Bitcoin miners why would you use immersion cooling? That's the topic we want to go through today. For those of you who aren't familiar, Bitcoin mining is done generally one of two ways: A traditional way, where you have a computer sitting in a data center and various form factors. That's just running in air. It has two fans, one on each side, coldish air goes in one side, hot air goes out the other, and it hashes away to secure the most secure network mankind has ever built, which is the Bitcoin blockchain. An additional way to run these computers is to submerge them in a dialectic fluid. And that just means the computers is completely, absolutely isolated from the local environment. It means that it doesn't matter if it's hot outside. It doesn't matter if it's dusty outside. Maybe there's a lot of ice in the air. Maybe it's high humidity. All of these things have a dramatic effect when you have a computer that has air running over the chips. If you get a lot of dust built up on the chips, they start to degrade in performance. It could cause failure. If you have ice that then heats up and turns into water. Boom, you fry your computer. Immersion technology for Bitcoin mining is the perfect application.Traditionally immersion has been phenomenally expensive compared to running it in air. We are at a point now where on a, the payback period of a mining machine itself let's call it five years. Immersion can pay for itself inside of the lifespan of one generation of equipment.Let me say that a different way, before the cost you'd have to have a payback period of 20 years, then it became 10 years and now it's five years or less. At the same time, the Bitcoin mining equipment is lasting longer and longer and longer. Now we're at a point where immersion technology is the obvious choice for anyone getting into Bitcoin mining that plans to do it for at least one cycle of equipment.Hope that was helpful. Next time we'll talk a little bit more about the differences in immersion mining.
What are some of the gotchas for mining Bitcoin in America? Let's start with the fundamental concepts here, even though Bitcoin mining is protected as free speech under the 1st amendment and the right of use of property under the 5th amendment, we still have to comply with all local state and federal law. And that means to the T, every detail. Here's something that happened recently in the news. It was reported that a Bitcoin miner was potentially violating regulations from the EPA. The natural gas that was coming out of the ground to power a genset to power a data center turns out they didn't have the permits necessary to consume that natural gas.The permit for the natural gas was only for extraction. This is a very good example of how if you don't understand the complexity of what you're getting into, it can burn you down the road. So instead of having a permit to use that natural gas for operation on site, it was only for extraction. That's one way that the bureaucracy can get you.There are hundreds, literally hundreds of those scenarios that can happen to you in any jurisdiction. So the critical thing to remember here is stay compliant, get experts on your team, know the law and keep mining Bitcoin. Stay tuned for more tips as we talk about Bitcoin mining every day.
Here's a topic you've probably never heard of called merged mining. Essentially merged mining is a way to use the compute power that you have, these Bitcoin miners that are hashing away to secure Bitcoin's blockchain. You can, at the same time, use that hashrate to secure other blockchains. That sounds really great on paper, but you can use your resources for multiple things at once. However, it has a fatal. If you are securing Bitcoin's blockchain, you are doing so within the regulations of the United States: IRS, SEC, Treasury, CFTC have all clarified their position on Bitcoin in that it is a taxable asset and it is not a security. However, the other projects that you could use merged mining with may or may not be an unregulated security. While you are able to use your resources for more than one thing, you are introducing an unnecessary amount of risk for your business. Therefore in the United States merge mining is absolutely a non-starter from my perspective. Hope that was helpful and stay tuned for more.
Do you want to understand the core issue with Bitcoin mining today? Let's talk about it. The majority of the companies here in the US needed access to a large amount of cheap capital in order to grow and scale their Bitcoin mining operations. So how do they do it? They use what's called a SPAC, a special purpose acquisition company, where someone who's listed on a stock market with some amount of money, they buy a private company, therefore taking it public without doing an IPO.Now, this is great for a period of time because you have a lot of cash to go scale up operations buy miners locations, etcetera. However, the risk with that is you are tying the volatility of your market cap and your stock price with that of Bitcoin. As we know, on any short period of time, Bitcoin has high volatility.Just for example, its gone from over $60,000 down to $20,000 in less than a year and all of these companies are feeling that pressure because their stock price is down between 75 and 95%. And so was it really the smartest decision strategically? Clearly the answer to that is no. Going public is not the strategic answer, even though it did give them time when Bitcoin was up, they had cash and now they're all struggling.What's the answer? The answer is stay decentralized, stay private, grow your operations in a way that you can financially afford. Follow for more we're covering daily Bitcoin tips.
Bitcoin will win where other cryptos will fail. It's quite clear that Bitcoin being decentralized trustless, open source, that being an opt-in model, it comes down to a belief system. Do people believe Bitcoin has value? And clearly the answer to that is yes. With 21 million in total that will ever exist, you could be living in Nigeria or the United States, both earning Bitcoin and both having a store of value.Other crypto projects don't work the same way. They have complex systems of governance, tokens they've been invested in by private companies that can dictate their future. They have the ability to turn it on and off. The Celsius network is a great example, dropped by 70%. They made the decision to basically stop it for a little while to let it recover.A decentralized solution like Bitcoin there is no governance. The market decides what it's worth and there is no ability to turn it off domestically, abroad - doesn't matter. Bitcoin can never be turned off and that's a major differentiator. I think a lot of the crypto projects we see that are not Bitcoin have a pretty big problem on their hands. They are going to showcase that they are not decentralized. They are still centralized. They're gonna showcase the fact that a small group of actors can materially influence the outcome of that project. So stay true to Bitcoin. And we'll talk to you again.
What is ESG and why do people keep talking about it? Essentially, ESG is about understanding the impact of a company in relation to the environment, society, and how they're governed. For Bitcoin mining, people love to harp on the electricity usage of this computing power and they use ESG as the narrative to do it.Here's the interesting part. ESG is not a regulation. ESG is an investing philosophy that basically says, if you focus on these things, you will get a better financial return and a better financial outcome. Larry Fink is the guy who's really started this initiative pretty heavily in the market and the media loves to jump on it for Bitcoin.And I think we really need to push back. We need to help understand what it means. We need to act in a way, as though we are doing the best thing for people, the planet, and then profits in that order. And ESG could be a good framework to do that at the moment. It's very high risk to talk about ESG in this way, because it doesn't mean the same thing to everybody.The government doesn't look at ESG one way or the other. So are we gonna see regular regulation around ESG? Who knows? Should we probably not question mark. But ultimately at the end of the day, we need to be good human beings. We need to deliver unbelievable value, Bitcoin does that. So let's take the principles and ideas of ESG and make sure that we're applying them in the right way, that benefits people planet and then profit.
Bitcoin is the next evolution in money and in value. Quick little history lesson on money. Initially, you had a good or a service and that had value. Let's say you raised goats and someone else had a farm and they had corn and you would barter. You would trade for those things. Barter became a very inefficient system because it wasn't disintermediated, meaning there was no middleman, and therefore, if you were out of goats and someone had too much corn, it might be difficult to trade. The barter system evolved into essentially a measuring stick where one person would have a building and they would store a stick in there and they tally it up and they were called tally sticks. That was the first iteration of a disintermediated bank, essentially.From that it became well, let's find something that can create a store of value for everybody which was gold. We all know the story of gold, which was then disintermediated again, into what we now know as Fiat currency. The difference is in the barter system, it was peer to peer - people were trading with each other. In the tally system it was still generally community driven in a very localized way. Gold became something that everyone agreed upon as a standard of value. Whereas in the fiat model, the governments took over and now the governments have decided what has value and doesn't. Here's where Bitcoin gets really interesting. It represents the freedom of wealth, the separation of wealth from state in the same way in the US we have a separation of church and state, Bitcoin, as the next evolution of money, is the separation of wealth and state.That is going to see it go across border. People in Nigeria or Japan or Canada, United States, anywhere in the world, all have money completely independent of the government and jurisdiction they choose to live in. And that is going to create a very exciting future for all of us.
Jack Dorsey launched TBD, essentially another layer sitting on top of Bitcoin's blockchain. The marketing tagline sucks to be honest, web2 plus web3 equals web5. I think there's some tongue in cheek going on here. But the core idea is awesome. Let's really examine that for a second.Bitcoin is a fundamental innovation, it's a discovery, it's this decentralized, trustless, permissionless network - the most secure network mankind has ever made. And that's it. It's just a network. To build an ecosystem you need to build layers on top and that involves a whole lot of things.I'll give an example, think of the Internet circa 1998, Amazon was selling 2 million books. That was their entire business. Think about all the industries that have been transformed since 1998, because of the Internet. Travel agencies, finance, e-commerce, just an unbelievable amount of industries and Bitcoin being one layer, we're still at 1998. The adoption rate of Bitcoin users is still on track to outperform the Internet in the same time period, but it needs this development to sit on top of it.So in spirit, I'm all for web5 and what Dorsey is trying to do. Is this project the one? Probably not... but you know what? Innovation takes a lot of left turns and right turns and sometimes going in circles. So I'm excited about more development happening on top of Bitcoin. It is going to push the industry forward. It is going to help transform even more industries than the Internet has.
Let's talk about the rights of being an American. Every citizen in this country, every company in this country has the right to free speech. Bitcoin is software, software has already been declared as a version of free speech. Therefore, Bitcoin is completely unstoppable as it is speech. Another inalienable, right that we have is the right to own and use property. The 5th amendment gives us that right, which is true for both people and companies. So we also have the right to turn on a computer and run some software on it, Bitcoin mining software perhaps, that allows us to generate Bitcoin. The first and the fifth amendments undeniably give us the ability to mine, Bitcoin, without limitation, anywhere in the country. However, we are going to see states test this out as New York is doing now, putting a moratorium on Bitcoin mining. I believe this will happen in other states also. And I look forward to it because as soon as this goes through the courts, it will be clarified undeniably in my opinion that the 1st and 5th Amendment rights are going to supersede any state level issue. Thank you and talk to you tomorrow.
What is the biggest risk to Bitcoin mining? Without a doubt it's jurisdiction. Let me explain that for a second. If we look at China overnight, one day, they decided they are going to ban Bitcoin mining and poof done gone. That industry is over in China. That is a great example of how a single actor can fundamentally change Bitcoin mining based on jurisdiction. Another example, Kazakhstan, they attracted a bunch of Bitcoin miners and then overnight they said hey, here's a whole bunch of new things to comply with and a bunch of taxes. Third example, state of New York proposed a moratorium on Bitcoin mining because it's not understood about its power consumption. So we definitely see the number one risk for mining Bitcoin to be jurisdiction. So why would Bitcoin miners continually go to the United States? Well, there's also a plus to regulatory certainty and the United States has a great history of regulation and how it moves throughout time. It does move very slowly. It moves with certainty. And ultimately that is a very attractive thing for people making large scale capital investment. Our suggestion? Decentralize. Focus on a bunch of jurisdictions in the United States, gain that regulatory certainty but spread the risk among a bunch of different states. That's it for today!
Today, some new proposed legislation came out from Senator Gillibrand and Senator Loomis as a framework to help regulate digital assets here in the United States. And for the most part, it covers a lot of different things from custody to consumer protection.But what about Bitcoin mining? This is the part that I find really fascinating and great for our ecosystem. This legislation proposes that the Federal Energy Regulatory Commission do a study to understand how Bitcoin mining uses electricity. Now at a very high level view, it's kind of a media-only story here with Bitcoin mining. As a data center industry, Bitcoin mining is a super fraction of a fraction, data centers as a whole in the entire world use about 2%. So it's more about understanding the story, but here's the beauty. An industry this young with this much scrutiny on the most pivotal thing for the financial future of the world which is this decentralized trustless blockchain, the most secure network ever made, by putting this focus, this spotlight on Bitcoin mining right now allows us to develop the strongest way forward that mankind has ever seen.So I look forward to where this legislation is going. I look forward to how Bitcoin mining is going to showcase its potential and the value that it creates. And let's see what happens tomorrow.