The mining industry is experiencing its first year of hash rate decline in 16 years, driven by the 'miner's trilemma' where miners must balance three competing factors: low-cost energy, efficient mining equipment, and capital availability. Publicly traded miners have been shedding Bitcoin and pivoting to AI/data centers, while financial institutions and nation states (like Iran) are entering mining to secure block space control rather than coins themselves. This institutional shift represents a fundamental transformation where mining becomes a utility service for block space rather than a coin-producing activity. The BIP-110 (RDTS) activation at block 961632 in mid-August 2026 may trigger a chain split, requiring miners to prepare backup pools and nodes to navigate potential network forks.
Troubling Bitcoin Signal Appears For the First Time in 16yrs | Bob Burnett
Added:where do you see the mining industry sitting right now one of the certainties of Bitcoin for 16 years was hash rates growing?
Well, it it didn't grow approaching a year of hash rate decreases.
we will continue to see negative growth probably through the having.
the larger organizations that have been in mining, especially the publicly traded have pivoted.
kind of shed Bitcoin even in their like the way they positioned their company.
in the next cycle.
post the next having we will see the entrance.
of the financial institutions in the nation states.
the financial institutions will realize that they must participate in mining.
Now, it's pretty clear that Iran, for instance, is already doing this.
The other thing I do want to talk about is Bitcoin ten, because you've been flagging support I think we have a 99% chance that this is a 1 to 2 hour issue.
There is a scenario that I think is really bad Quickly, team, I'm not going to ask you to like or subscribe, but if you do want to hit the show, continue. Just share it with one friend.
All right.
So for today we have one of the most respected voices in Bitcoin.
Bob Burnett, former CTO at Gateway Computers, now CEO of Barefoot Mining and co-host of the Bitcoin Boomers podcast.
In this episode, we discuss the harsh reality of Bitcoin mining in 2026, why nation states and financial institutions, not energy companies, will be the next big entrant into the industry and Bip 110 activation.
Bob shares his thoughts as well.
Some specific warnings that you need to hear in preparation.
All right.
Good morning, Bob. Thank you so much for joining me today.
Very excited to have this conversation, to have one of my favorite Bitcoin boomers back on the podcast.
The mining industry seems to have gone through a fascinating bit of a bear market shift.
We've seen massive capital pivot into AI, and it seems that hashrate has actually been in a bit of a downtrend since October.
So to kind of kick off the conversation, I'm genuinely curious, where do you see the mining industry sitting right now and where do you think things are headed?
Yeah, well, I guess, Yeah.
Nice to see you, Nathan.
Thanks for having me on.
Yeah.
We're at a very, very interesting and crucial juncture, I think, in the mining world.
And this is a first.
You said we were down. Like one of the certainties of Bitcoin for 16 years was hash rates growing?
Well, it it it it didn't grow like we've spent.
Now approaching approaching a year nine nine months or so of hash rate decreases.
And it's my prediction that we will continue to see at least flat but probably negative growth probably through the having.
So I think we're probably got, you know, as much as two years because, and there are several factors at play.
The, the first factor is that a lot of the larger organizations that have been in mining, especially the publicly traded folks, have pivoted.
A lot of them, interestingly, like they they've kind of shed Bitcoin even in their like the way they positioned their company.
Like they.
I hear I don't hear them referring to Bitcoin anymore.
Yeah. Yeah.
They you know, they'll call themselves infrastructure companies or, you know, data center providers or you know like they've really radically kind of shifted and, and and not only have they shifted the positioning of the company, but they have decommissioned equipment in a lot of cases, that decommissioning came because they had facilities.
That were attractive to in the eye and data center world.
And some of them want to make this look like, like immediate attention.
And so some of the decommissioning of those facilities was not because they had mining rigs that were at their natural end of life, but urgency to convert.
And so, you know, what we've seen is opportunities in some cases where equipment like very current generation, stuff like S-21, XP, two 70s that had been in service for four months or six months suddenly came under the use market, s 21 Pro, 230 fours, lots of those, which maybe were a year just 12 months old. So.
So they were like, this is like, you know, like really radical shifts, you know, and so, it's been good.
And so we've, we've been able to buy some equipment at that.
But you know, what happens.
And that's a pretty radical.
That's so that's part of why this is coming down.
At the same time.
Because Bitcoin's price has dropped even faster than the hash rate has dropped.
Hash price is really at an all time low, or at least I would say a a current low.
I mean, you could say that the, the miners in the first year or two had a pretty shitty hash price too.
But but in, in what we think of maybe as modern times or as, you know, as Bitcoin is mature era, these are unprecedented.
So what it's done is it also accelerated the rate at which machines like, it's easier to use the, the Bitmain family, but like an S19, j Pro 120 is, for most people, completely un profitable.
Like, you know, there's no difference between that and S9.
Like, they're both they there's just nothing you can do with them.
The, the market price of something like that is like, 70 bucks, 80 bucks.
You know, if you want to buy one.
For an S19 J Pro 120, you know, if you're, if you're trying to sell some quantity of them, you're going to get like 70 bucks, Wow.
That's like right around when I paid for my S9 like a couple of years ago.
And Yeah, yeah, yeah.
Even in S19 k Pro, which is the, the one after that, you know, that's that's at 120, 120 tera hashes per second.
2700 what machine?
160, $170 is the like that's that's what those would, would, would go for now.
And, you know, I have some operations where we produce our own power.
We have very low costs, and we still buy some of that stuff because we, we can still be profitable mining with even that, you know, that family of equipment.
But but most people can probably anyth almost anything on grid.
those are, those are untenable.
So so so we have an interesting thing where.
Those kind of units the, the, the rate of obsolescence of the lower end units is increasing.
But we also had some of the, the really recent generation stuff also get decommissioned on an accelerated basis.
So there's a I wrote an article for anybody that's interested, several years ago.
It's in Bitcoin magazine. It's called The Miners Trilemma.
And one of the things I realized was that, I was looking at new site development and saying, well, what what what are the factors?
What what has to come together if you want to put up a new commercial mining site.
And it really boils down to three things you need, consistent, low cost energy.
You need, efficient, reasonably priced mining rigs.
And you need money like.
And so what I realized, though, was that at any one point in time, one of those three would always be hard.
So that's that's the trilemma.
The miners strike.
The hammer is we have to battle through navigating that and solving for the hard won.
Like if if one of them's easy and it shifts.
Right.
And so if you're if you're a company, they maybe that's good at raising capital.
As an example, the public companies were always good at raising money.
That was a strength.
Well, if if you were in a market where that was hard, but the other parts were easy, where they put you in a great position because you, you had a lot of money at a time when, others didn't.
And, and the other stuff was there.
On the other hand, if raising money is easy, there is a tendency for the, the infrastructure, the the, the, the hash power itself to get really expensive because because if there's a lot of money, they quickly buy up the machines.
And then, you know, there's scarcity of those machines.
And then on the energy side, you know, what's interesting about the energy side is it used to be it was really just the bitcoin miners competing for energy.
Well we, we we have a serious competitor now.
And in fact that one I usually represent this as a kind of a triangle like you could think of, let's say, we're in a period right now.
The, the, the period would be, capital, very hard energy, very hard, and mining equipment very easy.
Like, that's the that's the current parameters.
So I would represent the mining equipment as green and the other two as red.
Just as an example, in the period just after the China mining ban.
So let's say the second half of 2021, early 2022, the capital was green, energy was probably yellow.
It was, you know, there was still a lot of energy out there.
You had to work for it.
But you could you could get it and it was impossible.
This was remember, people spending like $12,000 on an S19 100 tera hash per second, and.
That's why when you made the comments about how cheap they are right now, that's the number that was still stuck in my mind.
That's what like took me like really drew me back about whoa, they've really fallen.
Yeah.
So, you know, so in those conditions, and you saw it.
Well what you know, what happened.
Well the the essentially what happened was this is the Bob Burnett version of history.
So as I say that there's, there's people that will object to what I'm about to say, but I would say there was very, very poor fiscal discipline in the public pub cos they had all this money and they spent it they way overspent, like, that's why we have these $12,000 systems and they, they continue to overspend for a couple years.
So a lot of the meteoric rise in hash rate that we saw 2022, 2023, 2024 was because capital was too easy and it caused overspending and overbuilding, and that had the very negative effect of meaning that small to medium sized companies, which typically don't have access to capital, but maybe had operational excellence, they maybe knew how to run a low cost operation.
Maybe they haven had access to some low cost power, but in smaller pockets, they were forced out of business or the business never started.
So the way I look at it is, some people might look at it as Darwinian, but it really wasn't the survival of the fittest.
It was the survival of the biggest.
It's kind of like, you know, when, I guess try to put it in, in in those animal kingdom perspectives.
I'm making this up as I go.
It's almost like, you know, when when a new, like, predator comes in to a region, like an invasive species comes into a region, and it it completely screws up the balance of the ecosystem.
And the apex, the apex predator, the big the big bad one, the the pike.
Like. I live in South Florida.
The python, the Burmese pythons are in the Everglades, and they're eating all the rabbits and the, the, you know, all these other animals, and they're making it hard for even panthers and bears, other apex predators to live like they just like.
But, but and so so I think something like that kind of happened.
And so.
me of the Ray Dalio's debt cycle where, like, you would have had the normal, almost like, linear trend, but we way overbuilt.
And then we're going to as a result, we're going to way overcorrect down because it's been such a misallocation of That yeah that is I think that is true.
And what, what's been the beneficial though is, you know, the I thing.
One gave these companies because if you look at the performance of the public companies, it's shitty like they, they, they have not they have not operated efficiently.
They have.
Many of you have probably seen like the, projected cost of producing a bitcoin.
And you'll see I'm not going to call it any one specific company.
But you see a lot of them $103,000, $108,000, $98,000 for cost of producing one bitcoin, which, you know, we're as we're sitting here today, I think Bitcoin's at 62 after it, after the recovery from 58 like so if you're if you're producing at those levels but but you have in your treasury you have 60,000 Bitcoin.
You can do it like you, you know, you're, you're you're like a, a big fat person who, has a caloric deficit every day.
You can lose weight for quite a while before you die, you know, but if you're but if you're, you know, an average person who suddenly is on a caloric deficit, you don't have a lot of you don't have a lot of leeway, you're going to there's not a lot of runway.
So I think that's kind of what happened.
And so it, you know, I don't wish ill on anybody.
Those companies are pivoting.
It may save them because they they were on a path that was unsustainable, but but it was going to take a while.
Well, now they've gotten a refresh of capital.
Maybe under these business conditions, they can survive.
Good for them if they can, doing whatever they are.
But from a Bitcoin perspective, getting them out of the ecosystem, getting this apex predator who was disrupting the ecosystem out is, I think, very positive.
But it's painful right now.
And hopefully it will, it will, it will bring about, you know, the small and medium size, vendor.
So because, not not to be all over the place, but this concentration of hash rate also, which is bad, right?
That's just kind of a centralization force, I think.
Too much concentration of hash rate.
It also tended to lead to a concentration of pools because the big guys tended to use the same pools.
So so there was a direct correlation between this activity and hash rate centralization and then pool centralization and then block template centralization, like all these sort of things kind of played off of this really, symptoms of the same disease.
Do you think that the public mining.
Because I was talking about this myself.
I agree with all of that.
And I wonder if, like, publicly traded miners is a business model that is even possibly sustainable and sustainable in the long run, my instinct is actually know that it has to be more, small.
You have to be able to be small and nimble and able to move where the cheap energy sources are.
And I think that on a large scale, it wouldn't be large, publicly traded, miners.
I think it'd be large, publicly traded, maybe energy companies that end up getting into the space in order to deal with the excess energy or wasted stranded energy.
But I'm just curious on your thoughts, like, I don't I almost feel like a publicly traded Bitcoin miner isn't a sustainable business.
I, I agree with that.
With a few caveats.
The first is so I've been doing this for ten years, and, others may not know my background, but I used to work for, gateway, which was a fortune 200 publicly traded company, and I was with the company when we went public.
And I was the chief technical officer there.
So I was in the C-suite.
So I know what it means to be in a large public company.
And so there was an interesting opportunity.
I understand why a lot of companies took it in the post China mining ban is there was a flurry of people that when companies that went public in that 18 month period after that, and they did so because they were wildly profitable for a brief period.
And so what what I think they either didn't understand or maybe weren't as forthright as maybe they should have been about, was this was unsustainable.
We had a 50% drop in hash rate, and so all the companies saw a 50% increase in revenue with no change in their operating expenses.
Yeah.
So, I mean, when you have a a 50% increase in your operating, in your revenue with no change in your operating expenses, your profitability is pretty frickin good.
Like, it's and so, they were raising money on the back of that.
I do think it is unsustainable.
For a couple reasons.
The first one is that it forces you into a 90 day mentality.
It's it is in Bitcoin kind of vernacular.
It forces a higher time preference behavior because you're beholden.
And that that was the number one reason when I was thinking about how to take my company forward in that period, I didn't go public.
It's in its heart.
It's it's a really tough go.
It sounds glamorous and sexy and all that, you know, see the people ringing the bell and the like, all that sort of stuff and, and the big IPO.
But it gets a slog. It's really hard.
Well my first instinct is kind of like you know speedboat versus like giant tanker that it's something along the lines of because of the difficulty adjustment.
No matter how big you are you can't actually have a moat.
Like you can't be so big that you can basically prevent other competitors from coming in because the difficulty adjustment.
So it's going to sneak up on you.
Well, it does, but I think you can I think you can build your business model.
Like I'll give you some insight a little bit into the way barefoot work.
So when we put up a new facility, one, we produced our own energy almost in all our new sites.
We still have a few grid things, but, all our new stuff, we produce our own energy and, we have gas, we have hydro, we have, natural gas from natural gas wells.
We have natural gas from anaerobic digestion.
We have different ways in which we attack.
The common theme, though, is our energy is let's just say sub three cent per kilowatt of energy.
We can produce it ourselves sub $0.03 per kilowatt.
And and we can essentially do it 100% of the time.
So we're not dealing with curtailment or not dealing with demand response.
We're not dealing with all these things.
And, you know, maybe you can kind of get that same, situation, especially like in Ercot, you know, maybe you can get that.
But as I view it, I can't say for sure, five years from now, ten years from now that that, those on grid opportunities will still exist.
I also I'm here to mine bitcoin.
So, I don't want to be curtailed.
Yeah.
You know, that's a fiat mentality thing, right?
I like to say well, I'm going to curtail my bitcoin mining because I can get more.
Essentially selling my access to this energy back may be true in fiat measurement, but you're not making Bitcoin.
You're not securing the network.
You're you know, and so so that, so so that's one issue.
The other issue you brought up is that there's the law of diminishing returns.
So, and as it applies to this is if we reverse the clock back, let's say to 2021, we'll go back five, six years.
If you let's say you had a lot of capital and, like I said, very different time.
You had a lot of capital.
You wanted to build a, 100 megawatt facility.
Okay.
There there were at that time still plenty of places you could go and you could maybe find 3.7 cents per kilowatt hour with some kicker, because you're you'll curtail at a certain time.
And, you know, maybe, maybe you didn't even have to build out that much of the you didn't have to build out a substation.
Maybe it was already there.
Maybe there was an old aluminum smelting plant that you took over, like you remember.
I remember you've been around the long time to like you probably remember, these are stories.
Well, those are all gone like that.
That's all been sucked up.
So do those kind of opportunities still exist?
Yes, they do, but at a small scale, it might require going to a small town in Iowa or Missouri.
I'm talking on grid, first of all on grid, and you find a, a town of 3800 people that used to have 11,000 people.
And it used to have, I don't know, a factory, a grain drying operation or whatever.
And they have this rural cooperative power company and, they have the infrastructure for 12MW, but they're currently using seven.
So they would love to have somebody come in and buy five megawatts.
Yeah.
Now, if you're a small company, three, five, seven guys and you can stand up the capital to go build that out, that's a real business.
Like you can, you know, again, you might be nearby, you can get that three point something cent per kilowatt hour price.
You can still make it in Bitcoin doing that.
And it's a real business.
But if you are a public company with 972MW under, you're already mining at that, are you going to chase a five megawatt opportunity?
No, it doesn't you know, it doesn't move the needle for you.
It and, you have these you have to put in the effort.
You have to apply the overhead of this monstrosity onto this little operation.
It you know, it doesn't work, however, you know, I guess my advice to anybody out there to, like, when you build these operations and this is what barefoot does when we build an operation, you have to build into your cost structure like reserves.
So when we're when we're mining Bitcoin in our operations, we learned this.
We didn't start this way.
We learned this like, hey, we have to set aside a certain percentage.
We hold it in Bitcoin.
That's for machine refreshes.
We have we have because we produce our own power.
We have reserves for engine rebuilds, for unexpected maintenance for like all this stuff, all this stuff is built into the business model.
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So. kind of timeline for machine like deprecation?
What would it what would you normally cycle through an asset.
Would it be like 2 or 3 years.
3 to 4.
3 to 4.
But again that's, that's at, you know, let's say well, under $0.03 per kilowatt hour, but, but that's fully burdened by the way that includes like maintenance cost of engines and cost of gas and those other things.
So but here's the thing.
As you're building the reserve, you can make business decisions.
So if you've built a reserve and suddenly maybe you don't have all the money you need to replace everything, but but, suddenly a deal comes up and you can buy 221 exp two 70s that are only six months old, and you get them for $0.40 on the dollar.
Okay, well then you then you pull the trigger and you accelerate the replacement cycle.
So, so what you what you have to the mistake that I see a lot of companies and, and people do is they, they don't build mining businesses for perpetuity.
They, they kind of look at it as a four year cycle, and they don't build it so that it it's cash flow.
And these reserves preserve it so that it should last forever.
Now, could we still go out of business or do something wrong or conditions.
Sure.
We we still have risks.
But, you know, we as a small company, at least compared to the publicos, you know, we we're trying to build our, sustainability and survivability.
That's a lot of what mining is, by the way, mining is, a business of periods of survival followed by brief windows of prosperity, followed by another period of survival, like, like you, you know, and so you.
hodler.
You're only right for, like, two months out of the cycle, and then It is.
Yeah, it is, it is.
And so you have to be realistic about it.
And, and I know kind of been all over the map, but one of the things that I think is pertinent is that.
You what that means is.
You do not enter mining because it you're in a period of prosperity.
The best time to enter mining is to figure out how to do it in the depths of despair.
Which is?
Which is, by the way, where we are right now.
But it's right now.
Like if, you know, you know, figure out how to raise the money, figure out how to find the energy or produce the energy, I recommend the latter.
That's what we do, you know, figure out how to produce your own and go take advantage of the fact that you can get equipment, at much cheaper than normal, prices.
And build a business that makes a little bit of money right now and wait, because the thing about Bitcoin is, if we if we wake up 45 days from now and Bitcoin is $100,000, the hash rate can't respond to that quickly.
It can turn off.
If we woke up tomorrow or 30 days from now, and Bitcoin was 20,000, the the the network will turn off right there.
They'll still be some people out there.
And that can survive or even the philosophical miners, like they'll still be a network.
It'll still work, but you can respond instantly to the downside, but you can respond only with big lag times to the upside.
And that's so when the hash price goes up, you get a period if you're there.
But if you try to respond in that period, you're probably not going to get up before the, the period of prosperity ends and we're back into the other period, you know, so.
It reminds me of.
I think it was Ben was pulling the stats on, like, if you missed the best ten days out of each year in terms of the Bitcoin market, then you were you were down at the end like you have to be in it.
When do you have those little rips.
Otherwise you don't really you don't really benefit.
Too many prosper.
There's tons I want to unpack there.
Even going to the centralization of risk with miners and hash and all that as well.
But before that, you mentioned that you think that hashrate is going to continue going down into basically into the having, which I think is one year and nine months away, something like that.
Why such a long, drawn out timeline and continued declining in hash rate and then additionally just throw in there?
Is there any point in time where you'd be concerned about the security of the network from a hash perspective?
I for me, I was trying to think about this the other day and if I remember correctly, I think, oh geez, I think if I go back to like 2020 or 2019, we're only at like 100 x a hash or whatever it was.
And so that would be like a 10th of what the network is roughly right now.
And I didn't think it was unsecure at that point in time.
So even just as a loose heuristic, I was like, look, if I lost 90% of hash, I still don't think we necessarily be unsecure.
Yeah, yeah.
I don't have, concerns about the security because the, as you said, you know, if we fall by half or two thirds or something like that, it's still massive.
And although I would say the risk does start increasing, but it's, it's at, it's, it's really edge case stuff where the concern, the concern of a large bad actor trying to assemble enough hash power to attack the network, that's what we always have to worry about.
Okay, so in the current conditions, there's no way that bad actor could get the power or the the the compute the hash to do so.
So because even for instance, like if, if work 20% off of the peak right now, it's roughly in that range, you could say, well, if the bad actor requires that 20%, like somehow they take all the hash that went offline and they acquire it and they're able to energize it and they direct it in a negative way at the network.
Could they do anything?
No. Like it? It it doesn't.
Now, if the network falls by half.
And you know so so now theoretically they could.
Right.
So in fact, even if it's falls by like 40% because there's a misperception that a 51% attack takes 51%, it actually doesn't.
It only takes like a third.
But but but realistically, no, I mean, you know, because the even the hash rate being there, like, where does the power come from, where, where does you know, a couple gigawatts of power come from directed at this?
I just I just don't.
loss to. It's not.
It's like as soon as you start buying up, as soon as they start to come in and buy those assets, it also be raising the price Well.
market, and it'd be running away from them as well.
Yeah. Yeah.
Well, well, I will say this, though, it reminds me of something you said earlier that I forgot to comment on, which is you.
You talked about maybe some of the energy companies stepping in and some stuff like that.
So kind of go back to that for just a second.
I think we will see some of that.
I don't think we will see nearly as much as people think.
The, the part of the reason is, and I, and I think it's important to maybe shatter, an illusion that's often used as a narrative.
Okay.
So as things stand today, Bitcoin uses a little over one half a 1% of the world's electricity.
Okay, it as an industry this year, it will generate all the miners worldwide together.
It depends on how the price of bitcoin goes.
But let's let's call it $12 billion.
That's the total revenue for the industry.
So that $12 billion defines really the maximum power budget for the industry.
So we could buy if we took 100% of the money that we earned.
And directed it, just to buy power to keep, you know, to keep us going.
It's $12 billion.
Well, you know, we're like in order and a half magnitude smaller or like two orders of magnitude, actually smaller than the global electricity market.
We are so frickin small that the truth is we can't balance the world's grids.
We can't be the curtailment solution for everybody.
Can we do it in like, select cases? Yes.
And and it's helped Ercot yes.
Wonderful success story.
It is not scalable and extensible.
And I think we should not fool ourselves.
We should not be propagating this message to the world about us being the Savior because we're not and I don't I don't see a path where we ever are big enough.
Maybe we could become 2 or 3% of world.
I mean, I could probably stretch myself to find a scenario where we're like 2 or 3% of the world's electricity consumption, but highly unlikely.
The economics, aren't there.
And so getting back to your thing about the, the, the, the energy companies, we just don't solve a big enough problem for them.
Like, it's, we're we're just not big enough.
We can do it on small localized situations.
But but it really doesn't work, at scale.
And, and I think we should be careful about creating this false what I perceive to be a false promise because, you know, because it's kind of weird.
On one hand, we have we've but it's not so bad anymore.
But we live through this period of people think Bitcoin was going to use all the world's energy.
That was one side of this.
And then the other side, and I being I'm not trying to be critical people.
I'm just trying to be realistic.
Like we, we we just don't have the capacity to really solve grid problems, you know, to provide baseload, to be curtailment, to be demand response, like all this sort of stuff at any level of scale.
So I think the narrative on both sides should go away like it should not be there.
What we can do, it's where I'm focused, is we can find spots where energy is trapped.
It could be a, like, I like I have, natural gas wells.
So there are natural gas wells that, are trapped.
The that the well exists, but the pipeline is either un inaccessible or too far away or something like that.
Well, you know, we can use that gas.
We can, we can find these different pockets, little hydro facilities and things like that.
We we can provide some benefit to the world.
By doing that, we can do it in a way that, is, unobtrusive and and I think that really helps fight, because interestingly, now I think we've seen a lot of narrative, pushing against AI and data centers, like, there's all these movements, I think, that were directed.
the youth in particular which is kind of surprising Yeah.
threatens their first opportunities on the career ladder.
But like I didn't realize just how strong it was to maybe about a month ago or so.
Yeah.
And we even face it.
So we, we have, we have some operations, for instance, in, western Pennsylvania, very rural areas.
And, like one of our facilities, it's a five, five megawatt facility, all powered by natural gas.
We're not connected to the grid.
We use Starlink and cellular for backup.
We don't have a water line like we we exist, in our own little mining citadel there.
Like you could say.
Like we are completely self-sufficient within that facility.
We are close to a small town, and we just in the last we we've been there for over a year, but we just received a call from the town supervisor.
And we try to be friendly and and be a good citizen, but he called up and said, hey, I'm starting to get a lot of feedback from the community that they're concerned that, you guys are going to raise their power costs and, use up all the water.
And we had to remind him, this is the town supervisor.
We don't use any of your power.
We don't use any of your water.
We don't touch it.
We don't touch it.
You know, we employ some some of your, with the town of, like, 860 people.
We employ like, five.
Like, that's a that's a big fucking deal there.
Like like the don't come after us.
But what's happened is the general community doesn't understand things.
Well, they're aware of our presence kind of just outside of town on this, you know, hill on a well pad.
And and they're scared because this these movements are stirring people up.
And a lot of these are fixed income people that.
Oh, if my power cost goes up, if my water goes up like they're they're afraid.
I understand, you know, but they're, these activists are causing, undue problems now that maybe, maybe in select cases, they do have something to really protest and probably, maybe true. Maybe not.
I don't know, I'm not an expert on, on every site, but yeah.
No. It's interesting.
It's, And I wonder too, because.
What are you talking there?
I wonder if there's been misallocation.
Like, I think even on this terms of these, like, credit cycles and cycles moving forward too.
Like, I wonder if we're going to see at some point in time, like we just had meta announce that they could be selling excess compute coming up here.
Like, I wonder if you'll see the same sort of pattern play out in the AI infrastructure industry, where they way overbuild that actually come to the benefit of Bitcoin miners down the line when they just have way more power than they even necessarily need for the operations.
Quick, the thoughts on that and then also want to quickly tag on there.
Just to get some clarification.
Again, why do you think hash rate will come down for such a long period of time?
yeah. Okay. So.
Okay.
So why why will hash rate come down for a long period of time?
I think I've avoided that question more than once.
Already saw it.
So. Okay.
I mean, we we are, we are in the the depths of despair right now.
Oh yeah. Every sentiment.
So by the way, even just Yeah.
site, because I watched the videos and what they're searching for and all Yeah.
possible thing that I could look at to try and gauge sentiment says it's absolutely shit, that everyone is miserable or they just don't care.
Yeah. So, the truth of the matter is, raising capital is hard.
It's not impossible, but it's hard.
And, we're just about to actually enter.
We are planning to expand.
So we we we're we're going to, open up a new investment opportunity here, probably in the next 30 days.
Similar site to the one I just talked about, in Pennsylvania, natural gas site.
But there's a select group of people who, one have the money.
Money is tight because, you know, when you're raising money and, when Bitcoin at 110,000, I mean, our most likely investors are bitcoiners, right?
So if Bitcoin's at 110,000, they feel a lot better about either cashing in some bitcoin or taking a loan against the bitcoin to, feed the investment.
The banks and the lending institutions which traditionally hate us.
Anyway, we've never really been able to secure them.
They really hate us now, like, you know, so capital is there.
I don't see any of the publicos jumping in, like, I just, I see nothing.
I want to come back to who?
I do think we'll come in on the back side of the, So remind me to do that if I, if I don't hit it naturally.
The having is scary.
So when you're putting a business plan in place and you look at it, you go, well, okay, I'm going to if I start today, let's say a site takes four months to bring up like a small site, you know, let's say four months.
Just pretty quick, actually.
Well, now you have maybe a 15 month run, something on that order, 16 month run free, having you got to deal with the subsidy getting cut in half.
And we have a fee market that are zero.
Yeah.
So, you know, you can't while historically fees look like they rise just in front of the having but, you know, a lot of that was like the last one, which was especially high was driven by a lot of the ordinal inscription chat, you know. Yeah.
of the having that like, fees just went through the roof.
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Oh, yeah.
Well, the, the there was a, the block, eight 840,000 which was the having block, I think it was like 38.
Bitcoin was the fee.
Whoa. Yeah.
So like I said, the ordinals inscription guys, which those of you don't know me, I'm not a fan of that stuff.
But it did it did show.
It did show what happens when.
So what I'm grateful for is I think it was a economic experiment or social experiment on the scarcity of block space.
Yeah.
And so, you know, we got to see in real time with real data, what happens when there's competition to get in a block, to get in a block before a certain date or a certain time, like, like how valuable that can be.
So that gives us hope for the long run.
But it's not in the short run.
So I just I don't see any major investment in mining until we get to the back side of the having till and, and we see some indication of either much higher bitcoin price, sustained higher bitcoin price and or a sustained spike in the fee market.
And I just don't see any money coming in.
What I do see is a lot of machine obsolescence coming up.
So next time like like we're we're we're seeing the S19 k pros start to flip out of circulation and then we'll have the s19 exp class, we'll follow that.
And so there's, there's a lot of hash rate represented by those machine classes currently in operation.
And I just don't see it being, refilled.
One of the traditional things that would happen, by the way, is that let's say if you had a sale, you had an S19, k Pro, okay.
Now it it breaks or its economics no longer are viable.
Well, traditionally what would happen in a commercial situation is is somebody going to go buy a, a better machine.
It would probably be something like an S19, XP 270.
So what you would see is with roughly the same power profile in that spot, you would see a doubling of the hash rate.
Yeah.
So while, you know hash rate was doing this, it was going up to the first part of it was actually new energy coming in and new machines.
And the second part of the spike was a lot less new energy, but a lot more, replacement.
It's basically Moore's Law driving us up.
Okay. So so that's, But we're not I think we're instead seeing the opposite.
We're either seeing, facilities shut down or facilities converted to, to AI or data center applications.
Are we still seeing the same kind of growth in machine, in assisted, efficiency?
Or is that starting to kind of taper off a bit as well?
Well, it's it appears to be slowing and, I think it will continue to slow.
And, this hasn't been talked about a lot.
It's a really good question.
I'm I'm purely speculating.
I have no inside knowledge, but I but I lived in the chip world from my personal computer days a lot.
Spent a lot of time with these kind of companies.
Bitmain maker, Bty Canaan, these sort of companies like they they have relationships with these with TSMC or Samsung that build the chips.
If I, if I were them, I would be extremely reticent to be place.
And you have to place orders like a year ahead.
You have to put deposits down, you have to reserve the wafer.
So like I would be I would be shutting that shit down big time not to zero.
I would, you know, because, or I would be selling my wafer starts to Nvidia, or Qualcomm or these other companies, but I would be doing everything I could because once they get the chip built, they got to turn it into a system.
And you know that that takes a lot of capital on their side.
And I don't think even when they sell new units today, they're really making any money.
We also have, by the way, even though there's not a lot of it in, our systems, you know, they're still like Dram and things like that that go into, a Bitcoin mining system.
And those prices are just ungodly.
Right.
And so the market can't bear it though, like we you know, we can't.
It's why I think the use the use markets flush because like those are those are sunk costs.
But the new the new systems I think they're having trouble getting anybody interested in new systems.
Prices just aren't cheap enough.
So anyway, the, the, the that's my long winded way of saying I believe we're going to see way, way less wafer starts directed at Bitcoin mining and then that will.
So what could happen then if we go back to the trilemma is when the next period of prosperity comes.
There's going to be no systems there like you systems will get like super expensive because like they won't be producing the new ones and then they'll they'll restart the engine.
But it's a it's many months if not a year to restart the engine.
At the same time they're going to most likely slow down R&D and pushing a, you know, these efficiency gains which get harder anyway there. So so yeah, so I, I see a lot of that kind of, just really, really dragging.
know, not financial advice.
It almost sounds like if you wanted to go like long Bitcoin mining and prosperity like buy a pallet of used ASX and put them in the barn.
Just If you, you could try it, you know, some I'll never forget that, in it would have been like late 20, 20, I had an opportunity to buy 10,000 S nines for 25 bucks a pop.
Yeah.
And, I passed.
Right.
And that would have been a what would that be?
That'd be a quarter million dollars.
So, like, what am I going to, you know, I don't know, but a year later, I probably could have sold them for 150 to 200 each.
And in the midst of the China mining ban.
So we all have our woulda, coulda, shoulda stories.
So that could happen.
And in hindsight, it wouldn't have been that stupid because other than that was 10,000.
Maybe I could have bought a thousand something.
But but because had that and I had the China mining ban that happened, they still would have probably been worth 20 bucks or something like they wouldn't have.
They had of a scrap.
They was like barely over.
I could have probably scrapped.
Let's say I put 25 instead of 250,000.
I put 25 grand in and then, you know, had a chance to tax my money.
But my downside was maybe getting $0.60 on the dollar and scrap like, I could, like, I don't know, I, I didn't see the possibility though.
That was the, that was that was the part of the equation.
So I yeah.
So my crystal ball wasn't that good.
who will be getting in.
You want to make sure we hit on Oh yeah. So.
As. Radical as this will seem.
With black space being so available and fees being low, I, I expect in the next cycle.
So we'll call that the next, you know, post the next having we will see the entrance.
At a decent scale of the financial institutions in the nation states.
And I.
agree. Sorry.
Yeah. quick, And please continue.
Let me interrupt. I'm just so excited you brought that up.
Because with.
What is it?
With Intel getting popped by the US government, the US government to share an Intel, and then OpenAI is trying to give them 5% stake as well, too.
I completely agree, but please continue.
Yeah.
So we'll see it.
We'll see it before the having by the way.
But we will we will see the, the evidence of.
Of this occurring beforehand.
But the institutional adoption of Bitcoin will start there.
And we'll talk about nation state separately.
The institutional adoption is there like in the it's part of the reason why I think people are just completely flux numbed by the, the price, because we have all this institutional adoption of Bitcoin.
I think they are on the cusp of realizing that the power of Bitcoin is not simply the asset, but the network, and that, in essence, block space itself is the, from their perspective as a bank or a financial institution.
That's actually what's precious, Yeah.
their their ability to participate and control transactions.
And, and in a way, potentially existential.
So if if you're a bank, financial institution and you have a shitload of Bitcoin, but block space is crowded, you don't have a mechanism to move it.
And you're, you know, how many how many big businesses regularly use services where they can't predict when they can get access to the service and what the cost of the services.
Like?
Doesn't seem very reasonable, right.
So, you know, would you, would you, rent hotel rooms by just showing up at the hotel when you want to, sleep at night at a hotel, would you just show up in the lobby and say, how much is a room?
And so. Well, we're Falster.
Oh, shoot.
What do I do?
You know, or.
Yeah, we have a room available.
But it's, you know, $750 a night.
Like.
Well, that's that's the way Bitcoin is structured right now, right?
So if you're, people will probably hate this, but I'm just giving the reality, okay.
If you're Blackrock if you're a Bank of America, if you're Morgan Stanley and you want every day you're going to be making Bitcoin transactions.
Moving from account to account, doing trades, putting things in the storage.
And you don't know if you're going to get in blocks and get confirmed and you don't know what the cost is, that's that, that that does not sit well in corporate America.
Right. Yep.
So there is a way around it.
And the way around it is Bank of America gets now they could build it themselves or they could rent it beforehand, but, or rent it from somebody or have a partnership with somebody, but they go control.
Let's just say one half of 1% of the world's hash rate, and they control the block template creation for that.
And what do they do?
They put all of their transactions in the block.
Has nothing to do with fees, right?
They just say, well, okay, we have a percentage wise.
We're going to get roughly a block every day.
Some days we may get one, some days we may get nine, some days we may get two.
But you know at that rate and we're going to just prioritize all our own shit and and we'll put other stuff in if there's room.
But we're prioritizing our own shit.
And I think that's what's going to happen is the financial institutions will realize that they must participate in mining.
And that might sound wild, but go look at like Bank of America, Paul, Paul, one of their like year end financial statements.
And look at their IT budget.
It's like $10 billion.
Well, I told you earlier the Bitcoin network's revenue is like 12 billion in a year.
The IT budget they they could stand up a couple hundred million dollars a year of mining.
And it, it, it barely moves their operational costs.
They, they don't have to look at it.
They don't have to look at mining as a business producing bitcoin.
They look and they will look at Bitcoin as, an expense to get access to block space. Yep.
So that's a misnomer.
By the way, I, I've said this, several times, but I think if you ask most people what is the business of a Bitcoin miner, they will say something like, oh, they make bitcoin.
The answer is wrong.
They make block space.
They get paid in Bitcoin. Yep.
So people that are hackers and to distinguish a hash are from a miner.
Hackers which are most of the public knows we're not we're actually not miners.
They were hashes.
They would send their hash rate to a pool.
They would get paid for that.
So for them as a hash for yes, their product, their product was their hash rate.
They got paid in Bitcoin.
If you're a miner barefoot some miner we use ocean with datum.
We produce block space.
We create our own templates as do hundreds of other companies and, and individuals now.
And there's even been recently an SV two block, created on demand.
That's great.
That's wonderful.
Like, the more the merrier.
There's always been a few solo miners out there, although some of the solar miners aren't really creating their own template.
They're kind of.
But but anyway, I won't we won't go into that.
So that's what we, that's that's the direction like and, and I think the financial institutions will become miners and it's going to get funky because the way they view the economics of mining, they're not trying to maximize the block reward.
They're trying to maximize their financial interests, which include making sure that all their Bitcoin business, is prioritized.
So the value is not in the block reward.
The value is in the power of the block space.
Which leads us to the second one, which is the nation state.
So the nation state, the nation state has some similar things.
And, and now I think you're, we're talking about things like economic sovereignty.
So if you're a nation and you want to insulate yourself or insure yourself against economic sanctions or or what I would consider financial attacks by the global financial system, this is how you do it.
Now, it's pretty clear that Iran, for instance, is already doing this.
And people what, what what I think got missed, I can't prove I can't prove what I'm about to say.
So I'm this is, speculation within the Bitcoin community.
There was oh, look, I ran is, taking bitcoin payments, as a tax to use the Strait of Hormuz.
I, I remember when that came up. Yep.
Well, what nobody knows for sure, but they have a like a percent or two most likely of global hash rate. Two.
And I would expect and they've been doing it for a long time, I would expect that they have a mechanism in place.
They may or may not be using it, but they have a mechanism in place where they can solo mine if they have to, so that, if we ever saw things like affect compliance, trying to be forced into the pools or, like any of these sort of restrictions, that they'll just go and create those templates.
And I think that's smart.
And I, I'm sure North Korea knows they can do that.
I'm sure Iran knows they can do that.
Russia knows that they can do that.
And, and I think what we're going to see is we're going to see dozens of countries realize that this is their safety valve.
It's their their their their national sovereignty.
Certainly their economic sovereignty is dependent on this.
And we're going to see an explosion of that.
I completely agree.
I even think that you'll see geographical pools, like, what is it? And pool.
I think it's based out of Singapore.
And so if you're dependent on them to actually pay you out from the Coinbase after the fact, that kind of becomes a liability potentially at some point in time that you'd want to have, like an American pool, like a UK pool, like you might even see a little bit more decentralized in that sort of sense, where they wouldn't want to have it outside the bounds of their legal system.
I also just want to quickly point out that if you really want to get your tinfoil hat on, which is great and tons of fun, what was that?
It was June of last year that we that the US bombed Iran and hash, hash came down that well, there was that first attack on their nuclear facilities.
Hash rate fell off a little bit.
Could be complete coincidence, but I thought it was interesting.
Worth pointing out.
Yeah.
I mean, none of us know for sure.
But I but, I mean, I, I doubt it was the full reason for that drop, but it.
agreed.
I think it was perhaps a similar power source or something.
But but it could have been a contributing factor.
And I mean, the there's smart people in every country of the world and, and I think the realization, the power of bitcoin.
So here in the West, we take for granted certain things like like we talk about like the sovereign individual.
Right?
I mean, that's a very common the most Bitcoiners have read the book.
And you know, we have all this thing.
But, the exact same principles extend at the state level.
And, and so if you're Israel or Albany, or, you know, pick your country or a Salvador or, you know, Ecuador or whatever, whatever country you are, especially these small, medium sized countries that are not like super aligned with either the US or China, like they don't have big brother and they don't want that either.
Like they want to stay sovereign.
They don't want that.
Bitcoin is a fabulous tool because if, if, if, if they can say, well, even if we get kicked off the Swift system, we have a way to sell oranges and buy wheat and move commerce around the, you know, sell goods and services around the world, that's really frickin powerful.
And, and, any country I've spoken on this a couple of times, but any country that doesn't at least have that as a safety valve and have some sliver of the, template control is is correct.
And by the way, the other thing I think you I think you're going to see more and more, pools.
I think we're going to see the death of PHP, and I don't know how much your typical audience would understand the different payout methods, but.
rundown of, like. What is it? Full pail prepared.
It was a full pail, per Full pay per share.
So, in terms of.
And then, okay. ocean. And you were doing.
So this the simple version is this if you if you point your hash rate at foundry, you're essentially, leasing that hash rate to them.
And whether they win blocks or not, they're going to pay you.
And when you get paid, it's kind of like getting a check in the mail.
So you're not getting paid from the Coinbase.
You you are getting paid from foundry and you're, I'm, I'm not telling you to be worried about this, but like, you're dependent on them paying you and they might pay you from Bitcoin that they want and a block ten minutes ago, but they might also pay you from Bitcoin that they had from a year ago.
Like like you don't know If you mined with ocean or you solo mine let's say also you get paid from the Coinbase transaction.
So the Bitcoin network is paying you the money.
And so there's no counterparty risk essentially in the equation.
It also means by the way so you're getting virgin bitcoin and but we get approach regularly from people who want to buy virgin Bitcoin.
There is a secondary market for Virgin Bitcoin and it and it it's a premium.
Why the premium?
Because there are people who believe that in the future.
There may be Enforcement by certain organizations of bitcoin that came from the wrong group okay.
So if you're.
transaction history prior to them getting it.
Correct.
So they say well if, if if I buy it from barefoot as an example and barefoot was paid directly from the Coinbase transaction, I know that.
And by the so let's say I'll just give you an example.
Let's say you're a family office.
You're building a massive Bitcoin stash in a trust for 5100 years from now.
You're never you're going to take this Bitcoin.
You're never going to touch it for 5100 years.
Yeah.
You want you want the most pristine.
Bitcoin you can get.
Yeah.
And would you pay an extra 3 or 5% for it.
Knowing you're not going to touch it for 50 or 100 years, do you really give a fuck?
Like how?
Oh, it's like a 6% spread for non KYC.
Right.
There's absolutely potentially the value Yeah, right.
So it's the same.
you're de-risking any sort of regulatory or cultural changes along the way.
Correct.
And so that's essentially that's the way some of these big boys, family offices are thinking.
And so, yeah.
perspective okay.
So we got nation states coming in.
We talked a little bit about the decentralization there.
The other thing I do want to talk about is Bitcoin ten, because you've been flagging support for Bitcoin ten.
And I'm curious even just laying out quickly for people that might not be necessarily familiar.
We touched on a little bit with the centralization there.
What are the problems that essentially are trying to be addressed.
And then additionally, come August here, I'm curious on what you think the maybe the top two most likely scenarios are, and what do you hope to see?
What do you think is likely to happen?
Okay.
All right.
Bip 110 I was, but different people have different reasons for supporting it.
By the way, my may not be the same as other people.
I'll.
I'll give you mine, and I'll try to steal, man a few others.
That, but I would say it's, it's, a collective response from a group that objected to the policy changes promoted by Bitcoin Core, starting with version 30.
And the biggest thing was a propensity to essentially stop using policy.
So, so, so traditionally what would happen is an operator.
So there's an option for something called op return for those less technical in the audience, think of it as if you were writing a check.
I was writing a Nathan a check for $100.
Who's buying his bicycle?
Like old school check, right?
I would have in the, a memo field, and I could say, a note to myself buying Nathan's bike.
Something like that. Right.
So Bitcoin has the same opportunity.
And there are historical examples like, you know, Chancellor on the brink and different times when people have used that field to put what I think a lot of people would call data into the, blockchain.
Okay. And so it historically was restricted to 40 bytes.
And then a few versions ago it got changed to 83 bytes.
I think most people find that that's fair.
Like not really a problem.
And useful like, I, I, I, I think that the example I just gave if instead of writing Nathan a check, I, was buying a bicycle, we were using Bitcoin and I wanted to, for whatever reason, make a note.
I was buying his bike. I could do that, right?
It cost me a little extra because that makes the transaction larger.
And the fee structure is based on the size of the transaction.
Now Bitcoin is set up so that and so that was called policy or sometimes it's called the standard.
And the nodes that you when, when you would create a node with a Bitcoin core client, that's the way the standard was set.
That also meant that as your node was running, if it saw transactions being broadcast to it, that violated that rule.
They would not rebroadcast them.
They would not enter the mempool of that node and they would not rebroadcast them.
Okay.
So what did that mean?
Well, there's something called consensus in bitcoin which is different.
So it says like what what is the largest transaction that could be created and be considered part of, a valid block?
Okay.
So that happens to be the whole block.
Like you could theoretically have a transaction that.
Yeah.
Yeah.
So that was that.
So if you are out there and that's what you wanted to do, then, you had to get a miner essentially to help you, like you had it.
You had to do something special.
Like marathon has a service called Slip Stream, and you could that would be one way you pay them extra, and they would.
They would do that. Okay.
I think that for the most part, everybody was okay with that.
What it meant, though, was that different nodes could be configured so they had different mempool policies and we could move, Certain transactions may or may not get propagated through the network depending on it.
There were several services outside of slip stream, for instance, something called Libra Relay, written by, Peter Todd.
That was a group of nodes that said, well, we'll relay everything.
Like we'll try to get like their I'll try not to be critical.
Just say like, well, they they just wanted to say like, hey, we're going to enable the maximum freedom.
So will anything that is considered consensus valid will propagate it?
You know, set up preferential pairing and make their own little way through.
Right. Okay.
So so those nodes got set up that way.
What kind of happened though was when, SegWit and then taproot were activated, certain things happened.
One of them was that the opportunity to create data in places other than an operator also came about.
And, so things like, ruins, use the OP return, but then other things like or inscriptions, primarily the inscription movement used what I would consider to be an exploit of the, window opened by SegWit and taproot.
Yeah.
Okay.
And so, the thing we talked about earlier where the 38 bit coin or whatever the number was, guarantees was because people were people were doing those sort of things.
Well, it got to the point where I think, the development community basically looked at it and said, well, these everything is ultimately getting through.
So these policy restrictions of like 83 bytes really were meaningless because everything is getting through.
So starting in version 30, we're going to change the default from 83 bytes to 100,000 bytes.
And so you could, from the perspective of a certain group, that became a lot of them were part of the bit 110 movement who was like, we're giving up on trying to fight spam.
Now, I should also point out that as this was occurring as the the proposition for Bitcoin Core to do this, when they were still working on version 30, there were lots of people, myself included, that said, hey, I think this is wrong.
And by the way, one of the reasons I think you're wrong is while it is true that all the spam gets through, I think it gets through because of pool centralization.
So if you only have if you have 90% of all the templates created by five pools, it's really the behavior of those five pools that determines what gets in blocks.
And by the way, if they were the opposite, none of it would get through.
Correct.
Right.
So so you're maybe you're kind of giving up based on what I believe, our current conditions that aren't necessarily the long term conditions.
And so I think that's a mistake.
So, and the manner in which Bitcoin Core, I think, rejected the input of me, plus a whole bunch of other people, it's not about me, but I'm just representative of one group of people was somewhat, Offensive.
Felt kind of flippant.
We didn't see the need for why now?
The the the they have other reasons that get somewhat technical.
Interestingly, a lot of them had to do with them something called compact block relay, which we don't need to talk about, but let's just say it's it's a creation that I think is cool and that will work better.
It doesn't mean it doesn't.
It will work better honestly with this policy.
But the benefit is trivial to the the small miner and I you know, one of the things I've said publicly is like the Bitcoin Core guys and gals, that were working on it, they, were doing something under the guise of helping the small miners.
But to my knowledge, I didn't talk to any small miners to say like, do you want this?
So, so, so what we had was kind of a couple things happening simultaneously.
I know this is a long winded one.
One was, a technical disagreement about whether this stuff worked or not.
A second piece that I think was kind of around the process in the culture, like, whose voice matters, who are they listening to?
And it it pissed a lot of people off.
Right.
And and it also scared a lot of people.
So, so ultimately this resulted in Bip 110.
So it was a proposal to say, well, this has gotten out of hand.
So what we're going to do is temporarily Bip 110 is also called our DTS reduce data temporary soft fork.
So what it does is say we will change consensus for a one year period of time and reduce it to 256 bytes of what's called arbitrary data.
It's kind of that memo field I talked about.
So you could still do it, but you you do it within reason.
It and it gives us time as a community to hopefully come back and actually have a dialog about where to go in the long run.
So for me, that's a big part of it.
The second part of it for me is that there's something called the SegWit discount.
So when we saw the arbitrary data that was going in, move from OP return over into this taproot script, what happens is the users of that method get a 75% discount on the block space that they use.
So, that's called the SegWit discount.
Probably a lot of people have heard of it. That's basically what happened.
And like, well, if you go back to earlier, my job is to produce block space.
So this is a this is like a really bad thing.
My job is to produce block space.
If the protocol is forcing me to give a 75% discount to somebody, no matter how much they use, and I want to see that changed.
The third reason, which I'm less concerned about, but some of the people that are Bip 110 proponents, feel very passionately about is the the risk that a transaction, including, csam is a child or even just normal, you know, sexually explicit materials or very offensive materials becomes higher.
I think that's less of a risk than others.
But some people view it, as even like an existential issue.
So, so that happened.
So hence we have Bitcoin ten well deep. 110 activates at block height.
961632 it's roughly 35.
Excuse me. It's roughly mid-August. Yes.
Yeah.
So what happens is somewhere around 15% or 20% of the nodes in the network today say that they support Bip 110 and they're configured such that after that date, they will only accept blocks which also signal support for it. Yep.
And then we have 80% roughly just use round numbers right now that appear to say they will they will accept blocks either way because a Bip 110 compliant block is compliant with quote unquote the normal chain or the current chain.
However, it presents a really it real issue for miners because we have to decide starting at that block height, what blocks do we accept.
So if, if, when we hit that block height, let's say foundry produces a block that is not compliant with Bitcoin ten and at a similar time another miner produces one, maybe slightly later.
Even that is compliant.
But it's the same block height, you know, well we have to decide which block to build on after that.
And so.
You could have miners.
I think this will happen.
Okay.
So people talk about a chain split.
I think it will happen.
Is it substantial or not? I don't know.
So I think what will happen is there will be some miners that build only on blocks signaling for Bip 110, and there will be others that will accept either.
However, as soon as they start building on different blocks you have, you have a split.
So it's a real conundrum for the miners.
I don't think it presents a node risk.
We can talk about that. And to users.
But like which one do we build on?
Because if there are two chains and we need to let's say sell our coins.
Well, if, if the Coinbase transaction we get is, let's say from the RTZ chain.
But Coinbase doesn't view that as the viable chain.
Well, we got to find somebody who does.
And by the way, vice versa.
Same thing.
Like, you know, it can go either way.
And I think we're at a point now where I'm trying to be, as unemotional and as, level headed on this as possible.
I think we're at the point where there are factions on both sides that are very obstinate in their position.
Maybe that's the wrong word.
Very tied to their position such that they will they will go.
These two chains will exist for a while.
One. being very nice about it.
I think there's, it's gotten really heated, at least to some extent on either side.
It's not everyone, but you can see the temperature's really gotten dialed up on both sides.
Oh, yeah, it is, it is very, very.
And by the a part of the I'm, I'm, I'm trying to walk it while I clearly support bip 110 and and that's what that's the path I would like to see.
I do not want to see a chain split.
And I think that.
There are, I don't think it's good for Bitcoin.
And I think if Bip 110 ends up not becoming the dominant chain that there are still paths for us to hopefully resolve these differences and figure it out some, some that some of the people on the Bip 110 side feel like this is it like this is, you know, you know, the this is D-Day.
Like the invasions are going to work.
That's probably a bad term.
But you know, we're either going to stand, you know, the force is going to hold and or, or we're going to get overrun like and and I don't view it that way.
Even and I, and I try to keep good relationships with people on the other side.
There are people, you know, for instance, like wicked, who, never met him in person, actually.
But we, we communicate, regularly on a private basis.
I don't want to say that, I don't want to, say anything, publicly that he said to me privately.
But I will say that the dialog is respectful and it's, maybe, you know, joke around with each other a little bit and, I, I wish there was more of that.
Like, hey, we just we see two things differently.
And, but but it's, it's a very unfortunate that we've come to this.
I think both sides have some fault in it getting to where it is.
I, I have some real concerns about core that I expressed both privately to some of the leadership there, but also publicly, we've seen, for instance, in the last few days, even like Jeff Booth, and some other folks, have come out and, and, talked about this, I it's interesting because I think that there's somewhat of a lack of understanding, like, I think core a lot of the course, what we'll call the core supporters to represent the, the legacy side, think a lot of the issue is about spam.
But I think most of the people on the, other side, it's less about spam and more about the, process by which things happen and the way core behaved and the way that, in face a loss in faith of course is what I read a lot of it as.
Yeah.
it's a rejection of core which is in my opinion a little bit and one of the things I find unfortunate about the whole situation, if I'll just talk even just a little bit on it, was that I felt it became very like Democrat and Republican, whereas like, if I know one bit of information about your position, I can guess the rest of them.
Like we can talk about, core and knots in the client and the proposal all separately.
They don't actually necessarily have to be linked together.
And I think that's almost like one of the casualties of what's happened here.
Sorry.
I just want to kind of get that No, it's true.
And, you know, I mean, I want to say, like, you know, certain thing, like I, I have, some dialog with members of core, you know, even even now, I don't think any of them are stupid.
I, I think that for the most part, they are well intended, but, I also think they have failed from a communication standpoint. Yep.
I think they have been very selective about the voices that they're listening to.
I believe it's a hard job.
You know, I, I, and I come from a product development background.
It's very hard to listen to everybody.
It's very hard to decide whose opinion you should value and who's you shouldn't.
It's very difficult.
So I, I understand it's hard and I also understand that most of them just want to like code, like they, they, they want to get in there and do their job and work and they want to have technical discussions.
I have certain technical, capabilities myself and experience, I am not a as good as they are at what they do by.
I'm not even close.
I do know a hell of a lot about mining and the way mining works, though, and I if not me, then there are, you know, eight, ten, 12 other guys that I think are really good too.
And I would like them to have a voice and, and I think that, that, that has to change.
I think that there's been a lot of antagonism.
And, you know, it's kind of like any sort of fight.
I mean, at some point the Hatfields and McCoys sort of stuff too, like who who started this, who threw the first punch?
I, I don't know, I don't know, but, you know, it's pretty toxic, dysfunctional and and, you know, I've been around the block for a long time, stuff with Bitcoin and part, part of the reason why, I'm trying to keep open channels.
I'm trying to be, respectful.
By the way, I don't agree with everybody on the Bitcoin intense side.
So I have private conversations and signal groups and things like that.
And I'm not agreeing with everything going on there.
Like it's it's not, I'm sure it's the same thing on the core side.
Like, we don't all agree on everything.
Our motivations are not exactly the same.
Our our commitment and ability.
Like there there are people on the Bitcoin ten side who are this is it.
This is like, you know, we hold the fort.
If we lose the heart, if we lose the fort, then we lose Bitcoin and we better we better try to fork this off.
And you know, maybe even like they're thinking 2 or 3 steps ahead.
They just want it to win this way.
But there are people that say well well then we have to hard fork and then we have to do this and we have to do that.
I'm not I'm not there.
If the on the other hand, if Bip 110 ends up not being the dominant chain, I'm going to be really upset if there's people on the other side that gloat and also take it as, reinforcement that the existing behavior and methods should continue.
Or that the problems that are brought up, the initial problems are not worth addressing.
Still, Correct? Yes. Right.
I've been I've been strategically quiet on it for a number of reasons that I won't get into, but, more or less, one of my biggest worries is that the that legitimate concerns throughout this whole process are negated from the social consensus layer.
If it's unsuccessful.
Yeah.
Yeah, yeah. And that's, that's that's legitimate.
And I, you know, I would I mean, there's a there's a lot of perspectives, I my advice is so if, if, if, if you're not a miner, if you.
Well, let me give advice to miners and also advice to the plebs.
Okay. it.
If you're a pleb, as we approach 961632, if you have things that you need to do, you got to move something to cold storage.
You want to UT so consolidate.
You want to do, you know, whatever.
Try to do that before that block, right.
Or give yourself several days or a week or two after that block.
Right.
Because things could get a little wonky.
Fees could probably go up going into it to.
They could do that.
That would be a nice little side benefit.
Do not this is really bad given the current situation.
Don't buy Bitcoin in that time period.
It's I mean, you probably would be okay buying it from an exchange.
Don't.
for just Yeah, right.
I know, but see that's the yeah, that's the weird thing.
Right.
So if, if you like really had like, like advice, you will probably never hear from me again.
If you must go buy it from Coinbase or a really large exchange and leave it there until the settles.
Yeah.
So to say.
yeah, but you know why I'm saying it, right?
I mean, that's okay.
is necessarily going to be recognized.
There's also the possibility of like, what is it, a replay attack.
It's just just Yeah.
There's there's yeah, those things exist.
If you are a miner, Be in a position where you can pivot pools quickly.
And.
I'm not quite in a position to talk about some public things.
I think, Ocean should be able to give you quite a bit of flexibility in this period.
That's about all I can say in that, to help you navigate, as the only pool that at this point clearly gives you a path to mine on the RTZ chain.
That option exists.
Then have that as a backup, get a datum server up with a node that's already compliant, and signaling and, and even if you're mining with foundry or somebody else, have that option available so that you can pivot, if you are a miner with whatever day or time of day, block 9616, three two comes up.
I was joking to somebody that day.
I know it's going to be like 330 in the morning, on a Sunday or something like that.
But you got to watch because we don't know where the heavier chain is going to be.
And you need a mechanism that you can flip between and rdd's art, the R, D T, s compliant chain, or the legacy change very quickly.
And there's going to, in my opinion, it's going to take an hour or two to sort out.
And we'll hopefully like I think that's the probable situation either.
Yeah.
Our either RTZ very quickly is showing support and the chain length is keeping up or exceeding the other chain.
And and if it does, I think it will go.
But the opposite is also true.
That if you know, if, if we get an hour or two hours in an hour isn't getting much hash rate, it's going to get six, ten, 12 blocks behind and it's it won't be able to catch up.
So, but you're going to have to watch it and, and you're going to you're almost certainly going to have some risk of spending at least a certain period of time mining the wrong one, if that is unpalatable to you, then just plan to turn off at 961632 and take a couple hour break Yeah.
and see where it you know, see which one emerges and then turn back on.
But I think those are your either either you got to have but either way you got to have the backup because you don't know when you come back up.
Let's say let's say you're with foundry.
I'm not trying to I, I'm on the board at Austin.
I'm an investor in Austin.
But this is not an option.
Advertisement I'm trying to help people like you.
If you're with foundry, I'm not telling you to switch from foundry or ampoule or whatever.
Just, you know, keep doing that for right now.
Go. Go get a backup.
Signing up to ocean is easy, but, you know, getting a data gateway set up and getting it configured properly takes a little bit of work.
Most miners would have the technical competency to to do such a thing.
But, you know, do that.
Be ready.
Because we don't know the the good news is.
I think we have a 99% chance that this is a 1 to 2 hour issue.
There is a scenario that I think is really bad and hopefully doesn't exist, which is the two chains kind of have the same weight, roughly equal weighting.
What will I think what will happen, though, is.
The, the big miners.
Will be in a quandary too.
So imagine you were somebody that had 30 or 50 hashes, let's say, you know, and you're trying to make this decision.
Well.
You're going to have to swing one.
Right.
So if the, if, if these two chains are coexisting in, we'll call it roughly equal weight.
Like, well, one guy can sway at them like like let's say 50 hashes leave 30 or 50 hashes to be like 3 to 5% of the network could then just sway it and become self-fulfilling.
in the worst.
And I think it'll be a in the, in the worst case scenario, you get to live with that gambler's dilemma.
Like if you're, if you're 5050 and you're on one side and you've got a block or two, it's like, do you do you discard those to pivot?
Yeah, well it's tough.
Yeah, it's really tough.
But one.
yeah, Well, so if you, if you're with ocean, the, the, the, the miners making that decision probably.
But if, if you're with foundry and found, you know, now foundry has got to make that call.
Yeah. The pool.
You know unless they decide to fire up to that, that I mean they could do the same thing.
They could foundry or hand pool could, could do the same thing.
They could say, well, we'll, we'll have two pools and then force the, the hasher to pick, To pick which side.
to pick which side that that could happen to.
very interesting.
Some of they're my friend of at least I think you're right.
I think we'll know in very short term.
And I hope that everybody kind of comes back to the table, no matter what happens when it's all said and done.
Bob weeping almost go on for two hours.
This has been absolutely phenomenal.
Where can everybody go to check out you your stuff fully work the Bitcoin boomers everything doing it barefoot.
What's all the links in the goodies?
Yeah. Thank you.
Barefoot mining.com is our website.
I'm on Twitter at Boomer underscore BTC and, YouTube and other channels.
You can see my show with, Larry the pard and, Gary Leland called, the Bitcoin boomers and and then also my own my own show, which is called Old Man yells, just, you know, wherever you get your podcast shit. So.
if you enjoyed this episode with Bob Barnett, check out the previous episode with Matt Hale and Matt O'Dell or the recent live stream.
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