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The Future of Bitcoin Mining with Fred Thiel

May 17, 2023

Fred Thiel, CEO of Marathon Digital Holdings, discusses Marathon's Bitcoin mining operations, which began in 2017 and have expanded to nearly 10 facilities across the US and UAE, with a focus on utilizing renewable energy sources. The company is transitioning to immersion cooling for miners and are building a 250 MW immersion-based site in the UAE, aiming to be the largest mining operation in the Middle East. Thiel emphasizes a commitment to energy efficiency and sustainability while also developing technology for the broader Bitcoin mining industry.

00:00 Intro

0:30 Marathon Digital Holding

4:13 New Technology

12:30 Current Architecture

16:05 Competition

19:05 Cyclical Models

23:57 Having

28:03 Hash Rate

31:36 Regulatory

38:10 Adoption metrics

41:26 Biggest challenges

Transcripts are autogenerated. May contain typos.


foreign [Music] welcome back to the Bitcoin layer I'm Nick Bhatia and today we have Fred teal he is the chairman and CEO of marathon digital Holdings Fred thank you so much for joining us today great to be here Fred talk to us about your firm Marathon walk us through your operations and uh what it is that you guys do on the mining front sure so uh Marathon digital holding started mining um operations back in 2017 with small number of miners outsourced at a facility up in Canada today we operate across almost 10 facilities uh around


the U.S and um soon to be in UAE primarily in Texas we operate behind the meter at a large wind farm in West Texas we also have a handful of other smaller sites in Texas and then our newest sites are in North Dakota which are adjacent to a large Wind Farm there so our model is typically to sit behind the meter or adjacent to a renewable energy source so we're drawing predominantly power that is renewable whatever is not renewable we're offsetting um with renewable energy credits to make sure that we're operating uh you know


with no carbon footprint if you would from a mining operations perspective um we're predominantly historically been air cooled mining we're moving heavily into immersion our first fully immersion based site is the one we're building in UAE right now which is a 250 megawatt um facility together with our partners uh there um that'll be the largest digital asset uh mining operation in the Middle East the 250 megawatts it's all immersion it's based on um the First full implementation of our


technology stack where it's our pool or firmware in the miners or controller boards and um our co-developed immersion technology so we're super excited about that because it allows us to operate in very hostile environments from a climate perspective high heat high humidity with very light touch or Pilot installation there in UAE ran over 100 days before an engineer had to touch a single liner which is uh you know when you think about the operating cost of mining it's predominantly people and touching miners


so we're excited about that um we're well on our way to hitting our goal of 23 hexa hash by the middle of this year at 23x the hash will be the largest self-miner of publicly traded companies in the world um I'm sure there's some nation states potentially that are mining Bitcoin that could be bigger than us but amongst public trading companies will be one of the largest in the world and will continue to expand from there so we're super excited to be really focused on not just mining Bitcoin but also


developing technology for the Bitcoin mining industry uh you know all the way from the pool down to the Asics uh today you may have seen a press release from a company called auradine that we're an investor in together with Mayfield fund and Celesta it's a total 81 million dollar investment by the three of us and some other investors um into this company that's going to develop web 3.


0 infrastructure technology which we're very excited about so great thank you for bringing us up to speed on marathons operations now there's so much to unpack with what you started with I want to discuss what are the advancements in pools Asics and I want to discuss immersion technology so let's start with immersion you mentioned UAE so is this is this in Dubai or close to Dubai can you tell us anything more about the facility and then explain to the audience please air cooled traditionally is how we cool miners because they uh you know let off


a lot of heat so what is this new technology and that you're implementing in the UAE sure so uh UAE uh and specifically in Abu Dhabi which is one of the Emirate countries it's the uh Emirate that kind of generates the majority of the revenues for uh the seven uh states that come together under UAE um so it is uh you know an environment where the you know ambient temperature can be 115 120 degrees Fahrenheit with 99 humidity because it's on the gulf it's very warm water so uh if you think about it a traditional Miner


as the temperature gets above 90 degrees ambient it gets to be too hot for an air cooled Miner to operate typically um the way miners cool themselves is they suck in air uh and flow that air across the circuit board where the actual A6 the chips that do most of the hard calc generate huge amounts of heat and so the traditional miners that you can think of these shoe boxes that sit on shelves with big fans that sort of suck air from outside through the minor and then exhaust it typically through either a chimney or out the other side


of a container if it's a container installation and you know the drawback with that system is that uh when you're operating in places like Texas in the summertime temperatures get above 90 degrees the miners start shutting down to protect themselves and so you are automatically curtailed not because of energy but because of the fact it's just too hot to operate with immersion uh you can essentially use fluid as a way to move heat away from the chips and not to get into the laws of thermodynamics but basically


fluid is anywhere upwards of 30 times more conductive for heat than air and so in theory by using fluid you can suck more heat away from the chips and that way the miner can operate better and you use a fluid that's called a dielectric fluid meaning it does not conduct electricity and so the miners are literally put into Vats almost you could think of them as tanks and they're submerged into these tanks you remove the fans you remove some other things um and they operate in this fluid and the fluid circulates and the fluid uh like a


car radiator the way you know your engine is kept cool basically the fluid circulates through the tank sucks the heat away it goes into essentially a chiller which is just like a radiator that has a fan attached to it and that blows cool air over the radiator which cools the liquid and then the cool liquid is pumped back into the tank so it's a closed loop cycle if you would we don't use water to cool the miners at all unlike other immersion facilities this is 100 air cooled um the fluid is air cooled air chilled and


you know part of the unique nature of what we've been able to do here is in working with our um container manufacturing partner is essentially have a container that doesn't need liquid why was that important well in UAE they don't have well water all of their water comes from D cell so they're desalinating ocean water and so it's very expensive water and so if you think about large sites that typically are immersion they need access to water and they're using fresh water typically Lake water and they're


using that to cool their systems if we don't need any of that so our environmental impact is de minimis uh it's really just the energy we use um which is great because the fluid continues uh you know you're not it's not like you have to throw away the fluid after a certain number of hours of use so uh it's a really allows us to operate with a lot more uptime um which is great because it improves the economics of mining um some other things we've done is just the remote control technology the


monitoring technology and the fault tolerance we've built into it uh make it a much better solution and we've been able to get the cost down where it's um approaching a cost that the trade-off between air-cooled and immersion is becoming less of an issue where before immersion technology typically was significantly more expensive from a capex perspective uh you know we've gotten been able to get that number down significantly and then you have the other benefit that when you're running an immersion you can


also overclock miners because the um you can run them at a higher speed which generates more heat but because you have a more efficient heat off take system you can now uh even overclock miners which means that you have to deploy Less capex in the way of miners to get the same amount of hash rate and to do that efficiently meaning that you're not using uh incrementally much more energy to generate the higher hash rate you need to have custom firmware so that's where our custom firmware comes into play it allows us to not just


overclock miners but it allows us to underclock them too why would you want to underclock miners well um if you think about areas where you have variable price to energy when energy gets very high priced it can make sense for you to underclock your Miner because you can still have hash rate going and because you're running the minor at a slower speed it uses significantly less energy and one of the things we've been able to tune using our firmware is the ability to really save a lot of uh energy on the


underclocking side but even when we overclock we're not necessarily decreasing the Energy Efficiency a whole lot so we've been able to overclock at a good marginal value without having a commensured amount of energy uh efficiency loss which we think is a very unique kind of thing because there are other ways you can overclock miners but you get to less than or you get to a greater than one to one so if you increase uh your hash rate by one percent uh you're using more than one percent more energy which is a loss


of efficiency in our system we're actually gaining some efficiencies um even as it grows so we're super excited about that and then as you look at the pool layer the pool is kind of the orchestration layer and because we run our own pool we don't have to design our pool software to manage third-party miners so there are many aspects of the ways in which pools and miners communicate that when you're dealing with a third-party pool and third-party miners you have to have all of these inefficiencies built in the system to


deal with validating that the miner is who they are Etc all those types of things you also have um the issue in third party pools that you have to deal with Fleet variations where you know some of the miners contributing hash rate to the pool may be running old s9s or s17s and the way those miners communicate to the pool the latencies are greater and so you have to design the pool for the minimum common denominator in our case because the only client for our pool is ourselves and we use one class of machines generally


across our Fleet we can optimize the operation of the pool specifically to those models and so all of those little efficiencies between what we can do in firmware what we can do in the pool we can do an immersion Etc start adding up to enhanced productivity for our Fleet so we're very much a technology-led minor and while we may not be the first to deploy immersion I think the fact that we waited pass gen 1 and into Gen 2 um has allowed us to take advantage of kind of standing on other people's shoulders you know the proverbial the


Pioneers in an industry always get arrows in their back uh in our case um you know we're leveraging kind of the efforts some early people did in the industry to learn some lessons and then do it better the second time around and we're not stopping with single phase immersion we're very actively developing Technologies around dual phase immersion which um you know we're super excited about because it'll allow us to really do combination of energy generation and Mining at the edge which we're very


excited about too so you talk about the firmware advancements the pool advancements and the cooling advancements now how do you treat the input of A6 themselves so um a couple of different ways uh we're big Believers that the current architecture of miners if you think about these shoe boxes they're very much like old desktop servers of the early PC era right there's a lot of air in those boxes because they're air cooled they're designed to be air cooled so there's a lot of volume that's wasted and


um if you think about how really high efficiency computers and high-end uh you know high performance Computing systems are built they're blade based so you have a basically a bus and then you plug all these boards into it um that are gpus and the bus is just providing communication and power um as opposed to um today where each Miner has some hash boards it has a firmware controller board a controller board it has its own firmware and you know there's a lot of software and Hardware overhead in each Miner that's not needed so we're very


focused on redesigning if you would miners to be more blade based and working with various vendors to do this we've invested in Hardware companies who are specifically focused on doing some unique things with Asics that we look forward to kind of seeing the benefit of down the road but we're working with you know all the other major manufacturers on really um taking hash boards and making them uh let's just say ready for blade-based bus-based production what that gives you is the ability to in immersion do much


higher density of compute power uh in some cases I think we're going to see a benefit of about a 4X increase in compute power per cubic meter of of fluid now that also requires you to move a little bit to dual phase immersion which is um different than single phase immersion single phase is like a car radiator the fluid circulates and cools in the case of dual phase the fluid actually boils and in boiling it changes its physical state and if you think about how air conditioners work it's the opposite process you take a gas and you condense


it into a solid well it has to give up all this heat to be converted into a solid well in the case of dual phase for cooling this liquid when it turns into a gas it absorbs a huge amount of heat and so it takes the heat out of the fluid converts it into a gas and then you recondense it into a fluid um using some very economical means and heat pump technology so that you can have a closed loop system that doesn't now need air chillers it doesn't need any external cooling at all it's a full closed loop and um that allows you to do


much higher density of compute because uh flowing water versus letting the liquid boil uh or it's not water it's a fluid um is much more efficient so letting it boil is much more efficient and so the heat uh that you can extract is higher which means you can pack the boards denser and so when you can get you know three to four times higher density now you can pack a lot more hash rate into a smaller footprint which then means you can start doing things in a much more reliable way so we're super excited


about that technology as well but you know think of it this way as um as we continue to scale as a minor we want to integrate all aspects of the technology stack just like apple does with their smartphones they have everything from the cloud down to the Asic you know we're not going to go into the Asic manufacturing business but that doesn't mean we're not investing directly at that layer of the technology fascinating and so can you speak objectively about your competition you've you've laid out uh you know so


much of your strategy as you have to do to your shareholders how how do you view your competition where are they in competing on the r d side and how are you you guys positioned how many maybe years ahead are you on the cooling technology itself or the whole stack from how you from how you see it yeah I mean it's a great question for one thing we don't view our colleagues in the industry as competitors because when you think about it we all produce Bitcoin um there's no differentiation between our Bitcoin because Bitcoin has to be


fungible uh and um it's not like we sit on reserves like you do in the oil and gas or gold industry you know we're all competing for this zero-sum game of 900 Bitcoin a day today until the having and then that'll decrease to 450 a day and so it's all about efficiency um you know we view our mission very much as that of you know we're helping secure the Bitcoin blockchain and everything we do that makes it more secure that makes it more efficient that lowers the power consumption um to produce Bitcoin uh the better we can


contribute to the industry and you know we've spoken about our Fleet um you know when fully deployed uh or 23 extra hash here at Mid this year you know it'll have an operating efficiency of somewhere around 24 joules per Terra hash where the industry on average is in the 40 joules per Terra hash today so significantly more energy efficient than the broader industry Fleet what does that mean well it means that we can operate profitably at Bitcoin prices being much lower than a lot of other people can provided our energy input


costs are good so we think it's really important to be able to be one of the most energy efficient Miners and one of the most efficient miners our technology stack is something we are open to providing to other minors uh you know we don't view this as something that we have to hold ourselves we think other people can benefit from it and we're you know currently evaluating kind of how and what do we want to potentially uh offer to the market that people could use but we're totally open to licensing this


technology um and we think that that's just beneficial to the industry especially the the immersion technology we think is very beneficial to the industry um and as we look at dual phase immersion you know it's even broader than just the Bitcoin industry there are lots of uh users of high density compute who would love to be able to use uh you know our dual phase immersion technology potentially so we think that that has applications outside of the Bitcoin mining industry as well which could be a profitable line of business for us as


well so we just view Technologies being important to not just differentiate but enhance our performance and again you know we're open to being a technology provider to the industry if that makes sense and how do you balance capex with r d in an environment which we all know Bitcoin has an extremely volatile price but do you approach the price with cyclical models or how do you how do you strike that balance uh with liabilities and and Equity you have to meet the demands of the of those that are funding you sure so


um we look at the this business as being kind of you're profitable for two years and you're eking out efficiency gains for two years it's a four-year kind of cycle historically granted you know we've only been through a little more than three Cycles at this point and there's no promise that the Cycles will continue to repeat in the future but essentially traditionally you know they're kind of two years where mining is really profitable and it's growth price of Bitcoins growing in two years


where it's not and so you have to engineer what you do so that you're growing when the cost to grow is as low as possible but you're also timing that growth so you're able to bring online that additional hash rate when the price of Bitcoin is is increasing and so timing is critical in that and you know a lot of people questioned why at the absolute peak of the market in 2021 we were placing orders for you know nearly a hundred thousand bit main XPS uh at the peak of the market uh well for one thing we purchased those XPS with


price protection meaning they had to lower the price as the price in the market came down and it also meant we got access to the XPS before a lot of other people did and so we were able to kind of be at the front end of the technology curve which we think is the most important part about the Cycles is you have to have the most efficient machines and the most powerful machines that you deploy when bitcoin price is at its lowest so that um as Bitcoin price goes up you're going to be one of the most profitable


providers and then when bitcoin price comes back down again uh you're one of the most efficient operators and so you know the challenge for this industry is that you know you look at Global hash rate today you know getting very close to 400 exahash if you go back to my comment about the efficiency in our Fleet at 24 joules per Terra hash where the average efficiency of the Bitcoin mining Industries in the 40s um you know we have a having coming in May of next year that means the rewards are going to drop by 50 percent which


effectively means your cost approves of Bitcoin doubles um and you know the miners that are at 40 plus joules per terahash are going to have a problem unless the price of Bitcoin goes up dramatically between now and then and so um we think that you know again being at the bleeding edge uh of the technology curve has long-term advantages to us and then you get into a place where uh you know a lot of hash rate has come online over the past two three four years uh well some of that hash rate is going to have to be updated and upgraded and the


question is you know how are those miners going to finance that because today there's not easy access to money like there was back in 2021 and 2020 when you could raise you know uh hundreds of millions of dollars at very low cost today the cost of capital is very high and so you know we purposely made sure to clean up our balance sheet so that um coming out of the winter we would have no short-term debt you know we only have our convertible bond which is a one percent coupon very easy note Service uh and then a lot


of cash and Bitcoin on the balance sheet so we're able to take advantage of growth opportunities here uh in this period as um as they present themselves but we think it's really important for the health of this industry that you know miners continue to invest in new technology because otherwise what's going to happen is um you know we're going to see actual drop of hash rate and many uh you know analysts are now predicting that you know as we come out of the having for the first month's post having next year


there'll likely be a significant drop in hash rate as machines come offline unless again the price of Bitcoin moves up substantially north of forty thousand dollars um by the having the Bitcoin layer is sponsored by Foundation devices Foundation devices are the creators of the passport Bitcoin Hardware wallet the Bitcoin Hardware wallet that you already know how to use guys it's got a gorgeous design it's got a very Sleek interface very great screen directional pad that everyone knows how to use it makes


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com to get yours today now on with the video I want to emphasize for the audience that publicly traded miners have to have cyclicality in their own models when they approach the industry and so we can argue all we want about havings and the cyclical nature of Bitcoin but with the empirical evidence that large miners with huge pools of capital that have dedicated themselves to finding the most efficient forms of mining must approach Bitcoin with a four-year cycle in mind it's we only have three but we do have three and so we're going into the fourth we'll get


to test it again what we've read and so um how I mean how do you formalize that to your shareholders when you talk about you know the havings and the mining reward falling to uh falling to just above three Bitcoin here next year the break even you've established in at the broad Market level is about 40 000 that means yours is a little bit lower than that but how are you communicating to your shareholders uh with specific uh regard to the having yeah so we talk about um our Energy Efficiency going into the


having obviously having achieved scale going into the having has a huge impact because our SG a is you know essentially amortized leveraged across our scale uh uh you know while um we've grown a lot um percentage-wise in our head count uh you know we're still sub 50 people in our organization and um you know as you scale that from you know 3x a hash kind of at the beginning of last year to 23x a hash by mid this year uh you get a lot of benefit out of that scale and so your cost structure uh your overhead is considerably better


than some other operators in the industry which is really important but it's really about longevity and survivability uh long term like any industry they tend to commoditize and you know pricing always wants to move down to its marginal cost to produce right there's this constant model in economics that kind of drives that way and in the case of Bitcoin it's not about your selling price it's about your cost to produce because of the incentives that exist in mining Bitcoin people will add hash rate until it's


unprofitable to add hash rate and mine and then it normalizes and I think what will end up is similar to many mature Industries the margins in this industry will normalize around 30 percent and hash rate will grow and Shrink based on that profitability so if bitcoin price starts moving up then more hash rate will come online until you hit about a 30 margin and then it'll normalize and then you know hash rate may fall off and um some unprofitable miners uh you know have to kind of exit until they can refresh their uh you know their fleets


but I think one part of the economic model that most shareholders don't take into account is they look at somebody's current efficiency and they don't look at the fact that um where is any given minor in the upgrade cycle of their infrastructure right if 66 of our Fleet um is made up of XPS so the most state-of-the-art Miner that's out there uh there are a lot of minors out there that are running old uh s19 Pros or even s17s and some s9s those machines have to be replaced so somebody has to go raise


money to go buy new miners to replace those miners just to maintain hash rate and so this is something a lot of people don't realize is that every four or five years miners have to essentially refresh their fleets and that requires a certain amount of capital and access to Capital and I think over time what's going to happen is the large well-scaled well-financed miners like Marathon are going to be the ones that will tend to survive and talk about the Boom in hash rate that we have experienced this year where to where do


you attribute that boom in hash rate as price has basically been stubborn and and and low generally speaking so how do you view that boomination and are you able to how easily are you able to identify sources of new hash rate so um you know part of it you can look at inbound shipments to the US from the major minor manufacturers you know I think some of the um either Media or analysts did a study or they I guess looked at all the Customs paper we're working for minors and figured out so many tons of minors which converted


into so many minors which converted into so many Terra hash or exahash um so there's been a backlog of minors that have been being shipped since really kind of Q3 of last year into q1 and now that's starting to slow down and you can tell just by looking at you know um minor pricing on a proterra hash basis it's not gone up significantly which means that there's still a glut of equipment in the marketplace um but I think uh you know if bitcoin price continues to move up that glut will dry up pretty quickly there's also ample


amounts of Hosting available on the market because a lot of people invested in infrastructure to build hosting sites and then couldn't raise Capital to go populated with minors and so now that capacity is available so I think what you're seeing is a lot of backlog of miners being deployed and then um which was you know all paid for with money that was raised in the prior boom cycle um and now that capital is scarce and hard to find I think you're going to see that growth and hash rate slow down but


you know again just look at us we were ended last year at 7x a hash we'll be mid this year 23x the hash that's you know 15 16 extra hash growth just us and you know you look at some of the other big Miners and um you then start looking at some of the um uh International uh operators uh and you can see some good scale I mean just look at our project in UAE uh you know it's a joint venture um we own 20 our partners own 80 percent uh they are new to the mining industry if you would and uh you know that's a 7x


a hash site uh or the two sites combined or seven X a hash so that's basically about 5x a hash that they'll have that's five extra hash that is coming from a brand new Miner effectively uh in the industry um you know mining in Russia has increased significantly I think mining in Russia now makes up about a gigawatt of energy um which is pretty significant you still have 21 the global hash rate coming out of China uh you have countries like Paraguay Argentina coming online um and uh you'll soon have some uh


mining a small scale in Africa but growing in places like Kenya and then you're going to start seeing you know Bhutan Nepal these countries that have huge amounts of hydroelectricity in excess you're now seeing um you know companies local to those regions investing significant capital and building out uh Bitcoin mining operations in those countries as well so there's still going to be a desire to grow Global hash rate um but I think we're going to get to a point where we're going to start seeing some of that


hash rate churning where old machines come offline new miners with new machines come online and things now can you talk about the regulatory seen now you have a new facility in UAE that is 80 owned by your partner so you're still you a us-based entity now how do you would you when you guys look at the regulatory fight battles what's going on with the SEC what's going on with litigation and exchange how much how much of it affects you and how of it how much of it kind of just rolls off your back and how are you approaching


regulation at the firm level that's a great question so um you know up until the FTX Celsius three arrows Capital blow ups that happened kind of last year um and the beginning of this year uh Bitcoin was not something that had a lot of kind of regulatory backlash happening to it and uh while mining was being uh you know the energy use of proof of work versus proof of stake was being debated um there wasn't a lot of energy from the administration's level in one regard or the other regarding Bitcoin that changed


dramatically this spring and the Biden Administration made the determination that crypto is bad you know Rick broad if you would um and you know Bitcoin is getting cut and you know caught in those crosshairs and you know this whole suggestion of a 30 excise tax on energy used specifically by Bitcoin miners is you know just targeting Bitcoin mining and it has nothing to do with the Energy Efficiency because for one thing um you know had the people in the administration thought through what they were doing properly


um they should have instead applied an excise tax to uh the reinvigoration of any fossil fuel plant but they can't do that because obviously uh you know the fossil fuel Lobby uh spends a lot of money in Washington DC and there are a lot of people who would like to see Bitcoin disappear the banking Lobby would love to see banking disappear as well um there are a number of people who run peaker gas plants um that would love to see Bitcoin disappear from Texas because the ability of Bitcoin miners to curtail energy


takes business away from these Peak or gas plants whose profitability is because they only generate electricity in the absolute premium times and interestingly enough some of the people who own these Peak or gas plants happen to be large shareholders in the New York Times interestingly enough who writes stories about the Bitcoin mining industry consuming lots of energy so um you know I'm a big believer in Charlie munger's philosophy of you know if you want to see who's behind something look at who has the incentives


but we're spending a lot more effort in Washington uh we're spending a lot of time educating uh staffers on Capitol Hill uh we're spending a lot of time in working with think tanks and having them develop materials that clearly and academically kind of look at proof of work and why it's better uh you know many people don't realize but when we talk about security of consensus mechanisms proof of work versus proof of stake you know Bitcoin miners have always said that Bitcoin is you know the


most secure network uh and vitalik buterin has said that you know ethereum is with proof of stake is good enough security well many people don't realize but the ethereum network had an outage of 25 minutes last week if the Bitcoin Network were to have an outage of 25 minutes people would be screaming uh and so I think that you know people really need to understand that proof of stake is not a very secure algorithm or method to use when you're securing uh something as important as the you know potential new Financial system and I


think over time the concentration that exists within ethereum and one of the reasons the ethereum network went offline was because of too much concentrated stake validation and while that's something they can re-engineer uh in the uh from a technology perspective the fact of the matter is the ethereum blockchain is highly concentrated both control of code development and features which are driven by the foundation but also um just the the stake validators are highly highly concentrated um in the ethereum world whereas Bitcoin


is very very decentralized I mean it's one of the biggest miners in the world we have sub five percent of the of the Bitcoin blockchain um from a hash rate perspective so it's very very decentralized but we're spending more and more uh time and effort in Washington um we're going to be making some announcements at the um Miami Bitcoin event regarding other things we're doing in support of the Bitcoin Network um and in trying to really ferment more and more development on bitcoin which drives more adoption you know we're


super excited about the fact that um you know we now have over a million wallets with more than one Bitcoin in them in the Bitcoin blockchain today um when you think about it that means there are a million individual wallets that hold more than twenty four thousand dollars with the Bitcoin in them granted there's some very big wallets in that yeah and there's some smaller ones but the minimum threshold is at least one Bitcoin and so uh that's a lot of Bitcoin that's held uh uh across a broad number of


wallets which just speaks to the adoption cycle and if you look at the adoption curve from 2009 to today it's pretty much at a linear there was a bit of a hiccup in 22 but we're right back on trend for adoption in Bitcoin so that's uh something we're very uh glad to see and continue to want to ferment that adoption of Bitcoin and as more and more adoption happens on bitcoin more things are done on it you've seen with ordinals and with this latest BRC 20 tokens what that's done to transaction fees which we


as miners really appreciate because you're seeing transaction fees go from one or two percent of uh total block rewards to now in some cases being 100 to a block reward in some blocks um now granted that's a moment in time um and you know we're now seeing those block rewards those transaction fees return back towards normal they're still higher than normal but they're coming back down but we think over time there'll be a lot of applications like that which will draw um you know new use cases for Bitcoin


and continue to just see Bitcoin grow like we think it should can you talk about which adoption metrics you prefer uh what do you look at you mentioned number of wallets with addresses that have one you know more than one Bitcoin in its balance but what else do you look at are there any qualitative or quantitative metrics that you can identify for us so the amount of Bitcoin the volume of of trading that happens is indicative of a healthy system a system with good liquidity is a healthy system and we've seen liquidity


shrink since the uh shutdown of silvergate and signature and the shutdown of the sen Network which was a liquidity pool uh essentially allowed the various institutions to clear Bitcoin 24 7. amongst themselves um you know the liquidity has dropped and um so we obviously want to see Bitcoin uh liquidity increase so we want to see more trading of Bitcoin but by the same token we've also seen a lot of Bitcoin go into long-term wallets and more and more Bitcoin is not moving meaning it's sitting in um hodlers wallets who you


look at the amount of Bitcoin that hasn't moved in over six months and it's a vast majority of Bitcoin out there and so what that means is that the belief that people have that Bitcoin is the store of value it continues and remains strong people are hoddling their Bitcoin um and at the same time um what that does is lack of liquidity means more volatility in the price and so you're going to see these swings between 24 000 to 32 000 and back and uh because of the limited liquidity that exists in Bitcoin but I think over time we're


going to see more and more liquidity come back in the market and that'll make volatility start shrinking and when volatility shrinks you'll see more institutional interest and you know we remain very optimistic about things like you know Fidelity now offering custody and training trading with Bitcoin and ether NASDAQ has applied to be a custodian for digital assets um with a future potential plan to actually offer trading in digital assets so I think as these institutions continue to roll out systems


um that uh support the industry you know adoption will continue a pace I think the U.S just happens to sit behind the ball the eight ball on the regulatory framework you know Europe uh England Europe the UK Singapore Hong Kong and other countries have put fourth Frameworks that allow the industry to operate with a higher degree of clarity the US hasn't done that uh you know part of that may be intentional if what The Regulators want to do is have the industry die in the U.


S and move offshore then they're doing a great job of that but I think over time what's going to happen is um you'll see the U.S either adopt the same set of rules that the partners in Europe have done or some modification thereof but uh you know the us is going to have to play catch-up because after all this is one of the largest markets for digital assets potentially in the world and um uh you know U.


S investors won't stand still um if The Regulators don't you know start doing things they'll find ways to operate offshore now what are your biggest challenges every publicly traded company has to disclose what they view are the biggest risks to them going forward now what what have you guys identified as your biggest risks I would say let's say outside of a collapse in the Bitcoin price um from here outside of that what are some of your largest challenges yeah some of the from a risk perspective uh you mentioned price of Bitcoins


that's obviously one energy costs is another one that we're constantly looking at you know the uh war in Ukraine drove a spike in energy costs which impacted all miners you know it was you could argue that this perfect storm of low low price of Bitcoin and high cost of energy drove some of the bankruptcies that happened last year uh in the mining space um specifically core uh you know is one where uh people had taken for granted that energy costs would be low long term and so they hadn't hedged the downside


necessarily and yet had fixed price to their customers and so you know that's just a maturity thing in the industry but I think uh you know the impact of energy cost is important so it's very important to be properly hedged and um you know have uh procedures and processes in place to diminish that risk as much as possible um that's one of the reasons why we like renewable energy its cost is more driven by the development cost of the project unless by the operating cost of the input source uh you know wind is free


the sun is free it's really the cost of developing those sites that drives what your lcoe or levelized cost of energy is whereas natural gas you know that's a commodity that varies in prices that's cold so it's one of the reasons outside of just the environmental reasons that we don't want to be using fossil fuels it's one of the reasons we prefer Renewables um because of that um then it's really regulatory risk um and you know Bitcoin has this unique nature in that uh you know if the the


developing if the developed countries the G7 countries were to prohibit Bitcoin it would still exist and it would live on and Bitcoin mining would just move to places not under control of those Nations and this is one of the things that is frustrating to the G7 Nations who want to control Bitcoins that they can't control it and I think that um you know there are uh some places like uh you know Europe the UK Singapore Hong Kong where they're embracing digital assets and saying well let's you know let's take advantage of


um allowing this industry to grow because it's going to happen regardless uh and uh you know the US is just gonna have to catch up to that but I think your regulatory next to energy cost is most probably the the two biggest things outside of the price of Bitcoin that you know we worry about on a daily basis and can you close with what you are looking for for from your own firm as you drive toward bringing on your new UAE facility and you look to implement your technology stack what are you most excited about


um yeah it's a great question I think the uh we're super excited about International expansion opportunities um UAE and the Gulf States is a region we're very excited about because of the asymmetric energy uh consumption there basically means you use a lot of energy in the summer not a lot of energy in the winter and so what are you going to do with all that excess energy generation capacity so great economic model for Bitcoin to solve uh there are other countries and places in the world where there's a lot of


excess hydroelectricity you know Paraguay Brazil uh you know have a project of a dam which generates a lot of hydroelectric energy and Paraguay has too much of it and doesn't know what to do with it you can't ship energy very long distances so it's not like you can package it up and sell it mining Bitcoin with it however lets you do that in a slightly different way it lets you convert energy into Bitcoin and um at a very high value retention and uh so that's an area which we're looking at


um and just International expansion also decreases your risk and exposure to things like energy cost uh potentially and also regulatory risk uh the technology stack is all about getting long-term uh ideally our vision is that when we mine Bitcoin we are not consuming energy that otherwise could be used by consumers of the grid so long term we want to get to a net zero consumption of public energy so what does that mean it means that you know potentially we're generating our own energy and consuming it ourselves


and um the only argument somebody could ever make about why that is bad is the fact that we're using our energy that we're generating for ourselves for Bitcoin versus selling it to the marketplace and making money on the backs of consumers so uh I I think the the benefit is really that uh if we can generate our own electricity do it with renewable sources and fuel so we're not uh damaging the environment in any way you could never argue that what we're doing is causing more fossil fuel to come