people really expected Bitcoin to be which is essentially this uh digital gold if you would great place


to store value put your money in Bitcoin the markets are going up and down and gyrating and it's holding its value so if you think about global liquidity flows and what people are forecasting I think there should be a tendency for Bitcoin to increase in price um as we go into next year and um into the latter part of next year early part of 2025.


um and again I'm talking about the price of Bitcoin from an investor standpoint not from a minor who's worrying about having Cycles um so if you layer on top of that the having Cycles yeah it happens to match up pretty well also but you know if you back test liquidity Global liquidity and having Cycles they tend to March fairly uh correlated so that's the price of Bitcoin then you have to look at Global hash rate so Global hash rate impacts minor profitability because it determines how much hash rate we have to contribute to


the global uh you know hash rate to be able to mine the amount of Bitcoin we need to mine and so you've seen Global hash rate growing not so much because publicly traded miners like Marathon are adding lots of hash rate and we've tripled the amount of hash rate we have online kind of at this point in the year compared to where we were at the end of last year already um and we'll continue to likely grow uh over the balance of this year and into next year um but there are also new miners that have come into the marketplace now look


at our partners in UAE look at there are minors in Russia that have added huge amounts of capacity there are minors in other places uh Kyrgyzstan there was an article about the government of Kyrgyzstan wanting to start mining their uh so you're seeing more and more uh Sovereign mining starting to happen around the world and I think that's going to continue to happen so what does that mean well for people to invest in more minors and grow mining capacity they have to have access to Capital there are very few minors today in the


U.S who have good access to Capital markets because liquidity has kind of dried up um so you have the larger miners Riot ourselves uh and some others who have the benefit of being able to tap Equity markets many privately held miners don't have that they only have debt markets and with debt being priced worded today you can't get that and you can't get equipment financing today so that's going to drive the bigger miners to keep growing and as we depending on where Bitcoin is at the having if Bitcoin


isn't above 50 000 at the time of the having you'll see a drop in hash rate reason why is Bitcoin at 50 000 with the hash rate continue to grow at the rate it's been growing this year and it's up considerably over last year um is about the same as Bitcoin at twenty thousand prehabbing so if Bitcoin worth 20 000 today there are a lot of miners who would be squeaky wheels and having problems so if Bitcoin isn't north of fifty thousand dollars come to having they're going to be miners that are


going to have to unplug Miners And so some analysts are forecasting a 20 to 30 percent drop in hash rate we'll see if Bitcoin is above 50 000 that may not happen uh so that's going to kind of Drive things so we kind of look at three scenarios always bear case bold case base case and we plan for all three contingencies and again we maintain optionality so we can hit the accelerator button if we think it's going to be a bold case and if it's going to be a bear case we have contingency plans for optimizing so


we're constantly focused on kind of three things as a company energizing capacity optimizing existing capacity and diversifying those are our three things that we focus on and we put kind of numerators to those numbers to those that are the kpis that drive our teams and that's what we're focused on a very simple set of goals and we keep everybody really focused on love that you answered it perfectly that's exactly what I was looking for and thank you so much you know challenges bring opportunities and you


can definitely expand your business and growth and not take advantage of opportunities that appear during this having cycle and you've got all the bases covered love that the optionality is key thank you so much Fred this has been absolutely wonderful please tell our viewers how they can follow you on Twitter and Linkedin as well as read more about Marathon digital Holdings sure so I'm on Twitter at the letter F the letter G and then t-h-bl um you can find me just you know you can connect with us at marathonis mara.com


m-a-r-a.com is our website and um you know just search for me on LinkedIn and you'll find me there by name so there luckily there are not too many people with my name so I'm easy to find absolutely well thank you so much and thank you to all the listeners thank you very much it's a pleasure to be Beyond