Bitcoin CEO Has A Message for Saylor

[00:00:00]I did not see this coming. Offers from trillion dollar companies to do deals.

[00:00:04]>> How much of the AI utilization to create these financial products is a machine being sick of phantom to you to convince you that this is a good idea?

[00:00:12]>> Now you have a financial structure that's fallible and your only option is to sell Bitcoin. Sailor was supported.

[00:00:17]He's too big to fail almost. Your ego is in the driver's seat.

[00:00:26]Sup freaks. Before we get into the show, I just want to send a heartfelt thank you. Thank you for joining us and ask for one quick thing. Could you like this episode, subscribe to the channel, and if you like the conversation, join us in the comment section.

[00:00:39]>> Jamie McCavity, welcome back to the show, sir.

[00:00:43]>> Thank you.

[00:00:45]>> Get hydrated, get caffeinated.

[00:00:48]We got a tight >> I just did a workout and I got a protein shake.

[00:00:53]>> Oh, protein shake. What's your workout routine? I'll have my uh I'll have my best takes for you.

[00:01:01]>> Well, uh freaks, we're sitting down with the most the most profitable Bitcoin miner in the world. Is that how you would define yourself?

[00:01:08]>> I would say the lowest cost producer of hashes. Lowest cost producer of hashes.

[00:01:15]>> What uh how does that feel?

[00:01:19]>> Um do you want me to give my honest opinion? Yes, >> it feels like we have won like a fencing competition. Feels like we we won something that not many people really care about. Uh well, let me put it this way. There's a very unique dichotomy about being a Bitcoin miner where people who love Bitcoin and who have this big ideological alignment and feel a passion about it for one reason or another distrust of the state.

[00:01:56]They're a sovereign individual that that they have anti anti- monetary debasement. Whatever it is, those kind of people are like you're the best.

[00:02:05]You're the most badass person around.

[00:02:08]and high-five almost like I'm a quasi celebrity in maybe two rooms three times a year. Uh, and that's nice. Like it is nice and I I was that person before I built this business. And it's, you know, it's cool to realize your dreams. And then there's like investors and and uh, you know, employees and the mark the general market. And the market does not care. The market didn't really care that much that we built an amazing Bitcoin mining business. And that's that's a little deflating because at the end of the day, you want to make money and if you want to retain really really smart people who helped you build a great business, they want to make money too and they have a lot of opportunity.

[00:02:59]>> Yeah. Especially these days with the the AI boom, the gold rush that we're experiencing there. It's uh >> Yeah, we actually had both kind of uh employees in the company. There's people who sort of would would not want to be a part of the company if it weren't um focused on Bitcoin and there's people who would probably leave the company if if it's not focused on AI. So, we're sort of uh caught in the middle a little bit.

[00:03:24]>> I feel like every Bitcoin miner is these days. I mean, big theme last 12 months accelerating through the first two quarters of this year is this transition away from Bitcoin mining towards GPU compute.

[00:03:40]Yeah, to a certain extent the crowding of the Bitcoin mining market accelerated the the eventual transition to AI just because you had difficulty increase in a way that was unconstrained by economic reality for a long period of time. And so that that just made the the returns and the past performance that would be used to justify further investment and growth into Bitcoin mining, it just made those economic cases look bleak. And there's there's an irony about it almost which is that now that nobody is investing in Bitcoin mining of all of the US pubos uh for the most part and you know that the market is kind of weak and unsexy. It's the best it's the best time to invest in Bitcoin mining hands down of the last maybe five years.

[00:04:41]>> That's what I I'm pulling up men.space space here. Looks like in 31 hours we're going to have a negative 10% difficulty adjustment.

[00:04:48]>> Yep.

[00:04:50]>> Yeah. Yeah. And that's that's the one thing uh I've been saying behind the scenes, too, cuz if you think about it, especially for these miners that are transitioning to GPU compute, there's a relative lack of investment in Bitcoin miners in general. But you're just thinking about the hardware that they're offloading. I I have to imagine. All right. I mean, you don't have to imagine. And I think it's pretty clear that AS6 are going to be a good buy, I think, throughout the summer, maybe through the end of the year.

[00:05:18]>> Yep, definitely. And this is really what what I think Bitcoin mining should look like. Um I I think this is I've been beating the drum on this for a little while now.

[00:05:30]I think this is a healthy departure away from the previous economic paradigm, which would be you're upgrading your miners every two to three years. You're running them 95% of the time or more.

[00:05:44]There's a a legitimate hosting industry that exists. Like that is that should not exist at all. Uh and and the fee market is relatively stable in a 24-hour period. I mean, all of those things are I think they're remnants of an era that has now ended. And the what I expect the new paradigm will look like is you're running AS6 for a very long time. You are running them if you are only one step removed at most from energy production, ideally colloccated. I think you're you're going to see more and more colloccated energy production and mining. the fee market will be very volatile because block times will be very volatile and you know it's just going to be the kind of thing where the the fee market will really materialize because there will just be a backlog of uh of transactions and that will largely correspond to the cheapest energy input in the world which is solar and or maybe flare gas. But in flare gas you have to you have to build and maintain a gen set and uh I think that's a little bit challenging but with with solar I do see a very cheap source of power and that's when there will be lots of abundant hashing going on and then block times will be slow when the sun is shining on a part of the planet where there isn't a lot of Bitcoin mining.

[00:07:16]>> Yeah. And that that's actually the main reason I reached out to uh to bring you on. Obviously an update on the state of Bitcoin mining, your perspective on on where we are in the cycle, but I think more importantly, the last time we talked was over a year ago now at this point talking about the the generation mix and the state of the grade particularly in Texas and where it's going >> uh across the United States. And obviously since then the AI narrative's really taken hold and it's become abundantly clear that there is not enough generation uh to uh supply the demand that that we have for compute right now and arguably for the foreseeable future. So, I wanted to get your perspective on how this has evolved since we last spoke and and where you see it going because it seems like it is being deemed a national security uh initiative now at this point.

[00:08:12]>> Yeah, I think we chatted in 2024 or 2023. I still had really long hair. I cut my hair to a more medium length in in May of 2024. That was like an end a little bit of an end of an era. And we were still in the Biden administration.

[00:08:30]Then the renewables above everything else push was still going strong. You and I were talking about how power grids are weakened by too much renewable energy without a without an inertia presence like a you know rotating turbine that that can absorb changes in grid demand and supply very quickly.

[00:08:55]and, you know, just generally like demonizing the renewables uh group think. I I'm surprised by how much of a 180 we've seen now with a pro-uclear uh pro pro- natural gas and grow the grid at all cost top down statement. And I'm also surprised to see I guess I shouldn't be surprised, but it's a little bit wild to see such strong and and baseless opposition to this stuff. Um whether it be like growing our energy base, fixing our our grids, uh the same misinformation about AI data centers as we saw with Bitcoin mining, like they're going to use all the water. It's going to drive up your electricity costs. Uh it's just like so uninformed [ __ ] and people are buying it. Uh I just I'm saying like anytime I see like that's Chinese propaganda. They are trying to slow down our data center expansion because they want us to buy all the AI tokens from them in the future. Cuz no matter what, even the protesters, they're going to buy AI tokens, too.

[00:10:09]Everybody is going to be buying and using AI tokens all the time. You can update the genie back in the model.

[00:10:14]They're even making protest flyers using chatbt. It's like the most ironic thing in the world. Uh and like don't you want this to be built here? Don't you want America the free the leader of the free world where we still have some rights and civil liberties. and you could still push back against the state to a a slight degree and have these great freedoms. Don't you want that to be the place that has the best AI instead of this authoritarian complete surveillance state where they could just squaltch out any opposition? I mean, it just is so halfbaked. Uh but what do you expect, man? It gets votes. It does. Well, I mean, let's let's tackle one misconception because if you do look at the the chart, I forget if Fred puts it out or whoever puts it out, but the average price of electricity in the United States has gone up. I believe price per kilowatt hour in city centers is drifting up towards like 20 cents a kilowatt hour.

[00:11:13]>> But how much of that is uh transmission?

[00:11:16]>> Well, exactly. I mean, this is again getting to the core of the problem. Like what is the problem? a lack of investment years ago in transmission and other stuff. Correct.

[00:11:28]>> Well, I think it's transmission now goes towards building out new renewable generation in places that want to do ESG stuff. And new renewable generation doesn't actually increase the overall capacity factor of a grid to meet peak demand because it's it might not be there when you need it. And then you have a disincentive to actually build reliable thermal generation, nuclear generation, coal generation because all of those generators run close to around the clock and um and don't ramp down.

[00:12:04]And so when when those generators have to endure long periods of low pricing from excess renewables, it it kind of corrods their economic return. So, it's um look, I'm not going to say that if we increase electricity demand by 5x that it's not going to drive up prices. Uh sure that that it makes sense, but the places that have the highest power prices have the worst transmission planning and modeling and investment case. like California, you know, Texas has the lowest prices and we have the the fastest growing renewable sector uh and and an excellent market-based power economy. So, it's you can have growth, you can grow your transmission base, you can have cheap energy. It it all kind of works together.

[00:12:53]>> Yeah. I think I mean, is the shining example that everybody should try to follow. I think I read in the headline.

[00:12:58]Correct me if I'm wrong, but they're spinning up a 453 megawatt net gas plant outside of Houston, too. And there's going to >> There's so much going on there. It's testing the limits of of Texas businessfriendly policy. You know, it's just everyone's a data center developer now. Everyone's got a behind the meter power plant. There's 350 gawatts of power in the queue on an 85 gawatt system. And yeah, I mean it's madness, but people are eating, man. The state is eating.

[00:13:31]Tax revenue is going to go up. A lot of that data center investment is going to go right to school district budgets. You know, property tax goes I think like 90 cents on uh let's see uh 90 basis points of our property tax goes to the school district. Um, so it is and if you're an electrical cooperative, you your adder on your power as a data center goes directly back to as a rebate to all the residential customers. So there are a bunch of really good models in Texas, specifically in rural Texas, that are going to be like home runs for these communities just because they have power and and kind of a can do attitude.

[00:14:13]>> Yeah. what um like obser because I've obviously sit on the board of a minor exploring AI computes. I've been sort of um behind the scenes ear close to the ground watching this AI data center buildout happen. Um and and like you mentioned there's 350 gawatt of people in the queue for a grid that has 85 gawatt on it and it's just are you seeing like what I'm observing it seems like a lot of what was happening in 21 and 22 in Bitcoin mining where people saw this gold rush that was going to that was incited by the Chinese mining ban and they were everybody and their mother said okay all this hash rate's going to have to move let's land it in the United States. And many people who had nothing to do with mining at the time, their eyes lit up and they they became power uh and infrastructure experts overnight.

[00:15:14]>> Mhm.

[00:15:15]>> And it seems like I think in the AI space that that is happening and arguably on a a level that may be an or order of magnitude larger than what we experienced in in the Bitcoin mining space.

[00:15:28]So, I don't disagree about the the your general characterization that it's a frenzy. Um, and I think a gold rush is a great way to put it. Uh, and I have no disagreement there and surely that will die down. So let's let's break out let's start by sort of comparing mining to mining activity and mining investment to AI data center activity investment. You know in mining when the Chinese mining ban happened bitcoin was in the midst of a big bull run. And I think the price of Bitcoin was around 60K. And it had rallied significantly from 5 to 7,000 in 2020 to to 70,000 in in early 2021. Then China banned mining. So you had 12x price expansion and then 50% of the network dropped off. So mining economics were 24x within a 12-month period. If if you were mining at scale, your profitability looked incredible.

[00:16:35]It's commodity production. High prices are the cure for high prices. And then what we saw thereafter was a massive expansion in hash rate and a deployment in capital that was underwritten based on that those that period of economics culminating in you know 12 months 12 to 18 months later FTX went bankrupt and Bitcoin was trading 17,000 and there were there were bankruptcies throughout the mining industry. So it was the economics of Bitcoin mining can change so quickly via price and difficulty that that capital was was not prudent underwriting.

[00:17:14]In in AI data centers, you're signing a 10 to 15ear lease with a investment grade entity that is is a very solid lease such that you can finance it with 80% debt. um you have that dynamic which is totally different cuz you're locking in the economics for 15 years which is fantastic. Uh separately you have this this birth of a new commodity.

[00:17:45]The the commodity is is digital labor.

[00:17:48]And digital labor can be used to replace or complement human labor in an explosive number of of use cases. And digital labor is in price discovery right now. Digital labor is not commoditized. You know, a a token of compute in an anthropic model is not the same as a token of compute in a in a deepseek model or or a Grock model. It's all different. So it's there's no fungeibility in the commodity yet. And many of the producers of of that digital labor commodity are are producing at a loss and they're producing at a loss to acquire users and market share. Or perhaps they want more uh more data from users to to improve their models. They want more direct user feedback. There could be a world where they value that.

[00:18:39]Um you know I don't know for sure how they're making decisions. And so this new commodity is being born. We're in price discovery on it. We are in a commodification phase where eventually some standards will emerge and at some point in the next 10 years it probably will trade close to its marginal cost of production and there will be bankruptcies from overlevered players.

[00:19:05]Um maybe some of these leases will get broken and it will be litigation.

[00:19:11]uh and for sure there will be a correction, but I I do think that due to the nature of the leasing activity and the fact that you can lock in these these revenues for long periods of time and the fundamental demand structure on on this commoditized digital labor tokens, you know, I as long as you sail through this this volatility somewhat prudently and and you're mindful of who your counterparties are on some of these long-term contracts. I think generally speaking, people who are rushing in right now have a better chance to end up in a good spot. Um, >> I would agree there.

[00:19:50]>> So, freaks, this work was brought to our good friends at BitKey. Guys, things happen, things get lost, you need to replace your phone, life happens, and BitKey has been designed with this in mind. Uh, so if you're looking for the easiest way to secure your Bitcoin uh off the exchange, go get a Bit Key.

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[00:22:01]>> No, especially when you consider where we are just on the demand curve.

[00:22:06]Like the agentic economy just launched what five months ago, 6 months ago maybe depending on who you talk to. Some will say October of last year with Opus 45 and probably less than.5% of the population is even aware and less than that is probably even tried to implement this. And then you think we haven't even got to robotics yet.

[00:22:30]Robotics is going to need insane amount of compute. It looks like the regulatory barriers for um full self-driving with Tesla, robo taxi, Whimo, they're beginning to to the they're about to be unleashed. If you think of the demand for these tokens, it's I can't even fathom like what it's going to look like five years from now. And so like you're going to have consistent demand. I guess the the big question is is how how much more efficient do we become with the different types of tokens to your point there uh about the commodification of tokens. I actually had a really interesting conversation with Haley from Luxer when we were in Austin u for the Bitcoin takeover last month and I think the the conclusion that we came to is that right now like the compute it's like different grades of of crude oil like sweet sour light heavy >> and data centers catering to particular types of comput like the refineries um >> we were running with that analogy interesting interested to hear your thoughts on that if you think that's directionally correct It's it's not a bad analogy at all. Um and and I would say I actually think that you know it that AS6 are almost a a better analogy but even so it's incomplete. It's the thing that it reminds me of is some early days of of GPU mining. some of these GPU minded shitcoins like Grin um where >> Sorry to hear that.

[00:24:16]>> Yeah. Uh yeah, Corman launched as a a GPU M. We were in upstate New York. We didn't have competitive electricity costs. So we we had to be a a GPU proofof work miner and we mined this this coin called Grin in 2019.

[00:24:35]and you you mind it with a GPU. And the reason why I think it's analogous is because this token launched and there was price discovery in the token. So you had a a fluctuating token price.

[00:24:52]Then you had difficulty increasing from people who were adding new compute to the network generally to to pursue mining of the token and and to hash towards it. And then you had a third dynamic which was the software that was mining this new um this new algorithm this new proof of work algorithm was improving in such a way that existing compute was able to get you a better product you know more hashes without doing anything to your hardware. And so during that time, you just didn't want to be caught short difficulty in any way. And in in the case of right now with these frontier labs, whoever has the best model which has the the highest quality pre-training and and parameter size and all the variables that make a new model better and more performant.

[00:25:55]They release that model and they're able to acquire all these new users. There's a separate dynamic of sort of are you going to keep those users once you get them into your ecosystem?

[00:26:05]what's their long-term value? And if you give them a bunch of compute at a loss, you know, how do you think about your customer acquisition costs there? But it's I don't hate the the crude oil um grade analogy. I just think it's it's actually more complex than that because the with with crude oil grades, you just need to have a refinery set up to to handle a specific type of crude. It's basically useless if you have the wrong kind of crude going into a specific type of refinery. With this AI compute, I mean these the the quality difference between even models a year ago and today is so different that u it's so different and it's changing so fast that I think some people are rightly calling it to question the investment strategy of the Frontier Labs. Like what is your plan here? Are you just going to keep spending tons and tons of money on on training data centers to build a bigger model and you know is the new massive training model worth the expense of acquiring those users? And we'll we'll know the answer in a few years. Uh but I think it's still a big open question at the moment.

[00:27:20]>> Yeah. Yeah, I mean I was watching the uh Brad Gersonner conversation with Gavin Baker that dropped yesterday and I think Gavin brought up I think Gnome Bloom uh Gnome Brown excuse me from Open AI put out this thought experiment like we like to your point like we don't even know how smart these models actually are because we've never run one like 4.8 8. Nobody's ever run it for a year straight. Like done a a Gent run for a year straight with that to see how smart it actually is cuz you're >> they got out Fable 5 and like arguably they're going to move straight to Mythos if they figure out um how to get comfortable with with unleashing the full power >> of that model. And so like if you're continually trying to progress the models and get smarter models, you actually don't know how smart the previous model can actually be.

[00:28:13]Yeah, that I think that's a great point.

[00:28:16]And also I do think that that there's a part of this that is divorced from economic reality almost in a religious way where the the richest and most powerful companies and and the people who lead those companies in the richest and most powerful state America are chasing this godlike divine intelligence.

[00:28:46]moment and they're all competing with each other. The way that they talk about it is almost like a gospel in especially, you know, if you read Daario Ammoday's uh blog posts and books, he speaks about it as if it has divine characteristics and and it and hopes that it has a divine benevolence. Hopefully, it's a New Testament God, not an Old Testament God. Uh, and I think that it there's almost this awe of, well, of course, we have to spend all of our money on compute and who cares, we have it. This is the last thing. There's egos caught up in it.

[00:29:31]There's this divinity aspect and and now there are some profits. You know, thankfully Anthropic finally is is generating what looks like a a healthy positive gross margin and that will underwrite in the next couple trillion dollars that are spent in this this thing. We we are in a unique moment in time for sure. Sup freaks. This rep is brought to you by our good friends at Ligos Finance, Celsius, BlockFi, FTX.

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[00:31:16]Check it out. Yeah, a couple things there. One, it was interesting that Anthropic felt compelled to go visit the Pope. Uh, and you I was actually having a conversation off the record with a buddy a couple weeks ago and we were talking about how injecting the Bible or Bible verses into post training has a a way to to push the models to be more benevolent to your point.

[00:31:44]>> Yeah.

[00:31:46]Um, yeah. And then you had uh I can't remember some agrieved Silicon Valley VC was quoting Daario's the the last couple of paragraphs of Daario's Machines of Loving Grace essay and uh I think it was Bill Gurley and he was specifically pointing out some language where it's like we hope that the the AI that we build happens to value a certain kind of human and it is a machine of loving grace yada yada yada which I appreciate his directness. I think he's he's trying his best Daario is and trying to translate what he's seeing into an appropriate level of of cautionary guidance for the species. You have to recognize he's in an impossible position. Uh, and no matter what, if you're doing something that significant at that scale and making so much money at the same time, probably 50% of the population at least is going to hate you. And that's just kind of what comes with the territory of that role up for him, I guess.

[00:33:03]>> Yeah, I'm a bit worried about his uh association with the effective altruism movement. Uh, >> yeah, rightfully so. Rightfully so. And hopefully that group has learned from some of the flawed thought experiments of their previous uh celebrated members.

[00:33:21]But >> yeah, >> I think there's a lot of, you know, there's good reason to be worried. I'm just an optimist. I think it's all going to be okay. I would prefer that this technology gets built in America. I don't think there's any way you can put the genie back in the bottle here and and stop people from using this this technology. And um you know it's your job as a young person who has a family to support or or a company that depends on him or her to just try to get as as close to the front of the the tip of the spear of knowledge in this industry so that you can make the best the best decisions possible or avoid bad decisions. And you could put your head in the sand and be a hater and be a lite. Uh or you can you could do that. Um and I think the the former path is oriented around protecting your ego potentially.

[00:34:16]>> Um and the latter path is the path of humility, the path of of greater understanding and learning. And uh that's the path that I want to take. So, just like when I discovered Bitcoin, had to do the same thing. You have to get right to the front of this thing and try to understand it as best you can.

[00:34:32]>> Yeah. I tweeted out this morning, I've never been more bullish on humanity. I don't buy the uh permanent underclass meme. I then to your point like I've done my best to be on the the tip of the spear in terms of interacting with this technology and we've been building we've been building like a company brain at TFTC using Agentic Flows. so much fun and you can see you see touch feel. It's like oh this is real and it makes it much easier to um to completely discard the the lites or the the haters who say there's nothing here. It's like well have you actually touched it? Have you seen it? Have you have you experienced its power? How has your um how is your audience generally kind of uh what's your view on where they land on this issue? Cuz those are you know you have a a loyal and uh fierce group of acolytes.

[00:35:35]>> Uh very receptive. We actually have data on this because we do a a type form survey for anybody who signs up for the newsletter. Not everybody responds to it, but we've gotten um thousands of responses and in the last three months uh we have sort of an open-ended like what type of content would you like us to cover more of? And AI is I think 60% of people like AI content. And I think to your point about you had that feeling around Bitcoin, I think many Bitcoiners, particularly if you've been in Bitcoin for a certain period of time, uh, are fine-tuned to be more receptive to this type of disruptive technology. And so I actually think my audience, uh, the TFTC audience is is more attuned to being receptive to this stuff. And I think it shows out in the data and the survey data that we have.

[00:36:29]>> Yeah, that makes sense.

[00:36:32]I wanted to ask you uh at some point when we're talk about Sailor.

[00:36:39]>> Yeah.

[00:36:40]>> Yeah.

[00:36:41]>> What What's your question about Michael?

[00:36:44]Well, I'm I've historically been a I'm going to call myself a defender and a I wouldn't use the word fan, but I would say a defender and a a hat tipper where I'd say I think his actions have been rational, smart, defensible, and I'm a hat tipper in that I'm like, "Good for you, man. you you know you accumulated a massive quantity of Bitcoin in this entity, you can pay yourself a salary from that entity and you're able to add more Bitcoin to your ownership per share in that entity. Like as a Bitcoiner where I wish I thought of that like and I I've been a big sort of a supporter like why are people hating on this guy?

[00:37:41]I'm a little concerned about what he's done over the last month or two and yeah, I would love to hear your take on it.

[00:37:51]>> I think I'm very uh very aligned with your perspective on it, which is I've been a a hat tipper. I mean, Michael has been on the show once and it was uh I think five or six years ago at this point when we were fighting. I mean, I think I have the most combative uh podcast episode Michael Sailor has ever been recorded cuz it was when he was pushing the Bitcoin Mining Council and I was very much in the camp of we don't need this, don't cater to the ESG >> um crowd and he was very much in the we should just appease them and I was in a big don't appease them and I still stand by that. actually think >> my perspective and position actually played out uh to be the right one in the long run. But outside of that historically um since strategy started accumulating Bitcoin been a hot tipper like hey you're doing it and you're um you're utilizing this entity to acquire Bitcoin in a way that is accreative to shareholders. But to your point, like with like stretch and all these preferreds and a narrative switching and the forward guidance uh strategy we'll give in a in an earnings call and then quickly and it started last year. So my um my antenna peaked last year after their Q2 earnings call.

[00:39:05]I forget exactly what he said, but he there was something about the mechanics of the ATM and the guardrails they were putting on themselves for when they would leverage the ATM. And literally two weeks after that earnings call, they neged on that forward.

[00:39:19]>> I remember that. Y >> and I remember at that moment I was like, wait a second, this is a little weird. And then obviously you have these perpetuals that have come out strike and stretch. And I'm not going to pretend to know how to dissect the financial engineering and pinpoint exactly where it could blow up.

[00:39:40]But the caveman to me is just like this seems too good to be true. And >> that's my perspective. If you want to invest in strategy, MSTR, stretch, strike, go for it. Uh not my cup of tea, though.

[00:39:55]Yeah, I I think you're right to point out this this call it shareholder deception started a a while ago and it's now reached a I would say it is overlapping with another behavior that I think is concerning which is I don't think he's making good choices right now. I think that the the key thing he did wrong was he bought back those preferreds that preferred uh convertible convertible debt. I mean he bought back the convertible debt and reduced his dividend runway on the all of the preferred instruments from I think 18 months to 6 months. And that was when the market started kind of freaking out a little bit and selling off. And then they came out with a a slide deck that said, "Oh, well, now we can sell Bitcoin and buy USD as a as a fifth pillar of our strategy." And he's always said, "Of course, we're never going to sell Bitcoin, and we're always trying to increase SATs per share." And uh so he he's gone back on what he said he was not going to do. he made a misstep on managing their strategy and and their financial position because really what he's done now is taken a a timebased concept where as long as Bitcoin goes up more than the yield that they have to pay on the preferred then it it should be an accretive strategy and I think there's some reflexivity to it where the more that he's able to buy the more that the more likely that that outcome becomes but now that he's actively deceiving leaving the shareholder base and he is he's made a financial misstep. I think it's the time for him to reflect and I I would I have a message for him.

[00:41:54]I would say, Michael, you need to channel through a quantum portal to your future self and recognize that you're in a precarious position right now. You've brilliantly financial engineered your way into a massive Bitcoin position and you now need to figure out a way to create intrinsic value with that Bitcoin. The jig is up on the the financial engineering. You can't sell the market. The more that you deceive people from here here on out, the the more that this will be the high water mark on your reputation. you need to figure out how to actually create cash flows or Bitcoin denominated cash flows using your stack. That's my message to him.

[00:42:42]>> Yeah. And then that's always I think the caveman intuition in me is like you can only financial engineer to a certain extent, but you need cash flow if you're running a business.

[00:42:53]>> Well, he did he did it. I mean, it's like, hey, man, you got 900,000 Bitcoin.

[00:42:58]Maybe you could start a uh a financial services company. You could do hard work. You could do a hard thing. What you did was novel and you you sold a bunch of people on this thing. Most people who bought your equity instead of Bitcoin over the last couple of years have underperformed and now you have a financial structure that's fallible and your only option is to sell Bitcoin or or sell common stock below your MNAV. and that people are rightfully pointing out that the MNAB figure that he's he's using is somewhat deceptive. So, it's he's got to I think stop.

[00:43:38]>> Yeah.

[00:43:39]>> Take the summer off, you know. Well, that that's >> that's the other question because he was very public about it starting last year that we're using AI to create these financial products and like AI as we just described it's it's very powerful but I think if you're seeing touching feeling you also know it's it's fallible to a certain degree too like right now it's at the the the functionality I mean Fable 5 was a big big jump but 4.8 actually when 4.8 it came out, I diverted back to 4.6. I preferred 4.6. But long story, sure, they're just like sophisticated calculators that can give you wrong answers um and are a bit sick of so how much of the AI uh utilization to create these financial products is a machine being sickopantic to you to convince you that this is a good idea.

[00:44:34]>> Yeah, totally. Um, you got to read the room a little bit. I think and yeah, >> something has changed recently. I know.

[00:44:48]I'm worried for him.

[00:44:49]>> To your to your point about MNAV, like Malers's asked him the question, I guess, in Prague a couple days ago about it, and >> he gave a 10-minute long-winded answer that was sort of a non-answer. And then today he gave us >> and and excluded strike from from the from the slide of uh emerging Bitcoin companies which was I think a bit pedantic.

[00:45:10]>> Yeah. Yep. Uh and look the the Jack Jack's always been you call a Bitcoin vanguard and I think he's he's saying what the market is feeling. He's got a platform that breaches that that barrier there, which is like generally speaking, Sailor was supported. And there's a an immune response within Bitcoin that we're not going to allow a a deceptive person in our midst to go uncalled out.

[00:45:47]And he is now actively deceiving on on all of his platforms in a variety of ways. and he's making financial missteps and that you know he is he has too much he's too big to fail almost and that should be the narrative. The narrative should be you're [ __ ] up and your ego is is in the driver's seat and you're deceiving people and you need to take a break. You need to reflect.

[00:46:17]>> I I would agree. I am we are in alignment there. And then yeah, because I mean now it's getting to the point too where you have like derivatives of the strategy strategy with like Strive and Seda and like you're beginning to to build layers on top of this and if you're deceived and >> there are stable coins that are backed by it out there, >> DeFi. Yeah.

[00:46:37]>> Yeah. It's crazy.

[00:46:39]>> It's awesome.

[00:46:43]>> Good to hear. Good to hear we are aligned on so many things. What do you suppose we are not aligned on?

[00:46:50]It's a great question. I mean, I think you've definitely uh pulled me more in your I mean, we've we've known each other for what almost a decade now. Uh >> the stuff we were not aligned on the ordinal stuff, but I think was I proven right there or do you think there's a >> h I I will say that ordinals was is obviously not a was not a persisting phenomenon. Um, and I was I don't know that I ever went on record saying that, but I did say I enjoy the incremental fee revenues being paid to miners. And I do think that that is a problem. Although I've moderated my views on this a little bit, which is that I think the fee market will will materialize when there are is more volatility in block times. And it'll be interesting to see how Bitcoin works in that era. I mean, imagine if you had to pay a big transaction fee if you wanted to get your transaction confirmed in like 3 or 4 hours. Do you think you would do that?

[00:47:58]>> Yeah.

[00:48:00]>> Yeah, I think so, too. But, um, yeah, I mean, I'll give you I'll give you that one. I'm not sure what the uh the exact nature of our disagreement was, but >> well, I think it was around the fee market, so it was a layer above the core >> discussion, which was are you worried about a long-term security budget?

[00:48:20]I am worried about it and my my concerns have moderated a little bit, but I I am definitely worried about it in that I do think people will pay high fees if if this phenomenon emerges, but I wonder what the market's receptivity will be to tolerating a a long-term high high fee regime and if that will if that will persist. You know, I worry that people will try to find ways to innovate around paying high fees and then what will the the nature of the relationship between protocol and the revenue that's generated from blocks and Bitcoin miners be? What is that going to look like? You know, >> maybe this is not >> I've always been under like the we don't know what the future state is going to be. So like I think uh keeping an open mind in terms of the ability of creative new use cases of Bitcoin to emerge that we can't even fathom. I I just I just always have this maybe it's blind confidence and naivity but that we're going to find a way or it's not like find a way to you don't go in with the intention to increase fee revenue for miners via transaction fees just to do that. it's that Bitcoin will be so useful that >> um like I don't think you can try to engineer increase V revenue for miners intentionally out of the box. I think the goal should be to make Bitcoin so useful on every different layer protocol layer layers above it that demand for the UTXOs. I mean it's the conversation of Jevans paradox for compute is is very um very front and center right now. It's funny watching um everybody learn what Jebvin's paradox is uh in the outside world outside of Bitcoin because I feel like Bitcoiners been talking about it for a while, but I do still operate under the belief that you can apply Japan's paradox to UTXOs too. And so the more that we can make UTXO usage more efficient and increase the optionality of use cases with individual UTXOs, I feel like it's going to drive demand for them in the long run. That's my intuition.

[00:50:48]What is your view on quantum? Maybe we're not aligned there.

[00:50:52]>> Um, I am personally skeptical that it'll arrive on the timelines that are being put out there, if at all. However, I have become thoroughly convinced that regardless of whether or not quantum manifest, we should um be preparing for new signature schemes. Um anyway, >> and a lot of those just so happen to be quantum resistant, too. I feel like the the work's being done. I I guess many people would argue about whether or not the urgency with which it's being done is is urgent um is sufficiently urgent.

[00:51:39]I I'm under the uh impression that it's sufficient enough for me at this point.

[00:51:44]What's your thoughts?

[00:51:47]>> Yeah, I it does feel like the the two sides of the debate are really around the nuance of it. Um and then maybe the more uh the nastier debate that is impending is the implementation form where there pe there will be a lot of of nerd bloodshed at uh at what is the actual final form of >> I'm not going to give up the sign >> I'm not going to give up uh my perspective on this one yours first. Do do we dump Satoshi's coins or do we freeze them?

[00:52:28]It's a great question. Um, I I think you can't touch them personally. I just think that it's like, what are you talking about? Um, I I get it and it sucks. You hope that, my hope is that a benevolent entity that controls the most powerful AI cracks it and and burns them as a flex like a like Google uh Google quantum because it is a a crime maybe. Um, and you can see right now, I think some of the more interesting things that you're seeing right now is people are setting the stage for legalizing that crime by claiming lost property on chain and then they'll steal it with quantum and they'll be like, well, this was my property. Uh, which is a very interesting little tactic.

[00:53:28]>> That's the question I have is like, are these people working on quantum that are making these claims or is this somebody?

[00:53:33]I think they maybe are just imagining a time when when the techn is widely available and they they need to have legal title to it or somebody steals it and then goes to them and they have legal title and they're like my fee is 5%. You know, like uh I will clean your money and you can launder it through US bank rails because I own title to this and you have stolen it. Um, maybe it works like that. But that would be I think it'd be sick if Google was just like, "We are so far ahead and we crack Satoshi's coins right to a burn wallet. Let's go, boys." Uh, I think it would be that'd be great.

[00:54:12]>> That would be sick. We're aligned here.

[00:54:14]Uh, I don't think you can touch Satoshi's coins. However, an interesting conversation this week in New York. I won't disclose with who but he presented a third option which I think many people are completely overlooking which is Satoshi is still alive and well and actually does want to move his coins at some point in the future and >> his whole argument was like in Bitcoin we hold Satoshi up as this deity like figure and there's a lot of reverence for what he did by launching Bitcoin and by walking away from it. And it's like he's almost this untouchable um entity that that everybody looks up to. And the argument he was making is that everybody is underappreciating him.

[00:55:02]Like who's not to say that Satoshi has a long-term plan is waiting for the market cap to >> get to a certain point at which he can begin deploying his Bitcoin uh to to invest in things that he wants to see, >> which I >> did. You watch that uh documentary, the one that came out recently?

[00:55:21]>> No, I haven't watched it.

[00:55:23]>> No, >> I feel like I've seen >> It was a It was a compelling case, I would say.

[00:55:29]>> I' I've >> Yeah, I found it to be believable.

[00:55:34]>> A lot of them are believable. A lot of the uh theories are believable. You can you can make the case for for many of them if some less believable than others. But >> you should watch the documentary and see what you think. I think that the the approach they took to the research was more credible and methodical than previous approaches. And um >> finding Satoshi, that's what it's called, right?

[00:55:59]>> I think so. Yeah, you have to go buy it on their website. So there's sort of like I'm not going through conventional distribution channels. you can come buy it direct from me, which is that kind of the way that you would do it if you release a documentary, I think. So, >> yeah, >> you should give them a little little props on that. Pay your 20 bucks.

[00:56:17]>> Well, value for value. Not against that.

[00:56:19]All right, maybe I'll I'll rent it and watch it this weekend.

[00:56:23]>> Yeah.

[00:56:23]>> Yeah.

[00:56:25]>> What else?

[00:56:26]>> Did the Did the person who provided that theory, had they watched this documentary?

[00:56:32]>> I don't know. I didn't ask them. I can't I can't say.

[00:56:36]I'm curious whether this person is.

[00:56:38]>> Yeah, I'll I'll um I mean, of course, the typical Bitcoiner fashion is like I won't tell you who I think Satoshi is because I would never >> want to draw that attention to them, but uh very confident. I just thought it was an interesting theory. I think many people are discounting that possibility that Satoshi's alive, >> wants to be a uh a trillionaire philanthropist uh at some point in the future.

[00:57:05]Yep. Many of our brightest minds are distracted by AI at the moment. Probably a good time to do stuff in Bitcoin if you if you wanted a good development environment.

[00:57:15]>> I I'm mean I'm very happy with where the pace of development and I I do agree that many I think there are a certain sub sub there is a certain subsector of the Bitcoin uh world that is distracted by it. But I think I mean a lot of the conversations I'm having is like people trying to figure out again how to be on the cutting edge of this to leverage it to effectuate the proliferation of Bitcoin technology. Um >> Mhm.

[00:57:46]>> Cuz you'd be stupid not to leverage this stuff to try to build. There's so much more now.

[00:57:53]>> Yep. And if you happen to own a bunch of powered land, you got a nice little gift dropped into your lap.

[00:58:00]>> How how good are you feeling right now?

[00:58:02]um with everything that's going on for powered land developers.

[00:58:07]>> Look, I feel lucky. Um, I would say in in our marketing materials a couple of years ago, we would claim that part of the hypothesis of developing power land for Bitcoin was that it AI compute could grow and demand for that power at scale could could make the assets that we were buying for relatively cheap look like a a great buy in hindsight.

[00:58:36]Um, I did not see this coming.

[00:58:41]Uh, you know, did not see that our company would have offers from trillion dollar companies to, you know, to to do deals. It's um, it's a little wild. It's also a little bit of a it's a different skill set than I think you have as a Bitcoiner. It's a different muscle where in Bitcoin there's a a sovereignity that extends also to the companies. There's a way we do business.

[00:59:13]There's just a it's a very colloquial relationship can be high trust. Some of the norms of of Bitcoin and and cryptocurrency would be shocking to people who come from Fortune 100 company world. So there's a part of it that is you feel like a little bit of a sellout um if you go down that road where there's so much diligence, so much compliance, so much lawyering, and then you just get a big fat check at the end and it's like, yeah, you're you know, you're being paid a little bit to sell sell your soul. Um, so it's it's not all positive, but I would say overwhelmingly that the the weight of the burden that you feel for your shareholders and your employees to deliver a positive result and I mean I take that very personally and it's a heavy burden for me where this is a it's a blessing. We we got lucky and we want to do our best to capitalize on it and overall just generally feel lucky.

[01:00:25]>> Well, I mean luck is uh what is it? Uh preparation of fate meeting. Uh and so >> opportunity meets preparation.

[01:00:33]>> Yes, opportunity meets preparation.

[01:00:35]There we go. And I think uh out of many people in the Bitcoin mining space uh your preparation was uh better than most which is evident by the lowcost mining and the ability to survive through multiple cycles that you've that you've shown. Um one last question though I mean building on what you just described about uh sort of interacting with these Fortune 100 companies. What can they learn from what we've done in Bitcoin?

[01:01:02]And do you think we can pull them more towards our worldview via interacting with them more at this intersection of compute and power?

[01:01:10]>> I I would say directly speaking for mining, you know, uh the way that we built mining data centers was you you're building to extract the commodity out of the input. commodity as cheaply as possible. You're building an electricity conversion machine where you're trying to convert electricity into bitcoins as cheaply as possible.

[01:01:39]You can build a data center for $100,000 some megawatt including labor, including all materials and labor from a high voltage input source to the plug. You can do it and you can run a data center for 2 cents a kilowatt hour. You can even run it for free. And the more that you embrace flexible operations and invite downtime into your design philosophy, the lower that your total cost of ownership will be.

[01:02:15]Fortune 100 companies and the style of data centers that they build were oriented around I think as a a core principle. We don't go down ever. And the reason why is because if AWS goes down or if if Instagram goes down, the amount of revenue loss that they lose is probably thousands of dollars of megawatt hour equivalent. You know, it is it is astronomical because their it's their reputation, it's commerce streams, it's you know, frustrated users and all of those things. And so the data center design philosophy for those Fortune 100 companies reflects that. And we're in commodity production like this. We this type of of compute is different. You are producing commodities here. And when you're producing commodities, it's a marginal cost of production business.

[01:03:12]And so I think that Bitcoin mining data center developers who were oriented around building and operating data centers at the lowest possible cost are going to be in a good position to innovate in the AI data center space where you have people coming from this sort of no downtime paradigm. And then you have these sort of garbage collector Bitcoin miners who are like building these really lowcost chicken wire data centers and like there's a middle point there that's going to be we could end up in a good spot there as an industry. I mean we already have we're the industry is landing this pivot very well.

[01:03:47]>> I agree and I think um on this because I know you have a tight hour here. Uh Colossus won. It was amazing watching how Elon and crew built that because I they did a what in a 100 days and when we finally got a look at how they did it was like oh they acted like a Bitcoin miner. Daisy chaining gen sets putting battery walls on the inside and just thought like a a scrappy Bitcoin miner.

[01:04:15]>> Yeah, it was remarkable. I mean, I think that if you have all the if you have all the stuff, you can build these data centers fast. If you have to buy it through the supply chain, you know, you there's parts of the supply chain that just take longer. We would build Bitcoin mining our our best Bitcoin mining data center was like 110 days at $104,000 a megawatt built. Um, that was the best we ever did. But there there are parts of that that you just can't control like supply chain and timing. And so I think that like Elon definitely nailed that.

[01:04:53]But if you need to order everything from scratch and you don't have it in inventory, 100 days is not possible due due to some supply chain timing. But I mean he's a badass. I'm a fan and definitely setting the pace as usual. I hope we're not competing with him. I see all this like SpaceX leasing data center compute and I'm like [ __ ] I do not want to compete with Elon.

[01:05:16]>> Yeah. Yeah, you do. Iron sharp sharpens iron, you know.

[01:05:20]>> That's true. Yeah, that's true. And we are we can hold our own. I mean, we're we're scrappy. But >> you always want to compete with the best. It's not worth being in it if you're not if you're not competing.

[01:05:29]>> I would rather compete with the worst.

[01:05:34]Hey, I just want to win. and um competing against a person like Elon who has so much more resource and and and so much more just like raw intellectual firepower in himself and around him.

[01:05:50]It's tough, man. It's uh it'd be daunting, but I think there's plenty of wood to chop out here. We need a lot of compute. West Texas is going to be a great place to do it. So, we're excited.

[01:06:01]>> Well, I'm pumped for you, brother.

[01:06:03]appreciate you uh taking some time to to catch up today because uh I think this is a topic that many people are still trying to wrap their heads around and I think you're one of the sharpest minds within Bitcoin that's playing at this intersection can actually articulate it.

[01:06:20]So appreciate that.

[01:06:22]>> Yeah, let's let's do it again. This was fun. Thank you very much for having me.

[01:06:26]>> All right, peace and love, freaks. Okay, thank you for listening to this episode of TFTC. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there. Also, wherever you're listening, whether that's YouTube, Apple, Spotify, make sure you like and subscribe to the show. And if you can leave a rating on the podcasting platforms, that goes a long way. Last but not least, if you want to get these episodes a day early and add free, make sure you download the Fountain podcasting app. You can go to fountain.fm to find that. $5 a month get you every episode a day early ad free.

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