WBD668 Audio Transcription

WBD Live in Miami - Bitcoin Mining with Troy Cross and Harry Sudock

Release date: Thursday 8th June

Note: the following is a transcription of my interview with Troy Cross and Harry Sudock. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

Troy Cross is a Professor of Philosopher and Fellow at BPI, and Harry Sudock is Chief Strategy Officer at Griid. This interview was a live recording made at the Bitcoin 2023 Conference in Miami, where we discussed Bitcoin mining: the industry’s rapid evolution, how it’s optimising other markets, and why its relentless search for cheap energy will facilitate human flourishing.

“It’s really exciting for me to see the transfer from… what the best we could do was plugging in 800 FPGAs to our father-in-law’s warehouse, to today where we’re signing some of the largest energy contracts in America, we’re building the backbone of our electric systems day by day, we’re integrating across core human infrastructure. So, getting to build a business at the intersection of energy and money, it’s the dream of a lifetime.”

— Harry Sudock

Interview Transcription

Peter McCormack: Welcome, hi.  If you don't want to be filmed, put your hands up and we will, I don't know, put a carrot over your face or something.  Put your hands up if you don't want to be filmed; you're at the fucking front!  All right, we will...  There is a bar, there's food, if you go and get drinks during it just try and keep quiet and don't disrupt everyone. 

I'm going to give a big shoutout to our lead sponsor who've paid for this.  So, I don't know if anyone notices, but we have a new lead sponsor, they're called Iris Energy.  You've probably heard me say this, they are the largest Nasdaq-listed Bitcoin miner, using 100% renewable energy, but I just want to give them a big shoutout; it's very cool.  They got in touch with me and Danny a few months ago, they said, "Look, we're interested in sponsoring the podcast; what do you want to do?"  So, we got on the phone to them, we went out to Canada, met them, they took us snowboarding for the day, and they said, "What do you want to do?" and we said, "Well, we want to do the podcast", and they said, "Well, anything else?" and I said, "Yeah, we want to do a bunch of live events", and they said, "Anything else?" and we said, "Well, we want to make more films and get this football club promoted again".  So everything we said we wanted to do, they said, "We back you 100%". 

They're great guys, I think some of them are here somewhere; if you get a chance to meet them, say hello.  But I just want to say a big shoutout to them, thank them for everything they're doing actually, and they're an amazing business; go and check them out.  All right, so have I forgotten anything?

Danny Knowles: You've got everything.

Peter McCormack: Who knows Danny?  Star of the show.  Who watched the Saylor interview today?  We have Connor at the back there.

Danny Knowles: Cameraman.

Peter McCormack: McCormack Junior in the house.  We also have Emma here; Emma, wave.  Emma pulls all this together, thanks to her.  And we also have Austin here, where's Austin; Austin's here somewhere, Austin's at the back.  So, the whole team's here apart from Ben who's had a baby so we miss him, but anyway, we're going to get on with this.  Danny, you'll keep the time, Danny will throw some questions in, and good to see you, Harry.  How are you?

Harry Sudock: No bad days in Bitcoin.

Peter McCormack: Troy, how are you?

Troy Cross: I'm doing great.  Thanks for having me.

Peter McCormack: Thanks for you both coming.  Okay, so this is essentially a mining session; obviously Harry works for Griid, we have Troy here who just works on a range of things.  So, one of the things I found super interesting is, over the last six years since we've been doing the podcast, when I first started, mining wasn't anything I really paid attention to, it was just like this weird group of people with these machines out in Kazakhstan who secured the network; I paid no attention to it for a good few years. 

Then all of a sudden, it's the miners who are leading the game of Bitcoin, they are kind of running the show.  They've got some of the most interesting companies, they are publicly listed, they're driving a huge amount of innovation, things we didn't even know were going to happen, some crazy shit.  I mean, you've been in it for a while, Harry, what do you make of all this?

Harry Sudock: Well, first and foremost, I think we need to help everybody here and listening understand just how not sexy mining was in 2018 and 2019, and just how weird and crazy it was.  We're coming off of eight to ten years of this being a deeply hobbyist, really in your basement, kind of not a business, but truly a hobby.  Providing hash rate to the Bitcoin Network was not a professional activity, it was barely an altruistic activity, and that was really a function of a couple of things. 

The first is that Bitcoin wasn't very valuable for a long time, which we've somehow forgotten; Bitcoin was freedom technology and privacy technology and it was foundationally useful in all of those ways before anybody figured out that they wanted to trade a lot of US dollars for one, and so the mining industry was born out of that ethos.  So, a huge number of folks running nodes and mining nodes on PCs, that's what bootstrapped Bitcoin from the beginning, so we thank them for their energy service, even though they've achieved fabulous wealth since then, but they deserve every satoshi.

We've come a long way since then and really the professionalisation of the mining industry is something that I kind of tripped, fell and landed in.  I'm not an energy guy, I'm not a datacentre guy, I'm barely a Bitcoin guy at the time that I got into it.  But really, I felt an enormous centre of gravity around providing proof of work to the Bitcoin Network and taking on that role, taking on what we at Griid and what every miner I've ever talked to takes as a foundational responsibility, a deadly serious responsibility, which is if we want this thing to work, we have to participate and we have to participate aggressively and competitively and honestly. 

So, it's really exciting for me to see the transfer from what the best we could do was plugging in like 800 FPGAs to our father-in-law's warehouse, to today where we're signing some of the largest energy contracts in America, we're building the backbone of our electric systems day-by-day, we're integrating across core human infrastructure.  So, getting to build a business at the intersection of energy and money, it's the dream of a lifetime.

Peter McCormack: How about you, Troy?  Troy, you're at the forefront of some of the most exciting things that are happening at mining, things that, apart from Hal Finney, nobody really thought about.  Also, Troy's just like come out of nowhere and become this superstar.

Harry Sudock: Rocketship.

Peter McCormack: Yeah.  What's it been like for you?

Troy Cross: Yeah, well first of all, it's really great to be here and be with friends and talk about something that has absorbed my life that I feel passionate about, and with people doing it well who I really admire tremendously.  The business of Bitcoin mining is just truly unique.  On the Uber over here, I had this picture in my head, it just sort of floated in just before I arrived, of like a petri dish and a culture in the petri dish expanding rapidly out to the edge of the dish.  And then I was interpreting the image and it's like, this is Bitcoin mining, the petri dish is the block reward, the culture is mining and it's just going to run right out to the edge of that until it starves and reaches its limits; it's ecology, it's population dynamics.

Bitcoin mining is so, in a way, perfectly formal.  I'm a philosopher, an academic philosopher.  You can think about it at this very high abstract level, like the petri dish; in some sense, you know exactly what is going to happen with the block subsidy.  You don't know what's going to happen with fees, but you can sort of project that it's going to be a perfect competition to get that block reward, whatever it is, everybody's running the same miners, everybody's got the same tool, and these little marginal differences on how you operate are going to make all the difference; also it's a zero-sum game, in a way, for all the miners.

So, it's a fascinating space, not just philosophically and theoretically but personally, to know what kind of person sees the halving a year off and it's like, "I want in".  It's this looming thing where the major part of your revenue, up until recently, is going to drop in half across the industry and people are like, "Yeah, it's time to expand.  If you don't expand, you die".  It's like, "What kind of a human being does this?"  I think they're very courageous individuals and risk-taking individuals and look, they've been right in the past, not of all of them, but they've been right.  And so to me, it's one of the most amazing examples of capitalism in its rawest, purest form, almost purer than any kind of form that appears in nature where you have so much randomness in how well you do; this is such a pure competition and it draws a certain kind of person.

Everybody I talk to in mining is like, "We're expanding", and I say, "What about the halving?"  I'm a somewhat cautious person, and they say, "Yeah, but our power price is really good", and it's like, "Yeah, but if you talk to everybody else, they're telling me the same thing", and then it's like, "Yeah, but it's Bitcoin".  It's like, "Yeah, it's Bitcoin", no further explanation.  It means what?  It means that maybe the number goes up, look, it's the halving, number's gone up before in the halving.

Another thing it means is maybe we get a black swan, a disruption in the fee market, it suddenly lifts all boats that nobody expects.  It occurs to me that, in Bitcoin, this is the other part of the capitalism thing, in Bitcoin mining, it's all about risk and reward.  What you're really betting on are these black-swan-type events, like a bubble in price where nobody can get a hold of ASICs and you can print money hand over fist during that period, and you're betting on the probability of that event happening.  So, it's operationally, are you better than other people; but it's also like, will this black-swan-type event happen, and miners keep getting it right as prices double or more with each halving, and as we get disruptions in the fee market? 

So, I'm a bystander, I'm an onlooker, but I'm just fascinated by the kind of person and the dynamic that mining is.  And of course I think about it, like where does this go; where does this kind of person in this kind of industry, unleashed on the world, the world of energy and resources and states, what does that look like?  You were saying, Peter, that this era doesn't resemble previous eras.  Well, guess what, the next era does not resemble this era; we're going to have this conversation two halvings down the line and it's going to be like, "Remember how completely naïve and simplistic we were?"  This time, right now, it's going to keep changing.

Peter McCormack: Harry, in a world where we have a lot of meddling and interference from governments and regulators, what does Bitcoin mining teach us about markets?

Harry Sudock: Bitcoin mining is just the ultimate teacher.  Troy talks about what kind of person does this for a living and I suppose that I'm one of them, and I'm not sure exactly what that means other than, if we just take a step back to why do we mine and what's the thought process there, it really kind of dials back to a little glass room in 2018 and 2019 when we thought about the business and we said, "All right, we're going to be structurally long Bitcoin and Bitcoin usage, and structurally short power markets and hashrate".  That sounds like a terrifying bet to take on the face of it, but the good news is that by taking a bet like that, you're compressing an enormous amount of normal business risk into this one very specific perspective. 

What has emerged is that Bitcoin is a black hole, and that's a conversation from a different day, but Bitcoin, it's just like this hyper centre of mass that drags economic utility into it and spits it out on the other side in its most efficient form.  I've seen mining as a total microcosm of that same dynamic where Bitcoin mining is a buzzsaw that's getting taken to a dead oak forest that hasn't been touched in 200 years, and so --

Troy Cross: Maybe the environmentalists don't…

Harry Sudock: It's dead oak! 

Troy Cross: Okay, okay, okay. 

Harry Sudock: Live oak, we leave and grow and sequester carbon from the atmosphere, or better yet, we plant new forests.  But really what's so exciting about getting to run this buzzsaw into untouched markets is, it's a dumb example but I think it's really material, but everybody's who's here who came on an airplane, you charged your phone at the airport probably at some point.  The cost to install those outlets is $600 per unit, and let's just use one unit for the sake of the argument. 

To install one of the same units at a Bitcoin mine costs between $100 and $150.  And so we've seen between 75% and 80% cost savings on delivering electricity to an outlet; why?  Because Bitcoin miners care a lot about making their builds cheaper and no other industry thought to shave that $450 out of it because it's not a big line item, it's not worth a lot of attention, there's no driving, urgent market force asking those businesses to cut that cost.

Then, when you look at our business, we've got to install that like 32,000 times.  And so at 32,000 times $450 is a lot of money and it's probably the difference between one miner being able to operate through the halving versus another.  And so, every time I see a 1%, 2,%, 3%, 5% incremental opportunity, I want to go kill it, I want to go take deep and urgent violence to the opportunity set, and every miner thinks that way.

So, these are the people who are reading through power agreements, these are the people who are looking at generation assets, these are the people who are looking to convert waste into use.  So, you take an army of these businesses operating all across the world and all of a sudden there are a lot of efficiency gains that get delivered.  And so while I've solved the problem with the $450 savings at the outlet, that's actually a benefit that's now going to get propagated across an entire economy. 

This is how innovation delivering value works, is one business is presented an urgent need, and then every business gets to eat that benefit over some dispersion field of time.  And so, this is why everything's good for Bitcoin, Bitcoin is a black hole, it's going to suck in all of these positive sum economies of scale over time and we're going to make it.

Peter McCormack: I think it's about $1.6 million or was it $16 million you saved with that?

Harry Sudock: It's a lot, a lot of outlets.  I'll tell you one more anecdote from early Griid.  So our CEO and founder, Trey Kelly, and I, we're not electrical engineers or electricians, and so we conceptually knew what we were going to build when we were going to build a Bitcoin mine but our view of that was like, "We kind of need 3,000 outlets and we're going to plug them in", and we had no idea what happens behind the 3,000 outlets, and so we had to go through this very rapid and urgent education process!  Thankfully, we hired some incredible, incredible people along the way, but that was four-and-a-half years ago.  So the learning curve is just unbelievably steep for all of this stuff and we're all starting basically at zero in our own different way.  So, if you're interested in any of this, or interested in something else in Bitcoin, just start; nobody knew anything before they started.

Peter McCormack: I still don't know anything!

Harry Sudock: We know!

Peter McCormack: Okay.  So, one of the things I found most interesting over the last certainly couple of years is that we've had these new cohorts of people coming into Bitcoin; it's just not crazy psychos any more.  We've got a very smart group of philosophers who've joined us in the world of Bitcoin.

Troy Cross: Also crazy psychos.

Peter McCormack: Yeah, but in a different way, like gentle psychos.

Danny Knowles: They're the dangerous kind!

Peter McCormack: Yeah.  I've really enjoyed getting to know Troy and his mafia of philosophers, but as a philosopher, how do you think about mining; does it present new, weird ways of thinking about the world?

Troy Cross: Absolutely, yeah.  I mean Bitcoin does, and mining is inextricably connected with it.  Of course, it's pushed me into thinking about the relation generally between energy and money.  I think money always finds its way into energy at some stage or another, and mining is just a particularly direct path for it.

I wanted to riff on something that Harry said and also answer your question, in a sense that I think that the philosopher-level view, which is not only do you not understand what happens behind the plugs, but you don't even think about the number of plugs or anything; the philosopher level view is it's a brutal competition, ruthless competition, for a fixed reward, and 70% of the cost is power.  So, humanity is witnessing a search for cheap power like it never has before, and it doesn't matter where it is in the world because there's internet everywhere now.  So it's the first industry that is totally location agnostic and scalable, and that is entirely sensitive to the price of energy. 

So what does that do?  Well, to follow Harry's example, it improves energy in the same what it improves power supply units.  We're going to figure out how to get energy out of the niches of the natural world in new ways, and cheaply, that are motivated by that block reward.  And the competition means that all of the fights that we have -- Justin, I'm talking to you -- all the fights that we have about power and what's the best form of it for humanity, how do we produce it best, which of these pie in the sky ideas about our energy future as a species is really going to work, mining is like the asset bath for any of those ideas. 

It's because you've got to compete with these other miners, and if you make promises in your pitch deck about your new energy idea about how many cents per kWh this is going to provide and how much uptime you're going to give, that doesn't matter.  What matters is whether miners can actually profit on it, and they're in a zero-sum game against every other miner.  So, it's like a global-scale, perfect competition that incentivises what humanity needs, which is cheap, abundant energy to power its future. 

So, taking a big step back, I think our energy system is probably the largest issue facing humanity generally.  We're increasing our demand for energy, we've got large parts of the world that are using little energy now but are going to use energy.  How do we do that in a just way; how do we do that in a sustainable way; and, how do we get people power who don't have it and improve their lives?  You can't find a bigger problem than that to solve or to think about.

Harry Sudock: Why does energy density per capita matter? 

Troy Cross: Well, it's just hard to do the things we want without it.

Harry Sudock: The toll of human flourishing.

Troy Cross: Yeah.

Harry Sudock: It's being able to go to the hospital, it's being able to feed yourself and your family, it's being able to travel, it's correlated to every biomarker of a successful civilisation: infant mortality, education rates, literacy rates.  Pick any societal biomarker and energy density per capita correlates one-to-one with improvement.  And we deserve it, we dug ourselves out of the caves for this, there are 50 million years of ancestors counting on us; it's urgent!

Troy Cross: Yeah, and at the same time, our energy landscape is constantly changing.  We cleared forests, we used the easy deposits, the cheap and easy hydrocarbon deposits, they're gone; it's getting more and more energy intensive to get energy out.  So, to keep up our improvement in our human flourishing, we need innovation on getting more out of less and getting energy out of new sources that we haven't already done.  Everybody has their own idea about how to do that, and of course we have governments subsidising it, we have a lot of partisanship in that, but I think what's beautiful about Bitcoin mining is, it just doesn't care about your feelings, you know what I mean, it's about the bottom line in the end.  It's like, "That's very nice if you're doing that, but sorry, it costs you more than a Bitcoin to mine a Bitcoin, you're done".

Danny Knowles: So, Harry, why do you think people at New York Times are working so hard against this?

Harry Sudock: I think, if we take the charitable argument on their behalf, reluctantly, then it's just ignorance, right.  If you went into the news office there and you sat down with every reporter who worked on that or every reporter in the bullpen and just asked, "How does energy get generated and delivered?" nobody can answer.  So, you're fundamentally asking people with no technical basis to comment on the moralisation of the usage, and that's not a fair assignment, and so that's one leg of it.

The other is just that there's a moral superiority that's been represented about one use case of energy versus another and that's wrong.  We have a market for this thing, everybody pays their power bill at the end of the month, whether you're a huge Bitcoin miner or whether you're a household, and the ability to freely associate within the context of that marketplace is what we, as Americans, have come to understand we have a right to.

Peter McCormack: Now tell the truth.

Harry Sudock: Or there's just like a massive political biased agenda coming for us; one of the two!

Peter McCormack: I'm not sure which one!  It's a news office.

Harry Sudock: And let's dig into the reasons why, because there's really a very responsible fact-based way to approach this where, if you just look at the list of power plants and mining facilities listed, they just omit all the big, good ones; it's just the least reasonable cohort to be able to represent one point of view.  You want to talk about marginal accounting for emissions?  We can go there next, but that's the most egregious methodology that we could think of.  But if you just go look at a holistic list, you don't end up with the dataset that they've arrived at.  You've just excluded everything that touches a renewable generation source, and look, I can cherry pick data to say whatever I want.

Troy Cross: That piece was devastating to me because I just knew what the response of my colleagues and friends and acquaintances would be, and sure enough, my inbox was full, "Troy, I don't know if you've seen this story, I'm guessing you probably have.  It's good to see data on what Bitcoin's actual emissions are", yeah.  I don't know, I'm still frustrated, I can barely think straight still about that story.  I talked to the reporter, as many bitcoiners did, had actually a really hard but productive 90-minute conversation with Gabriel Dance.  I don't know, Harry, whether it's just ignorance, because this reporter seemed very smart and seemed to be tracking well.  I don't know what happened in the editorial process or the writing process, but I think that someone was hunting a white whale, a great white whale for six months and gathering data and they got their whale, and will try to ride that story to accolades in journalism and so on; it's just a better story. 

Here's one story; what's the impact of Bitcoin mining?  Well, it's kind of complicated really.  You've already lost your audience.  It's kind of complicated really, it's actually very good for grid stability, these are large consumers of power but they pay very little for power so they usually use energy that others don't want in a way.  There are exceptions to that when we have a spike up in prices and then they'll just stay on all the time, and so they'll be some communities that have pricier power because of it, etc.  You could give the whole picture; is that a story you want to read?  You're already bored right now, I'm losing you!  Of course the New York Times is going to lose its readership. 

Here's a story, Bitcoin is destroying the planet, it's a bunch of rank capitalists who have no concern for anybody else's welfare, they just want to get rich and let's, yeah, get them out of our country, never mind where they will go, and save our planet; that's a much better story.  I think the data was pushed to fit that story and then the ways in which the data was massaged, the selective attention, we could be here all night to talk about it, but the headline was written before the story, was my impression, the story was written to meet the headline.  It's a shame, we're going to be fighting it for a long time, but ultimately we will win because we have the truth and because the farther this narrative is from reality, when we start showing people what Bitcoin mining is doing for our energy systems in creative and cool ways that blow their minds, they're going to be like, "What?" heads absolutely spinning because they've been led to believe the exact opposite.

So, the real Pulitzer Prize is to be written on how did we get here; how did we get government, academia and media all on the same page, singing the same tune about a brand-new, emerging technology that nobody even frigging understands, really, before they write about it, and we get a moral crusade and the issues in policy proposals that could actually delay the energy goals that the very same people have.  That's the story; how did that happen to our societies?

Harry Sudock: I could tell you, I have a great answer, which is those are cohorts that fundamentally do not build things.  Bitcoin demonetises the political class and it remonetises the productive class; that's it, that's the point.  So, the heuristic for us to walk out of here with is, if you look at people who are making an argument around to cut a pie versus somebody who's willing to bake a pie, listen to the second group, please. 

Troy Cross: I'm the pie-cutter right here!

Peter McCormack: All right, we're going to open up for a Q&A shortly, but I've got one last question I wanted to touch on very quickly, just very quickly, is on ordinals; I haven't met a miner yet who dislikes them.  A quick show of hands if you dislike ordinals, hands up.  Hands up if you like ordinals.  Hands up if you're indifferent.  Hands up if you're too scared to put your hand up and didn't put your hand up.  Okay, yeah, I'm kind in the indifferent camp.  Just very short, ordinals, good, bad, don't matter?

Harry Sudock: Ordinals are in-consensus transactions, like the Bitcoin software that everybody's running on their own nodes is their sovereign version of what they're willing to include in an accepted block that gets propagated to them.  Nothing in the ordinal spec and nothing in the BRC-20 spec is an out-of-consensus transaction, and therefore I don't have a moral right to comment on it.  Please pay me your fees!

Peter McCormack: As I said, I've never met a miner who dislikes ordinals.  All right, listen, I just had to ask that.  Right, we've got a mic here, just our lessons from previous shows, we invite questions, please don't give us your life story; I know it's great for you, but we've got limited time.  If you want to come and ask a question for any of our esteemed guests, just come up around here, there's a mic.  Don't be scared.  Here we go.  Go on, Blake.

Danny Knowles: I tried to get him on the pod.

Audience member 1: Hey, guys.  How are you thinking about jurisdictional risk?  So, Harry, how is it to be a miner in the United States right now looking at a five-year plan versus another country?

Harry Sudock: It's really tricky, first and foremost.  So, number one is there's federal risk and there's country jurisdictional considerations; the next is state-by-state, region-by-region, you know, New York is not Texas, is not Tennessee, is not Washington.  So, there's some significant kind of balkanisation within our environment as well.  I think, at the end of the day, the most important thing for us to do is build the most productive business we know how, and right now, that means publicly listing on US exchanges to the best of our ability and trying to sign power contracts in the country that has the best property rights in the world. 

Peter McCormack: Fair answer. 

Troy Cross: I think that's great. 

Audience member 2: All right, okay.  So, yeah, I had a question for Harry and Troy.  In terms of just Bitcoin mining and generation, where do you see things going, perhaps in terms of nuclear and other alternatives?  Harry, there you go, right, ready, okay?

Harry Sudock: A little nuke meat for me?

Audience member 2: Yeah.

Harry Sudock: We love the isotope, we think that nuclear power is just a similarly societally-unlocking technology, similar to hard money.  I think it's a total travesty how we've stunted that industry over the last 60 years and we've basically done so on the back of fear and disinformation, but the facts of nuclear generation bear themselves out all over.  Are they the perfect solution in every power market?  Of course not, but I would expect massively more nuclear generation to exist 50 years from now if we win.

Troy Cross: I have a less informed take that matches Harry's.  I've been weighing into these nuclear/anti-nuclear debates within the energy space, and I've got to say it is like among the most intense fights I have ever witnessed.  People are ready to go to the mat on this question, and it's difficult to get to the bottom of it.  I'm glad we have Bitcoin as a way of deciding this contest that does not involve language but involves sats and electrons.

Audience member 3: This is a weird question, what do you think about consumer mining embedded in solar systems so they can use the excess credits that are wasted now?

Troy Cross: Can I try this one?  So, yeah, I'm hopeful about this application.  It depends on some factors.  It depends on, first of all, capex being low enough because you have competing spots for those miners that have high uptime.  Here's what we have, miners all want high uptime and low cost, and there are some sources that will give you both.  The question is, how much of that is there in the world that gives you super-cheap power that is always up?  Miners will obviously take that before they go to solar setups that are not 24/7.  Then the question is which do you give up; do you give up some uptime and go with excess solar, where your power's free but you have limited uptime; or do you pay more and stay up all the time?  That's going to be a question that you have to model out with your capex and how much it's depreciating.

So, in the long term, I think absolutely, think about it in the long term, the cost of mining is going to go to the cost of producing those ASICs, and that's only going to go down.  And in the long term, the margins are going to be super-tight in mining as we find cheaper and cheaper power, and we're going to have older equipment sitting around as we age out of it, and the improvement in ASICs is also going to decrease, I think, I hope.

Harry Sudock: Yes.

Troy Cross: Blake's laughing at me, so maybe I'm wrong.  But in time, I think you're going to have cheap chips sitting around waiting for excess power wherever it exists, and that's going to include all of the solar power, for instance, that's DC that never makes it to AC even, that's just trapped behind there.  We'll probably find a way to get that into ASICs without ever going through AC conversion and back to DC.  When you see how much clipped power there is, it's absolutely stunning, especially given that solar, whether you like it or not, is going to explode.  We're going to have loads of wasted energy of all kinds in this system because of its intermittency, and then you'd be a fool not to mine with it because it's going to be free, but maybe not right now.

Harry Sudock: My name's Troy, I'm just a philosopher, I don't know anything technical about anything!

Audience member 4: Hello, Chester from ALL4, we do environmental consulting.  Really appreciated your perspective last year on the ESG panel at the mining stage.  Talk to me about how ESG, it's a bit of a curse word, I know, but a lot of publicly traded companies are going to be doing some reporting; talk about how mining and ESG are more friends than enemies, maybe frenemies.

Troy Cross: Well, yeah, this is a delicate subject.  This word, ESG, I've discovered it has a symbolic function and political meaning and a lot of states are passing anti-ESG laws that don't allow their pensions to look at ESG factors and so on.  I think that it's going to be mandatory that public mining companies report their Scope 1, 2, 3 emissions; whether we like of it or not, it's just going to be part of the job, it's coming down the pipe, and so miners need to be thinking about it and planning for it, and you can talk to Chester here about how you may want to do that.

I think we have a really great story to tell; we have to tell it on our own terms.  Bitcoin's superpower really is its flexibility and the contributions that come from being able to turn on and off quickly, and we need to find ways to translate that story into reports that people will understand and recognise, and that's not an easy job.  The same goes for the other things that we do, capturing methane, reusing waste heat.  Bitcoin miners contribute to sustainability, to the E side of ESG in a lot of different ways.  That's one of those things that we'll look back on in four years, we will have very sophisticated ways of translating what we do for the grid and for the environment that we don't have now. 

So, if you're looking for a market to get into or something to do with your time, that's an excellent project to work on.  There's going to be huge demand for it and it's going to require a lot of ingenuity and skill.

Harry Sudock: I just want to offer some framing, which is that I think the reason that ESG ends up being this sort of third-rail thing is because, on the one hand it's a very reasonable set of objectives to stand behind, but on the other hand it gets used as a cudgel to pick winners and losers, choose outcomes.  Look, SBF had one of the highest ESG ratings ever.  So, we've seen sort of the misuse of the characterisations, the qualitative and quantitative metrics that get associated with it, and so when we talk about reporting regulations, that's one thing, but when we talk about the political implementation of these types of metrics and values, that's another thing. 

Troy Cross: It's a scam and it's a tool of control, and don't hate me please, I'm not an advocate for ESG in any particular form.  I do think that we do have a story to tell; there are investors who want to know that story who care and will invest differentially depending on how you run your business.  Some of it's just about being good neighbours in a broader sense.

Audience member 5: Hey, guys, I had a quick question.  So, do you have any concern about mining in the future in the US reaching a point where the state may ask you to censor certain transactions, or there are maybe laws that pass that attack Bitcoin mining?  The reason I bring this up is because you had mentioned how there wasn't really much to mining before 2019, I think you specifically meant the US because China was big, massive, that's where all the mining was.

Harry Sudock: That's a great point.

Audience member 5: Right, and I know you know that, and obviously what happened there, it was banned.  So my question is the censoring of transactions, are you concerned miners will be willing to go along and are they mobile enough that they would leave the area?  It's kind of hypothetical, but it has happened in a sense in China.

Harry Sudock: Yeah.  I think, just to think about it at a higher level just briefly, the great thing right now is that the miners aren't particularly involved in constructing block templates that include transactions; we get fed those by automation and optimisation software tools outside of our house.  So, we're a service provider selling compute and we don't have any role to play today in individual transaction inclusion.  That could change in a world where Stratum V2 gets rolled out, which is also a positive thing for this space, I think.  But you're asking a deep and nuanced question that I think is philosophical in asking but is technical in answering, and so I think the levers of control and the means by which to avoid those levers of control haven't particularly been built yet.

Troy Cross: That's a great answer; I'm going to give you a shallower answer.  I've seen in the past few weeks Carole House speak on a couple of occasions and had conversations with her, and she's the former Head of Cyber Security for the National Security Council and has held numerous positions in the White House.  She was very clear, and this is not her opinion, I think she was the most Bitcoin-friendly person we had in the White House, but she was just very clear that -- wow, was that a bat?!  Wow, amazing!  We had a bat in here! -- but she was very clear that there are a number of options that they have on the table for making sure that money is not used improperly from their perspective, and they want to take the most egregious case, like someone buying weapons of mass destruction or something from North Korea, and then they're going to say, "Hey, guys, can you just not process this transaction".

I'm going to quote her, this is from the Princeton Conference, she said, "What we need is for all of you to get the relevant people in a room and make this decision for yourselves so we don't have to make it for you".  And my panel was next and the panel title was a question, it was like, "If Bitcoin is the answer, to what question is it the answer?" or, "If Bitcoin is the answer, what is the question?" and I was like, "The question is, can you invent a kind of money for which there is no room, that you can get all the relevant players in and do the thing that the White House wants us to do?"  That's what Bitcoin is; it's a technology that doesn't have that room. 

Harry Sudock: Take it up with the CEO.

Troy Cross: Take it up with the CEO, right, there is no room.  And what's amazing was that they think only in those terms, and for every other kind of protocol that was represented in that room, some of the people were in fact in that room, like Joe Lubin was there sitting in the front.  So, you can round up the relevant people but you can't for Bitcoin.  So, I think we're on a collision course and maybe it'll be settled politically, maybe it will settle in elections, maybe it will be settled legally. 

They know how extreme this is and it's not just like censoring blocks from a transaction, but censoring you from mining on top of a chain that has it somewhere deeper, because if it's just censoring, it will get in from miners elsewhere; but if they say, "You can't mine on top of a chain that has this transaction in it", it's effectively saying you can't mine Bitcoin in the US.  That's a disastrous scenario, it's kind of on the calendar for me in the way that the Department of Defence has the war with China on the calendar.  It's on the calendar; I don't know when but maybe it's like 2030 or something, they're just going to do that, and I think we have to prepare for it politically, legally and technically.

Peter McCormack: Okay, we've got time for one more question and let's keep it quick.

Audience member 6: Yeah.  So, I just wanted to ask, since I'm really interested in this idea that Bitcoin can reveal what energy sources are actually good and actually optimal, but I fear that that would be distorted by things like subsidies and over-regulations on things, and any government can make any energy source look good to Bitcoin miners and have them all use the worst energy source possible just by taxing and subsidising --

Troy Cross: It's already happening, it's happening all over the place.  Sorry, I'm just jumping right into this thing.

Peter McCormack: No, let's keep it quick as well.

Troy Cross: Bitcoin is a black hole; one of things it sucks in is subsidies.  If you subsidise energy and make it artificially cheap, whether it's coal in Kazakhstan or in Kentucky, Bitcoin miners will come in, absorb it, and yes, we're not completely outside the system.  That's a really good concern, it absolutely does happen, I just think those subsidies are not sustainable and Bitcoin will destroy the subsidies over time and replace it with a natural one.

Peter McCormack: Yeah.  All right, a big thanks to Harry.  Big thanks to Troy.