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Transforming Tomorrow: Marathon Digital's CEO Fred Thiel on the Global Impact of Bitcoin Mining

April 23, 2023

Fred Thiel, the CEO of Marathon Digital Holdings, delves into the significant role of Bitcoin mining on a global scale. Thiel highlights the volatility of Bitcoin prices, the challenges of infrastructure investment, and the cyclic nature of Bitcoin's value. He discusses the evolving relationship between hash rate and price, attributing hash rate growth to miners executing expansion plans laid out in 2021. Thiel also touches on the struggles faced by smaller miners and the potential of stable coins in facilitating global access to financial assets. He emphasizes the political and regulatory challenges facing the mining industry and the need for education and advocacy to overcome these obstacles.

00:00 Intro

01:20 Bitcoin price and hash rate

03:00 Bitcoin mining cycles

05:50 Mining in China

08:20 Geography of Bitcoin mining

10:00 Geography diversification

13:10 Environmental issues

17:55 Anti-crypto agenda

23:35 Threats to Bitcoin mining

32:00 Russia & Bitcoin

35:50 Fred Thiel’s way into crypto

39:00 What is Bitcoin?

42:00 Bitcoin vs other blockchains

45:20 Existential threat to Bitcoin

Transcripts are autogenerated. May contain typos.


you know number go up oh gosh you know price of Bitcoins blowing through 50 blowing through 60. let me raise some money now and everything I can raise I'll put into my infrastructure and then Bitcoin goes up two years goes down eighty percent uh everybody freaks out and we go right back up I think you tweeted uh a scene from Game of Thrones Walk of Shame as uh Shame Shame uh Russia is coming on strong there was a recent report that came out that said they had about one gigawatt of power dedicated to Bitcoin mining and you know


they have all the reasons in the world to mine as much Bitcoin as they can right that's private industry or is everything in Russia effectively the government and does that then mean that the government is actually stacking Bitcoin Bitcoin mining has taken the brunt of the flood and negative news and attacks from regulators and legislators historically for the entire crypto industry but most of what they're saying is completely false and Bitcoin and Bitcoin mining have a very very bright future I spoke with Fred teal the CEO of


marathon digital Holdings about out all of the promise of Bitcoin mining what's happening in the industry and what the future holds [Music] in the crypto space there's long been a debate about the relationship between bitcoin price and hash rate and we used to see these Trends where people would argue with which one followed the other but they would generally Trend in the same direction that seemingly stopped happening over the last year right as Bitcoin hash rate continued to rise massively and price


went down what do you think the relationship is between those two at this point well I think you know Bitcoin hash rates growth is more due to minors who are finally executing on their growth plans that were laid in 2021 really so what typically happens is Hash rate lags the rise in bitcoin price by six months in this case it took about 12 months so you had a lot of expansion you know ourselves included we're growing 3x this year over last year from a hash rate perspective and so those plans take time to execute because they're kind of large


at scale you know we're going from 7x to Hash to 23x hash and six months basically that's a lot of growth to do so um yeah so you know miners were procured last year they have to arrive the sites have to be prepared and all that so um I think what you're seeing now is just kind of serendipity in that Global hash rates continuing to grow prices come up nicely this year um in the first quarter and you're now seeing people kind of okay we're back to kind of a profitable Place how much more do we want to grow and it'll be really


interesting to see what happens between now and the having and do we see global hash rate kind of plateau towards the end of this year or are we going to see it kind of blow through uh and keep growing early into next year certainly for smaller miners it seemed like it was touch and go for a while there uh at the end of last year I know that anecdotally some people I spoke to said they really kind of bought more at the top right bought a whole bunch of Asics and machines when bitcoin price was in the sixty thousands and those are now a


fifth of the price right uh the actual miners so I think that speaks to sort of that delay right there's no way to really tie time it perfectly if you want to be ahead and getting machines online in a year or in two years yeah I mean if you look at this industry it's typically profitable for two years and then two years are kind of less profitable because you're down at the bottom of the Bitcoin pricing kind of uh swing so traditionally you grow and you invest in growth during those cold winter months


when machines are cheap and the challenge we have this cycle compared to last cycle is you know in 2020 uh in 2021 Capital was easy to get the equity markets were open uh you could get debt Equity you get machine financing and so the guys that weren't public they could go get equipment financing from nydig and others and now you're in an environment where you know conditions are getting better but people don't have capital and so you look at a lot of the miners have sold Bitcoin we sell Bitcoin just to cover operating


expenses because we don't believe it makes sense for us to sell Equity to pay operating expenses at this point in our life and so uh you know the smaller miners are definitely squeezed in between a rock and a hard place because they don't have the money to buy more miners when miners are cheap and they don't have the ability to invest in more infrastructure and so it's really the big guys that are at scale that are going to continue to grow ahead of the small guys I think um other than some Niche players who are


doing a good job but um yeah it's interesting yeah it's interesting that even in this Niche industry it still follows the same patterns of human behavior that we see in every Market which is effectively that people are forced to sell the things that they don't want to at the bottom and they've never raised enough Capital to be prepared for buying right having cash on the sidelines that's the story of every bear market and cycle in human history yeah yeah and you know it's I think you


get a lot of people who came into this business who haven't lived in a very cyclical industry before and they think you know a number go up oh gosh you know price of Bitcoins blowing through 50 blowing through 60. let me raise some money now and everything I can raise I'll put into my infrastructure and then when the infrastructure is ready I'll go raise some more money to buy Miners and then lo and behold the window for raising Capital disappears and you've got infrastructure but you don't have


minors or you paid deposits on minors and you just look at the glut of equipment on the market today and it tells a pretty pretty sad story yeah how much of a boon was it when China went offline uh because obviously that we saw that was the major decline in hash rate but a lot of people pointed that to that as a major opportunity certainly for mining companies in the United States yeah I mean definitely the people that had hash rate on when that happened you know became hugely profitable because you had a 40 drop in global hash rate uh and all


of a sudden you're minting Bitcoin at a rate that you hadn't minted before and then is that hash rate low slowly got caught up as it either transitioned to the states or some minors in China were able to turn their machines back on discreetly um you know things got back to the normal curve and you know if you look at the graphs today you know the global hash rate is growing kind of on a nice linear line and that little blip that was the the China ban uh is kind of buried in the noise at this point which is interesting because at the time


it seemed like the pundits believed that everything was over but it was really just another opportunity well it's just like you know you know you look at with uh earlier this year you know people were again saying you know bitcoin's dead it's gonna get stomped out of existence and you know here we are a little bit of a banking crisis and Bitcoin is touching on thirty thousand uh that's the everyone's favorite opportunity is when you say something's dead right isn't that the greatest


bottom signal that there is that's probably when you guys are uh salivating to get more minors online I would imagine but interestingly you touched on the fact that uh some miners quietly came back on in China when you look now at where the hash range is coming from they're a meaningful percentage again yep no it's about 21 I think it's the number most people are quoting these days how's that possible um you know part of it is uh uh people operating high performance Computing data centers which are allowed


it's just what are those machines actually doing uh you know I think in that regime there is a certain amount of under the table stuff that happens and then there are just some minors that operate in places where you know officials kind of don't have oversight of them um but uh so asset approval from the uh local governments absolutely yeah definitely and so where are we seeing now the rest of the hash rate I mean I'm assuming that the bulk of it now is in the United States or North America the U.S is about


37 to 39 percent uh Russia is coming on strong there was a recent report that came out that said they had about one gigawatt of power dedicated to Bitcoin mining and you know they have all the reasons in the world to mine as much Bitcoin as they can right um and they have very inexpensive power they have a lot of nuclear power plants that basically are quasi-idle that um in Siberia and in Romance places like that where before the Ukraine War uh you know we saw sites um on the market that were available uh at you know 1.9 energy


um yeah so I think yeah I think so I think you're going to see Russia continue to grow um and then you know obviously the Europe in general there is getting harder and harder to mine Sweden just increase the taxes on bitcoin miners the energy tax by six thousand percent so it's making uh you know the what was an attractive uh energy price in Sweden now unattractive and um I think what's looking interesting is you know Middle East we have a big site uh in Abu Dhabi about 250 megawatts that'll come online here uh in the


middle of this year and be done by the end of the year and um you're also seeing some stuff in Asia starting to come on Africa is looking potentially interesting in some locations but you have regime risk and then uh you know Paraguay Latin America there's some other places there that are looking interesting as well as a company what drives your decision to diversify locations is there a reason that you wouldn't be holy in the United States mining why do you look to Abu Dhabi to build facilities what's the


what's the motivation so um Abu Dhabi um was based on a couple of factors um they have an asymmetric power issue there what I mean is in the summertime they generate four gigawatts of power for air conditioning that heat that comes off that power generation drives their water D cell so that's how they get their drinking water in the winter time they only need one gigawatt of power but they still need the heat from the energy generation to drive their water D cell and they consume about as much water in the


winter as they do in the summer so they have to keep the generators running so they have this essentially upside down period of the Year where they generate a lot of electricity and they don't use it and at the same time the government subsidizes energy to the population so uh the idea here was to partner with um the essentially the owner of the power infrastructure in the country which is a sovereign wealth Fund in a way to solve their energy problem and do it in a way that would generate revenue for them such that they wouldn't have to


pay subsidies to the populace but the populace would still get the benefit of low-cost energy and so that's essentially why we chose to do it and it'll be uh you know the largest data center in the Middle East um when it's done so really excited it's interesting because that implies obviously that Bitcoin mining is helping the electricity situation and is helping their grid that's not the narrative that we're hearing from the United States government or from New York State and such I mean I've got I've gone swimming


right at greenidge uh green age minor in in Lake Seneca or Seneca lake and I can tell you that it's very cold it's not boiling that as as was reported in the articles that lake is freezing even in the summer yep yeah it's you know it's a shame that the New York Times uh has gone from being um what I would have said uh you know in my childhood days that critically acclaimed uh newspaper reporting the news all the News That's fit to print I think is in their headline their Banner their Masthead uh to a very politicized


um very polarized um he's a media not unlike Fox on the other side right so um I think you know the research that was done for this recent hit piece um was incomplete um the energy is not a zero-sum game we generate more energy than we consume lots of energy is stranded in this country the biggest problem we have in the U.


S is lack of sufficient transmission lines and renewable energy is the last energy to be used by their grid and the first to be shut off by the grid and unfortunately the um the editorial team that you know decided to put that piece together were more focused on painting Bitcoin badly than doing good reporting and good fact-finding and I think you'll see that over the next few months a number of pieces have come out kind of showing where that article was definitely lacking in rigor right but even outside of that specific article I still think


that one of the overarching narratives about Bitcoin is that it has a negative environmental impact yes right and that's been a very hard one to dispel I mean first of all is it true I I have my feelings about it but well I mean think of it this way so running a data center doesn't generate uh carbon right we consume electricity so where does that electricity come from um you know Bitcoin miners according to data from the Bitcoin mining Council over 50 percent of the energy used for Bitcoin mining is renewable energy


right so that's clean uh the E-Waste from Bitcoin mining there are less than five million mining rigs in existence in the world there are eight billion cell phones the cell phone has more E-Waste in it than a Bitcoin mining rig does and you swap them out with a high degree of frequency Bitcoin mining rigs live for five to ten years and there's very little waste in them so uh from a perspective of pollution you know Bitcoin mining doesn't generate a lot of pollution it uses a fraction of one percent of the energy generated


uh globally uh you know people playing video games people running holiday lights uh the electricity used by Bank ATM networks all consume more energy than Bitcoin mining it's just a very easy industry to kind of isolate and focus uh on as an enemy and you know listen go back to 1995 and look at the rhetoric that was being pointed at the internet the internet is useless it adds no value you know why can't we send stuff by fax machines Etc right yeah but is that nefarious or is it ignorance I I think it's uh a bit of ignorance


um you know the thing is for example politicians think that um having a uh essentially a uh an asset that is not controllable by them they think that's a bad thing and they want to control it well you know they're trying their best to stamp it out it seems um and yet they don't realize the benefits and you know you look at people in the third world the benefits they get from having um an asset like Bitcoin where they can move their money when they have to leave Ukraine uh you have you know farmers in


parts of Africa and Latin America who because of cryptocurrencies can actually operate if countries where 70 of the population are unbankable they're unbanked they can't get bank accounts yet they can use cryptocurrencies as a way to pay you know El Salvador for all the hype and noise you know it's a very simple use case 23 of GDP in El Salvador is from foreign remittances the average foreign remittance to El Salvador is 150 to 200 if there's a 25 or 50 fee that's money that's not going to families in El


Salvador and if you can do that with Bitcoin without fees a lot more money comes into the country so there are lots of very valid use cases for it and I think the younger Generations in the U.S view Bitcoin and view crypto as an asset class that allows them to control their Destiny if you would independence from Banks and the banking system and yeah we just had a perfect example of it with the banking crisis that happened yeah it's interesting that you did specify cryptocurrencies and not just Bitcoin in that conversation because we


used to only talk about Bitcoin in that regard but I do think that stable coins have solved a lot of problems for people in foreign countries who are looking for access to dollars as much I think as bitcoiners we would love to say everybody and every one of these countries should be doing this with Bitcoin it's the best for remittances this is how they should be storing their wealth I think to be intellectually honest more of them or at least a huge proportion just want access to dollars that they can't get and they can get


that through stable coins correct absolutely I mean listen the uh you know there's a historical precedent for this and it's called the euro dollar Index right the euro dollar market exists because the U.S forced people to use dollars and yet tried to control the currency and so that market grew up in England and is larger than you know the the money supply going around uh circulating in the U.


S so uh this is not the first time this has happened I think the US has uh hopefully not trying to do what they did in 1933 with gold which you know essentially you know people were investing in gold instead of in U.S savings bonds and so they made holding gold uh illegal as a way to force people to put money into savings bonds and uh yeah the problem is if they prohibit Bitcoin and you know Bitcoin mining uh and crypto in the US it'll just move offshore and they'll lose total control over it and we've been seeing quite a bit of that


obviously not necessarily I think targeted at Bitcoin but clearly there's been an increase in rhetoric enforcement action you know uh threats of negative legislation in the United States just in 2023. I mean what do you make of how much is coming out of Gensler and how much is coming out of Elizabeth Warren and and all of these others that have really been pushing this anti-crypto agenda well I think the um you know prior to Celsius three Arrow Capital FTX blowing up I think there was a fairly uh you know I won't say isolated group in


Washington but the the administration was certainly more open to uh crypto and Bitcoin digital assets and uh in January February of this year that swung around to all of a sudden a very antagonistic position you look at the White House's economic report in the position they took there Senator Warren's now raising an Army against crypto uh and you know I think a lot of this is driven by constituents who feel they may have been harmed um by what happened to FTX and um three Arrow Capital Voyager Etc and you know


politicians uh basically if there's a squeaky wheel they're going to try and silence that squeaky wheel and because they many politicians don't really understand how digital assets work the good that they provide how they help balance the grid Etc um they just play whack-a-mole and they say okay let's just stomp this out and you know that way people our voters will like us well the challenge they have is that the younger voters actually are all interested in crypto and digital assets and so what's interesting is where


before crypto and digital assets were not a polarizing um political Hot Potato if you would or topic um it now is definitely becoming something that the Democrats are anti-crypton digital assets and the Republicans seem to be Pro and I you know I think it's going to become a divisive issue um especially demographically um in this country uh and it'll be very interesting to see the simple fact that individual states are passing you know right to mind laws and trying to do things to uh you know uh limit regulatory overreach which is something


that you know the SEC and other Regulators have been practicing in this topic um it'll be very interesting you know the the whole way the Signature Bank thing went down was yeah if they were seized I'm sorry I don't do tin hats I don't make conspiracy theories I literally don't allow people to Pander that in my show but they were closed on a Sunday by the FDIC and I'm yet to see overwhelming evidence that they were going to be the next to fail exactly that's what happened and that's because


obviously of Signet and said and so it leaves the industry effectively unbanked which is interesting because I spoke with Caitlyn long almost a year ago now at Bitcoin Miami uh in 2022 and she said to me you know the cftc and the SEC is a bit of misdirection the people we really need to worry about are the OCC the fed and the FDIC because the banking rails are the real threat of course she's you know custodia bank and and has a vested interest in talking about banking but that really is what we've seen happening


and I don't know if it's truly operation choke point 2.0 as people have said but it does seem that the banks that will service this industry are becoming few and far between and the ones that stick their heads out are the victims of that game of whack-a-mole that you sort of mentioned yeah I listen I think the the industry is under a huge microscope and the regulators and the administration are trying to figure out how they can bend it to their means um but I think the it would be a shame if they drive the industry out of the


U.S because it's just going to thrive you know Europe has some a great regulatory framework they've agreed on you know in Germany the most conservative of the EU countries today you can go and take a real estate development project and tokenize it and fractionalize it they have great rules for how that works um and you know it's a wonder that the U.


S where normally Innovation should Thrive is busy being luddites effectively with this technology yeah I I agree with most of what you said as to the reason what I disagree with is their read of the constituency I mean anecdotally I speak with quite a few people obviously in this space and even the people who got burnt I don't think are anti-crypto correct I think they're angry at the platforms and they're angry at the people that they were scammed by or the fraud but I think that's a misread by politicians in fact I think that all of those people who got


scammed would be interested in reinvesting in crypto if they had the money with sensible regulation or legislation yes absolutely totally agree with that is that is that that's what alarms me so that leads me down the road of just believing that largely these specific politicians or perhaps that party just got egg on their face from SPF yeah and exactly yeah it's interesting I was speaking with a former supporter of Elizabeth Warren the other day who said that um where they had supported her in the last


election cycle they felt they no longer could because of the ridiculous stance she had taken regarding crypto yeah and I think that we're also seeing listen I know that our Echo chamber isn't as large as we would love to believe and that uh when we're in it it feels like we're a huge piece of the constituency I don't necessarily believe we are but I do think we're getting a lot of one-issue Voters in the crypto space I can't speak to how big that is but I think that there's a lot of people


putting Bitcoin ahead of party now and that trend is not reverse no yeah I mean even I can say that that's probably how I feel now you know so it's hard hard to argue with it but do you think that anything that they're doing is a legitimate threat to your business to the industry specifically let's talk about Bitcoin I think it's a huge threat to a lot of other things but for Bitcoin itself which I think is clearly been deemed a commodity even the SEC is not arguing that that's a security do you


think that there's any threat here to your business could a bank could the banking problem for example be an issue for you uh well you know we were a customer of signature and silvergate um so you know we had to move our money from signature to other Banks uh so you know which was a process and uh but there are thankfully banks that are open to to banking companies like ours um you know obviously we don't take customer deposits we're not doing trading we're not a custodian we're a relatively safe bet you know we


basically run data centers where I think um you know we will likely continue to see threats are in things like um specific taxation moratoriums on permitting things like that where uh similar to what happened to New York State um which you know I think it's kind of interesting it's just Bitcoin mining operations that Revitalize a fossil fuel generator if you're taking energy Off the Grid and essentially competing with consumers for it for the New York Times that's okay but you can't you know revive a a


defunct power plant um but I think we'll see it in things like uh you know you look at what uh SB 1751 in Texas which was basically um the ability for Bitcoin miners to participate in um in load shedding programs that they are compensated for uh you know that was lobbied for by Legacy industries that had previously received the Lion's Share of those uh essentially uh fees and it's just Bitcoin miners are better at shedding load more efficient at shedding load and so they get more of that and so you know that's a group of people trying


to limit Bitcoin miners benefit there and then you know it tucked into that bill was also a tax abatement for data center operators where Bitcoin miners were not going to be considered data center operators and um not get to benefit in that property tax abatement so you know while I don't think that is going to pass the Texas house uh you know that's the way that this is you know miners are being attacked it's by permitting its taxation but even in Texas right I mean for the last few years Texas has been the uh Holy Land


for Bitcoin mining in the United States everybody moving there building huge facilities using flared energy right I mean with a reasonable government that was passing favorable laws to give those benefits I mean shouldn't this be putting us on high alert that even in Texas we're now seeing sort of even if they're quiet attacks this kind of legislation proposed yeah I mean it's definitely something everybody is very attuned to right now and you know there is a there's a lot of work being done by


the industry in reaching out to politicians to lobbying organizations both in Washington at the state level at the community level to really start building a Grassroots kind of uh movement around understanding and educating um people about what Bitcoin mining is all about and how it benefits the communities uh and the industries you know riots operations in Rockdale you know they generate hundreds of jobs they bring the biggest taxpayer in the county um the problem is that you know there are you know 70 of the population in


Texas that votes on these types of issues is in Dallas Austin Houston and not in West Texas where a lot of these operations are um yeah so how do you reconcile that problem yeah well it's just it's interesting I was speaking I was in Washington a few weeks ago talking with a staffer for the uh Senator the represent one of the centers that represents the state of Nebraska and the staffer said to me you know listen uh you know we like Bitcoin mining you guys bring us jobs we're rural communities with 300 people that


live in a town if you can create 50 jobs that has an impact on our community and our economy right and you're paying taxes so you know it's this um the rural States um where you have it's easy to generate renewable energy because you have cheap land you have space so the energy developers go there the problem is the energy developers don't have customers for their energy and the transmission line operators won't build transmission lines unless they're you know the site is actually built out so that's where


that beautiful partnership between Bitcoin Miners and renewable energy generators really shows its best and that's why from Texas north to North Dakota that middle of the country is where you're going to see the heart of Bitcoin mining really develop because you have good wind energy there good opportunities for solar energy and um you know this country is going to need a lot of renewable energy if we're going to Electrify all the vehicles if we're gonna like in California have no gas cooking no gas heating and it all


has to be electricity we're going to need lots of renewable energy which to me is so just hypocritical when you listen to the politicians talk about it because electricity is electricity like what why does a Bitcoin mining rig worse than uh electric car that's being charged it's electricity and you know let's yeah this is one of the things that New York Times you know omitted um it's the fact you know in Texas uh you know 20 of the time energy can be negatively priced and that means there is so much excess


energy that people want to give it away essentially uh and you know the problem with renewable energy is uh there's this concept called the duck curve right think of the silhouette of a duct right you have a tail the tail and then the stomach and then the neck and the bill and the tail is in the morning so people wake up they turn on their lights they turn on the heat they cook breakfast and then they go to the office and there's a dip where the duck belly is and then at about four in the afternoon people come home and


between four and nine they're cooking they're heating they're washing so that's when Peak demand for electricity is now let's look at renewable energy when does the sun shine at 9 A.M to 3 P.M right in that least demand period when does the wind blow typically in the afternoons and evenings but only spring and Autumn generally so you have nuclear energy in the bottom of the energy pyramid that's base load right it you don't turn it up you don't turn it down it just runs and comes Coal Energy which you


can't really regulate it takes a day or two to turn a cold plant higher up or lower then you have natural gas which yes you can move up and down they're essentially peaker plants as they call them they're made using jet engines and they literally turn it on and in 30 minutes you have energy being generated and you can turn them off uh then comes solar and then comes wind so unless you're at Peak demand solar and wind aren't being used and so if people are complaining about fossil fuel having to be turned on


because Bitcoin miners are using the renewable they just don't understand the way the energy stack Works in this country I mean you know renewable energy is the last one to be turned on by the grid and the first one to be shut off and unless somebody is there to buy that energy there is no incentive to build more solar and there's no incentive to build more wind and it just gets wasted exactly right which is just uh yeah I think that's that's a hard uh learning curve though to educate the public on that we


have to but how do we do that or why would they care I guess is the real question yet again the echo chamber we care to look into that and to explain that to people but they just care that their likes go on yeah I mean at the end of the day people only complain when electrons don't come out of the plug in the wall yeah when the electricity is off which is a problem a lot of the time in the rest of the world I want to go back something you said earlier that you expected Russia to continue to ramp up hash rate and build you said something


that seemed kind of obvious probably to us is that they have the incentive to continue to mind as much Bitcoin as possible but maybe the reason is not so obvious to the audience so why do you think that Russia will continue to ramp up do you think that that's private industry or is everything in Russia effectively the government and does that then mean that the government is actually stacking Bitcoin well I let's look at it this way the largest minor in uh Russia is a company called bit River um and I would assume to have the right


to do what they do they pay certain people certain fees um and it may be that the only way for them to monetize their Bitcoin is to sell it to the Russian government so they kind of act as a proxy to the Russian government why would the Russian government want to have Bitcoin well it allows them to effectively transact with people when they can't use rubles right because their dollars are frozen and they can't use dollar rails yeah what the um Regulators seem to kind of forget when they talk about how you know


Bitcoin is used by criminals uh is that you know you can trace every Bitcoin transaction from source to wallet right so um it's very easy to see where Bitcoin is moving and you know if the regulars really want to control the you know Bitcoin then make sure that most of the Bitcoin in the world is mined in the US and you'll have an ability to do that you can't do it if it's uh all mined outside of the U.


S but is the implication there that countries like Russia are actually holding Bitcoin in the Central Bank you know like they do gold or that they could potentially be stacking SATs for you know believing in the asset long term or just to I guess I don't want to say evade sanctions but just to protect themselves because they don't have access to their dollars as you said well I think you know you have to look at kind of the scale right there are 900 Bitcoin uh awarded every day um that's you know if Russia mined every


single Bitcoin every day it's not really going to have a huge impact on their uh their ability or their needs to to fund the war and their other efforts um but you know you you did mention something that's key who are the largest Central Bank buyers of gold today it's China and it's Russia and it's Saudi Arabia it's countries that are worried about you know the U.


S weaponization of the dollar and the Swift system uh you know and they're buying gold because you know they don't want to buy treasury bills anymore and you know this um dependence that the U.S has had on foreign Nations holding their reserves in dollars and treasury bills is going to make it harder if countries stop doing that to keep pumping out debt which the US government needs to do you know we're about to increase the debt ceiling by a couple trillion dollars that's probably here um somebody's got to buy that debt


and uh if the U.S keeps going down this route it's going to be very difficult to find buyers for that and what that means is the dollar is just going to be debased and keep dropping down uh you know we live in the Fiat world of dollars so we don't really see the difference that much but if you look uh and you talk to people in Europe or other places um who these countries have to pay off their debts that are dollar denominated when the dollar uh goes up because the FED raises interest rates it has a huge


impact on these countries and so the US is just creating incentives for countries to move off the dollar right and potentially a Bitcoin can be a part of that I I need to know that what cuts you into mining what cuts you into Bitcoin yourself um for 40 years and uh you know my first foray into Tech was actually writing software in Banks and um my stepmother was a senior Economist at the oecd responsible for uh Bank regulation and Equity trading regulation and when the uh Soviet Union fell apart uh she was very involved in helping


attempt to instantiate regulatory rules uh in the Russian Federation but um so I had grown up kind of in a world where you know banking regulation and financial regulation was kind of dinner table conversation and fast forward um to about 2015 2016 and uh I started looking at Bitcoin as something very interesting um you know digital currencies and you know digital payments was a great way to facilitate more rapid payments um you know if anybody has ever tried to operate an international business and wire money around the world the fact


that you can only wire money uh nine to five in the U.S Monday through Friday and it can take days or weeks to get money someplace when with Bitcoin you could do it instantaneously you know the promise of what Bitcoin and cryptocurrencies had to offer um was huge and so as I looked at um you know how people were buying and selling and trading these things I realized that um there were these isolated Islands uh of liquidity pools if you would exchanges in different countries where you had pricing Arbitrage and if you


could create one exchange that kind of traded or exposed the order books globally so you could trade in one place that would be something very uh beneficial and so did the research in the U.S couldn't get it built because The Regulators would never approve it and you needed you know each of the 50 states had to approve it so it made no sense went to Switzerland um had long talks with the Swiss regulators and they said yeah we could do this but you'd have to have a banking license um and we still don't have real crypto


regulations and then went to Lichtenstein they said well we'll write a law for this and Lichtenstein being an EU country um wrote one of the first European crypto laws uh essentially designating uh the trading of Bitcoin and ether as foreign exchange trading and so didn't need a banking license didn't need you know to be a Securities Exchange and so um built an OTC operation there and at about the same time a good friend of mine who um had just taken over the CEO role at Marathon patent group the predecessor


company Marathon digital Holdings uh needed a board member who understood crypto because they were going to transition from being a patent troll into mining Bitcoin and so joined the board in 2018 and uh then uh you know fast forward to April of 21 when I became CEO and you know the rest kind of History uh you know we've built uh one of the biggest Bitcoin miners in the world very proud of it as well you should be so you've clearly uh stumbled down the rabbit hole progressively over the years what is bitcoin to you now because we've seen


this sort of evolving narratives of what it could be what it should be what it is where are we in 2023 in your mind yeah I think uh Bitcoin is an asset for acting as a store of value just like gold I think the correlation to gold which has been growing this year you know for the longest time Bitcoin has been more correlated to NASDAQ inequities and risk assets you know the um risk-adjusted return of Bitcoin uh for the first three months of this year uh is amazing it you know tops the list of any asset and so I


think that's one place for it the other is as a a settlement layer and we're going to see more and more applications built on the Bitcoin blockchain that use the Bitcoin blockchain as a validation layer essentially so think of it as you know we're lightning essentially settles on the Bitcoin blockchain you're now going to see other applications like that start appearing you know ordinals is the first iteration of kind of nfts migrating to the Bitcoin blockchain why well it's the most secure blockchain in


the world it's fully decentralized and um you have an ability to actually store the images on the blockchain which you don't do uh in ether um the other thing you have is the ability to build side chains uh so think of it as if you wanted to build a side chain that tracked the ownership of ships or airplanes or whatever you now don't have to worry about proof of stake or proof of work you can simply store your hashes on the Bitcoin blockchain in blockheaders and in that way as long as that lock that hash that you have matches the one


on your side chain you know that there haven't been any changes to your blockchain and so it dramatically decreases the cost to build security into any new blockchain so the only thing somebody has to do is build a side chain and you can readily take um you know a copy of the Bitcoin blockchain build your own side chain and then there are tools being developed by companies that will allow you to then store the hashes on the Bitcoin blockchain such that you don't have to build a whole new validation system


proof of stake or proof of work and I think that's where you're going to start seeing more and more economic value being built on top of the Bitcoin blockchain that is separate and apart from Bitcoin the currency it's interesting because that idea is a bit contentious in the Bitcoin Community because you know we obviously have Bitcoin maximalists but that's become even split camps themselves there's the argument over ordinals as you sort of alluded to there's some people who believe that nothing else


should be built on bitcoin and it should be just Bitcoin I obviously fall on the let people innovate and iterate you know and and build things but do you think that as a result of I I'm not going to say because of that tribalism but it seems that Bitcoin is far behind on a lot of the things that have been built on other blockchains right I mean smart contracts obviously are far more advanced on ethereum than they are at Bitcoin for now yeah I think a way to look at it is uh you know ethereum is a programmable


blockchain uh Bitcoin is literally a ledger it's a simple ledger so um and because of how the uh the uh governance model Works within Bitcoin any changes to the core code require major you know uh consensus being formed between node operators and miners Etc and you know the segwit wars of 2017 were an example of you know 93 percent of miners wanted to implement a change and it couldn't be done uh so it's you know the Innovation if the base layer is slow but the fact of the matter is just like TCP in the internet you know today


sixty percent of the internet still runs on TCP ipv4 even though V6 has existed for decades why because it's good enough um and I think the Bitcoin blockchain doesn't have to evolve uh to any huge degree it's at the other layers where you build in all this additional value why is that important well the security inherent security of having a very simple protocol is huge you know the problem uh when you get a programmable base layer is the risk for exploits and bugs get more and more heightened and if you look at all


of the issues and attacks that have been done against um crypto networks and and you know uh stable coins other things happen at bridging points um around the evm right and that's where you get these complex uh problems so I think the simple nature of the Bitcoin Network itself is its biggest asset in that it's very easy to maintain the security of it and um yeah the other fact of the matter is you can do all sorts of innovation on top of it and again just like the internet analogy you know TCP is the base layer of the


internet you don't have to change it and now look at all the things we're building on top of it um and all those things are built at higher level layers so effectively everything that we're seeing built on other blockchains all that Innovation could eventually be moved to bitcoin with a more secure base layer and that's it no need for any of them well I don't think it's no need I think you know one of the best things about ethereum is it's a great place to innovate right it's super easy to


innovate and so that's great and it it it's not like one obviates the need for the other there are use cases and needs for multiple blockchains I think that um you know Bitcoin being the most secure one uh things that need Ultimate Security it's a good place to build those on so identity Health Care data you know financial data I think you know if a bank wanted to build a system on a blockchain while the programmability of ethereum is attractive when you start looking at the security aspect you know uh maybe we


could do this on bitcoin instead that that that does make a lot of a lot of sense obviously so I I you know I know we're kind of uh running out of time here but do you think that there's any existential threats even outside of Regulation at this point to bitcoin or do you think that we're just going to continue through our four-year Cycles come into the having and continue up and that you know all of this will somewhat be laughable in retrospect that's what I think I think that in hindsight you


could have fallen on your head missed all the macro for the last three years and as you described earlier it's just another cycle Bitcoin goes up two years goes down 80 percent uh everybody freaks out and we go right back up yeah I think that you know Bitcoin will survive this uh latest rash of uh headwinds and uh come out the other side even stronger uh you know a certain amount of tempering you know it's like with steel right you heat it up you put it in cold water you heat it up you put it in cold water when you temper steel


and it's the same thing with Bitcoin you know it every time it gets tested it comes out stronger and I think we're gonna just see it continue to evolve we're going to continue to see you know crypto evolve and become stronger and more adopted you know adoption hasn't slowed down even through the winter adoption continued a pace um at its rate so I think we're going to continue to see adoption happen we're going to see new use cases continue to develop on a global level and yeah the noise in the U.S is going


to be a problem for a while but you know there is an election in two years and I think you know there are some members of the you know political uh parties who actually you know understand crypto and know where are the pluses and minuses are and how how to best use it and where it fits in and I think senior Minds will prevail over time well anyone who saw Gary Gensler take a public beating and flogging in the Square the other day and that Congressional hearing knows that there are a few people there who clearly get it


yes I I saw that the uh I think you tweeted uh a scene from Game of Thrones Walk of Shame as uh Shame Shame that's I listen like I'm not gonna say I feel for him because I don't but there was no winning in that uh in in that uh situation for him but it was good to see the cognizants from so many members of Congress of what was happening there and and then a defense sort of a Bitcoin in the asset class it's important I I don't know how many of them there are I've sort of joked that like again it's our


Echo chamber there's a few very Pro Bitcoin and crypto legislators there's maybe a few more who are anti but then the vast majority literally just don't care right and by the way there are there are a lot of members uh of Congress who do have an opinion but don't voice it because they either don't want to lean too much towards one side or the other because at the end of the day they're running for re-election every two years you know in the House of Representatives I blame Sam sorry I blamed him for that because last


year last year I would have said that at a year ago this time we were getting to the point where there was reputational risk for not having a position on bitcoin and you would probably have to at least lean slightly favorable enough to outright be a supporter but you couldn't be outright against it yep but then after everything that happened this year and finalizing with Sam like I said I mean he's meeting with Maxine Waters and Gary Gensler these people are his friends at some point literally the worst person in the worst


case scenario that's so sad novogratt said to me he thinks it set the industry back two years uh yeah maybe more yeah sad sad way for us to end but wait can everybody uh follow you and check out everything that uh Marathon has going on after this conversation great thank you very much appreciate it thank you