In this enlightening episode, we welcome Rob Warren, author of "The Bitcoin Miners Almanac," to discuss the intricacies and innovations within the Bitcoin mining space. Rob shares his journey from running a creative agency in New Orleans to becoming a key figure in Bitcoin mining. He reflects on the human rights aspect of Bitcoin that initially drew him to the space and the supportive community he found, including DJ Val, our host.
Rob explains the technical aspects of Bitcoin mining, breaking down complex concepts like hashing and proof of work in an accessible manner. He discusses the importance of energy consumption in Bitcoin mining, emphasizing that energy use is a feature, not a bug, and highlights how Bitcoin mining can drive innovation in energy production.
The conversation explores the potential of Bitcoin mining to electrify remote villages, mitigate methane emissions, and stabilize power grids. Rob shares insights into how Bitcoin miners can act as flexible energy consumers, providing grid stability by turning off during peak demand times.
We also delve into the socio-economic impacts of Bitcoin mining, such as job creation and providing opportunities in under-resourced areas. Rob discusses the potential for Bitcoin mining to support renewable energy projects and the future of home heating with Bitcoin miners.
Throughout the episode, Rob emphasizes the diverse opportunities within the Bitcoin mining industry and encourages listeners to explore and contribute to this evolving space. Whether you're a newcomer or a seasoned Bitcoiner, this episode offers valuable insights into the dynamic world of Bitcoin mining.
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https://www.amazon.com/Bitcoin-Miners-Almanac-Business-Everything/dp/B0D6QZ2QK2/
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(00:00:30) Introduction and Guest Welcome
(00:01:04) Rob Warren's Bitcoin Journey
(00:03:11) Transition from Creative Agency to Bitcoin
(00:06:08) Early Bitcoin Mining Experiences
(00:12:32) Understanding Bitcoin Mining and the Book
(00:23:53) Energy Consumption and Bitcoin's Environmental Impact
(00:28:15) Electrification of Remote Villages
(00:34:17) Methane Mitigation and Bitcoin Mining
(00:41:05) Grid Stability and Renewable Energy
(00:49:23) Job Creation through Bitcoin Mining
(00:54:38) Innovations in Clean Energy
(01:00:28) Home Heating with Bitcoin Miners
(01:03:56) The Bitcoin Miner's Almanac Book Discussion
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[00:00:16]
Unknown:
Hey, aloha. Get ready for an epic episode. And if you love it, please share it. You know why? Because you got the love. Enjoy, my friends. Hey, aloha, love tribe. Welcome to the show. I have somebody here with me who has been kind of like an angel on my shoulder since I started my Bitcoin journey. And this is Rob Warren. He's the author of The Bitcoin Miners Almanac. And, Rob, you're somebody who's always been so generous and gracious with your time, answering questions for me, being very encouraging on my journey as a newbie and a Bitcoiner and certainly as a woman in the space. You've been so just so amazing. And I'm just so grateful to to call you my friend, and I'm so excited for you to talk about your book. And let's talk about Bitcoin mining together. Welcome. I love it. Thank you so much, Val. You know, I feel very much the same way. I remember one of the earliest conversations we had,
[00:01:14] Unknown:
was at it was at one of the meetups or one of the conferences or something, but it was a little while back and it was right when the space has always been super, super tech bro heavy, super, super kinda finance y, like engineering type. And DJ Val shows up and is just flowing around the room saying hi to everybody. And I remember schmoozing with you at at an event. I can't remember for the life of me what what what event it was. And I I kind of look over and I go, what are you doing? Like, how did you decide to come here of all places? Of all the places you could be, this is where you decided to be. And you told me something so interesting that really set the stage for me in terms of where the space is going and who we should expect to kind of come and be learning about Bitcoin in the future, which was that you said to me that, it was the human rights aspect of, of Bitcoin that got you interested to begin with. Yep. And I just thought that was the coolest thing ever because for me at least, having been in the space since since 2017, it's always really, really interesting to see who who are the newcomers, who are the new folks that for whatever reason they're kind of called to come and figure out what the heck this Bitcoin thing was. And I thought that you were just such a perfect example of that showing up and going, okay, what is DJ Val doing here?
And then, of course, to see you DJ at the at the Bitcoin conference was, was only a greater pleasure because there she is in her element.
[00:02:37] Unknown:
Thanks, Rob. I know. It's fun. I mean, it is intimidating, I think, for a lot of people who I mean, obviously, as a DJ, I'm a nerd. I like buttons. I love technology, but I'm not a coder. I'm not, you know, a billionaire, crypto, or hedge fund manager person, or whatever, you know? And so going into those rooms, especially in a dev, you know, Bitcoin, like a BitDevs meetup or anything or it's just like, but everybody is so warm and welcoming and inviting and you've definitely been, like I said, an angel on my shoulder. So thank you. Thank you. Yeah. And I love the work that you're up to. So let's talk about it. Let's talk about your history. How the heck did you get into Bitcoin mining, you know, from, you know, I know you had a creative agency a while back in New Orleans, and thank you for taking some pictures for me a couple weeks ago, so I'm gonna use those. But how did you go from this creative
[00:03:26] Unknown:
man into Bitcoin, you know, tech and mining and writing this book? And why why did you write this book? I love that. Well, hopefully hopefully, still creative, but just in a different way. Right? You know, it's, many mediums, but one one individual. Yeah. The the as many folks in the space, you know, your kind of professional career, has jumped around a bunch, and and so I'm not so strange in the Bitcoin space for being one of many weirdos who have very atypical or nontraditional backgrounds, not coming from, like, traditional, traditional energy or traditional engineering.
You know, I'm a philosophy trained in philosophy undergraduate in psychology and then worked in education and, was in startup in New Orleans for the better part of a decade where I started a essentially, a high volume production agency that was generating content for organizations, typically, kind of midsize larger organizations that wanted to have the, the quality of product for, like, an in house photo or video, agency, but didn't wanna pay those kinds of rates. So we had an agency that was basically kind of the outsourced version of that to all these various companies. So it was a huge blast. We got it up to about 13 people. We were super active in the startup space in New Orleans, which is very small by startup space comparisons anywhere else.
Anywhere else. And then as all things go, you learn a lot in in startup. It's it's kind of like your MBA that, that you hopefully are able to pay yourself doing. We were going through a a round of fundraising and had a difference very, very different, idea of direction with my partner at the time. And from there, it it turned out to, as they say in the marriage space, you know, it's a reconcilable differences. People just wanted very, very different things. Yeah. So we wound up winding that company down, and and thank goodness we, we did because there's no way that it, it would have made it through all the COVID lockdowns and net downs and everything just because, you know, 90% of the work that we were doing, 70 probably 80, 90 percent of the work that we were doing was very events heavy. And New Orleans is a very events heavy city.
Yeah. And that went to 0 and it just sat there for, you know, 18 months, 2 years. So that point, while that company down at the time, I was, meeting and dating my my now wife and wound up in, in the state that she grew up in in Colorado. And I had I'd kind of heard about this Bitcoin thing in 2016. There's, there's a really excellent podcast with a guy named Russ Roberts called Econ Talk that, goes comes out of the Library of Economics in Liberty. He was initially located in Stanford. Now he's in in Israel as, as a professor there, I believe. But just this fantastic podcaster that's very economics focused. And in 2016, he had Wences Casares on, on the podcast. And Wences, if you're familiar with the work that he's done, was just so exuberant and so over the top and so excited about this Bitcoin thing that I had kind of seen about it. Like any guy in their twenties does who, you know, finds himself on a weird website, with a Tor address.
Not buying anything, of course, but, seeing how things are denominated and hearing this Wences Casares guy talk about it, but didn't really start buying until, until early 2017. Self self custodying at the time. Thank goodness. I kind of got the self custody pill very quickly. But there's really only two reasons that people buy Bitcoin or get into Bitcoin, at least in my perspective in the the kind of developed world, which is that you are either greedy or you have to get into Bitcoin. You know, the function of Bitcoin is necessary for you. So I was definitely on the greedy side. You know, I was running a startup. Maybe I buy this asset. Maybe I make a bunch of money off of it. How cool will I be? Pat myself on the back. I'm a genius 20 something that's buying this, this magical Internet money. Didn't really understand it as a network. You know, on the other side of that coin, obviously, you have people who need Bitcoin to protect their purchasing power Yeah. To protect their wealth.
Those people kinda grok it in a very powerful but different way. I was in very much the first world, let me buy this thing number go up. Right? Yep. And then was so busy in the company, kind of forgot about it. But as I relocated back up to Colorado and with the advent of all the COVID lockdowns and all the human rights issues that came out of that domestically, not spread across the world, but a resegregation based on your vaccine card status that was happening in, in the wealthiest country in the world and everybody was kind of oddly going along with it, the the Bitcoin pill kind of popped again in the brain. And for the first time, I really understood it and appreciated it as the network Bitcoin, as this kind of living, breathing thing and not just as this kind of number go up mechanism.
And it was around then that I made the choice that, you know, this is this is the industry that I wanna work in full time. So I was doing a bunch of work in not in the dev side because I'm I'm not a dev, but in early stage mining. So at that time they had mining for the streets, which was diverted into KYC, this great little PDF, very introductory kind of intro to home mining. And then a kind of alchemist was doing a ton of guides, a ton of write ups. He was doing a ton of home heating stuff. This was, you know, prior to the upstream data black box. And for the first time, you could sort of get an s nine for a $150 shipped to your house.
And happened to know a couple of guys, Neil, Ronan Miner, and Joe Rogers, formerly of Bitcoin Magazine, who bought a pallet of s nines. And just because they wanted to support plebs, broke it down and reshipped it out to a bunch of people, and I got a couple of s nines. And we were living in this, this 5th story apartment, right off of Wash Park in, in Denver. And I plugged these things in, and my wife looked at me like I was absolutely bonkers. Because I was because I was plugging in this industrial equipment in in an s 9. An s nine is a piece of industrial equipment. Like, it's not a it's not a cute little cell phone. It's not like a thing that fits in your pocket. Like, it is a it is an aggressive angry machine that should not be sitting in your living room or in my case, my my second my guest bathroom.
And she looked at me and was like, babe, I love you a lot, but if you wanna get married, we will solve for this. And that's to say, I figured it out quick. At the time, Steve Barber had actually published, published a little, a little diagram for how you could construct what is now known as the black box, but it was a brown box. You could construct it out of a piece of plywood, a single piece of plywood that you can cut and break down. So I drove over to, to the local Home Depot and bugged the heck out of them buying a single piece of plywood that I made them put like 8 cuts into, to go take that home and then assemble this brown box on my 5th story balcony because we we didn't have anywhere else to take it.
Excuse me. And then had a couple of s nines that then lived, first in the bathroom for a little bit because we got some heating in the winter and then out on our on our balcony. So this this brown box sat on the balcony and ran with a couple of s nines in it as I was continuing to learn in the in the mining space. And through that time I did some write ups. I was producing content for Bitcoin Magazine. Was just trying to get a feel for what the heck this mining thing was because everybody had a very strong opinion of it. And everybody seemed to say, oh, it's it's so hard. You don't want to get into it. Like, stick with this other stuff. Or, oh, it's too complicated. Or, oh, it's not profitable. It's it's never profitable. You never wanna do it. And it's it's so often discussed, but so very rarely actually done or mastered that it kinda planted a seed in me. Right? You know, let me let me kinda take this take this little, segue down the rabbit hole down the Bitcoin mining rabbit hole.
And, that's where I've been since. I've I've since set up mines, worked for publicly traded companies, written the Bitcoin miners almanac, which, of course, we, I'm super excited to share with you and kinda chat, chat about today, but that all kind of culminated in the writing of this book, the Bitcoin miners almanac, where really the effort that was done here was to not to necessarily simplify or oversimplify, but to add some synthesis to the space. Because we hear of so many different ways that people are mining Bitcoin. And you've got the the guys who are mining on solar, solar co locations or the guys who are mining on nuclear sites or the guys who are mining in the oil field or the guys who are in in the the jungles of Africa mining on hydro that is, otherwise stranded in these various locations.
And the way this stuff comes out to the general person is it just looks like an alien landscape. And so the goal with the book was really, how do you generate some coherence here? How do you start to establish the principles of what this is, what Bitcoin mining is? And fundamentally, you can either do it ideologically where you, you're just doing it because you wanna support the network, like these beautiful little bit access that they have now that people put on their desks and they mine with, or you do it as a business. And so that's the world that I was trying to create synthesis around with the book, which is how do we understand this business? How does this business work? How do people think about this business? And how the heck is somebody who's mining on oil and gas in the same network as some guy who's got 700 megawatts on ERCOT that he turns off at the flip of the switch when the electricity price gets too high? How does that work? And so the goal was to really start to establish the principles that sit behind Bitcoin mining. And if you can do that, then you can make it very intuitive for people in understanding all these various implementations that we see.
[00:13:32] Unknown:
And so, Rob, so, like, as you're writing this book, you know, what did you get any big synthesis moments where you're like, Oh, got it. This goes this is why they're doing this, and it goes together here, or anything that was sort of disjointed? Did you have any big, you know, epiphanies
[00:13:50] Unknown:
that you wanna share? Oh, my goodness. It's all epiphanies. The whole thing's a giant epiphany ball. It's like it's like I've heard people say where it's like once you see it and once you kinda put the pieces together Mhmm. It's obvious but not necessarily intuitive. Yeah. So when you look at it, you go, oh, yeah. That makes sense. But you wouldn't necessarily have gotten there by just some grand stroke of of, intellectual brilliance. Mhmm. There were the the way in which I chose to set up the book was to start with the machine.
[00:14:22] Unknown:
K.
[00:14:23] Unknown:
And the reason I felt that starting with the machine was the best way to start the book was because fundamentally, that's what connects you to the Bitcoin network. It's the machine. The machine is doing work, and that work is contributing hashes or mining, mining on a template that then is rewarded for. So that is that is the way in which you generate revenue in this world.
[00:14:49] Unknown:
And okay. That's And you just take a step back just again in case there's folks in the audience who don't understand, like, what does a Bitcoin miner do? Like, I look at, you know, I try to tell people it's like it's literally guessing a number. It's like putting a lot of tickets in and that's like cash power is you're putting all of your put, you know, your units of guessing into, you know, the the network into a pool or if you're doing solo mining. Can you can you make it simple for people who might be new to what that means?
[00:15:15] Unknown:
This is this was the hardest part to write in the book, to be honest with you, because the the machine has 3 physical connections. Right? The machine has to be connected to the Internet, it has to be connected to electricity, and it has to be physically connected to some cooling mechanism. So it has to be cooled or immersion cool. That's it. You just need 3 things to run the machine. K. If if you're trying to explain the cooling side of things, we already have this beautiful language around it, which is the the world of mechanical engineering and thermodynamics. And this is very well understood, and there's there's a whole set of principles and a whole set of design schemas that people can kind of tap into. And there is a lot that is already understood in the difference between air cooling and immersion cooling and hydro. So that's it's not settled. There's a lot of innovation to be have, but it's well studied. And then you look into the electricity side.
Electricity is incredibly well understood, not perfectly by any means, of course, but where where electricity comes from, where energy comes from that then create sources of electricity going through some kind of, conversion mechanism, a turbine, an engine, something like this, a large generator. Electricity is something that we're familiar with. We already have kind of an intuitive sense of it, an incomplete sense to the normal consumer. Right? I I flip a switch on my wall, the light turns on, where does the electricity come from? I don't know, the wire? Where does the wire go? I don't know. So you can do some educating there, but there's nothing there that is super unintuitive to people because we kinda touch it and feel it every day.
The second that you get to that Internet connection. So the machine is doing hashing. What the heck is hashing? Exactly as you said. Right? Hashing is well, I'm guessing a random number.
[00:17:00] Unknown:
Well, why do I have to guess a random number? Well, I And where does the random number come from? That's the question I get asked a lot. Like, how do you know it's the right guess, and where do these numbers come from, and who decides this random number? That's right.
[00:17:11] Unknown:
And it's that's where it becomes very hard to explain because it's very unintuitive because Yeah. What what where are we guessing in, in a random number? Right? Where where does the random number come from? Well, it's in it's in the shot 256 mathematical field. It is in somewhere in that immense exponential domain that we are guessing for this number. Okay. Well, who decides what the number is? Well, it's not really a single number. It's actually a whole bunch of different numbers that could potentially be input into this hashing algorithm that would satisfy the difficulty of the of the network. Well, what what what the heck is a hashing algorithm? Well, it's this thing that you put the data into, and it's sort of like a big wood chipper.
But it's a wood chipper that no matter what you put into it, it always spits out a perfect 8 by 8 by 8 block. So it makes it very easy to to kinda have, your your Italian villa. You put it in the wood chipper, you have an 8 by 8 by 8 block. Your your dog, your pet dog, you put it in the wood chipper, you get an 8 by 8 by 8. And it's very easy to check it using this algorithmic wood chipper. The problem is that you can't go backwards. Right? So it's very hard to get your Italian villa back. So what what is the the heck is the miner doing? They're guessing this random number. They're putting into some data, throwing it into this shot 256 woodchipper. And then the thing that it spits out is this very kind of obscure looking, hexadecimal number.
What am I supposed to do with that? Well, you notice something about it. Well, okay, you count the zeros on it. If you look on mempool, there's a whole bunch of zeros that lead in front of the hash of the blocks. And you go, well, what's that? Well, that's the result that we got when we threw all this information plus this random number into a woodchipper. And most of the time, when I throw all this information and a run number into my shot 256 woodchipper, it spits out something unpredictable that maybe starts with a 1, it starts with a 2, it starts with an h, it starts with whatever. So the odds of there starting with something that has a 0 in front of it is very low.
And my goal as a miner is to get a hash, get something that spit out of that wood chipper that starts with a bunch of zeros. And so to do that, I just have to guess. I have to guess a number. You gotta throw a whole bunch of stuff in your wood chipper. Put it in the machine. Keep putting a whole bunch of, like, 50 and guesses. Okay. Okay. I just do that. And this is not intuitive. It's not intuitive because to understand it, you have to not only understand the data that's going into the woodchipper, so the the the block header, the template, the nonce, everything. You have to understand what the wood chipper is doing.
And then you have to understand that the result, which is all these zeros, that's the thing that's really hard to find is that result with all these zeros and there's no algorithm, there's no way that I can cheat. I just have to guess numbers. And if I find this very rare thing, this very rare hash, that means that I am now I have now settled essentially the the tip of the block chain, the next block. It's what I mean when I say I found a block. I submit it to the nodes. The nodes go, yep. This is legit. And then we start building on top of that, and I've settled the transactions that were in the mempool and I've gotten a reward for it. I've gotten the Coinbase reward.
And that's all to say that we haven't even gone into what the difficulty adjustment is. Mhmm. Because the only reason you have all these weird zeros in front of the resulting hash, the data that comes out of the wood chipper, is because the difficulty adjustment is like this combination, accelerator and brake pedal, or it's almost like your HVAC system. But instead of being the AC or the heat, it's both. And the whole thing it's designed to do is just to keep you at a certain temperature. Or in our case, it's to keep you at a certain block speed. Time. That governor wants to keep us at 10 minutes on average. So now we're talking about this crazy conceptual stuff. Now we're getting really high level and that's where it becomes really difficult. Hands down, the hardest part of the book to write was explaining what hashing was and explaining what proof of work was, you know, as as a result of that and how that fit into the protocol side of things.
So it's it's a long explanation for a not good answer. Right? What is this random number? But I don't think that there is a really, an elegant singular way to kind of tie it up and give it to people. I think at the end of the day, to really be able to appreciate what's happening, because this is this is what Satoshi did that was so beautiful. Yeah. Was that you use this proof of work mechanism so that you can control the issuance and settlement and add a heartbeat to the blockchain. That's what's so beautiful about what this thing is. And and for that reason, I don't think you wanna oversimplify it in some sense. I think it's worth going in and trying to explore and and do the work to really get a sense of what what the heck it what the heck it actually is.
[00:22:28] Unknown:
And and I think too, Rob, like, you know, for me, again, I'm not a miner yet, and and my goal is to have a home heater and do all this stuff so I can start playing around here. But, you know, I think about the difficulty adjustment and proof of work because a lot of people ask questions and they're just like, Well, why can't I just go like buy 10,000,000 miners and then just have more guesses, like more lottery tickets as it were? And it's because of that difficulty adjustment. And that's sort of where I think people when we start to talk about that to them and it's kind of like, well, if we have this much hash power, then it's gonna be this much more difficult to get that little 10 minute block. But if we only let's say, China shuts down and we cut our hash power in half, then it's gonna be easier to guess because we want to stay on that time chain, that every 10 minutes. And so That's right. So I try to help people understand it. Of course, I'm still, you know, a newbie to all of this and I'm on a mission to learn always, you know, and try to share what I get to learn with everybody.
But that makes it really important. And, you know, a lot of times people that I'm speaking to and, you know, I've been to tons of, you know, environmental conferences and I've got a lot of wonderful healers and coaches and artists and activists and entrepreneurs who are just like, Bitcoin uses too much energy. It's bad. It's boiling the ocean. You know, why can't you just make it so it doesn't use all this energy? Can you tell people why the energy consumption is so critical and that we can't just have some kind of little monopoly money printer thing going on? Yeah. In the electricity is good. Energy is not a scary thing.
[00:23:58] Unknown:
Exactly. And it's it's a hard pill to swallow that energy use is a feature. It's not a bug. Yeah. But to really appreciate that, you have to appreciate that there is no energy poor, rich country on earth. Yeah. It it does not exist. Yeah. There is no country that, has become a first world nation by not consuming more energy. Mhmm. Hands down. That's something that I think people intuitively get. And their response to that is typically, well, we have to be we have to be stewards of our consumption. Right? We have to be responsible stewards of the world. We have to recycle and we have to, to rinse off everything and compost in the backyard and drive our Teslas and save the universe.
And aspirationally, you know, there's nothing wrong with that, there's nothing wrong with wanting to minimize your personal footprint in the world or be more efficient in the way that you use resources, but the electricity is not the problem. Mhmm. Because if you want humanity to continue to succeed and to create incredible things, if you want people to be putting rockets on Mars and curing cancers using AI clusters, the only way to do that is to consume more and more and more energy. Yeah. So the first thing I think you have to kind of, you have to energy pill people. You have to get them to understand that that energy use is a feature and not a bug. And what Bitcoin is doing, yes, it's energy intensive, but what kind of energy is it competitive for?
Because it's not competitive for the energy that you want to run your AC in the middle of the day. You're always gonna pay more for your electricity that you receive than a Bitcoin miner is going to be willing to pay for their electricity because we are on a very, very competitive network. If you look at the hash price, which is is the metric that you can search that will give you the, the expected USD value per amount of hash power that you have, right, per per terahash, per petahash, which is a 1,000 terahash. For a petahash, it's like 40 something dollars that you can make per petahash, based on the reward you're gonna get from the network.
That's not competitive when it comes to the electricity price that I need. So I make 40 some odd dollars for my 1,000, terahash, my 1 petahash. I can't pay 11¢ a kilowatt hour or 12¢ a kilowatt hour and make that math work. And if I just wanna do it ideologically, it doesn't make sense because I'm gonna be paying 1,000 of dollars a month in electricity bills and making 600, $800 in Bitcoin. So maybe it makes sense to some people who ideologically just want a dollar cost average and two, no KYC Satoshis. But it doesn't make sense as a business. There's no viable business there. So the question is what energy? Not
[00:27:07] Unknown:
the energy, but what energy? So let's talk about number 1 on our list of 5 things. And so, I think, you know, segueing into, like, electrification of, you know, remote villages, let's say. You know, we've got Alana who did dirty coin and I remember she was interviewing one of the doctors out there and he was like, You know, we used to do surgery by candlelight, and the wind would blow, and then I couldn't do my surgery. And so now you guys came and, you know, electrified the village with hydro, and now we've got electricity, plus we've got we're mining for Bitcoin. And so the capital expenditure for these people to get electricity that are super remote is never gonna happen because it's not profitable to just say, Cool, we're gonna go build something and connect you to this really, really long grid that is, you know, not gonna happen. So so can you talk a little bit about, like, why, you know, like, that's like we think about stranded energy or we think about remote energy and how that is actually something that we can turn into usable energy for the folks there as well as, you know and then we'll go into methane after that one. But let's talk about the electrification of the villages.
[00:28:16] Unknown:
This is a perfect example. So there there's a really fantastic entrepreneur in the space who I had the pleasure of actually interviewing for the book whose name is Eric Hersman. Gridless. Yeah. And, yeah, his his company is Gridless Compute. Mhmm. Fantastic entrepreneur. One of the nicest guys you'll meet in your entire life if you have the pleasure of connecting with him at, at a conference or event. He he details it so beautifully. And you have to understand that in this case, when you look at the problem that's happening in remote villages that he he's addressing with gridless, he is going to these, these communities that have some kind of untapped resource, you know, run of the river. They're gonna build a dam. They they wanna add some kind of electrical, generation utility typically. Right?
The first question is who's gonna fund it?
[00:29:03] Unknown:
Yeah. And
[00:29:04] Unknown:
where's the money gonna come from? And so when you start to shop around, the people that you tend to go to tend to be like an NGO, like a feel good organization. Mhmm. Of course, they want results, but you have to sell the story to them. You have to say, this village is on this very critical river, and, you know, these people culturally who live here have been here for, you know, 100 if not 1000 of years and they need electricity because they produce crafts or they they arts or something like this. You're shopping it to NGOs, you're shopping it to nonprofits, you're shopping it to large foundations. And you're essentially getting them to to make a distribution of capital where the payback is entirely hypothetical.
Entirely hypothetical because the assumption in the development world is that if we build it, they will come. If I throw a megawatt of of hydro generation in this remote African village, when I do my modeling as the builder or as the person running this facility, I'm gonna say the 1st month or the first, you know, the the the go live, 20% of the community is gonna be buying this electricity. And in year 3, it's gonna be 35%. And in year 7, it's gonna jump up to 55%. And then the town is gonna be bustling and people are gonna be flowing in. And it's I I have to tell myself this story, which is that if I build it, they will come. The city will flourish because they have electricity. And generally speaking, as Eric details in in his interview in the book, is that this doesn't happen. Everyone is just kind of throwing numbers at the wall, being very, very idealistic about it, but it doesn't happen. And so what happens now when you throw Bitcoin mining into the equation?
I have a location that has a resource, so some untapped river where I can add generation, and I'm gonna throw a megawatt of hydro generation on this river. Now when I go to do my modeling, when I add Bitcoin mining, on day 1, I can use a 100% of that electricity.
[00:31:05] Unknown:
Mhmm. 100%.
[00:31:06] Unknown:
Yeah. That's so fascinating. It tells me if I built an apartment complex. If I built this, a 500 unit apartment complex, and as soon as we cut the ribbon, every single apartment is rented out and generating cash. And then it gets better. Because, say, somebody in the neighborhood wants to come and move into my apartment complex. Okay. I'm just gonna pull out somebody who's in an apartment complex, in in in one of those rooms and I'm gonna put you in because I like you. You're a real person. It's the exact same principle when you talk about this business model in remote villages, which is I have a megawatt, Maybe I put a half a megawatt of Bitcoin miners in a container that's right next door to this mine.
On day 1, my apartment complex is 50% full. And so, now all of a sudden, people from the village can come and fill those extra apartment slots. And if I ever hit a situation where more people are in the village than I have room for, it's very easy for me to say, hey. Shut off one of your Bitcoin miners. We we need more for the village. There's a clear priority there in terms of what you are building for and who you're selling energy to. And the added benefit is that instead of going to an NGO and saying, our estimated payback is gonna be 25 years, and we're gonna estimate it based on these capacity numbers and who comes, instead of doing that, I immediately say, hey. Your payback is in 3a half to 5 years.
And as soon as we keep running these assets on your generator, you're actually gonna be able to charge less to your consumers, your final consumers. Because if you think about the total capacity, that total megawatt that you have, I've just given you 50% or 70% or 80% of your customers that wanna consume all the energy that you can generate. So you, on your staffing side and your revenue side, you can now project out on your generation business substantially further because you know that I wanna keep buying your energy. And you know that as soon as, somebody moves to the town or moves to the village and wants some electricity, that cool. You'll shut a miner down because the priority are the people in this in this town that we're gonna be developing for. So they get cheaper electricity in the short term, and they get capacity in the long term. And it rapidly accelerates the payback for these projects, and it does it without involving foundation dollars or needing to go to, some large n g NGO or the United Nations or some large nonprofit or anything like this. It's purely a business, decision. And for that reason, it it's, it's incentivized, at least in my opinion, in a more sort of clean and pure way.
[00:33:46] Unknown:
Yeah. And that's so exciting. I mean, I just think about investors and people who are interested in doing good and earning a living while they're doing it. It's just such a quite it's such a cool model. Let's talk Number 2, let's talk about methane because this is a big one. I look out my window at night, and I can go see I see all the flared gas in the field. Ah, you do see them. Yeah. Oh, heck yeah. And I'm just like, oh, where is that? Let's go get some miners over there. Can you talk to people about what what's flared methane and why Bitcoin miners can help with, with the the environment that way?
[00:34:18] Unknown:
Sure. Yeah. So the the conversation you hear around around Bitcoin mining and methane mitigation, and there's some really fantastic work that's been coming out from, Dan Batten, who has done a ton of research on this front Totally. Yeah. Particularly targeting this problem. And this is a really interesting, maybe a story of of kind of odd bell bedfellows in the Bitcoiner space where you wind up with folks who are very, very environmentally minded, who might not typically grok Bitcoin or think so much of Bitcoin are becoming extremely, extremely strong advocates of Bitcoin because what they're noticing is that there's a huge environmental problem. So if you look at, if you look at methane, why why does methane get picked on? I thought it was carbon. It wasn't methane. Everyone wants to talk about the the gases in the air. I'm breathing the air. What's going on?
Methane is a really interesting one because outside of the largest kind of natural producers of methane, which is like swampland or, or agriculture is another big one, there's a ton of man made methane. And methane is the result of, of oil and gas drilling typically, which is fracking or or just kind of standard, downhill downhill oil and gas drilling. The way that the distribution of energy under the surface of our earth looks is that you oftentimes get, get integrated gas. So you get, oil, which is really where you make all of your money. Right? Most of the money, if you're drilling, if you're fracking is gonna come from oil, you want the oil.
But that is often mixed in with methane. It's kind of the fizz at the top of the coke. And so when you poke your straw down into, into a basin to try to acquire that oil, you're letting off, you know, in the same way that you pop a Coke open, you're letting off this gas, and it's manmade. And in terms of the environmental argument, their estimate is saying that it's as it's as much as 40 times more damaging, in the environment or warming in the earth Mhmm. If that's the metric that you're using
[00:36:30] Unknown:
compared to c o two. Right? I've heard upwards of 80 times more. I don't know if that's
[00:36:36] Unknown:
accurate. I don't know. There's kind of this trade off of like it's atmospherically there substantially less time. Like it breaks down a lot quicker, but it's a lot more rapid in terms of the heating. And we're also buttloads of it are being released, right? So it's it's a growing problem. It coincides with the fact that any oil producing nation is inevitably going to have this gas, which is not worth as much as the oil. That being said, it's not that it's not valuable because natural gas is obviously important. You can you can liquefy it, you can throw it into a pipeline, you can sell it. But there are oftentimes very, very oftentimes where the price of natural gas drops, it's not worth it anymore to collect that or to to to sell it to market.
You may have, because of the price of it, it may not be worth it to go out there and pick it up from from the middle of nowhere Colorado. Mhmm. Mhmm. Or it simply might be coming off of your well and you want the oil so much more that this gas is just a waste product. So what what do people do? They they vent it, which is releasing it directly into the atmosphere that satellites can pick up and there's some monitoring there. You can flare it. So basically those torches that you see from your house spark it and then you just let it burn. And I'm sure everybody has seen this driving through rural areas where you see, a flare somewhere in the, in the rural, in a rural area by basin, or you can consume it.
And so what people are doing now is they're realizing that it's very common on these oil and gas sites to have gensets. A genset is just a combination of an engine, either like a turbine or reciprocating engine like a like a Chevy, like a small block Chevy, attached to an electrical generation source. And so you can take your waste product, what might otherwise be going to the atmosphere, and you can now monetize it. And Upstream Data is a is a company that has been very, very strong in advocating for this work. Crusoe Energy is one in Colorado that is, has been doing the same thing in the HPC and Bitcoin space.
But the general idea is that you're taking a waste product and one that is really, really frowned upon by regulatory agencies and environmental agencies, and you are turning it into hash power. And by doing that, you you get this kind of win win win situation where if the numbers work in the business, all you have to do is well, all you have to do the operations are very difficult, of course. You have to run a genset. You have to keep electricity flowing. You have to be consuming this gas. And then you're running machines in one of these containerized solutions out on one of these sites, and you're successfully reducing the impact of what would be a vent or a flare, by an order of magnitude. You're substantially reducing the environmental impact. Of course, there's gonna be exhaust coming out of the engine, but the difference between, you know, venting or flaring versus combustion, which in a in a well tuned engine is, is far more complete than just, you know, lighting a candle, is head and shoulders different. And especially because you're monetizing it, you are not relying on an external agency to dump 100 of 1,000,000 of dollars into playing cleanup in all these oil wells. Yeah. And I think that that's the point I wanted to bring up was,
[00:39:53] Unknown:
I mean, with regulations coming, you know, in and out depending on what administrations we have, I mean, if these administrations, and I know Biden was trying to, you know, get more legislation to regulate the methane, mitigate, you know, exposure in the world. And so, that costs a lot of money. And so instead of it costing 1,000,000 and 1,000,000 of dollars like you just said, it's like, hey. We're the Bitcoin miners. We're gonna come out and actually make you some money, and you're gonna be in compliance. And so to me, that seems like a total win win, you know, and so you're you're you're solving for several problems, you know, and I I think that's such a it's just so cool. I mean, I just feel like the creativity and the intelligence and the genius of this community just keeps rocking my little brain.
Okay. Let's go into to number 3. Let's talk about, let's talk about grid stability, and let's talk about, like, you know, because you mentioned ERCOT earlier. And I also wanna talk about, I wanna talk about Kent at SaaS Mining and what they're doing down, down south. So let's talk about, like, renewables. Let's talk about grid stability and how Bitcoin like you were saying, you can just turn off the miners and, okay, everybody, you get the energy today instead of the miners. So can you talk about that for number 3? You threw renewables in there, so that's a big Yeah.
[00:41:09] Unknown:
It's the, the monkey wrench. So the question is what is a grid, right? You have power, I have power, but what is a grid? And it's conceptually one of the most complicated machines that we've created as a human species. Right? The wires that come to my house or go to my panel in the back, go to my street power, and then go back somewhere to a substation that then go to some kind of high transmission lines, those big lines that you often see on the sides of the highways, and then go into some other substation and somehow connect to a natural gas plant or a solar plant, solar farm rather, or a wind farm, somewhere.
I don't know where it is. I don't know where the plant is right now that's producing the the electricity that's coming to my house. But I get the benefit of it. And so conceptually the grid is this thing where you have generation, transmission, and distribution, and then you have grid operators who are balancing this thing and trying to make sure that you always have electricity at all points in time because we live in the modern world, you know. What would happen if we couldn't get home and turn on Netflix? And this is an this is a known problem and this is a problem that we've had since, since we started electrifying, the US originally, was how to do it and how to do it best. And it's an engineering problem and it's a coordination problem. Because if you look at something like a city, it doesn't always use just the same amount of electricity all the time. Yeah. There's there's a change. There's a demand curve, what what we refer to as the the duck curve. Right?
And so you get kind of a peak in the mornings where people are waking up, they're getting their day started, they're, they're kinda getting to where they need to be to go work. And then the energy kinda drops and then ramps up again into the afternoons as people are getting home. They're commuting, they're running some errands, they're picking up their kids from work, the kids are on the iPads or they're, they're playing a video game with their friends. You have a lot more energy consumption and then it kind of falls off over the course of the night as people start to go to sleep and drops down. And so what the grid operator has to do is they have to be incredible estimators and predictors because they're trying to match.
They're playing a matching game. They want to match the consumption to the production. And so the production is a mix of coal plants, gas plants, hydro plants, solar, wind, whatever it might be, whatever whatever's producing electricity in your in your, local neighborhood. They have to coordinate with these people who are producing energy in different ways. And they have kind of different profiles, almost like if you're on a racetrack and you have a, a pickup truck going against a Toyota Corolla, going against a Mazda race car or something like this.
All these these generators that have very different performance characteristics, and they can only move in certain ways. They can only ramp up in certain ways or ramp down in certain ways. Some of them you can't ramp them at all. So when the sun comes up, your solar plants make an electricity. I can't really call it and tell it to produce more on a cloudy day. Right. It's not dispatchable. So what's happening is your your grid operator is constantly trying to balance the supply and the demand because the nature of the grid is that it always has to be balanced in its hertz, in the voltage that it produces.
And when it's not, when supply doesn't match demand, is when you start to get blackouts, you start to get brownouts, you lose modernity, right? You can't run the stuff of life. So what the heck does Bitcoin mining have to do with this? It's a big complicated machine. It's got generators. It's got consumers. The Bitcoin miner is a special kind of consumer, and the reason they're a special kind of consumer is because they they have a couple of characteristics about them that make them different. One is that they always wanna be running. Always.
I always wanna be running if it's profitable for me to run. Yeah. So I live in a space where I want you to give me as much electricity as humanly possible, but I'm only gonna run when it's profitable for me to run, which means that I really wanna use as much of your electricity as possible, mister grid operator, but I don't want to compete with the grandma out in Tulsa who in the middle of, you know, August is going to be cranking her AC. She can have she can have those megawatts. Right? She can consume that electricity because it it's just not profitable for me. So for a grid operator, you get this really powerful tool, which is normally if I need more electricity, I call up a plant or I call up a a a a load following resource. I call up a a combined cycle gas plant or I call up a peaker plant, and I say, hey, price of electricity is coming up. I'm gonna need you to to to to ramp up as hard as you can in this next 15, 30 minute window.
I need 50 megawatts. You're gonna do it because the price of electricity is going up because demand is going up. Go. Do your thing. And they're gonna ramp up. It's gonna be very inefficient because peaker plants are not super efficient to run, but you have to have them because you need the electricity. So instead of doing that, I now go to somebody and I say, hey. What if you just turned off? Instead of me having to call this peaker plant and they have to fire it up and I have to wait 20 minutes, 30 minutes, 40 minutes for them to get to full capacity. And at that point, I'm kinda balancing things out. What if I just go to these Bitcoin miner guys? Because I know they wanna run all the time. And what if I say to them, hey, could you turn off for me?
And they'll say, well, could you give me, like, maybe a little better rate or something? Could you give me a hedge? Could you give me, some kind of cost saving on my delivery fees and my contracting that I have? And as the grid operator, you go, yeah, this is amazing. This is a great deal. I'll give you a little bit of benefit on your delivery fees, help you kind of push your your overall cost down. And what you'll give to me is assurance that if I need 50 megawatts or 200 megawatts or 300 megawatts, you will turn it off. You will have it there, you will shut it off, and you will give it back to me so that I can keep balancing my grid. So in terms of grid stability, this is one that's obviously most talked about in Texas.
Because ERCOT, which is the, the management entity that keeps keeps the lights on in Texas, they have a, a free market. It's a it's a free floating market. Right? And so anybody can come in and build or can trade on the market or can consume on the market and you can negotiate one off with people. So there's a benefit there to being very, very large and negotiating with the grid operator to provide these ancillary services to curtail when the price doesn't, doesn't look profitable for you and to cut deals with the operator because you're providing an an insurance policy for them Yeah. That when it comes time to turn off, because we have to protect everybody who's who's cranking their AC on a 115 degree day, you'll do it. And this is probably the largest scale that we'll we'll see in Bitcoin mining where people are on these free markets, these open markets, and they are working directly with these operators as a resource to the operator, which is very, very powerful. And I I think we're very much at the early days of this, even though there's very big, big operators in Texas, we're still quite early in terms of having mastered this strategy. It'll be kind of exciting to see where this goes in the next even even, 2 to 3 years.
[00:48:49] Unknown:
Yeah. It's pretty exciting. I know I think about, again, the people who think like, Oh, no, it's using all this energy. It's almost like, No, we're the like we're the sponge. Like the miners are the sponge. Yeah. They're cleaning up the excess energy. For example. Like, Oh, good. There's a spill, but now this is actually gonna go, like you said, to grandma because she needs to turn on her AC so you don't need to clean it up. You redirect it over there, but it's profitable still, you know, because you have that incentive of them giving you discounts or whatever it might be. So I think that's super important. Let's talk about this will be 6 now, but but we'll go quick because we've only got a little bit of time. Sure.
Let's talk about, I I wanna talk about job creation. And, you know, I think about, I heard I think I I forget who was talking in El Salvador, but they were talking about how where they were setting up some minors and, there was it was very heavy gang, like militia and a lot of violence around the areas. And then instead of these people being the enemies, it's like they started to teach them, hey. You guys don't have to be in these gangs. You don't have to be in these violent situations, and you can start feeding your family and your children because you're gonna work and learn how to do Bitcoin mining. You know, to me, that seems like such a great way for you know, obviously, I'm all about Bitcoin for peace and how does Bitcoin contribute to a more peaceful world. And I think, like, if we're redirecting people from, you know, places of oppression and violence into places of opportunity and hope and prosperity.
You know, have you encountered any of that in in your Bitcoin mining world?
[00:50:24] Unknown:
Yeah. I think it's it's maybe an overarching trend, right, which is you you'll see in under resourced places that the options that you might have might be to leave the place that you are. Yeah. Go somewhere new. So in the in the US, you might see this as like the small town that has no opportunities. And unless you, you know, manage the local Walmart or own the local, car dealership, there just may not be resources for you, or it would be silly if you were young and aspirational to stay in the hometown. You know, there's there's Yeah. Hundreds if not thousands of these little towns all over the US where people will say under their breath like, yeah, I love it here, but why the heck would you stay here? You know, go somewhere else, you know, go to Chicago, go to New York, go to Denver, go go to Miami, go to Los Angeles, go to San Francisco, go be where the opportunity is. Yeah. And and even more so as you start to look internationally, right? It's it's then it's the fact of, okay, I'm in a small town or or a place that's under resourced.
I don't even have the resources to leave. Yeah. I might be still staying with my family and it's, I can't get a job. Maybe I could like drive a drive a taxi or something, but there's not like there's skilled labor coming out to where I am. What's been really interesting to see is that the the growth of a, any substantial Bitcoin mining necessitates all these other ancillary industries. Mhmm. It necessitates it, and it, in some sense, requires it locally.
[00:51:58] Unknown:
So when you start to look need to know you can't you can't a a either repairs from somewhere. You need Bitcoin. Like, if you're gonna have miner, you need to have repairs. That's a huge one. Like, just training people how to become
[00:52:10] Unknown:
ASICs repair, you know, guys and stuff or girls. I don't know if there's a lot of Yeah. And you can you can monitor it. You know, you get your Starlink or you get your your Ethernet, and you can monitor it from anywhere, but you still need somebody to go crack open the doors and change the filters, wash everything, pull the machines for service, understand how the machines work, understand how the networking works. The IT side is a huge side in these minds. You have to understand how to monitor these things. You have to understand if something breaks on the electricity side, is some is is a fuse gonna pop? Is is a breaker gonna trip? I need a I need a qualified electrician to come and take a look at that because we're dealing with huge amounts of power and that gets dangerous very, very quickly. Mhmm. So I need somebody competent. So now I that's not even getting into if you use immersion, in which case you you probably want somebody who knows how to work with these pump systems or somebody who can work with these, these dielectric fluids or who can work with these dry coolers that are required. There's a whole other subset of specialties that can be managed locally through local talent because it's oftentimes substantially cheaper to train somebody locally to do this than it would be to bring in, to bring in, you know, your your field service technician who's gonna be there in 6 weeks to come fix your dry cooler.
If you're not hashing, you're not making money. So you need to manage these things locally. So it's Yeah. What's interesting is that it and we're only figuring it out now because these big sites are starting to kinda grow. Yeah. We're only figuring out now that, oh, wait, it actually necessitates a lot of these skilled trades, the second that you start to get over a certain level of scale.
[00:53:49] Unknown:
Yeah. And I think that's such an important thing that we think about, like, because right now, we definitely understand that, the world is changing. What are our kids going to do? You know, what are they going to have jobs, opportunities for? And we think about all the machines taking over, but it's like, well, someone's still got to manage the machines of any industry, right? Whether it's these AI data centers, whether it's Bitcoin data, you know, mining data centers, it's important that I think we get excited about our hands, you know, and a lot of people aren't training that way anymore. And I'm like, These jobs aren't going away.
I mean, who knows? Maybe in a 100 years from now, we'll have the flying robots that do everything for us and we may not even be here as a species. But, I think that's an important thing to think about. We're gonna do a bonus one, but let's talk about clean energy, you know, and let's talk about hydro. Let's talk about solar. Let's talk about why like, how Bitcoin is contributing to, you know, the funding of these types of projects when we don't have buyers just yet for all the electricity, like you said. Can you talk about that? And then throw in let's let's just throw in a little micronuclear while we're at it. Yeah.
[00:55:05] Unknown:
Well, it's the it's the core problem. Right? Is the is the if you build it, they will come. Yeah. And I don't know. I see lots of positive things happening in the energy space and I'm, I'm incredibly optimistic about it. I think that it becomes very intuitive people, for people to understand that Bitcoiners or Bitcoin miners in a very strange way, occupy this place of being the buyer of first resort and the buyer of last resort. Yeah. And it's very rare to, to figure out who who's gonna use it. And if we're gonna have innovation in in energy, in in electricity production, which I think is is incredibly important because the the nature of the nature of innovation is, right, is it's you kind of move or you kind of move incrementally, and then every once in a while you hit these big, like, stepwise shifts. Right? So a good example is like HPC AI.
And it kind of reminds me of what was happening in, like, the early 2000 where people would say, like, you know, people people overestimate the amount of change or impact something can have in, in a year, but they drastically underestimate what can happen in, you know, 5 years or 10 years. And I get the sense that maybe AI or HPC is kind of in that space right now. What's HPC? High performance compute. Okay. So tangentially, essentially the same thing. People are so optimistic, so bullish on it that it just feels like this massive bubble right now. But we haven't started even started to scratch the surface for what this looks like in, in 5 years or 10 years from now. But we know that it's going to require a ton of energy, a ton of energy. Yeah. So we we have this buyer there.
And when you combine this this high value buyer, which is this AI buyer, who's not really competitive with the Bitcoin buyer because the Bitcoin miner wants your cheap energy, and we're not willing to pay these expensive rates that these HPC people can pay. You have 2 people who are have very different profiles, very different buying strategies, very different build out strategies. They capitalize in a very different way. They have very different perspectives on payback period. The the AI guys can look at, like, 20, 30 year timelines. The Bitcoin guys, we want payback in a year and a half, 2 years, and otherwise that's slow.
The combination of these two buyers to me is this perfect confluence where you can start to incentivize really powerful innovations in energy production. So whether that's, you know, small nuclear reactors, well, who's gonna pay for that energy? I don't know, an HPC guy, a Bitcoin buy guy? I don't know. We just know that there's this growing demand there. These huge solar farms, which have the benefit of being able to produce a ton of electricity very passively, very low cost, but they have the downside where they only produce when the sun's out. So your capacity factor, the total amount of time over the course of a given year that you're actually producing electricity is typically sub 30%.
And that's something that you can't do anything about because seasonally the earth is going to continue to tilt on its axis and your summer days are always gonna be longer than your winter days. And every once in a while, you're still gonna get the clouds. You can, you can provide demand to all those people. Yeah. So I, it's very hard to estimate, right? You can only kind of look at what's happening and then kind of smile if it actually unfolds. But I think in terms of like estimating or grand predictions, it's, it's so impossible to even like schematize for me at this point that I've, I've tried to, I've tried to stay far away from making grand predictions about, about energy or electricity, and really stick to the idea that, we have the buyers. We have the interested buyers, the Bitcoin buyer, the HPC, the AI buyer, where they will be in 5 to 10 years, maybe the same level of demand, maybe very different levels of demand.
But at the end of the day, that is enough to me to be very bullish on diverse ways of producing energy overall.
[00:59:13] Unknown:
Yeah. That's so exciting too. And I think about they're always gonna be there to pick it up as long as it's a 4 you know, it's profitable, especially the Bitcoin miners. Okay. Let's talk about we'll do the bonus one, which is heating our homes with the Oh, yeah. You know, we live in Colorado. Obviously, it's cold as heck here. 6 months out of the year, you gotta have, you know, either your propane, your your liquid you know, your natural gas, or your electric heater on. And so let's talk about that, you know, for the next couple of minutes, and then we'll talk about your book and we'll we'll, I'll get let you go free.
[00:59:47] Unknown:
I love it. Yeah. Home heating is sort of like the, I in in the space, I think home heating is like the pretty girl at the party right now where everyone is trying to find out a way to talk to her, but nobody nobody quite nobody quite understands what to say yet because there's something there that makes sense. So it Yeah. To go very high level. Right? The Bitcoin miner produces heat, tons of heat. Yeah. You need heat in your house. Yeah. And you generally have, a couple of key sources of heat. And one of them is probably sitting in your basement or your utility room right now. Mhmm. And it's 50 or a 100 gallons of hot water so that when you turn on the tap, you get hot water. And that can be electrically powered or, or gas powered, natural gas powered to heat that water. But that's a sunk cost, you know, that's a utility bill for you. Yeah. And then you have your, your home heating. So in the winter seasonally, obviously, you turn the heat on your house and your furnace turns on and you stay nice and cozy by the fireplace and and you feel good, you feel comfortable.
And what people are trying to the the nut they're trying to crack right now is how do I take a machine that runs on electricity, makes me money, and how do I plug that into these two things that I know I need anyway? Which is I wanna be nice and toasty in my house, and I know that I wanna have warm water. And that's a really, really hard problem to solve for. It, it would not be the, the scary pretty girl at the party problem if it wasn't a very hard problem to solve for. And the reason it's really hard to solve for is because Bitcoin miners are not like laptops. We haven't had 20 years of producing them. We don't have kind of best practices or open source versions of them.
They're not like TVs where they're so ubiquitous that you can pick them up anywhere or swap them out and do so very cheaply. That doesn't mean they're not going that direction, but they're just not there yet. Mhmm. So they're still relatively specialized devices. And if they break, you don't get heat. So it's a hard sell to somebody who, maybe doesn't understand Bitcoin, but wants to save money on their utility bill. Because you say, well, you you're gonna be able to replace your heater with this device, and it'll pay you money, But it's gonna be more expensive than your normal home heater.
And if it breaks, you won't get heat. Sorry. Yeah. So it's it is a hard nut to crack. Do I do I think that it's not going to be getting cracked? Nope. I think people are gonna figure it out, but it's very early. This space is gonna take, you know, 5 to 10 years to develop, and it's going to develop as a result of development in the ASIC space, development in the chip space. It's gonna take years. So I wouldn't, I wouldn't overestimate the, the speed at which this kind of thing can happen. And the fact that you can buy a space heater from Walmart for $15, it's hard to charge somebody $200 for something that they run 1 month out of the year.
[01:02:59] Unknown:
Yeah. Yeah. Depending on where we're at, obviously. And obviously, you know, we've got no KYC Bitcoin that we can get if we're doing this home heating, but it's still it's not you're not stacking for your retirement necessarily with this, but you are contributing to the network. You're getting some heat. It's just nice to be a part of it. But you're right. It's not something that you're gonna rely on and especially since you're not running it 12 months a year either, unless you are, because we're not gonna I don't need heat right now. It's September, August. That's right. Do I wanna do this and just blast the heat out and pay that high electricity cost? No, probably not. I'd rather just go buy some Bitcoin. But it's just we are right on that razor's edge of the future and I think it's just so cool that, you know, the pretty girl at the party analogy, it's like she's gonna get talked to at some point, and they're gonna pick One day. One day, someone's gonna ask her to dance.
Let's talk about your book, dude. Like Sure. You know, let's let's get people to buy this this beautiful book of yours. I'm gonna pull up the Amazon, thing. Yeah. Give people a heads up on your on on this book, and,
[01:04:10] Unknown:
and then we'll rock and roll here. Where is Sure. Sure. Sure. Yeah. So the the book is called the Bitcoin Miner's Almanac, and it is it is written to be as nontechnical as humanly possible. But, of course, the the one thing that I think that has to be a bit technical was the breakdown of hashing and the difficulty adjustment and all that. So if you can if you can hang on for dear life at that part, I can I can promise you that you will get the kind of high level schemas of understanding the shape of this space? Right? So it's it's a book in 2 parts. The first part is an introduction to the machine.
What are the parts of the machine? What the heck does it do? Those those three physical connections that I mentioned. And then, an introduction into where those physical connections go and kind of an essay of what does what does the space look like? Where does electricity How do people get it? Much of what we discussed on, on this podcast just now, what is hashing? How do people cool these machines? Kind of an overview. Give a, give a give people a sense of what the tools look like. Let me understand the tools and then help me from there, I can start to kinda play with them and understand how somebody might put together a business and why this might be a profitable business even though it's very different from another business in the space.
So that's the second half of the book. The second half of the book is interview driven where we talked to Kent from SaaS Mining. We talked to Jason Less from Riot. We talked to Eric Hirstman from Gridless. We talked to Okana Alchemist and and a few more folks, Charlie Spears who talks a bit about oil and gas mining. And we go through these individuals, and they all have very different reasons and very different setups in the way in which they mine Bitcoin. Mhmm. But for them, all of these all these different models are profitable for them. They work and they're different. And so what I want peep folks to really take away is, okay, you can start with the same fundamental tool and you can have very different businesses based on the way that you assemble the pieces. Mhmm. And that's that's a bit about the structure, but about the organization.
And it's just it's it's exciting to kinda start this thing and to put it together because I could tell you I'm already itching to get, get the 2nd edition in the works because Cool. Of course, there's stuff that was immediately introduced, you know, as soon as the book went to print that needs to be updated or needs to be added to. One of which is that, Mara just had just inter announced, just announced a 2 phase cooling solution.
[01:06:43] Unknown:
Mhmm.
[01:06:44] Unknown:
Which is nowhere in the book because it didn't exist when I was writing, writing the drafts and getting it edited. But it's such a cool, such a cool thing that they've done that, that it needs to be in the book as, as an explanation of a method of cooling. It's a really, really cool technology.
[01:06:59] Unknown:
Nice.
[01:07:00] Unknown:
So as long as people keep creating things, I think there will always be future opportunities maybe to, to spit out a new addition every, every 12 to 18 months or something like this. But thus far for for the the the casual reader, for somebody who's curious about this, who understands a little bit about Bitcoin but wants to know more about mining, it's really built for you. It's designed to kind of give you the tools and let you understand how these pieces hang together.
[01:07:23] Unknown:
Yeah. It's super important, and I I love that you wanted to synthesize things and be a dot connector for people. I think we need that so much. And, you know, and you have to have that repetitive exposure to these things from different angles, I think, in order to keep rocking it, you know, because it's complicated, you know. And unless you're an engineer or, somebody who really understands this kind of stuff, it's a lot to process, you know, and obviously, there's a whole spectrum of all of us who want to understand Bitcoin just in terms of like, Okay, I just want to save it and this number go up. Don't bother me. I don't care. That it's a network and care less, right? That's all they care about all the way up to like, I want to be a miner. I want to be a home miner. I want to run a company. You know, I want to go get volcano geothermal energy and all that, you know. So, there's a giant spectrum. And so, I think it's super important that we have tools like this, you know, to to enter into the space and, again, and not feel like, oh my gosh, I'm not over here yet, so I don't I don't even wanna bother. And so thank you for bringing this to to us, you know, us interested people who are, you know, not normies necessarily, but sort of we're minor normies.
Of course. But all the way up to the the people who aren't, you know, normies on it. So so this is super powerful. What, where can everybody find you, Rob? Right here. Cool. Yep. Follow me.
[01:08:44] Unknown:
Bikes and Bitcoin, you know, DMs are open. I'm always happy to chat with folks and, you know, talk to me about the cool things that you're you're building or the things that you're trying to model. I I get I get a few pings a week from folks that are just curious asking questions, wanting to see if it's right for them. I can't give you, obviously, investment advice or, I'm not making any affiliate links off of this, but I want there to be more people learning and growing and making stuff in the space. So always feel free to reach out to me. You can find the book at, Bitcoin Magazine. It's it's, published through Bitcoin Magazine Publishing.
You can find it on Amazon. Amazon's got both the, the quick order and then, also a Kindle version that's gone up. I'd like to do a book version, an an audiobook version. I think it'll be fun to, to go through and kinda do the read. And I've been told that you can do fun things on the audiobook version. Like, you can you can pause and kinda go into a tangent or something like this, which I think might be a lot of fun for me. So that that may potentially be, be coming out in the future. Oh, good. An audiobook version as well. Yeah. Get audiobook. I'm an audiobook
[01:09:49] Unknown:
nerd because I drive around a lot up in the mountains and stuff. So Very cool. It's good to listen to stuff, too. So any final words for people? And just, again, thank you so much for taking your time and, obviously, putting a lot of energy. I know how hard it is to assemble thoughts and put it together in a book. I haven't accomplished my dream yet of my book, so just I get I'm happy that you gave birth to it and got it out. I know it's it's it's a labor of love. Any final words for people listening?
[01:10:18] Unknown:
Yeah. The same as always, which is just if you're passionate about this stuff, take the leap. You'll figure out where you fit in. You know, I have a philosophy background and was running random startups in in New Orleans for the better part of a decade. You get in where you fit in, you know, and the space is so small and the space is so desperate to have folks that are contributing and educating that I'm not gonna say it's easy because we're having to write the rule books while, it's almost like, or to switch switch analogies where, you're having to, like, lay down the race course while you're racing on the race course.
So it's almost like a decent did. Like an acme, like the cartoon where they're they're on the train and they're putting the track in front of the racing train. And if they stop, they're gonna fly into nothingness, you know? It's like the old Looney Tunes. Oh my god. That's the world we're in right now. Yeah. And it's not just gonna happen by itself. You know, if you're really passionate about, whatever it might be about custody, about marketplaces, about mining, it's not gonna happen by itself. You know, it it takes you. And even even though you might not have the a beautifully vetted custom resume that speaks to it, you can still show up and just be curious, and you can learn, and you'll get in where you fit in.
[01:11:35] Unknown:
Yeah. I agree. I mean, that's such great advice. And I think, too, a lot of it, it's like there's no obviously, Bitcoin's permissionless. And so working in with for Bitcoin in any capacity, it's like you don't need to go get approval from the HR department to go start a project or to go do a podcast or to start a company or to write a book or any of it. And so, it's one of those I find it's just such a great, ocean of talent and people who are go getters and doers. And obviously, we're freedom lovers and truth seekers. And so it's just like, oh, wow. Cool. We don't it's just so cool and the sharing mentality of everybody because obviously, Bitcoin's open source. And so we're all wanting to like, you know, all, you know, rising tides lift all boats. And it really is true for this world and this industry. So everyone is invited and welcomed into Bitcoin.
And obviously, I'm living proof. Like, I'm not a coder and I'm not an electrical engineer or my you know, but I'm like, I can contribute my little my little thumbprint on the the sculpture that is Bitcoin. And so it's pretty neat. So, yeah. So thanks so much again, Rob. And thanks again for just you being you and just, again, being an angel on my shoulder and being a great friend and, just a fellow fellow mission driven nerd. That's right. Thank you so much. It's always my pleasure. Kathryn Yeah, totally. And, yeah, you guys, make sure you get on Amazon or go to Bitcoin Magazine and get, The Bitcoin Miners Almanac and you can go follow Rob at Bikes in Bitcoin. I'll have all the links and everything in the show notes. I got to get some editing going here in the next couple weeks and then we'll get it out. But, thanks, everybody, for tuning in and thanks again, Rob. I really, really appreciate you. So Beautiful. Likewise. Alright, everybody. Peace, love, and warm aloha until next time. Take care.
Hey, aloha. Get ready for an epic episode. And if you love it, please share it. You know why? Because you got the love. Enjoy, my friends. Hey, aloha, love tribe. Welcome to the show. I have somebody here with me who has been kind of like an angel on my shoulder since I started my Bitcoin journey. And this is Rob Warren. He's the author of The Bitcoin Miners Almanac. And, Rob, you're somebody who's always been so generous and gracious with your time, answering questions for me, being very encouraging on my journey as a newbie and a Bitcoiner and certainly as a woman in the space. You've been so just so amazing. And I'm just so grateful to to call you my friend, and I'm so excited for you to talk about your book. And let's talk about Bitcoin mining together. Welcome. I love it. Thank you so much, Val. You know, I feel very much the same way. I remember one of the earliest conversations we had,
[00:01:14] Unknown:
was at it was at one of the meetups or one of the conferences or something, but it was a little while back and it was right when the space has always been super, super tech bro heavy, super, super kinda finance y, like engineering type. And DJ Val shows up and is just flowing around the room saying hi to everybody. And I remember schmoozing with you at at an event. I can't remember for the life of me what what what event it was. And I I kind of look over and I go, what are you doing? Like, how did you decide to come here of all places? Of all the places you could be, this is where you decided to be. And you told me something so interesting that really set the stage for me in terms of where the space is going and who we should expect to kind of come and be learning about Bitcoin in the future, which was that you said to me that, it was the human rights aspect of, of Bitcoin that got you interested to begin with. Yep. And I just thought that was the coolest thing ever because for me at least, having been in the space since since 2017, it's always really, really interesting to see who who are the newcomers, who are the new folks that for whatever reason they're kind of called to come and figure out what the heck this Bitcoin thing was. And I thought that you were just such a perfect example of that showing up and going, okay, what is DJ Val doing here?
And then, of course, to see you DJ at the at the Bitcoin conference was, was only a greater pleasure because there she is in her element.
[00:02:37] Unknown:
Thanks, Rob. I know. It's fun. I mean, it is intimidating, I think, for a lot of people who I mean, obviously, as a DJ, I'm a nerd. I like buttons. I love technology, but I'm not a coder. I'm not, you know, a billionaire, crypto, or hedge fund manager person, or whatever, you know? And so going into those rooms, especially in a dev, you know, Bitcoin, like a BitDevs meetup or anything or it's just like, but everybody is so warm and welcoming and inviting and you've definitely been, like I said, an angel on my shoulder. So thank you. Thank you. Yeah. And I love the work that you're up to. So let's talk about it. Let's talk about your history. How the heck did you get into Bitcoin mining, you know, from, you know, I know you had a creative agency a while back in New Orleans, and thank you for taking some pictures for me a couple weeks ago, so I'm gonna use those. But how did you go from this creative
[00:03:26] Unknown:
man into Bitcoin, you know, tech and mining and writing this book? And why why did you write this book? I love that. Well, hopefully hopefully, still creative, but just in a different way. Right? You know, it's, many mediums, but one one individual. Yeah. The the as many folks in the space, you know, your kind of professional career, has jumped around a bunch, and and so I'm not so strange in the Bitcoin space for being one of many weirdos who have very atypical or nontraditional backgrounds, not coming from, like, traditional, traditional energy or traditional engineering.
You know, I'm a philosophy trained in philosophy undergraduate in psychology and then worked in education and, was in startup in New Orleans for the better part of a decade where I started a essentially, a high volume production agency that was generating content for organizations, typically, kind of midsize larger organizations that wanted to have the, the quality of product for, like, an in house photo or video, agency, but didn't wanna pay those kinds of rates. So we had an agency that was basically kind of the outsourced version of that to all these various companies. So it was a huge blast. We got it up to about 13 people. We were super active in the startup space in New Orleans, which is very small by startup space comparisons anywhere else.
Anywhere else. And then as all things go, you learn a lot in in startup. It's it's kind of like your MBA that, that you hopefully are able to pay yourself doing. We were going through a a round of fundraising and had a difference very, very different, idea of direction with my partner at the time. And from there, it it turned out to, as they say in the marriage space, you know, it's a reconcilable differences. People just wanted very, very different things. Yeah. So we wound up winding that company down, and and thank goodness we, we did because there's no way that it, it would have made it through all the COVID lockdowns and net downs and everything just because, you know, 90% of the work that we were doing, 70 probably 80, 90 percent of the work that we were doing was very events heavy. And New Orleans is a very events heavy city.
Yeah. And that went to 0 and it just sat there for, you know, 18 months, 2 years. So that point, while that company down at the time, I was, meeting and dating my my now wife and wound up in, in the state that she grew up in in Colorado. And I had I'd kind of heard about this Bitcoin thing in 2016. There's, there's a really excellent podcast with a guy named Russ Roberts called Econ Talk that, goes comes out of the Library of Economics in Liberty. He was initially located in Stanford. Now he's in in Israel as, as a professor there, I believe. But just this fantastic podcaster that's very economics focused. And in 2016, he had Wences Casares on, on the podcast. And Wences, if you're familiar with the work that he's done, was just so exuberant and so over the top and so excited about this Bitcoin thing that I had kind of seen about it. Like any guy in their twenties does who, you know, finds himself on a weird website, with a Tor address.
Not buying anything, of course, but, seeing how things are denominated and hearing this Wences Casares guy talk about it, but didn't really start buying until, until early 2017. Self self custodying at the time. Thank goodness. I kind of got the self custody pill very quickly. But there's really only two reasons that people buy Bitcoin or get into Bitcoin, at least in my perspective in the the kind of developed world, which is that you are either greedy or you have to get into Bitcoin. You know, the function of Bitcoin is necessary for you. So I was definitely on the greedy side. You know, I was running a startup. Maybe I buy this asset. Maybe I make a bunch of money off of it. How cool will I be? Pat myself on the back. I'm a genius 20 something that's buying this, this magical Internet money. Didn't really understand it as a network. You know, on the other side of that coin, obviously, you have people who need Bitcoin to protect their purchasing power Yeah. To protect their wealth.
Those people kinda grok it in a very powerful but different way. I was in very much the first world, let me buy this thing number go up. Right? Yep. And then was so busy in the company, kind of forgot about it. But as I relocated back up to Colorado and with the advent of all the COVID lockdowns and all the human rights issues that came out of that domestically, not spread across the world, but a resegregation based on your vaccine card status that was happening in, in the wealthiest country in the world and everybody was kind of oddly going along with it, the the Bitcoin pill kind of popped again in the brain. And for the first time, I really understood it and appreciated it as the network Bitcoin, as this kind of living, breathing thing and not just as this kind of number go up mechanism.
And it was around then that I made the choice that, you know, this is this is the industry that I wanna work in full time. So I was doing a bunch of work in not in the dev side because I'm I'm not a dev, but in early stage mining. So at that time they had mining for the streets, which was diverted into KYC, this great little PDF, very introductory kind of intro to home mining. And then a kind of alchemist was doing a ton of guides, a ton of write ups. He was doing a ton of home heating stuff. This was, you know, prior to the upstream data black box. And for the first time, you could sort of get an s nine for a $150 shipped to your house.
And happened to know a couple of guys, Neil, Ronan Miner, and Joe Rogers, formerly of Bitcoin Magazine, who bought a pallet of s nines. And just because they wanted to support plebs, broke it down and reshipped it out to a bunch of people, and I got a couple of s nines. And we were living in this, this 5th story apartment, right off of Wash Park in, in Denver. And I plugged these things in, and my wife looked at me like I was absolutely bonkers. Because I was because I was plugging in this industrial equipment in in an s 9. An s nine is a piece of industrial equipment. Like, it's not a it's not a cute little cell phone. It's not like a thing that fits in your pocket. Like, it is a it is an aggressive angry machine that should not be sitting in your living room or in my case, my my second my guest bathroom.
And she looked at me and was like, babe, I love you a lot, but if you wanna get married, we will solve for this. And that's to say, I figured it out quick. At the time, Steve Barber had actually published, published a little, a little diagram for how you could construct what is now known as the black box, but it was a brown box. You could construct it out of a piece of plywood, a single piece of plywood that you can cut and break down. So I drove over to, to the local Home Depot and bugged the heck out of them buying a single piece of plywood that I made them put like 8 cuts into, to go take that home and then assemble this brown box on my 5th story balcony because we we didn't have anywhere else to take it.
Excuse me. And then had a couple of s nines that then lived, first in the bathroom for a little bit because we got some heating in the winter and then out on our on our balcony. So this this brown box sat on the balcony and ran with a couple of s nines in it as I was continuing to learn in the in the mining space. And through that time I did some write ups. I was producing content for Bitcoin Magazine. Was just trying to get a feel for what the heck this mining thing was because everybody had a very strong opinion of it. And everybody seemed to say, oh, it's it's so hard. You don't want to get into it. Like, stick with this other stuff. Or, oh, it's too complicated. Or, oh, it's not profitable. It's it's never profitable. You never wanna do it. And it's it's so often discussed, but so very rarely actually done or mastered that it kinda planted a seed in me. Right? You know, let me let me kinda take this take this little, segue down the rabbit hole down the Bitcoin mining rabbit hole.
And, that's where I've been since. I've I've since set up mines, worked for publicly traded companies, written the Bitcoin miners almanac, which, of course, we, I'm super excited to share with you and kinda chat, chat about today, but that all kind of culminated in the writing of this book, the Bitcoin miners almanac, where really the effort that was done here was to not to necessarily simplify or oversimplify, but to add some synthesis to the space. Because we hear of so many different ways that people are mining Bitcoin. And you've got the the guys who are mining on solar, solar co locations or the guys who are mining on nuclear sites or the guys who are mining in the oil field or the guys who are in in the the jungles of Africa mining on hydro that is, otherwise stranded in these various locations.
And the way this stuff comes out to the general person is it just looks like an alien landscape. And so the goal with the book was really, how do you generate some coherence here? How do you start to establish the principles of what this is, what Bitcoin mining is? And fundamentally, you can either do it ideologically where you, you're just doing it because you wanna support the network, like these beautiful little bit access that they have now that people put on their desks and they mine with, or you do it as a business. And so that's the world that I was trying to create synthesis around with the book, which is how do we understand this business? How does this business work? How do people think about this business? And how the heck is somebody who's mining on oil and gas in the same network as some guy who's got 700 megawatts on ERCOT that he turns off at the flip of the switch when the electricity price gets too high? How does that work? And so the goal was to really start to establish the principles that sit behind Bitcoin mining. And if you can do that, then you can make it very intuitive for people in understanding all these various implementations that we see.
[00:13:32] Unknown:
And so, Rob, so, like, as you're writing this book, you know, what did you get any big synthesis moments where you're like, Oh, got it. This goes this is why they're doing this, and it goes together here, or anything that was sort of disjointed? Did you have any big, you know, epiphanies
[00:13:50] Unknown:
that you wanna share? Oh, my goodness. It's all epiphanies. The whole thing's a giant epiphany ball. It's like it's like I've heard people say where it's like once you see it and once you kinda put the pieces together Mhmm. It's obvious but not necessarily intuitive. Yeah. So when you look at it, you go, oh, yeah. That makes sense. But you wouldn't necessarily have gotten there by just some grand stroke of of, intellectual brilliance. Mhmm. There were the the way in which I chose to set up the book was to start with the machine.
[00:14:22] Unknown:
K.
[00:14:23] Unknown:
And the reason I felt that starting with the machine was the best way to start the book was because fundamentally, that's what connects you to the Bitcoin network. It's the machine. The machine is doing work, and that work is contributing hashes or mining, mining on a template that then is rewarded for. So that is that is the way in which you generate revenue in this world.
[00:14:49] Unknown:
And okay. That's And you just take a step back just again in case there's folks in the audience who don't understand, like, what does a Bitcoin miner do? Like, I look at, you know, I try to tell people it's like it's literally guessing a number. It's like putting a lot of tickets in and that's like cash power is you're putting all of your put, you know, your units of guessing into, you know, the the network into a pool or if you're doing solo mining. Can you can you make it simple for people who might be new to what that means?
[00:15:15] Unknown:
This is this was the hardest part to write in the book, to be honest with you, because the the machine has 3 physical connections. Right? The machine has to be connected to the Internet, it has to be connected to electricity, and it has to be physically connected to some cooling mechanism. So it has to be cooled or immersion cool. That's it. You just need 3 things to run the machine. K. If if you're trying to explain the cooling side of things, we already have this beautiful language around it, which is the the world of mechanical engineering and thermodynamics. And this is very well understood, and there's there's a whole set of principles and a whole set of design schemas that people can kind of tap into. And there is a lot that is already understood in the difference between air cooling and immersion cooling and hydro. So that's it's not settled. There's a lot of innovation to be have, but it's well studied. And then you look into the electricity side.
Electricity is incredibly well understood, not perfectly by any means, of course, but where where electricity comes from, where energy comes from that then create sources of electricity going through some kind of, conversion mechanism, a turbine, an engine, something like this, a large generator. Electricity is something that we're familiar with. We already have kind of an intuitive sense of it, an incomplete sense to the normal consumer. Right? I I flip a switch on my wall, the light turns on, where does the electricity come from? I don't know, the wire? Where does the wire go? I don't know. So you can do some educating there, but there's nothing there that is super unintuitive to people because we kinda touch it and feel it every day.
The second that you get to that Internet connection. So the machine is doing hashing. What the heck is hashing? Exactly as you said. Right? Hashing is well, I'm guessing a random number.
[00:17:00] Unknown:
Well, why do I have to guess a random number? Well, I And where does the random number come from? That's the question I get asked a lot. Like, how do you know it's the right guess, and where do these numbers come from, and who decides this random number? That's right.
[00:17:11] Unknown:
And it's that's where it becomes very hard to explain because it's very unintuitive because Yeah. What what where are we guessing in, in a random number? Right? Where where does the random number come from? Well, it's in it's in the shot 256 mathematical field. It is in somewhere in that immense exponential domain that we are guessing for this number. Okay. Well, who decides what the number is? Well, it's not really a single number. It's actually a whole bunch of different numbers that could potentially be input into this hashing algorithm that would satisfy the difficulty of the of the network. Well, what what what the heck is a hashing algorithm? Well, it's this thing that you put the data into, and it's sort of like a big wood chipper.
But it's a wood chipper that no matter what you put into it, it always spits out a perfect 8 by 8 by 8 block. So it makes it very easy to to kinda have, your your Italian villa. You put it in the wood chipper, you have an 8 by 8 by 8 block. Your your dog, your pet dog, you put it in the wood chipper, you get an 8 by 8 by 8. And it's very easy to check it using this algorithmic wood chipper. The problem is that you can't go backwards. Right? So it's very hard to get your Italian villa back. So what what is the the heck is the miner doing? They're guessing this random number. They're putting into some data, throwing it into this shot 256 woodchipper. And then the thing that it spits out is this very kind of obscure looking, hexadecimal number.
What am I supposed to do with that? Well, you notice something about it. Well, okay, you count the zeros on it. If you look on mempool, there's a whole bunch of zeros that lead in front of the hash of the blocks. And you go, well, what's that? Well, that's the result that we got when we threw all this information plus this random number into a woodchipper. And most of the time, when I throw all this information and a run number into my shot 256 woodchipper, it spits out something unpredictable that maybe starts with a 1, it starts with a 2, it starts with an h, it starts with whatever. So the odds of there starting with something that has a 0 in front of it is very low.
And my goal as a miner is to get a hash, get something that spit out of that wood chipper that starts with a bunch of zeros. And so to do that, I just have to guess. I have to guess a number. You gotta throw a whole bunch of stuff in your wood chipper. Put it in the machine. Keep putting a whole bunch of, like, 50 and guesses. Okay. Okay. I just do that. And this is not intuitive. It's not intuitive because to understand it, you have to not only understand the data that's going into the woodchipper, so the the the block header, the template, the nonce, everything. You have to understand what the wood chipper is doing.
And then you have to understand that the result, which is all these zeros, that's the thing that's really hard to find is that result with all these zeros and there's no algorithm, there's no way that I can cheat. I just have to guess numbers. And if I find this very rare thing, this very rare hash, that means that I am now I have now settled essentially the the tip of the block chain, the next block. It's what I mean when I say I found a block. I submit it to the nodes. The nodes go, yep. This is legit. And then we start building on top of that, and I've settled the transactions that were in the mempool and I've gotten a reward for it. I've gotten the Coinbase reward.
And that's all to say that we haven't even gone into what the difficulty adjustment is. Mhmm. Because the only reason you have all these weird zeros in front of the resulting hash, the data that comes out of the wood chipper, is because the difficulty adjustment is like this combination, accelerator and brake pedal, or it's almost like your HVAC system. But instead of being the AC or the heat, it's both. And the whole thing it's designed to do is just to keep you at a certain temperature. Or in our case, it's to keep you at a certain block speed. Time. That governor wants to keep us at 10 minutes on average. So now we're talking about this crazy conceptual stuff. Now we're getting really high level and that's where it becomes really difficult. Hands down, the hardest part of the book to write was explaining what hashing was and explaining what proof of work was, you know, as as a result of that and how that fit into the protocol side of things.
So it's it's a long explanation for a not good answer. Right? What is this random number? But I don't think that there is a really, an elegant singular way to kind of tie it up and give it to people. I think at the end of the day, to really be able to appreciate what's happening, because this is this is what Satoshi did that was so beautiful. Yeah. Was that you use this proof of work mechanism so that you can control the issuance and settlement and add a heartbeat to the blockchain. That's what's so beautiful about what this thing is. And and for that reason, I don't think you wanna oversimplify it in some sense. I think it's worth going in and trying to explore and and do the work to really get a sense of what what the heck it what the heck it actually is.
[00:22:28] Unknown:
And and I think too, Rob, like, you know, for me, again, I'm not a miner yet, and and my goal is to have a home heater and do all this stuff so I can start playing around here. But, you know, I think about the difficulty adjustment and proof of work because a lot of people ask questions and they're just like, Well, why can't I just go like buy 10,000,000 miners and then just have more guesses, like more lottery tickets as it were? And it's because of that difficulty adjustment. And that's sort of where I think people when we start to talk about that to them and it's kind of like, well, if we have this much hash power, then it's gonna be this much more difficult to get that little 10 minute block. But if we only let's say, China shuts down and we cut our hash power in half, then it's gonna be easier to guess because we want to stay on that time chain, that every 10 minutes. And so That's right. So I try to help people understand it. Of course, I'm still, you know, a newbie to all of this and I'm on a mission to learn always, you know, and try to share what I get to learn with everybody.
But that makes it really important. And, you know, a lot of times people that I'm speaking to and, you know, I've been to tons of, you know, environmental conferences and I've got a lot of wonderful healers and coaches and artists and activists and entrepreneurs who are just like, Bitcoin uses too much energy. It's bad. It's boiling the ocean. You know, why can't you just make it so it doesn't use all this energy? Can you tell people why the energy consumption is so critical and that we can't just have some kind of little monopoly money printer thing going on? Yeah. In the electricity is good. Energy is not a scary thing.
[00:23:58] Unknown:
Exactly. And it's it's a hard pill to swallow that energy use is a feature. It's not a bug. Yeah. But to really appreciate that, you have to appreciate that there is no energy poor, rich country on earth. Yeah. It it does not exist. Yeah. There is no country that, has become a first world nation by not consuming more energy. Mhmm. Hands down. That's something that I think people intuitively get. And their response to that is typically, well, we have to be we have to be stewards of our consumption. Right? We have to be responsible stewards of the world. We have to recycle and we have to, to rinse off everything and compost in the backyard and drive our Teslas and save the universe.
And aspirationally, you know, there's nothing wrong with that, there's nothing wrong with wanting to minimize your personal footprint in the world or be more efficient in the way that you use resources, but the electricity is not the problem. Mhmm. Because if you want humanity to continue to succeed and to create incredible things, if you want people to be putting rockets on Mars and curing cancers using AI clusters, the only way to do that is to consume more and more and more energy. Yeah. So the first thing I think you have to kind of, you have to energy pill people. You have to get them to understand that that energy use is a feature and not a bug. And what Bitcoin is doing, yes, it's energy intensive, but what kind of energy is it competitive for?
Because it's not competitive for the energy that you want to run your AC in the middle of the day. You're always gonna pay more for your electricity that you receive than a Bitcoin miner is going to be willing to pay for their electricity because we are on a very, very competitive network. If you look at the hash price, which is is the metric that you can search that will give you the, the expected USD value per amount of hash power that you have, right, per per terahash, per petahash, which is a 1,000 terahash. For a petahash, it's like 40 something dollars that you can make per petahash, based on the reward you're gonna get from the network.
That's not competitive when it comes to the electricity price that I need. So I make 40 some odd dollars for my 1,000, terahash, my 1 petahash. I can't pay 11¢ a kilowatt hour or 12¢ a kilowatt hour and make that math work. And if I just wanna do it ideologically, it doesn't make sense because I'm gonna be paying 1,000 of dollars a month in electricity bills and making 600, $800 in Bitcoin. So maybe it makes sense to some people who ideologically just want a dollar cost average and two, no KYC Satoshis. But it doesn't make sense as a business. There's no viable business there. So the question is what energy? Not
[00:27:07] Unknown:
the energy, but what energy? So let's talk about number 1 on our list of 5 things. And so, I think, you know, segueing into, like, electrification of, you know, remote villages, let's say. You know, we've got Alana who did dirty coin and I remember she was interviewing one of the doctors out there and he was like, You know, we used to do surgery by candlelight, and the wind would blow, and then I couldn't do my surgery. And so now you guys came and, you know, electrified the village with hydro, and now we've got electricity, plus we've got we're mining for Bitcoin. And so the capital expenditure for these people to get electricity that are super remote is never gonna happen because it's not profitable to just say, Cool, we're gonna go build something and connect you to this really, really long grid that is, you know, not gonna happen. So so can you talk a little bit about, like, why, you know, like, that's like we think about stranded energy or we think about remote energy and how that is actually something that we can turn into usable energy for the folks there as well as, you know and then we'll go into methane after that one. But let's talk about the electrification of the villages.
[00:28:16] Unknown:
This is a perfect example. So there there's a really fantastic entrepreneur in the space who I had the pleasure of actually interviewing for the book whose name is Eric Hersman. Gridless. Yeah. And, yeah, his his company is Gridless Compute. Mhmm. Fantastic entrepreneur. One of the nicest guys you'll meet in your entire life if you have the pleasure of connecting with him at, at a conference or event. He he details it so beautifully. And you have to understand that in this case, when you look at the problem that's happening in remote villages that he he's addressing with gridless, he is going to these, these communities that have some kind of untapped resource, you know, run of the river. They're gonna build a dam. They they wanna add some kind of electrical, generation utility typically. Right?
The first question is who's gonna fund it?
[00:29:03] Unknown:
Yeah. And
[00:29:04] Unknown:
where's the money gonna come from? And so when you start to shop around, the people that you tend to go to tend to be like an NGO, like a feel good organization. Mhmm. Of course, they want results, but you have to sell the story to them. You have to say, this village is on this very critical river, and, you know, these people culturally who live here have been here for, you know, 100 if not 1000 of years and they need electricity because they produce crafts or they they arts or something like this. You're shopping it to NGOs, you're shopping it to nonprofits, you're shopping it to large foundations. And you're essentially getting them to to make a distribution of capital where the payback is entirely hypothetical.
Entirely hypothetical because the assumption in the development world is that if we build it, they will come. If I throw a megawatt of of hydro generation in this remote African village, when I do my modeling as the builder or as the person running this facility, I'm gonna say the 1st month or the first, you know, the the the go live, 20% of the community is gonna be buying this electricity. And in year 3, it's gonna be 35%. And in year 7, it's gonna jump up to 55%. And then the town is gonna be bustling and people are gonna be flowing in. And it's I I have to tell myself this story, which is that if I build it, they will come. The city will flourish because they have electricity. And generally speaking, as Eric details in in his interview in the book, is that this doesn't happen. Everyone is just kind of throwing numbers at the wall, being very, very idealistic about it, but it doesn't happen. And so what happens now when you throw Bitcoin mining into the equation?
I have a location that has a resource, so some untapped river where I can add generation, and I'm gonna throw a megawatt of hydro generation on this river. Now when I go to do my modeling, when I add Bitcoin mining, on day 1, I can use a 100% of that electricity.
[00:31:05] Unknown:
Mhmm. 100%.
[00:31:06] Unknown:
Yeah. That's so fascinating. It tells me if I built an apartment complex. If I built this, a 500 unit apartment complex, and as soon as we cut the ribbon, every single apartment is rented out and generating cash. And then it gets better. Because, say, somebody in the neighborhood wants to come and move into my apartment complex. Okay. I'm just gonna pull out somebody who's in an apartment complex, in in in one of those rooms and I'm gonna put you in because I like you. You're a real person. It's the exact same principle when you talk about this business model in remote villages, which is I have a megawatt, Maybe I put a half a megawatt of Bitcoin miners in a container that's right next door to this mine.
On day 1, my apartment complex is 50% full. And so, now all of a sudden, people from the village can come and fill those extra apartment slots. And if I ever hit a situation where more people are in the village than I have room for, it's very easy for me to say, hey. Shut off one of your Bitcoin miners. We we need more for the village. There's a clear priority there in terms of what you are building for and who you're selling energy to. And the added benefit is that instead of going to an NGO and saying, our estimated payback is gonna be 25 years, and we're gonna estimate it based on these capacity numbers and who comes, instead of doing that, I immediately say, hey. Your payback is in 3a half to 5 years.
And as soon as we keep running these assets on your generator, you're actually gonna be able to charge less to your consumers, your final consumers. Because if you think about the total capacity, that total megawatt that you have, I've just given you 50% or 70% or 80% of your customers that wanna consume all the energy that you can generate. So you, on your staffing side and your revenue side, you can now project out on your generation business substantially further because you know that I wanna keep buying your energy. And you know that as soon as, somebody moves to the town or moves to the village and wants some electricity, that cool. You'll shut a miner down because the priority are the people in this in this town that we're gonna be developing for. So they get cheaper electricity in the short term, and they get capacity in the long term. And it rapidly accelerates the payback for these projects, and it does it without involving foundation dollars or needing to go to, some large n g NGO or the United Nations or some large nonprofit or anything like this. It's purely a business, decision. And for that reason, it it's, it's incentivized, at least in my opinion, in a more sort of clean and pure way.
[00:33:46] Unknown:
Yeah. And that's so exciting. I mean, I just think about investors and people who are interested in doing good and earning a living while they're doing it. It's just such a quite it's such a cool model. Let's talk Number 2, let's talk about methane because this is a big one. I look out my window at night, and I can go see I see all the flared gas in the field. Ah, you do see them. Yeah. Oh, heck yeah. And I'm just like, oh, where is that? Let's go get some miners over there. Can you talk to people about what what's flared methane and why Bitcoin miners can help with, with the the environment that way?
[00:34:18] Unknown:
Sure. Yeah. So the the conversation you hear around around Bitcoin mining and methane mitigation, and there's some really fantastic work that's been coming out from, Dan Batten, who has done a ton of research on this front Totally. Yeah. Particularly targeting this problem. And this is a really interesting, maybe a story of of kind of odd bell bedfellows in the Bitcoiner space where you wind up with folks who are very, very environmentally minded, who might not typically grok Bitcoin or think so much of Bitcoin are becoming extremely, extremely strong advocates of Bitcoin because what they're noticing is that there's a huge environmental problem. So if you look at, if you look at methane, why why does methane get picked on? I thought it was carbon. It wasn't methane. Everyone wants to talk about the the gases in the air. I'm breathing the air. What's going on?
Methane is a really interesting one because outside of the largest kind of natural producers of methane, which is like swampland or, or agriculture is another big one, there's a ton of man made methane. And methane is the result of, of oil and gas drilling typically, which is fracking or or just kind of standard, downhill downhill oil and gas drilling. The way that the distribution of energy under the surface of our earth looks is that you oftentimes get, get integrated gas. So you get, oil, which is really where you make all of your money. Right? Most of the money, if you're drilling, if you're fracking is gonna come from oil, you want the oil.
But that is often mixed in with methane. It's kind of the fizz at the top of the coke. And so when you poke your straw down into, into a basin to try to acquire that oil, you're letting off, you know, in the same way that you pop a Coke open, you're letting off this gas, and it's manmade. And in terms of the environmental argument, their estimate is saying that it's as it's as much as 40 times more damaging, in the environment or warming in the earth Mhmm. If that's the metric that you're using
[00:36:30] Unknown:
compared to c o two. Right? I've heard upwards of 80 times more. I don't know if that's
[00:36:36] Unknown:
accurate. I don't know. There's kind of this trade off of like it's atmospherically there substantially less time. Like it breaks down a lot quicker, but it's a lot more rapid in terms of the heating. And we're also buttloads of it are being released, right? So it's it's a growing problem. It coincides with the fact that any oil producing nation is inevitably going to have this gas, which is not worth as much as the oil. That being said, it's not that it's not valuable because natural gas is obviously important. You can you can liquefy it, you can throw it into a pipeline, you can sell it. But there are oftentimes very, very oftentimes where the price of natural gas drops, it's not worth it anymore to collect that or to to to sell it to market.
You may have, because of the price of it, it may not be worth it to go out there and pick it up from from the middle of nowhere Colorado. Mhmm. Mhmm. Or it simply might be coming off of your well and you want the oil so much more that this gas is just a waste product. So what what do people do? They they vent it, which is releasing it directly into the atmosphere that satellites can pick up and there's some monitoring there. You can flare it. So basically those torches that you see from your house spark it and then you just let it burn. And I'm sure everybody has seen this driving through rural areas where you see, a flare somewhere in the, in the rural, in a rural area by basin, or you can consume it.
And so what people are doing now is they're realizing that it's very common on these oil and gas sites to have gensets. A genset is just a combination of an engine, either like a turbine or reciprocating engine like a like a Chevy, like a small block Chevy, attached to an electrical generation source. And so you can take your waste product, what might otherwise be going to the atmosphere, and you can now monetize it. And Upstream Data is a is a company that has been very, very strong in advocating for this work. Crusoe Energy is one in Colorado that is, has been doing the same thing in the HPC and Bitcoin space.
But the general idea is that you're taking a waste product and one that is really, really frowned upon by regulatory agencies and environmental agencies, and you are turning it into hash power. And by doing that, you you get this kind of win win win situation where if the numbers work in the business, all you have to do is well, all you have to do the operations are very difficult, of course. You have to run a genset. You have to keep electricity flowing. You have to be consuming this gas. And then you're running machines in one of these containerized solutions out on one of these sites, and you're successfully reducing the impact of what would be a vent or a flare, by an order of magnitude. You're substantially reducing the environmental impact. Of course, there's gonna be exhaust coming out of the engine, but the difference between, you know, venting or flaring versus combustion, which in a in a well tuned engine is, is far more complete than just, you know, lighting a candle, is head and shoulders different. And especially because you're monetizing it, you are not relying on an external agency to dump 100 of 1,000,000 of dollars into playing cleanup in all these oil wells. Yeah. And I think that that's the point I wanted to bring up was,
[00:39:53] Unknown:
I mean, with regulations coming, you know, in and out depending on what administrations we have, I mean, if these administrations, and I know Biden was trying to, you know, get more legislation to regulate the methane, mitigate, you know, exposure in the world. And so, that costs a lot of money. And so instead of it costing 1,000,000 and 1,000,000 of dollars like you just said, it's like, hey. We're the Bitcoin miners. We're gonna come out and actually make you some money, and you're gonna be in compliance. And so to me, that seems like a total win win, you know, and so you're you're you're solving for several problems, you know, and I I think that's such a it's just so cool. I mean, I just feel like the creativity and the intelligence and the genius of this community just keeps rocking my little brain.
Okay. Let's go into to number 3. Let's talk about, let's talk about grid stability, and let's talk about, like, you know, because you mentioned ERCOT earlier. And I also wanna talk about, I wanna talk about Kent at SaaS Mining and what they're doing down, down south. So let's talk about, like, renewables. Let's talk about grid stability and how Bitcoin like you were saying, you can just turn off the miners and, okay, everybody, you get the energy today instead of the miners. So can you talk about that for number 3? You threw renewables in there, so that's a big Yeah.
[00:41:09] Unknown:
It's the, the monkey wrench. So the question is what is a grid, right? You have power, I have power, but what is a grid? And it's conceptually one of the most complicated machines that we've created as a human species. Right? The wires that come to my house or go to my panel in the back, go to my street power, and then go back somewhere to a substation that then go to some kind of high transmission lines, those big lines that you often see on the sides of the highways, and then go into some other substation and somehow connect to a natural gas plant or a solar plant, solar farm rather, or a wind farm, somewhere.
I don't know where it is. I don't know where the plant is right now that's producing the the electricity that's coming to my house. But I get the benefit of it. And so conceptually the grid is this thing where you have generation, transmission, and distribution, and then you have grid operators who are balancing this thing and trying to make sure that you always have electricity at all points in time because we live in the modern world, you know. What would happen if we couldn't get home and turn on Netflix? And this is an this is a known problem and this is a problem that we've had since, since we started electrifying, the US originally, was how to do it and how to do it best. And it's an engineering problem and it's a coordination problem. Because if you look at something like a city, it doesn't always use just the same amount of electricity all the time. Yeah. There's there's a change. There's a demand curve, what what we refer to as the the duck curve. Right?
And so you get kind of a peak in the mornings where people are waking up, they're getting their day started, they're, they're kinda getting to where they need to be to go work. And then the energy kinda drops and then ramps up again into the afternoons as people are getting home. They're commuting, they're running some errands, they're picking up their kids from work, the kids are on the iPads or they're, they're playing a video game with their friends. You have a lot more energy consumption and then it kind of falls off over the course of the night as people start to go to sleep and drops down. And so what the grid operator has to do is they have to be incredible estimators and predictors because they're trying to match.
They're playing a matching game. They want to match the consumption to the production. And so the production is a mix of coal plants, gas plants, hydro plants, solar, wind, whatever it might be, whatever whatever's producing electricity in your in your, local neighborhood. They have to coordinate with these people who are producing energy in different ways. And they have kind of different profiles, almost like if you're on a racetrack and you have a, a pickup truck going against a Toyota Corolla, going against a Mazda race car or something like this.
All these these generators that have very different performance characteristics, and they can only move in certain ways. They can only ramp up in certain ways or ramp down in certain ways. Some of them you can't ramp them at all. So when the sun comes up, your solar plants make an electricity. I can't really call it and tell it to produce more on a cloudy day. Right. It's not dispatchable. So what's happening is your your grid operator is constantly trying to balance the supply and the demand because the nature of the grid is that it always has to be balanced in its hertz, in the voltage that it produces.
And when it's not, when supply doesn't match demand, is when you start to get blackouts, you start to get brownouts, you lose modernity, right? You can't run the stuff of life. So what the heck does Bitcoin mining have to do with this? It's a big complicated machine. It's got generators. It's got consumers. The Bitcoin miner is a special kind of consumer, and the reason they're a special kind of consumer is because they they have a couple of characteristics about them that make them different. One is that they always wanna be running. Always.
I always wanna be running if it's profitable for me to run. Yeah. So I live in a space where I want you to give me as much electricity as humanly possible, but I'm only gonna run when it's profitable for me to run, which means that I really wanna use as much of your electricity as possible, mister grid operator, but I don't want to compete with the grandma out in Tulsa who in the middle of, you know, August is going to be cranking her AC. She can have she can have those megawatts. Right? She can consume that electricity because it it's just not profitable for me. So for a grid operator, you get this really powerful tool, which is normally if I need more electricity, I call up a plant or I call up a a a a load following resource. I call up a a combined cycle gas plant or I call up a peaker plant, and I say, hey, price of electricity is coming up. I'm gonna need you to to to to ramp up as hard as you can in this next 15, 30 minute window.
I need 50 megawatts. You're gonna do it because the price of electricity is going up because demand is going up. Go. Do your thing. And they're gonna ramp up. It's gonna be very inefficient because peaker plants are not super efficient to run, but you have to have them because you need the electricity. So instead of doing that, I now go to somebody and I say, hey. What if you just turned off? Instead of me having to call this peaker plant and they have to fire it up and I have to wait 20 minutes, 30 minutes, 40 minutes for them to get to full capacity. And at that point, I'm kinda balancing things out. What if I just go to these Bitcoin miner guys? Because I know they wanna run all the time. And what if I say to them, hey, could you turn off for me?
And they'll say, well, could you give me, like, maybe a little better rate or something? Could you give me a hedge? Could you give me, some kind of cost saving on my delivery fees and my contracting that I have? And as the grid operator, you go, yeah, this is amazing. This is a great deal. I'll give you a little bit of benefit on your delivery fees, help you kind of push your your overall cost down. And what you'll give to me is assurance that if I need 50 megawatts or 200 megawatts or 300 megawatts, you will turn it off. You will have it there, you will shut it off, and you will give it back to me so that I can keep balancing my grid. So in terms of grid stability, this is one that's obviously most talked about in Texas.
Because ERCOT, which is the, the management entity that keeps keeps the lights on in Texas, they have a, a free market. It's a it's a free floating market. Right? And so anybody can come in and build or can trade on the market or can consume on the market and you can negotiate one off with people. So there's a benefit there to being very, very large and negotiating with the grid operator to provide these ancillary services to curtail when the price doesn't, doesn't look profitable for you and to cut deals with the operator because you're providing an an insurance policy for them Yeah. That when it comes time to turn off, because we have to protect everybody who's who's cranking their AC on a 115 degree day, you'll do it. And this is probably the largest scale that we'll we'll see in Bitcoin mining where people are on these free markets, these open markets, and they are working directly with these operators as a resource to the operator, which is very, very powerful. And I I think we're very much at the early days of this, even though there's very big, big operators in Texas, we're still quite early in terms of having mastered this strategy. It'll be kind of exciting to see where this goes in the next even even, 2 to 3 years.
[00:48:49] Unknown:
Yeah. It's pretty exciting. I know I think about, again, the people who think like, Oh, no, it's using all this energy. It's almost like, No, we're the like we're the sponge. Like the miners are the sponge. Yeah. They're cleaning up the excess energy. For example. Like, Oh, good. There's a spill, but now this is actually gonna go, like you said, to grandma because she needs to turn on her AC so you don't need to clean it up. You redirect it over there, but it's profitable still, you know, because you have that incentive of them giving you discounts or whatever it might be. So I think that's super important. Let's talk about this will be 6 now, but but we'll go quick because we've only got a little bit of time. Sure.
Let's talk about, I I wanna talk about job creation. And, you know, I think about, I heard I think I I forget who was talking in El Salvador, but they were talking about how where they were setting up some minors and, there was it was very heavy gang, like militia and a lot of violence around the areas. And then instead of these people being the enemies, it's like they started to teach them, hey. You guys don't have to be in these gangs. You don't have to be in these violent situations, and you can start feeding your family and your children because you're gonna work and learn how to do Bitcoin mining. You know, to me, that seems like such a great way for you know, obviously, I'm all about Bitcoin for peace and how does Bitcoin contribute to a more peaceful world. And I think, like, if we're redirecting people from, you know, places of oppression and violence into places of opportunity and hope and prosperity.
You know, have you encountered any of that in in your Bitcoin mining world?
[00:50:24] Unknown:
Yeah. I think it's it's maybe an overarching trend, right, which is you you'll see in under resourced places that the options that you might have might be to leave the place that you are. Yeah. Go somewhere new. So in the in the US, you might see this as like the small town that has no opportunities. And unless you, you know, manage the local Walmart or own the local, car dealership, there just may not be resources for you, or it would be silly if you were young and aspirational to stay in the hometown. You know, there's there's Yeah. Hundreds if not thousands of these little towns all over the US where people will say under their breath like, yeah, I love it here, but why the heck would you stay here? You know, go somewhere else, you know, go to Chicago, go to New York, go to Denver, go go to Miami, go to Los Angeles, go to San Francisco, go be where the opportunity is. Yeah. And and even more so as you start to look internationally, right? It's it's then it's the fact of, okay, I'm in a small town or or a place that's under resourced.
I don't even have the resources to leave. Yeah. I might be still staying with my family and it's, I can't get a job. Maybe I could like drive a drive a taxi or something, but there's not like there's skilled labor coming out to where I am. What's been really interesting to see is that the the growth of a, any substantial Bitcoin mining necessitates all these other ancillary industries. Mhmm. It necessitates it, and it, in some sense, requires it locally.
[00:51:58] Unknown:
So when you start to look need to know you can't you can't a a either repairs from somewhere. You need Bitcoin. Like, if you're gonna have miner, you need to have repairs. That's a huge one. Like, just training people how to become
[00:52:10] Unknown:
ASICs repair, you know, guys and stuff or girls. I don't know if there's a lot of Yeah. And you can you can monitor it. You know, you get your Starlink or you get your your Ethernet, and you can monitor it from anywhere, but you still need somebody to go crack open the doors and change the filters, wash everything, pull the machines for service, understand how the machines work, understand how the networking works. The IT side is a huge side in these minds. You have to understand how to monitor these things. You have to understand if something breaks on the electricity side, is some is is a fuse gonna pop? Is is a breaker gonna trip? I need a I need a qualified electrician to come and take a look at that because we're dealing with huge amounts of power and that gets dangerous very, very quickly. Mhmm. So I need somebody competent. So now I that's not even getting into if you use immersion, in which case you you probably want somebody who knows how to work with these pump systems or somebody who can work with these, these dielectric fluids or who can work with these dry coolers that are required. There's a whole other subset of specialties that can be managed locally through local talent because it's oftentimes substantially cheaper to train somebody locally to do this than it would be to bring in, to bring in, you know, your your field service technician who's gonna be there in 6 weeks to come fix your dry cooler.
If you're not hashing, you're not making money. So you need to manage these things locally. So it's Yeah. What's interesting is that it and we're only figuring it out now because these big sites are starting to kinda grow. Yeah. We're only figuring out now that, oh, wait, it actually necessitates a lot of these skilled trades, the second that you start to get over a certain level of scale.
[00:53:49] Unknown:
Yeah. And I think that's such an important thing that we think about, like, because right now, we definitely understand that, the world is changing. What are our kids going to do? You know, what are they going to have jobs, opportunities for? And we think about all the machines taking over, but it's like, well, someone's still got to manage the machines of any industry, right? Whether it's these AI data centers, whether it's Bitcoin data, you know, mining data centers, it's important that I think we get excited about our hands, you know, and a lot of people aren't training that way anymore. And I'm like, These jobs aren't going away.
I mean, who knows? Maybe in a 100 years from now, we'll have the flying robots that do everything for us and we may not even be here as a species. But, I think that's an important thing to think about. We're gonna do a bonus one, but let's talk about clean energy, you know, and let's talk about hydro. Let's talk about solar. Let's talk about why like, how Bitcoin is contributing to, you know, the funding of these types of projects when we don't have buyers just yet for all the electricity, like you said. Can you talk about that? And then throw in let's let's just throw in a little micronuclear while we're at it. Yeah.
[00:55:05] Unknown:
Well, it's the it's the core problem. Right? Is the is the if you build it, they will come. Yeah. And I don't know. I see lots of positive things happening in the energy space and I'm, I'm incredibly optimistic about it. I think that it becomes very intuitive people, for people to understand that Bitcoiners or Bitcoin miners in a very strange way, occupy this place of being the buyer of first resort and the buyer of last resort. Yeah. And it's very rare to, to figure out who who's gonna use it. And if we're gonna have innovation in in energy, in in electricity production, which I think is is incredibly important because the the nature of the nature of innovation is, right, is it's you kind of move or you kind of move incrementally, and then every once in a while you hit these big, like, stepwise shifts. Right? So a good example is like HPC AI.
And it kind of reminds me of what was happening in, like, the early 2000 where people would say, like, you know, people people overestimate the amount of change or impact something can have in, in a year, but they drastically underestimate what can happen in, you know, 5 years or 10 years. And I get the sense that maybe AI or HPC is kind of in that space right now. What's HPC? High performance compute. Okay. So tangentially, essentially the same thing. People are so optimistic, so bullish on it that it just feels like this massive bubble right now. But we haven't started even started to scratch the surface for what this looks like in, in 5 years or 10 years from now. But we know that it's going to require a ton of energy, a ton of energy. Yeah. So we we have this buyer there.
And when you combine this this high value buyer, which is this AI buyer, who's not really competitive with the Bitcoin buyer because the Bitcoin miner wants your cheap energy, and we're not willing to pay these expensive rates that these HPC people can pay. You have 2 people who are have very different profiles, very different buying strategies, very different build out strategies. They capitalize in a very different way. They have very different perspectives on payback period. The the AI guys can look at, like, 20, 30 year timelines. The Bitcoin guys, we want payback in a year and a half, 2 years, and otherwise that's slow.
The combination of these two buyers to me is this perfect confluence where you can start to incentivize really powerful innovations in energy production. So whether that's, you know, small nuclear reactors, well, who's gonna pay for that energy? I don't know, an HPC guy, a Bitcoin buy guy? I don't know. We just know that there's this growing demand there. These huge solar farms, which have the benefit of being able to produce a ton of electricity very passively, very low cost, but they have the downside where they only produce when the sun's out. So your capacity factor, the total amount of time over the course of a given year that you're actually producing electricity is typically sub 30%.
And that's something that you can't do anything about because seasonally the earth is going to continue to tilt on its axis and your summer days are always gonna be longer than your winter days. And every once in a while, you're still gonna get the clouds. You can, you can provide demand to all those people. Yeah. So I, it's very hard to estimate, right? You can only kind of look at what's happening and then kind of smile if it actually unfolds. But I think in terms of like estimating or grand predictions, it's, it's so impossible to even like schematize for me at this point that I've, I've tried to, I've tried to stay far away from making grand predictions about, about energy or electricity, and really stick to the idea that, we have the buyers. We have the interested buyers, the Bitcoin buyer, the HPC, the AI buyer, where they will be in 5 to 10 years, maybe the same level of demand, maybe very different levels of demand.
But at the end of the day, that is enough to me to be very bullish on diverse ways of producing energy overall.
[00:59:13] Unknown:
Yeah. That's so exciting too. And I think about they're always gonna be there to pick it up as long as it's a 4 you know, it's profitable, especially the Bitcoin miners. Okay. Let's talk about we'll do the bonus one, which is heating our homes with the Oh, yeah. You know, we live in Colorado. Obviously, it's cold as heck here. 6 months out of the year, you gotta have, you know, either your propane, your your liquid you know, your natural gas, or your electric heater on. And so let's talk about that, you know, for the next couple of minutes, and then we'll talk about your book and we'll we'll, I'll get let you go free.
[00:59:47] Unknown:
I love it. Yeah. Home heating is sort of like the, I in in the space, I think home heating is like the pretty girl at the party right now where everyone is trying to find out a way to talk to her, but nobody nobody quite nobody quite understands what to say yet because there's something there that makes sense. So it Yeah. To go very high level. Right? The Bitcoin miner produces heat, tons of heat. Yeah. You need heat in your house. Yeah. And you generally have, a couple of key sources of heat. And one of them is probably sitting in your basement or your utility room right now. Mhmm. And it's 50 or a 100 gallons of hot water so that when you turn on the tap, you get hot water. And that can be electrically powered or, or gas powered, natural gas powered to heat that water. But that's a sunk cost, you know, that's a utility bill for you. Yeah. And then you have your, your home heating. So in the winter seasonally, obviously, you turn the heat on your house and your furnace turns on and you stay nice and cozy by the fireplace and and you feel good, you feel comfortable.
And what people are trying to the the nut they're trying to crack right now is how do I take a machine that runs on electricity, makes me money, and how do I plug that into these two things that I know I need anyway? Which is I wanna be nice and toasty in my house, and I know that I wanna have warm water. And that's a really, really hard problem to solve for. It, it would not be the, the scary pretty girl at the party problem if it wasn't a very hard problem to solve for. And the reason it's really hard to solve for is because Bitcoin miners are not like laptops. We haven't had 20 years of producing them. We don't have kind of best practices or open source versions of them.
They're not like TVs where they're so ubiquitous that you can pick them up anywhere or swap them out and do so very cheaply. That doesn't mean they're not going that direction, but they're just not there yet. Mhmm. So they're still relatively specialized devices. And if they break, you don't get heat. So it's a hard sell to somebody who, maybe doesn't understand Bitcoin, but wants to save money on their utility bill. Because you say, well, you you're gonna be able to replace your heater with this device, and it'll pay you money, But it's gonna be more expensive than your normal home heater.
And if it breaks, you won't get heat. Sorry. Yeah. So it's it is a hard nut to crack. Do I do I think that it's not going to be getting cracked? Nope. I think people are gonna figure it out, but it's very early. This space is gonna take, you know, 5 to 10 years to develop, and it's going to develop as a result of development in the ASIC space, development in the chip space. It's gonna take years. So I wouldn't, I wouldn't overestimate the, the speed at which this kind of thing can happen. And the fact that you can buy a space heater from Walmart for $15, it's hard to charge somebody $200 for something that they run 1 month out of the year.
[01:02:59] Unknown:
Yeah. Yeah. Depending on where we're at, obviously. And obviously, you know, we've got no KYC Bitcoin that we can get if we're doing this home heating, but it's still it's not you're not stacking for your retirement necessarily with this, but you are contributing to the network. You're getting some heat. It's just nice to be a part of it. But you're right. It's not something that you're gonna rely on and especially since you're not running it 12 months a year either, unless you are, because we're not gonna I don't need heat right now. It's September, August. That's right. Do I wanna do this and just blast the heat out and pay that high electricity cost? No, probably not. I'd rather just go buy some Bitcoin. But it's just we are right on that razor's edge of the future and I think it's just so cool that, you know, the pretty girl at the party analogy, it's like she's gonna get talked to at some point, and they're gonna pick One day. One day, someone's gonna ask her to dance.
Let's talk about your book, dude. Like Sure. You know, let's let's get people to buy this this beautiful book of yours. I'm gonna pull up the Amazon, thing. Yeah. Give people a heads up on your on on this book, and,
[01:04:10] Unknown:
and then we'll rock and roll here. Where is Sure. Sure. Sure. Yeah. So the the book is called the Bitcoin Miner's Almanac, and it is it is written to be as nontechnical as humanly possible. But, of course, the the one thing that I think that has to be a bit technical was the breakdown of hashing and the difficulty adjustment and all that. So if you can if you can hang on for dear life at that part, I can I can promise you that you will get the kind of high level schemas of understanding the shape of this space? Right? So it's it's a book in 2 parts. The first part is an introduction to the machine.
What are the parts of the machine? What the heck does it do? Those those three physical connections that I mentioned. And then, an introduction into where those physical connections go and kind of an essay of what does what does the space look like? Where does electricity How do people get it? Much of what we discussed on, on this podcast just now, what is hashing? How do people cool these machines? Kind of an overview. Give a, give a give people a sense of what the tools look like. Let me understand the tools and then help me from there, I can start to kinda play with them and understand how somebody might put together a business and why this might be a profitable business even though it's very different from another business in the space.
So that's the second half of the book. The second half of the book is interview driven where we talked to Kent from SaaS Mining. We talked to Jason Less from Riot. We talked to Eric Hirstman from Gridless. We talked to Okana Alchemist and and a few more folks, Charlie Spears who talks a bit about oil and gas mining. And we go through these individuals, and they all have very different reasons and very different setups in the way in which they mine Bitcoin. Mhmm. But for them, all of these all these different models are profitable for them. They work and they're different. And so what I want peep folks to really take away is, okay, you can start with the same fundamental tool and you can have very different businesses based on the way that you assemble the pieces. Mhmm. And that's that's a bit about the structure, but about the organization.
And it's just it's it's exciting to kinda start this thing and to put it together because I could tell you I'm already itching to get, get the 2nd edition in the works because Cool. Of course, there's stuff that was immediately introduced, you know, as soon as the book went to print that needs to be updated or needs to be added to. One of which is that, Mara just had just inter announced, just announced a 2 phase cooling solution.
[01:06:43] Unknown:
Mhmm.
[01:06:44] Unknown:
Which is nowhere in the book because it didn't exist when I was writing, writing the drafts and getting it edited. But it's such a cool, such a cool thing that they've done that, that it needs to be in the book as, as an explanation of a method of cooling. It's a really, really cool technology.
[01:06:59] Unknown:
Nice.
[01:07:00] Unknown:
So as long as people keep creating things, I think there will always be future opportunities maybe to, to spit out a new addition every, every 12 to 18 months or something like this. But thus far for for the the the casual reader, for somebody who's curious about this, who understands a little bit about Bitcoin but wants to know more about mining, it's really built for you. It's designed to kind of give you the tools and let you understand how these pieces hang together.
[01:07:23] Unknown:
Yeah. It's super important, and I I love that you wanted to synthesize things and be a dot connector for people. I think we need that so much. And, you know, and you have to have that repetitive exposure to these things from different angles, I think, in order to keep rocking it, you know, because it's complicated, you know. And unless you're an engineer or, somebody who really understands this kind of stuff, it's a lot to process, you know, and obviously, there's a whole spectrum of all of us who want to understand Bitcoin just in terms of like, Okay, I just want to save it and this number go up. Don't bother me. I don't care. That it's a network and care less, right? That's all they care about all the way up to like, I want to be a miner. I want to be a home miner. I want to run a company. You know, I want to go get volcano geothermal energy and all that, you know. So, there's a giant spectrum. And so, I think it's super important that we have tools like this, you know, to to enter into the space and, again, and not feel like, oh my gosh, I'm not over here yet, so I don't I don't even wanna bother. And so thank you for bringing this to to us, you know, us interested people who are, you know, not normies necessarily, but sort of we're minor normies.
Of course. But all the way up to the the people who aren't, you know, normies on it. So so this is super powerful. What, where can everybody find you, Rob? Right here. Cool. Yep. Follow me.
[01:08:44] Unknown:
Bikes and Bitcoin, you know, DMs are open. I'm always happy to chat with folks and, you know, talk to me about the cool things that you're you're building or the things that you're trying to model. I I get I get a few pings a week from folks that are just curious asking questions, wanting to see if it's right for them. I can't give you, obviously, investment advice or, I'm not making any affiliate links off of this, but I want there to be more people learning and growing and making stuff in the space. So always feel free to reach out to me. You can find the book at, Bitcoin Magazine. It's it's, published through Bitcoin Magazine Publishing.
You can find it on Amazon. Amazon's got both the, the quick order and then, also a Kindle version that's gone up. I'd like to do a book version, an an audiobook version. I think it'll be fun to, to go through and kinda do the read. And I've been told that you can do fun things on the audiobook version. Like, you can you can pause and kinda go into a tangent or something like this, which I think might be a lot of fun for me. So that that may potentially be, be coming out in the future. Oh, good. An audiobook version as well. Yeah. Get audiobook. I'm an audiobook
[01:09:49] Unknown:
nerd because I drive around a lot up in the mountains and stuff. So Very cool. It's good to listen to stuff, too. So any final words for people? And just, again, thank you so much for taking your time and, obviously, putting a lot of energy. I know how hard it is to assemble thoughts and put it together in a book. I haven't accomplished my dream yet of my book, so just I get I'm happy that you gave birth to it and got it out. I know it's it's it's a labor of love. Any final words for people listening?
[01:10:18] Unknown:
Yeah. The same as always, which is just if you're passionate about this stuff, take the leap. You'll figure out where you fit in. You know, I have a philosophy background and was running random startups in in New Orleans for the better part of a decade. You get in where you fit in, you know, and the space is so small and the space is so desperate to have folks that are contributing and educating that I'm not gonna say it's easy because we're having to write the rule books while, it's almost like, or to switch switch analogies where, you're having to, like, lay down the race course while you're racing on the race course.
So it's almost like a decent did. Like an acme, like the cartoon where they're they're on the train and they're putting the track in front of the racing train. And if they stop, they're gonna fly into nothingness, you know? It's like the old Looney Tunes. Oh my god. That's the world we're in right now. Yeah. And it's not just gonna happen by itself. You know, if you're really passionate about, whatever it might be about custody, about marketplaces, about mining, it's not gonna happen by itself. You know, it it takes you. And even even though you might not have the a beautifully vetted custom resume that speaks to it, you can still show up and just be curious, and you can learn, and you'll get in where you fit in.
[01:11:35] Unknown:
Yeah. I agree. I mean, that's such great advice. And I think, too, a lot of it, it's like there's no obviously, Bitcoin's permissionless. And so working in with for Bitcoin in any capacity, it's like you don't need to go get approval from the HR department to go start a project or to go do a podcast or to start a company or to write a book or any of it. And so, it's one of those I find it's just such a great, ocean of talent and people who are go getters and doers. And obviously, we're freedom lovers and truth seekers. And so it's just like, oh, wow. Cool. We don't it's just so cool and the sharing mentality of everybody because obviously, Bitcoin's open source. And so we're all wanting to like, you know, all, you know, rising tides lift all boats. And it really is true for this world and this industry. So everyone is invited and welcomed into Bitcoin.
And obviously, I'm living proof. Like, I'm not a coder and I'm not an electrical engineer or my you know, but I'm like, I can contribute my little my little thumbprint on the the sculpture that is Bitcoin. And so it's pretty neat. So, yeah. So thanks so much again, Rob. And thanks again for just you being you and just, again, being an angel on my shoulder and being a great friend and, just a fellow fellow mission driven nerd. That's right. Thank you so much. It's always my pleasure. Kathryn Yeah, totally. And, yeah, you guys, make sure you get on Amazon or go to Bitcoin Magazine and get, The Bitcoin Miners Almanac and you can go follow Rob at Bikes in Bitcoin. I'll have all the links and everything in the show notes. I got to get some editing going here in the next couple weeks and then we'll get it out. But, thanks, everybody, for tuning in and thanks again, Rob. I really, really appreciate you. So Beautiful. Likewise. Alright, everybody. Peace, love, and warm aloha until next time. Take care.
Introduction and Guest Welcome
Rob Warren's Bitcoin Journey
Transition from Creative Agency to Bitcoin
Early Bitcoin Mining Experiences
Understanding Bitcoin Mining and the Book
Energy Consumption and Bitcoin's Environmental Impact
Electrification of Remote Villages
Methane Mitigation and Bitcoin Mining
Grid Stability and Renewable Energy
Job Creation through Bitcoin Mining
Innovations in Clean Energy
Home Heating with Bitcoin Miners
The Bitcoin Miner's Almanac Book Discussion
