How to pronounce banging in English (2 out of 32 results in 0.003 seconds)

And now, we have the mining. panel with Sasha moderating it.

And Sasha is the US Operations. and Data Analytics Lead

at Kaiko, a digital assets--

whoops, sorry,. market data provider.

He carried out research. on economics and mining,

on the economics of mining,. and Bitcoin, and more recently,

on crypto market microstructure.

Previously Sasha was. an aerospace engineer

and received his. PhD in aeronautics

from the Imperial. College of London.

Welcome, Sasha.

Thanks, Daniel.

Good afternoon.

It's really a great pleasure. to be part of this year's MIT

Bitcoin Expo.

Always a great event.

And it's very exciting. to have you all today

to discuss Bitcoin mining.

Every time there's. a bull run, mining

becomes a very hot topic.

A lot of people try to. start getting into mining.

And it's often a very. controversial topic, as well.

It's been portrayed by some. media as a waste of energy.

And there are a lot of. other misconceptions

out there about mining.

But we're very fortunate today. to have four amazing panelists,

four leaders in. the space who are

joining me to give you a. broad overview of the mining

industry.

We'll focus on the. institutionalization of mining

in North America.

We'll touch on the. major trends, of course,

energy considerations.

We'll have a quick look at the. economics of mining Bitcoin

and what it takes to. maintain the decentralization

of the Bitcoin network.

So without further ado, I'd like. to have our speakers introduce

themselves.

And let's get. started with Brian.

Sure, thanks, Sasha.

So first of all,. thanks for having us.

I've learned a lot so far. from the other speakers

and panelists.

But quickly, on my. background, I've

worked on Bitcoin. related projects

at Fidelity for many years now.

So in 2017, I was working. as a strategy consultant

on internal projects. at Fidelity and was

fortunate to be able to work. on Fidelity's firm-wide Bitcoin

and blockchain strategy, really. evaluated a wide range of use

cases during that project.

I eventually moved. to start working

on investment products that are. relevant to this type of space

before then moving to. Fidelity Center for Applied

Technology, which is where I. work today within Fidelity.

So I researched. proof of concepts

there for about a year.

But I was quite attracted to. mining for a variety of reasons

and really wanted to. dedicate all of my time

at work to mining.

So about a year. ago, I transitioned

to Fidelity's. Bitcoin mining team.

I've been working. there since then

and I'm now Director of. Bitcoin Mining at Fidelity.

 .  . 68. 00:02:41,760 --> 00:02:46,860. Thanks, Brian and. we'll go on to AJ.

Cool, thanks for. having me, Sasha.

Really appreciate it.

So I work at a company. called Galaxy Digital.

We are a merchant bank that is. dedicated to the digital asset

space.

And I work on the mine team.

We do a couple of. different things.

So first, we Bitcoin for. Galaxy's own balance sheet.

So we have a proprietary. mining operation.

And second, we. develop and deliver

financial services to Bitcoin. miners in North America,

so everything from. equipment finance,

where we buy machines and sell. them to miners with financing

attached, to hedging solutions. through our trading desk,

yield accounts for. Bitcoin miners who

want to put their Bitcoin. to work, stuff like that.

 .  . 86. 00:03:29,290 --> 00:03:30,520. Thanks, AJ.

Next let's go, with Ethan.

Hey, thanks for. having us all on.

I'm really looking forward. to this discussion.

So my name is Ethan.

I co-founded a company called. Luxor Mining about three years

ago now.

We run mining pool. services, as well as

other hashrate-based best price. execution products for miners.

As well, we built a. mining data website

called hashrateindex.com, where. we track various data sets

in the mining space, things like. the value of ASICs over time,

or the value of. hashrate over time.

So we touch a few. different verticals,

both from the operating. and data standpoint.

 .  . 102. 00:04:14,257 --> 00:04:14,840. Thanks, Ethan.

Very excited to. have you here today.

And finally, the mysterious Jay.

Thanks for having me on, Sasha.

So I'm Jay Beddict.

I'm the Director of. Research over at Foundry.

Similar to Galaxy Digital, we. also offer financial services

around Bitcoin mining.

We are proprietary miners. ourselves, running operations

across North America.

And then we also have opened. up our pool, Foundry USA pool,

where I also act as the. product owner for the feature

set there.

 .  . 116. 00:04:47,130 --> 00:04:47,690. Thanks, Jay.

Well, so as you can see,. we have folks from, really,

across the landscape, from. the mining operation, even

to the pool, and the financial. services that go around this.

So why don't we get started with. the North American landscape?

This year, everybody. has been talking

about the institutionalizaition. of Bitcoin,

and with little surprise, this. has also occurred to mining.

So what does institutional. mining even mean?

 .  . 126. 00:05:19,840 --> 00:05:22,550. Who wants to go first?

I would just start by saying. that the biggest distinguisher

when you think about. institutional mining

is probably the most obvious. one, which is just scale.

Institutional miners tend to. be deploying tens of megawatts,

if not more, at a time.

They're much better. capitalized, often

with backing from. institutional investors.

And the big thing that. we're starting to see,

at least in North America,. is some of these miners

have access to public markets.

So they've raised. tens, if not hundreds,

of millions of dollars. over the last 12 months

to really expand. their operations.

Yeah, I think that's. exactly right, AJ.

I think if you look at North. America and one advantage

that North America has over. other parts of the world,

we just have the most. robust capital markets.

And we've seen that. particularly over the last year

with just huge, huge flows of. capital into this industry.

And I think with an increase. in capital dedicated

to mining, that leads. to a lot of other things

that I would say fall into this. bucket of institutionalization

of mining.

And so things like financial. products and financial services

that traditional. players would be used

to having in other industries.

So products that allow miners. to manage risk is one example.

I also think that we're seeing a. maturation of the supply chains

that are necessary for. miners to work with.

So don't get me wrong,. procurement of hardware

is still a challenge.

But things like actual, more. formal, secondary markets

for hardware, as opposed. to just procuring machines

through things like Telegram. groups or Telegram channels.

That's something that, to me,. is transitioning from something

that was clearly not. institutional to, now,

there's more. straightforward paths

that institutions. can actually play in.

The other side of institutional. money in North America

is a close relationship with. the power generation facilities

as well.

So where these large. scale miners are well

capitalized enough,. that they can

either own those relationships. or own the assets,

something that is. relatively recent

and North American mining scene.

Yeah, and actually, could you. expand a little on this, Jay?

For those who don't know. how those operations

are managed at scale.

What does it take?

How do you get your. electricity as an institution

or as a large-scale miner?

So there's a variety of ways.

I mean, traditionally,. if you're thinking

about being an. individual miner, you're

going to be buying. off grid and--

excuse me, off of the grid. meaning from the grid provider.

And there's retail rates there.

But a lot of these. operations in North America

may look for distressed assets.

And what I mean by that is. former aluminum foundries,

former hydrodams,. or hydrodams that

are underperforming in terms of. generation relative the demand

in the local area.

And so mining operations. will seek these out

and look for ways to. plug in to that power,

because it's generally. less expensive.

They are either buying. directly from the grid that's

subsidized with these. power production

assets that is keeping. the grid price very low.

Or more oftentimes,. they're working

what's called behind. the meter, directly

with the power. producer, where they're

able to get a very competitive. price for the power that

will be then going to feed. their mining operations.

Similarly, you can use. sort of Bitcoin mining

as a demand generator.

If you have sort of a. minimum power threshold

that you need to. maintain, Bitcoin miners

are a way to do that. profitably, rather than

just sort of burning. whatever fuel you're using.

In the case of hydor, you're. not burning the hydro,

but just letting the. water spill over.

But it's a great way to sort. of subsidize the grid, though.

Yeah, and I think. that's a great segue

to get into the very hot. discussion around the energy

considerations of mining.

So let's try, maybe,. to debunk a myth.

How wasteful is Bitcoin mining?

And how is this. energy consumption

spread across types of energy?

 .  . 220. 00:09:39,290 --> 00:09:40,490. I can start with that one.

So first off, I do think that. monitoring carbon footprint is

very important for. the world right now.

So it makes sense that. we're talking about this.

But I do think that maybe. Bitcoin mining is not the enemy

to many make it out to be.

I think one element of. why this constantly arises

is that Bitcoin is just. very, very transparent.

It's frankly not that. challenging to do

one of these calculations. and figure out

how much energy is needed to. power the network today, based

on current hashrate numbers.

That being said, I. think that because

of how transparent. it is, it just

makes it a very easy target.

And so I think that we. need to evaluate its energy

use versus other industries.

I think we also need to accept. that energy consumption isn't

inherently a bad thing.

And I think Bitcoin. is quite valuable.

I think it's possible that. this is laying the foundation

for a future financial network.

And so it actually,. to me, is a feature

that something that everyone in. the world agrees is valuable.

Energy is used as an. input for something

that is then valuable. on the other side, where

you get Bitcoin out of. Bitcoin mining activities.

And we should pay to. secure the network.

I will say, though,. also that it's clear

that renewables are a major,. major part of Bitcoin mining

today.

And I think that's, too often,. also lost in the discussion

when we talk about the. environmental impact

from Bitcoin mining.

And so I think one. of the most cited

reports is the Cambridge Center. for Alternative Finance's

report, which showed that. at least 76% of miners

use renewables in. their mix of energy.

And then they estimate about. 39% of total energy consumption

comes from renewables.

And I think there's probably. a large margins for error

on either side of that.

But directionally, I. think that's quite right.

And I think miners are. absolutely attracted

to the cheapest power sources.

But increasingly,. we're seeing ways

where renewable energy actually. is that cheapest power supply.

 .  . 268. 00:11:41,490 --> 00:11:43,490. I echo a lot of Brian said.

I think he laid it. out very nicely there.

I do think that we. do have some room

to grow on renewable energy. mix, as well as carbon

neutral sources for mining.

And so it's OK,. I think, to admit

that it's not perfect yet.

But if we can start building. products and funneling

investments towards miners that. are using that in their stack,

I think that's on all. of us on this panel,

as well as everyone in the. mining industry to push to.

So I'm pretty bullish that we're. going to move that direction.

I think it's a natural. flow of markets anyways,

heading towards ESG.

And so we need to make sure that. we're getting better ourselves,

because this media narrative of. energy consumption in Bitcoin

is not going away,. whether we like it or not.

And so we need to position. for the next 5 to 10 years

of this debate.

And what do you think of some. initiatives acting at the pool

level to try and force a. more renewable set of energy?

So pool level is definitely. one way to do it.

Argo and DMG announced. a new joint pool

that they're going. to only allow people

who use renewable energy or. carbon neutral sources to join.

As a renewable energy or. non-renewable energy miner,

I don't really. know the incentive

right now to join a pool.

Maybe that's like a. lower fee, or cashback,

or maybe it looks. better in the media.

I'm not quite sure.

That's yet to be determined,. what that incentive is.

But I think there's. other ways to incentivize

miners to use renewable.

Look at Square Initiatives fund.

For example, they're. investing money only

into renewable or. carbon neutral sources.

And I think there's going. to be a lot of investors

in the future that are taking. that into consideration.

And so, if you want to attract. the massive amount of capital

that is required to become an. institution in the mining space

and really scale up. your ASIC deployment,

then I think you need to. start considering what energy

sources you're using.

And echoing that, when. considering the energy mix

from a mining perspective,. it is, more often than not,

just an economical decision.

As Brian alluded to, green. energy, renewable energy

is trending towards being the. most cost-effective solution

there.

I do think, looking at. it from a pool level,

it becomes very. difficult to manage that.

If you want to be. a successful pool,

you need to have quite a bit. of hashrate on your pool.

And if you're restricting. your hashrate there,

the economics become. very difficult

from that operator side.

Before this, I'm. a reformed suit.

I used to work a lot of the. sort of audit angle of things.

And one of the biggest. struggles there

to get an ESG. friendly investment is

to have third party. auditors look at it

and provide attestations that. this energy source is, indeed,

what they say it is.

And it becomes very. difficult to do that.

I'm not saying it's impossible,. nor should it not be tried.

But it adds a lot of complexity. to what is an already very

complex process.

 .  . 337. 00:14:46,350 --> 00:14:49,250. I would just quickly. add, I sometimes worry--

I fully agree with everything. that's been said here

on the energy topic.

I do sometimes worry. that we, as Bitcoiners,

sometimes grant our. critics the implied premise

that energy consumption. is somehow bad, per se.

When the reality is. energy consumption

is correlated with. human flourishing

on so many different. levels, whether it's

life expectancy, GDP. per capita, et cetera.

So frankly, I want Bitcoin. to use more energy,

because it's going to. be the global reserve

currency of the world.

And I want my money. supply to be secure.

And so I don't think that's. necessarily a bad thing.

And furthermore, I. think we could play up

the fact that Bitcoin. mining actually

incentivizes more generation.

And it incentivizes more. efficient generation.

In the sense that. if you're a miner,

and you figure out a novel. way to produce energy

at scale for cheaper. than your competitors,

you now have a direct. way to monetize it

for the first time in history.

You don't need to worry about. transmission or any other sort

of geographic constraints. that, historically, have

kind of limited generation.

And so you could make the. case that mining itself

is going to lead to this. revolution in energy

production.

We're going to be able to. produce more energy at scale

for cheaper.

And this is. something that should

be celebrated, rather than sort. of criticized and condemned.

Completely agree. with AJ on this.

And another big advantage. of cryptocurrency mining

is, especially in renewable. energy, like wind farms,

the production is very volatile.

And so by mining. Bitcoin, you can actually

have those operations. run continuously

and smooth out the production.

What do you think,. electricity producer,

how do you think they're. approaching this?

Are they are they. mining to do that?

Or are they going to. be using contractors?

So I mentioned the demand curve,. or the sort of demand sink

that Bitcoin can act as.

And I mentioned. that from experience

where we have a. client that we work

with that was a. natural gas plant that

would, unfortunately,. have to meet

a certain minimal threshold to. keep their generators online

and the engines. running efficiently,

meaning that they're not wasting. gas and incomplete combustion.

So by running below. that threshold,

you're polluting quite a bit.

And running above it,. you're minimizing that.

But you're also. just creating energy

that's not going anywhere.

And so they've found Bitcoin. to be quite a novel solution

that they can run this minimal. wattage, megawatts, to keep

their operation on line.

So that when there is. demand on the grid that

exceeds the profit. on the Bitcoin side,

they're able to scale up their. production quite rapidly.

And they do this, they. operate in a space

where there's natural disasters.

And the grid sees quite. huge swings in demand.

And so it's been very valuable. from their perspective,

as a power producer, they. can keep their core operation

and add value to the local. community in that way.

But at the same time, sort. of maximize the profit

and smooth out these. sort of variances

on the production side.

Because it takes about 12 hours. to get these generators up

and running.

But if you're running. at a base load,

you can just flip it and. switch it around much faster

and respond to consumer. demand quite a bit faster.

Bitcoin enables them to. do this in a way that

keeps them a productive member. of their local community,

protecting the folks there,. but also securing Bitcoin.

 .  . 420. 00:18:26,217 --> 00:18:27,300. Those are all good points.

I think it's actually very. hard in energy markets,

to my understanding, to. actually meet supply and demand.

Perhaps more challenging. than other industries.

And Sasha, you brought. up wind as one example.

And this is actually. all renewables.

It's quite challenging,. because most renewables are

inherently quite intermittent.

And so something like. wind energy in Texas,

there's a lot of it.

But wind, it's hard to predict.

And it can occur during. points in the day

when there actually isn't. great demand for energy.

So a wind farm at night,. where it's quite windy,

but lights are off, people. are using air conditioning,

people aren't using. heating, there's

actually very limited demand.

And so what can actually. happen is that energy prices

go quite low for the suppliers.

And they actually can go. negative or get quite cheap.

And so if you think about even. investing or mining as a way

to increase investment. into renewables,

let's say you add a miner. to a situation where--

to a wind farm, where. at night, it's windy.

The wind farm is facing. very low electricity prices,

but now a miner can provide. a stable price floor,

where the miner can. say, sure, we'll

always take your. electricity when

it's $0.01 per kilowatt hour.

And maybe that's preferable. for the energy producer.

And now, they actually. increase revenues

over their alternative.

I think another. example that has been

quite trendy over the. last year is this idea

of mining using flared gas.

And I was reading a paper. by Nic Carter recently,

and he used this term non-rival. energy, which I quite liked,

which was energy that does not. deprive anyone else of energy,

nor does it drive up the costs. for other downstream consumers.

And flared natural. gas is a great example

of that, where miners can. come into these situations

where natural gas is created as. a byproduct of oil production.

And then rather than. flaring it, use that gas

to power Bitcoin miners.

And its example of--

it's not actually,. it's not impacting

any downstream consumer.

It's reducing flaring.

And it can be, actually, quite. profitable for the miner.

So this is a trend. that, I think,

energy producers are. going to recognize

a lot of these opportunities. and become increasingly involved

in mining over the. next several years.

Yeah, just to add, we have. the same view at Galaxy.

We think the energy generation. and mining industries

will really be the. same thing in 10 years.

And it's for the reasons that. the Brian and Jay stated.

As a miner, you're economically. incentivized to own

your own generation,. because you'll

be vertically integrated.

And you have better margins.

As an energy producer, you. can add to your revenue

by mining instead of selling. power to the grid when

it's more profitable to do so.

And so we're already starting. to see the convergence

of these two sectors.

And I think, in 10. years time, they're just

going to be the same thing.

Everyone's going to be doing it.

 .  . 490. 00:21:10,910 --> 00:21:11,660. Very interesting.

And that's why it's great. to have quite a few miners

on this panel today.

Because so you have. the electricity price

component of the mining,. but then you also

have to buy some. hardware, you have

to put this into a facility,. so you have some CAPEX.

You have, then, some OPEX.

You need to operate it.

Maybe it's generating a lot of. heat, you need to cool it down.

So let's dive a little into the. economics of mining Bitcoin.

Just a little thing on the. side, some of you mentioned,

there have a lot of publicly. traded company, even on NASDAQ,

so on NASDAQ Riot Blockchain. went up about more than 5,000%

this year, Marathon Digital,. even more than 10,000%.

What do you think. of those figures?

Why are these. stocks skyrocketing?

Why were they, in a. sense, discounted?

Is it a bubble?

Of course, none of this is. financial advice, please.

No investment advice,. but You see this a lot

in traditional commodity. industries, where

public equities kind. of act as a levered

play on the. underlying commodity.

You kind of get a little. bit of torque there.

So very common in. the gold industry,

where gold goes up 1%, you. could expect gold equities

to go up some multiple of that.

And so we've seen a. beta of around 2.5

on Bitcoin over. the past few months

here, across all the. different companies.

Riot and Marathon, obviously,. have done extremely well.

And that's really a function. of when Bitcoin price goes up,

and hashrate can't keep up,. because of supply constraints,

we're seeing very strong margins. from these public miners,

increased cash flow. and reinvestment.

And that reinvestment. cycle will just

allow them to acquire more. machines, raise more capital,

and continue that cycle.

And really give. them the advantage

that we're talking about. in the institutions part

earlier today.

And so that's just. playing out here.

And then the other. part of that it really

is the access to Bitcoin.

A lot of retail investors. want access to Bitcoin.

But it's still relatively. hard to buy the underlying.

I mean, first of all, you have. to go sign up for account,

do KYC, all of this, and then. you can't invest, typically,

in your 401(k), at. least, not easily

straight into Bitcoin itself.

And so anything that gives. you exposure to Bitcoin,

whether that's mining stocks,. Grayscale is another example,

those have all done. extremely well.

So the inflows into. the mining sector

is kind of a result of. interest from retail

to get involved in mining.

 .  . 548. 00:23:46,770 --> 00:23:49,770. And would anyone have a. take on how would you go

about valuing a mining company?

 .  . 551. 00:23:59,397 --> 00:24:01,230. One of the interesting. things we've observed

is the public markets seem. to be looking primarily

at hashrate when they're. assigning valuations

to these companies.

And not even really. deployed hashrate, more just

kind of publicly. announced hashrate

that will be online in the. next, call it, 12 to 24 months.

So you'll see one. of these companies

make an announcement that they. have contracted with Bitmain

or MicroBT for X number. of machines, expected

to be delivered over. the next 12 months,

and the stock will. immediately rip.

Which I think is interesting.

At least in the past, you. would see announcements

mentioning the. scale of facilities,

in terms of megawatts.

And now we've kind. of transitioned

to hashrate, or the. number of x of hash

that an operation or a company. has being kind of the headline

metric that people advertise. off of, and the market looks to.

 .  . 572. 00:24:56,070 --> 00:24:58,740. I think this valuation. piece is tricky,

because we all have this. fundamental view on how

to value these companies.

And we'll probably discount. future hashrate pretty heavily,

especially if it's being. delivered 12 to 18 months out.

And we don't know what network. hashrate will be at that time.

But equity markets. are incredibly

hard to trade right. now, not just in mining,

across all sectors.

And so you kind of need to go. with the market view for now.

Or else you probably. won't make the right bets.

And that market view is. just taking future hashrate

and putting a multiple on that.

And the US listed companies,. like Riot and Marathon

trade add a slight premium. to their Canadian and UK

counterparts.

And you mentioned the. difficulty to get access even

to the hardware.

And I'm sure some of you have. been going through this stuff

right now, might not be. able to talk about it.

But I'm sure potentially. waiting for--

excited for some. deliveries to come soon.

And as the price of Bitcoin. shoots up, of course,

the cost of finding hardware. becomes prohibitive.

And becomes very difficult. to get hold of those ASICs.

Why is that?

So where is the limitation?

And how do you get. access to the hardware?

Is it just a price point thing?

Do you need some kind of. privileged relationships?

How do you get access to. this hardware at scale?

So the ASIC market is. fascinating from a study

of economics perspective in that. it is brutal supply and demand.

The demand for ASICs right. now is through the roof.

We've seen a lot of great. price action on Bitcoin.

And we were talking about. these companies getting valued

on their potential hashrate.

It's a common theme.

And we saw this slightly. differently in 2017.

But the way in which. ASICs are manufactured,

it's just silicon.

So there are two major. foundries in the world.

And forgive, don't. confuse with our name,

but when we speak of. foundries in this case,

it's a silicon foundry,. TSMC and Samsung.

They only are able to produce. so many silicon wafers a year.

Those wafers tend. to go your computer,

your phones, your car.

And there's a major supply. crunch on that in general.

When it comes to mining. hardware and mining ASICs,

specifically, it's a. very heavy technical lift

to develop these.

And then once they're. developed, you

need to go and have Samsung. or TSMC produce the lower end

chipsets for you to then put. and assemble into your miner.

What's happening now is that. every generation of ASICs

has gotten more. and more efficient.

And that efficiency is gained. by reducing the size of the chip

itself.

So right now, we're in the. sub-10 nanometer size, which,

not getting into. the grisly details,

but we're competing with. cell phone manufacturers,

laptop manufacturers, folks. who Samsung and TSMC know

will make money off of the. chips that they give them.

So they know they're. a good customer.

But it's also, if you're going. to contract with someone,

it's a little bit. easier to look at Apple

and say, yeah, I can. give you more allocation,

because you're Apple, versus. some of the Bitcoin mining

machine manufacturers.

Obviously, just different. economies of scale at that

point.

But the problem we're facing. now is that Bitmain, Whatsminer,

Canaan just can't keep up. with the pace of demand

with the amount of. allocation that they're

receiving from the foundries.

So they're making as. many chips as they can.

But the market wants way. more than they can produce.

And we sort of see it trend. as hashrate and price grow.

The demand sort of follows.

And then, if there were to. be a downward trend in price,

you'll see hashrate. continue to grow,

because people made. bets and bought

equipment that isn't. going to be delivered

for X number of months.

And so this hashrate. will continue

to grow as a price. may drop off a cliff,

and you see people. constantly trying

to deploy and recoup. what they initially

invested in the asset.

So it's fascinating.

But the long and. short of it is it

is a supply and demand. constraint at the manufacturing

level.

Yeah, and a big part of. it, as you mentioned,

lies in the economies. of scale that you

can achieve by the sheer. size of your operations.

So does that bring. to you some concerns

around the decentralization. of Bitcoin?

What does it mean,. if you're a very--

maybe we can get. Ethan's take on this.

What does it mean,. at a pool, level

how are you trying. to incentivize

the decentralization. of the network?

Can you tell us a. bit more about how

you do pool management. and governance the way

you do at Luxor?

Yeah, for sure.

I think just like. taking a step back,

though, you can look at a. decentralization of the network

on multiple bases.

You can look at it on. a geographic basis,

so how many countries. is how it spread across.

You can look at. the foundry level,

which Jay was talking about.

You can also look at it on. an ASIC manufacturing level.

You can look on it at. a miner hashrate level.

And then you can look. at it as a pool level.

Focusing on that. pool level, which

is one of those verticals,. pools are the ones

that ultimately determine which. transactions go into the block.

They're the ones. kind of doing a lot

of the governance of the. Bitcoin network themselves.

And so, historically,. they've been

acting as kind of a. spokesperson for the miners that

are connected to their pool.

And so I think it's really. important for mining pools

to have the best interest of. the Bitcoin network in mind,

and consult with the miners that. they're doing business with,

and make sure that. that's kind of reflected.

A recent example. of that is Taproot.

Taproot is, at the. end of the day,

is going to be. determined by the pools.

But the pools need. to look and see

what's in the best. interest of their miners

that use that platform.

And so I think that's an. incredibly important piece

to it.

And it's an important part of, I. guess, allowing anyone to mine,

too.

Kind of shifting gears. a little bit here,

but back when Bitcoin started,. you could self mine yourself.

And you could. maybe find a block,

because there weren't that. many miners on the network.

But as more and more. miners joined the network,

the chances of you finding. yourself diminished.

And so by pooling together. resources, with Slush Pool

initially, it allowed miners. to kind of find more blocks,

consistently get paid. out as a percentage

of their hashrate contribution.

And then in 2013, there. was a large revolution,

which was BitPenny came up with. a mining pool scheme called

paper share, which. essentially pays miners out

on the expected value. of hashrate straight up.

And in that kind of. case, mining pools

are essentially acting. as a buyer of hashrate.

And so miners can get. consistent rewards all day

long from their mining. pool, without having

to deal with mining. luck, which is

incredibly important for miners. that have large OPEX expenses.

And they want to make sure. that their cash flows match up.

And so just summing up. the mining pool business,

I think mine pools need. to take into consideration

the miners and their platform.

But they also just. provide a very vital role

to the ecosystem, because. they allow anyone to come in

and earn a reward daily.

And let's dissect this into. the institutional part and then

the retail part.

So as institutional. investors dealing

with Bitcoin or. cryptocurrencies,

why is it important. for you to participate

in the security of the network?

And maybe Brian, if. there is anything

you can share on how Fidelity. got into looking at mining.

Yeah, absolutely,. I mean, we've been

into mining for a long. time now, over six years.

And really, when we first. began our mining journey,

it wasn't actually about. earning, generating

significant revenue,. being profitable.

It was about learning. what Bitcoin is,

participating directly in this. network, in this new protocol.

And then because. we started early,

we were able to get really. solid learnings from that.

And then it sort of evolved.

And that's it's very. close to Fidelity Center

for Applied Technologies,. sort of scan, then try,

then scale that we follow here.

And we're fortunate that. we began that early.

But to that point, I. think, increasingly,

as Bitcoin becomes more and more. important at a global level,

it will become,. simultaneously, increasingly

important for large. institutions to have

a very strong understanding. of what Bitcoin is

and to be able to participate. quite directly in securing

something that's quite. foundational to what

the financial system. could be built on.

And so, yeah, this. direct participation,

building that. strong understanding

is very close to the origins. of Fidelity's mining story,

and was definitely. important to us,

and continues to be important.

And so finishing up on this,. is there room left for retail?

 .  . 776. 00:34:15,449 --> 00:34:19,880. So I mean, my S9 in the. other room says yes.

But that's only because the. current economics are so good,

I could turn it back on.

There are teams that are. focused on this problem.

And I think it's something that. should be strongly considered,

because, again, from a. decentralization perspective,

if it's just. institutions mining,

then it can get kind of dicey.

So the folks over a Compass work. directly with retail miners,

helping them source equipment.

And so I think that's something. that needs to be looked at.

I mean I got into the mining. space back in the GPU days,

when that was a thing.

And I was very much. a retail miner.

But the ASICs and the. economies of scale

that we've been. talking about, it just,

it made it very difficult. for the individual user

to really participate, at least. in the mining side of things.

And so we're talking about. centralization risks and stuff.

And I think that, ultimately,. one of the verticals

that Ethan mentioned there. is the miners themselves.

And if the miners themselves. are too centralized,

then that's,. ultimately, going to,

no pun intended, but. undermine the value

of Bitcoin, because. it's sort of not

enough cooks in the. kitchen, in that case,

voicing their opinions, and. participating in that network.

 .  . 804. 00:35:45,060 --> 00:35:50,550. I have a cynical opinion. here, that there's

an idea of a path. of least resistance.

And right now, it's just. incredibly hard for retail

to access ASIC markets.

And there's new products that. can allow people, investors,

retail investors, to. get access to mining.

So there's new hashrate tokens. launched by Binance and Pool

and now Blockstream.

There's the public. mining companies,

which we talked about earlier.

I think there will be a. lot more hashrate contracts

in the future.

I mean, we saw an. earlier iteration of that

with cloud mining.

And so I think, naturally, as. these ASIC markets are just

really hard to. access for retail,

and it's hard to set up. an operation if you're

a small miner, and. you want to spend less

than, say, a few. hundred thousand,

they'll naturally-- those. investments will naturally

flow to financialized products.

And you're really starting. to see that play out

in the hashrate token. market, which has exploded.

And the hashrate tokens. trade at around a 12% to 15%

premium over ASIC markets. now, just because they're

such easier markets to access.

And they also have that. exchange rate liquidity,

in case you want to exit. your mining position,

which you can do in. ASIC mining, but it's

just a little bit tougher.

And you're going to lose. out on a bit of money there.

So I think, naturally,. retail is going

But it's not going to be. at the ASIC level, at least

on a grand scale.

 .  . 840. 00:37:05,340 --> 00:37:06,432. Thanks, Ethan.

So now we have a couple of. questions from the public.

The first one follows. on the flare gas.

So what percentage of. flare gas would you

estimate could be. mitigated by BitCoin mining

with the US in the next decade?

 .  . 847. 00:37:25,000 --> 00:37:27,970. I mean, I think the flare. gas angle is fascinating,

because it also sort of. helps with decentralization.

Because instead of. having large power plants

with a lot of miners on. it, you have these sort

of containerized. solutions that are

dropped in the middle. of nowhere, essentially.

So that's one angle.

But in terms of the percentage. of flare gas mitigation,

it's one of the. things that we're

seeing a lot of. demand for right now

from our advisory. business is that.

Of course, ASIC the. constraints being

the main prohibitor right now.

But there's some very. large megawatt numbers

about how much methane. and other natural gases

are currently being flared.

And I think from an oil. producer perspective,

there is strong. incentivization to do this,

because you are able to. make your normal profit off

of your current production.

You're able to minimize. regulatory impact.

And you're able to find. a new source of revenue

from something that was, in. the past, viewed as waste.

And then from the. ESG side, you're

capturing some of. the worst pollutants

around and transforming. them into something

incredibly valuable.

So I think there's a strong. incentive, at least in the US,

to see that.

And of course, the. US is very much

an oil and gas focused area.

So I think we'll see a lot of. increased activity in there.

 .  . 880. 00:38:54,740 --> 00:38:56,840. I guess one comment is. for those that are maybe

less familiar with. this type of setup,

just to even visually. picture what this looks like.

I mean, these are. really remote oil fields

where flaring occurs.

And unlike traditional. hosting type setups,

where you could have sort. of a massive warehouse that

can supply many, many. megawatts of electricity,

these are really, if you can. picture a shipping container,

essentially, that then. can supply miners that

are inside that, essentially,. shipping container, anywhere

from just a couple kilowatts. to maybe 2 megawatts or so.

And so I think one potential. limiting factor, something

that I would just. keep an eye on,

is how does this scale. from a megawatt container?

And maybe you can, I. mean, you can certainly

deploy several of these. types of containers.

But to something that's. hundreds of megawatts,

because that's where. it would really

be necessary to. significantly cut

into flaring across the country,. if you're viewing mining

as the big thing that is going. to cut into flared natural gas.

 .  . 903. 00:40:06,910 --> 00:40:10,090. Thanks, and the next. question is the comment

that consuming energy should. be commended is just not true.

More or less equal,. less energy consumption

is better than more.

Does the rest of the. panel agree with the view

that somehow energy consumption. should be seen favorably?

 .  . 910. 00:40:30,430 --> 00:40:33,230. I fully agree with AJ on that.

I mean, the reality. of human civilization

is perpetual increased. energy consumption.

So for humans to prosper, for us. to do more with what we've got,

you need energy.

Agree, that, yeah, it's kind. of hard to juxtapose the two.

But what's really critical. to understand here

is that it's energy-- it's. efficient use of the energy.

So combustion of coal is not. as efficient as combustion

of natural gas, which. is not as efficient

as nuclear energy, which,. hopefully, fusion always

10 years away, really stoked. for that for BitCoin mining.

That's a separate topic.

But the scale at which humans. create and generate energy

is important to the success of. human civilization as a whole.

And so when we think. about how energy is used,

it needs to be used the. most efficient way possible.

Minimize the waste product. from it, of course,

minimize the. transmission loss, which

is a very difficult. problem to solve.

But your electric car uses. the same amount of energy,

in theory, as your gas vehicle.

It's just coming from. a different source.

And if it's connected. to the grid,

it could be a coal-fired plant.

But you're still. consuming energy

to get the same. amount of work done.

It's just a matter. of efficiency.

And I think it's. really important

to think in terms of. efficiency versus raw numbers.

 .  . 941. 00:41:57,140 --> 00:41:59,180. I agree with Jay and AJ here.

I think as a human. civilization, we

should be striving. for unlimited energy.

Obviously, we want to reduce. the amount of externalities

that come with the production. of that energy and usage of it.

But our end goal, as. a human civilization,

should be unlimited. energy, unlimited clean,

renewable energy.

 .  . 950. 00:42:18,970 --> 00:42:24,210. Thank you guys so much for. this really insightful panel.

This conversation. always pops up,

kind of like Sasha was. mentioning, energy consumption

with Bitcoin.

But I think hopefully. people watching

have been educated on why. it's beneficial that Bitcoin

consumes the energy it does.

So thank you so much.