#909 Jason Les On Bringing Hashrate To The U.S.

Jason Les is the CEO of Riot Blockchain. In this conversation we discuss Bitcoin mining and the ongoing ESG conversations, the mining industry, the importance of capital markets, and why he wants the United States to be the leader in Bitcoin mining. ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Imagine coinmarketcap - decentralized. 3X in valuation is 15 billion dollars from the current price. Cryptotoday.com starts at zero, at fair launch on 7th of March. No VC. No pre-sale. Team tokens locked. For the people, by the people. For decentralized crypto. Visit http://cryptotoday.com and read the whitepaper for the details. =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Jason Less is the CEO of Riot Blockchain. In this conversation, we talk about the Bitcoin mining industry, including how it fits into the ESG narrative, the importance of capital markets, and why Jason is so focused on bringing hash rate to the United States. I really enjoyed this conversation with Jason, and I hope that you enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by BlockFi. BlockFi provides financial products for crypto investors. Those products include the BlockFi Wallet, a US dollar loan collateralized by your crypto, and a no-fee trading product. BlockFi also released the world's first crypto

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• 1:31Anthony Pompliano?

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• 2:13Anthony Pompliano?

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• 2:58Anthony Pompliano?

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• 3:42Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 4:06Anthony Pompliano?

  All right, guys. Bang, bang. I've got Jason here with me. Thanks so much for doing this.

• 4:09Speaker 02

  Thank you for having me. This is like, it's so cool. I listen to your podcast like every week for so long, and now to be able to sit down here and chat with you, it feels like a dream.

• 4:17Anthony Pompliano?

  I, uh, I'm really excited about this because I think most people know Riot. They understand Bitcoin mining to, you know, some degree, uh, but you have this incredible, uh, kind of backstory. And I actually didn't know this story until recently, uh, when I heard you say it, but, uh, you were a professional poker player for like 15 years. It, where did that come from? Why were you, uh, why were you so enthralled with, uh, playing poker?

• 4:38Speaker 02

  Sure. I'll, I'll give the lowdown of the story here. So, you know, going all, all the way back to a very young age, I really knew I wanted to be involved in computer science. You know, I was a kid during the tech boom during the nineties, uh, and I, I wanted to be involved in that anyway. So from a young age, I was, you know, coding, learning how computers work, repairing computers, making them, all of that kind of stuff. And that led me to studying computer science in college. I started college in 2004, and that lined up right when poker was taking off in a huge way after MoneyMaker won the World Series of Poker in 2004, and internet poker was getting crazy. And I just had this like epiphany where, wow, I can sit at my computer and I can play this game,

• 5:21Speaker 02

  and I'm going to make money as long as I'm better at the game as everyone at the table. Now, no easy feat, but it captured my attention and it was a challenge I wanted to take on. So, while, you know, finishing my degree, I embarked on this 13, 14, 15 year career as a professional poker player, mainly playing online, um, and then evolved into playing, uh, high stakes tournaments as well. You kind of get to a level at some point, no one wants to play you online anymore. So you gotta play these, uh, big tournaments. And, uh, towards the end of my career, I was really focused on heads up poker, which is one-on-one poker. To me, that was the purest form, just you versus another player. You're playing almost every hand. Bluffing is

• 6:03Speaker 02

  a huge part of the game. A lot of strategy goes into it. I worked with an incredible, incredible group of friends to study the game and help each other. And that was, you know, a great experience. And it's through that is how I discovered Bitcoin.

• 6:16Anthony Pompliano?

  So heads up poker, let's start there first. Like this is the, as you said, the most pure form of it. It's, it's frankly just savage. I sit down for across from another person. I either take their money to take my money is, is the, uh, the way it works. Is there one, you know, hand or one game that you remember playing where you're like, people won't even believe how ridiculous or crazy it was?

• 6:36Speaker 02

  Uh, you know, it's, it's hard to now remember one specific hand, but I mean, there were many times online where I played, you know, a losing player, what in poker we call a fish, or if they're really bad, a whale. And, um, it would be amazing to me, the amount of money some people would have to just lose. Uh, but also, you know, playing good players, you get put in the most tough situations. And, you know, I, I think, I think one of the biggest hands I ever played, I, I mean, I don't remember the exact action of the hand, but one of the biggest hands I ever played, I was just check calling down with like ace, high or some all in on the turn.

• 7:17Speaker 02

  And I, you know, thought out the hand, you know, did the all analysis, you know, I always do, and I just called off with ace high and I won this massive, uh, five figure pot. And I was like, wow, I'm playing with some beast. If this is, uh, this is what it takes to win. So yeah, I guess, I guess think about that from a couple of directions.

• 7:38Anthony Pompliano?

  Yeah, that's pretty crazy. And so, uh, you discovered Bitcoin through this. Explain kind of, uh, the way it payments work and, uh, and even Black Friday and kind of how you came across Bitcoin.

• 7:47Speaker 02

  Yeah, so a big part of internet poker, or even poker in general, is, you know, moving money around. Uh, as a poker player, you're always going after where the best action is, where people are playing, where the highest stakes are, where the worst players are, and that requires a mobility of funds. And, you know, if you have an edge, you want to play the highest stakes possible, you're trying to move a lot of money around all the time. So, um, uh, in 2011, there was something called Black Friday in the internet poker world, where the DOJ, uh, released an indictment against the major US poker sites that serve, you know, most of the international market and seized funds. And you can no longer play on those sites. So I was all in on

• 8:33Speaker 02

  funny use of phrase, but all in on internet poker and that was everything I was doing all the time. So suddenly, one day, almost all of my money was just gone. And not only is that, you know, that hurts from a financial perspective, that hurts from an ability to do my job anymore. And it was also, you know, an attack on my identity, really. I had an entire identity wrapped up in being a professional poker player. You know, a career that many people will look at and think is a joke and oh, you're never going to make it. And then for something completely outside of my control, it just went away and was gone. And that sucked. I was pretty upset about that for about one day. And then I said, you know what? One day is enough to be upset.

• 9:14Speaker 02

  We're going to figure out a way around this and figured out a way to continue playing poker. And that is when I first discovered Bitcoin. I heard people posting on the forums like, hey, have you guys looked at this Bitcoin thing? You can move money around. There's no third parties. And I said, oh, that was kind of interesting, but I didn't, you know, dive too much into it. And then as time went on, I'd be like more poker sites started implementing Bitcoin after that over the ensuing years. And I said, wow, this is, this is way easier to move money around. Because it's always a challenge in internet poker to be moving money around, even though it is not illegal to play internet poker. You know, transactions are getting stopped, banks are, you know, shutting down your bank accounts.

• 9:57Speaker 02

  So I've experienced that. I've seen that from other people firsthand. It's not some theory that in the Western world, your financing can just be seized or shut down by banks or the government. So I became, the use case for Bitcoin was right in front of me. It wasn't theoretical. I, it was a tool that I and we in the poker community needed to utilize to, you know, even do our job.

• 10:21Anthony Pompliano?

  Yeah, it's pretty incredible that that entire community was so early to understanding it, but it really was at a necessity, really. Innovation is the mother of necessity. And when you think about how this works, if you can't transact, even though it's not

• 10:36Anthony Pompliano?

  Not life or death, right? It's more from an entertainment purpose or a work purpose. It still is a use case that people needed to solve. And once people see the problem, I always think that they understand Bitcoin better. And it seems like that entire community, that was that was definitely the case.

• 10:51Speaker 02

  Yeah, you're absolutely right. People have to see that problem for themselves to understand why you need it. So it was always interesting to me, you know, the difference in viewpoints, like thinking back to 2013, and people talked about Bitcoin like, oh, you know, this would be useful if the government started trying to cease bank accounts, if different entities were blocking transactions. And then there's others, you know, the detractors are like, why would you ever need that? It's the United States. We don't have that here. And, you know, I was experiencing that firsthand. So I was like, yeah, no, this is needed. And now, you know, in almost 10 years since then, we're seeing more and more geopolitical events that I think really gets it in people's mind that, hey, trustless finance, permissionless money is very, very important.

• 11:34Anthony Pompliano?

  Yeah. And given your background in computer science, once you started to learn about Bitcoin, did it immediately click and you're like, yep, this is like this amazing thing? Or did it take you time to kind of learn more about it and kind of get higher and higher conviction?

• 11:47Speaker 02

  Yeah. So at first, it was, you know, kind of just for this payments thing that was interesting. But, you know, there's only so much use for dollars. So I started storing Bitcoin, just holding Bitcoin, you know, using that to move, deposit, withdraw from poker sites, and then, you know, cash out and have a stash sit there. And I thought it was cool. You know, it was actually also was really transformational for me is seeing what happened through Silk Road. When Silk Road got shut down in 2013, my initial reaction was, okay, well, I mean,

• 12:19Speaker 02

  Bitcoin was cool. But, I mean, if that's getting shut down, then maybe it's kind of going to die away here. And that very quickly wasn't the case. And that was a big lightbulb moment for me. Or in 2013, like a bull market was kicked off after that. And I said, wait, just like it just suddenly dawned on me, like Bitcoin is way bigger than all of this. It's way bigger than even just payments. It's a store of value. And this is a system that's going to really take off. I think it was our friend the other night said, you know, where your pocket but goes, your mind follows. So as my Bitcoin stash started to increase in value, I started to get more and more interested in it over the years. And it was really the scaling debate

• 13:03Speaker 02

  and the block size wars that started kicking off in 2015 to 2016 that really brought back in that computer science background to me because I wanted to understand this debate because it was important to Bitcoin and I wanted to make sure my money was going to continue on the way I had wanted it to. And so that got me really interested in learning about how Bitcoin works at as deep of a level as I could understand. So did, you know, studied with Jimmy Song, you know, started trying to get into mining myself and just started doing projects, listening, anything I could just to learn more about Bitcoin.

• 13:39Anthony Pompliano?

  It's pretty incredible because there is this idea of Bitcoin's price is its marketing department, right? It's a decentralized network. There's no CEOs, no board of directors. That also means there's no marketing department. And when price goes up, what happens is the people who are already holding it pay more attention. They start talking about it. The media starts writing about it. And you get this positive feedback loop. And Satoshi talked about this early on in some of the forums. But really, that price, although many folks who are critics look at it as like the speculation that's occurring in the market, it does serve as a customer acquisition or user acquisition tool as well. And it's very unique in that way because as a decentralized system, if you don't have price attached to it, there's

• 14:21Anthony Pompliano?

  a good argument that Bitcoin maybe never gets adopted because people just don't end up hearing about it.

• 14:26Speaker 02

  Unless the absolute use case like became a necessity in front of people's minds. Yeah, that's a great point. The volatility is the marketing department. Even the price going up is the main marketing department. And then all the action before and after that is the secondary part of the marketing department. And that captures people's interest. It gets people on this, it keeps people on the sidelines sometimes, you know, a lot of people, they see that and like, okay, I'm just gonna wait for the right time to come. And I know we meme about that in the Bitcoin community all the time, like, oh, yeah, when it dips, I'm gonna buy.

• 14:57Anthony Pompliano?

  I'm still waiting for it to go to 10K again.

• 15:03Speaker 02

  Yeah, so I can remember like someone naming a price from every level all the way up that they're gonna wait for it to come back down on. And yeah, but I think, you know, eventually it just overwhelms people. In a good way, it becomes clear that it's a movement and they want to get on the bus sooner rather than later.

• 15:24Anthony Pompliano?

  For sure. And so let's move to the Riot story itself. You know, obviously publicly traded companies, there's some things you can talk about, some things you can't. But this was a company in the public markets that wasn't doing so hot, maybe is a fair way to put it. And it's an incredible turnaround story. And so maybe just start with like, at what point do you get pulled into Riot? And is it even in the Bitcoin mining business at that point? Or is it doing something else?

• 15:48Speaker 02

  Sure, yeah. So I was, you know, I continued to play poker through this whole Bitcoin journey. But eventually, the, I was so captivated by Bitcoin, I couldn't focus on poker anymore. I just wanted to study and follow Bitcoin full time. So, you know, it's not like the NBA, you don't announce retirement from professional poker, but you just kind of stop playing one day. And I just, you know, I had no aspirations of working in the industry whatsoever. I just wanted to make Bitcoin my life. And just did more software engineering, more mining, stuff like that on my own. And eventually, I got the opportunity to join the Advisory Board of Riot when it, I guess you could say, launched at the end of 2017. They were

• 16:29Speaker 02

  a reverse merger of an existing kind of publicly traded shell that prior business hadn't been successful. And, you know, at the time, Riot was trying to meet a need of giving public investors exposure to the Bitcoin blockchain space. Very early on, Riot was involved in Bitcoin mining, but it was doing a number of other things as well. There was like, you know, a little bit of Litecoin mining. Riot was looking at launching an exchange, was looking to, you know, make a mining pool, had some strategic investments in the space. It was involved in the space, but kind of spread out all over. So I was on the Advisory Board, and then I was asked to join the Board of Directors and

• 17:12Speaker 02

  You know, kind of funny. I'm like, hey, I've been a professional poker player for the past, you know, 13 years. Like, I don't know what it, what it entails being on the Board of Directors of a public company. And they said, you know, don't worry about it. It's, you know, we're looking for Bitcoin expertise. You'll learn everything else as you go along, which was true. You know, I dove in to, you know, figure out everything that I needed to know to be successful at that job. But immediately after that was the end of the 2017 bull market, start of the 2018 bear market, caused a massive decline in the price of Bitcoin and thus very correlated Riot stock. And, you know, especially as a public company, that brings all sorts of other problems. So you don't learn better than through adversity.

• 17:58Speaker 02

  Okay, so fresh on the Board of Directors of Riot Blockchain and we have, you know, massively declining stock price.

• 18:06Anthony Pompliano?

  Would it go down like 80, 90% probably?

• 18:08Speaker 02

  Uh, I think it peaked at near $40 and then quickly went down to like 10 and then quickly, I mean, went down lower than that. There was, you know, CNBC doing a negative coverage on the company. Class action lawsuits start, shareholder derivative starts. The SEC, you know, issues a subpoena to look into, you know, what's going on. Registration statement is no longer effective, so we can't raise money as easily anymore. So not, I mean, massive.

• 18:36Anthony Pompliano?

  Every curve ball possible.

• 18:37Speaker 02

  Every curve ball possible. So everything you need to learn how to solve, not everything, but it was an incredible education experience to be thrown right into that. And, I mean, really, it's like a sink or swim thing.

• 18:49Anthony Pompliano?

  Correct.

• 18:49Speaker 02

  You, you know, legally, reputation wise, you know, even financially, I was invested in the company. I wanted it to succeed, needed to, needed to swim, needed to figure out a way to save that company. Because I believed in the vision, even though like the company was, you know, in very poor condition at that time, I still believed this public vehicle would be something very useful for Bitcoin and Bitcoin mining. And that was my vision. So we went through this period of. I guess you could say cleaning up the company. You know, the management changed. There was a reconstitution of the board. And when we finally made it out the other side, you know, we kind of had this.

• 19:33Speaker 02

  I wouldn't call it a shell, you know, still we had a mining operation going on. We had some other things going on. Now we had some cash on our balance sheet. And the question was, what are we going to do? And we had, you know, a lot of meetings about it. And, uh, you know, to support what I wanted, I assembled an advisory board to the company full of Bitcoiners. Very lucky that Pierre Richard took that first step in there. Uh, I had known him previously and he, uh, joined us on the board of directors. And that got on, uh, Jan Pritzker and Corey Klipsstein as well. So a real, you know, Bitcoin advisory board that helped me, uh, in my efforts to focus the company on a hundred percent Bitcoin and a hundred percent Bitcoin mining.

• 20:17Speaker 02

  And our, our that management team, you know, uh, it was truly a team effort in believing that vision and wanting to make it happen altogether. And so through that, uh, the board, you know, eventually tapped me to be CEO because I was, you know, one of the driving forces of that mission and vision. So now I know I'm going through a lot, a lot of years.

• 20:38Anthony Pompliano?

  I love this. This is one of the most incredible stories in all of Bitcoin of the last couple of years.

• 20:41Speaker 02

  So we come out and, you know, we make, we make that decision in 2019. We start buying lots of new miners from Bitmain. We're able to, you know, raise the money, uh, raise a good amount of capital with our at the market offering that year. Started buying lots of miners, upgrading our mining operation. And that's what we started charging for through, starting in 2020. But we, I think the company, the, the, the Riot stock price hit a bottom of 55 cents in 2020, um, after, you know, the whole crash of everything in, in March of that year. And reached, uh, I think the peak was 7950 in 2021.

• 21:18Anthony Pompliano?

  55 cents to 7950 in about, what, 18, 24 months, something like that?

• 21:23Speaker 02

  Uh, well, I, I think from trough to peak, it would have actually been about one year, which is pretty crazy. But I mean, we were, we were doing so much operationally alongside that. We kept, we were very aggressive. We, we just made a bet on Bitcoin and Bitcoin mining. We were deploying capital to buying miners in 2020 when it wasn't that popular. Bitcoin's crashing down to 3,500. We're buying as many Antminer S19s as we possibly can. We continue to do that and we continue to do that. And because we had that long-term view on Bitcoin and that belief in Bitcoin mining and a belief in ourselves and in our ability to compete in that space, that paid off in 2021 as we started receiving these miners, deploying them, our hash rates going up,

• 22:06Speaker 02

  and we're able to mine a lot of Bitcoin in a, you know, crazy bull market environment.

• 22:10Anthony Pompliano?

  Yeah. So today the company's approximately $2 billion or so. You guys, I think, reported in December of 2021 for the quarter about $90 million in top line revenue. When you think about this, how big can a business like this get? Is this something where you guys think these can become, you know, 50, $100 billion companies? Is it something where you think it's more of, you know, hey, our goal is to get to 10 billion? We think that's, that's kind of a natural size for a business like this? Like, how do you think about market cap and growth or adjustable market for one individual miner?

• 22:41Speaker 02

  I think a successful miner who has a long-term outlook and is focused on building a sustainable business should, in theory, continue to scale with the price of Bitcoin. Bitcoin mining is a game of scale. So it's not, you know, I, I don't know any miner, especially not Riot, that is thinking, okay, we're going to get to just this size. We're going to get to just this hash rate and then we're just going to ride what happens with the price of Bitcoin over the, you know, the next five, seven, 10 years. We are always focused on expanding and, you know, our goal as a miner is to grow our hash rate faster than the global network hash rate. We want to increase our piece of the pie over time. And if we're doing that and in combination, the price of Bitcoin is going up,

• 23:25Speaker 02

  you know, the, the goal is obviously from that, that the market cap could just continue to increase over time. But you know, there's a lot of execution that goes into making that happen. Way more easier said than done, but you know, we are, we are long-term believers in Bitcoin. It's a very important cultural part of our company. It's not a bunch of people collected just to, you know, make money through mining. It's a group of people who believe in Bitcoin and believe in what they're doing through Riot. I think that's very culturally important. And we are, we are doing everything we can to, you know, our job every day is to mine as much Bitcoin as possible.

• 24:06Speaker 02

  And I believe in, I believe that the proliferation and adoption of Bitcoin is going to continue on the trend it does. And I'm, you know, working to position the company to continue to ride up with that trend.

• 24:18Anthony Pompliano?

  So I want to talk about a couple of different aspects of the mining industry that I think you've got some either unique thoughts on, or you just spend all day talking about, thinking about. The first is geographic dispersion of the actual mining hash rate. So we know that kind of going into 2021, about 65% of all hash rate was in China. Contrary to the critics' thought process, that doesn't mean China controlled the Bitcoin network. It just means that geographically that's where it was located. They went ahead and they banned miners in a number of different regions and we saw hash rate drop 50%. And then people moved elsewhere. The United States seems to be the biggest winner or beneficiary of that. How important was it to not have so much of the mining concentrated in China specifically

• 25:01Anthony Pompliano?

  versus being, you know, elsewhere around the world?

• 25:05Speaker 02

  Yeah, I mean, that was an incredible, I think, event for the Bitcoin community, for the Bitcoin network. That was FUD for Bitcoin for so long. Oh, 65% of mining is in China. They'll take it over or they'll just shut it down and what's going to happen to Bitcoin? Well, okay, that's what happened. China shut down all of mining and Bitcoin was unaffected. You know, blocks came, I think, maybe 14 minutes slower for a little bit and then difficulty, you know, I'm sorry, four minutes slower than than average, difficulty adjusted and everything moved on. The users were unaffected. And as Riot, it's actually kind of funny, like before any of that happened. We were talking about ourselves as America's Bitcoin miner.

• 25:48Speaker 02

  There weren't that many publicly traded miners at that time. US hash rate was around 7% of global hash rate. And our goal was to build the US presence of Bitcoin mining, to further decentralized mining and put the consensus mechanism in the same geographical and jurisdiction as where so much adoption is. There should be that people participate in the Bitcoin network, both on a peer-to-peer level and through mining the consensus level. That should be coinciding with where adoption is. Those two things shouldn't be distinct. That was kind of the vision. So like I mentioned, we put a lot of resources into growing our Bitcoin presence in North America by buying hash rate.

• 26:31Speaker 02

  And then, most importantly, the most transformational thing for the company was acquiring Windstone US, largest Bitcoin mining facility in North America. So we were making good progress on that goal. And then they banned mining from China. And that was just massive tailwinds. And it's like, oh, wait, they made this a little too easy. We wanted to accomplish this on our own. And then they just got rid of 65%, 50% of hash rate. But I think it is important that hash rate is distributed. You know, I'm an industrial scale miner, but I think it's very important that hash rate is distributed in all levels. I think home mining is important. Like, I'm here because I'm a Bitcoiner. And I care about every aspect of this network, of this protocol, of this system.

• 27:15Speaker 02

  So it's important that there's a proliferation of home miners. It's important that there's medium scale miners. And I do think industrial scale mining is important as well. Gives benefits that I think trickle down to all the other types of scales of mining. So I think the network is better off, even though I don't think, I think the risk of 50% to 60% of hash rate in China was overstated. I think we are much better off today because of that. And I think what we're seeing now with people understanding the value of Bitcoin mining and wanting to adopt that in jurisdictions all over the world, the network is just becoming more resilient. Hash rate is just becoming more distributed.

• 27:53Anthony Pompliano?

  When you start to think about that hash rate coming to the United States, I don't know the exact numbers, but the last ones I've seen are the US has about 35% of hash rate globally, 10% of the total global hash rate is in Texas alone. Is it a bad thing if all of a sudden, let's say, America had 50 or 60%? So basically went from, you know, 50 to 65% in China to now 50 to 65% in America? Is that an issue as well? Or is it something where, hey, look, it's naturally going to coalesce in a couple of regions and we'd rather it be in a democratic society versus maybe, you know, a different society?

• 28:26Speaker 02

  Yeah, I mean, I think it's going to 50% very quickly. When you look at all the capital that has flown into Bitcoin miners, particularly publicly traded Bitcoin miners in North America, and that capital being deployed in the form of a new hash rate within this jurisdiction, like, it's going to get to 50% very quickly. But yeah, I think, one, because it is a more democratic environment, I think there's much less risk of the government, for example, taking over all the hash rate and directing that for some type of attack. Even if they could take over 50% of the hash rate in the United States, that success, the likelihood of that attack succeeding is very low. You know, a lot of people talk

• 29:10Speaker 02

  about 51% attacks, that's just a probability to succeed. It's not, doesn't mean you're going to sustain that attack. It's still cost prohibitive. The Bitcoin incentive system still works. But also, the United States is a more federalist system where these different states approach Bitcoin mining a little bit differently. And the fact that, so you look at hash rate in the United States, but then see it's distributed over, you know, however, 10, 15, maybe even more states. I think that that is, you know, kind of further diversification within that jurisdiction. And Texas, like, I mean, great point. We believe, we build in Texas. We are 100% focused on Texas. I believe that is going to be

• 29:51Speaker 02

  the future Bitcoin mining capital of the world. And I feel secure about that because of how friendly and accommodating Texas is to Bitcoin. From the governor's office to the CEO of Urquhart to the local county judge that we work with in Mylan County in Rockdale, Texas, they are, they understand the value of Bitcoin mining and they understand the value of Bitcoin in general. And with that type of support, you know, I'm not, I'm not worried about that. And I think if anything, it is an example that other countries will see and want to follow as well. And that problem of hash rate, if you want to call it a problem of hash rate being 50% in United States or North America, I think just naturally solves

• 30:33Speaker 02

  itself over time. This is a growing, you know, this distribution of hash rate is like a growing and flowing organism that moves with energy markets and moves with the Bitcoin market. And I think the incentives are such that it'll be spread out in a secure way over time.

• 30:53Anthony Pompliano?

  Yeah. One of the things that we've seen a ton of conversation about mainstream media, critics, et cetera, is all the ESG FUD. And yesterday at the Bitcoin conference, Peter Thiel gave a talk. And in one part, he said, you know, when you think ESG, think CCP. And I thought it was a really unique way to kind of position this idea that folks are using what sounds like a good idea, right? This kind of virtuous, hey, we want to be good for the government, for the environment, we want to be good for governance, we want to have all these positive impacts in the world. But at the same time, those people will go home and they'll fly in a private jet, they'll go ahead and they'll use their refrigerator, right? They'll use their clothes dryer and all this stuff. And so it's a very

• 31:33Anthony Pompliano?

  complex issue. But how do you view, you know, we're mining Bitcoin, there's obviously a economic empowerment story there, there's a security story there. But there are people who are worried about the environment and some of the ESG issues, like, do you think about that? Do you just say, hey, look, it's all bullshit? Like, where do you come out on how you as an industrial scale miner should interface with some of these concerns?

• 31:58Speaker 02

  Yeah, we think about, you know, the ESG discussion that's becoming more and more prominent, prominent in the public domain a bit. But I think what's important is we and everyone, you know, don't get stuck in Just the E. There's a, there's energy, social and governance that goes into that. And all three of those are important. From an energy perspective, Bitcoin mining does have a positive impact. I believe it is help strengthening energy grids and is giving a better environment for all participants in an open and free energy market. And I was thinking like Bitcoin has this really interesting impact on people. People didn't think about money and how money works as much before they discovered Bitcoin. Correct.

• 32:42Speaker 02

  And then when they see, they see something, then it clicks like, wait a second. Everything I knew before is wrong. This is how it's supposed to be. And then I feel like it has this downstream effect when then, when the energy discussion comes in relative to Bitcoin mining, then people start to understand how energy markets and grids work. And they're like, wait a second, I didn't quite understand how that works before. I can now see how flexible loads are important here. So we believe from the ESG standpoint that we are having, and the feedback getting is we have a positive impact on, you know, the energy market ERCOT in Texas. We help capture surplus energy. Most people probably don't know that one third of all energy globally is wasted. It is congested, lost in transmission. There's no buyer.

• 33:27Speaker 02

  Bitcoin miners are the buyers of last resort for energy. So by being that buyer, we believe we provide a positive incentive in the market for creating generation sources. And with the different types of renewable generation sources in that market, it's important that there's buyers when there might not otherwise be. So, and we have the flexibility, I touched on, we, you know, we have deployed capital to secure a load of energy for a very long time. Like that's, that's a bet we took. We're going to buy energy for 10 years, no matter what, because we believe in our continued presence in Bitcoin mining. And since we now own that energy, we are able to provide that energy to the grid when it becomes strained, when supply is low and demand is high. Now that's the E portion.

• 34:12Speaker 02

  We focus a lot on the social portion as well.

• 34:17Speaker 02

  As the buyer of energy of last resort, we are finding surplus energy in rural communities that would not otherwise have these major industries in them. For example, our Windstone facility is in Rockdale, Texas. Rockdale, Texas, used to be the home of an Alcoa aluminum smelting plant and aluminum generation facility. One of those towns that was built around those two businesses being there. And in 2008, they were finally both shut down. That has a real negative economic impact on that town. So much of the employment and money flowing around there was gone. Now, what else would normally come to that? Who else would suddenly want to come in and build a 700-megawatt Bitcoin mining facility?

• 35:01Speaker 02

  A 700-megawatt load in the middle of nowhere? A Bitcoin miner is that answer. So Windstone has built that facility there, has employed now over 200 full-time benefited employees, and indirectly about 400 contractors work around that facility as well. That's in a city with a population of about 5,500. We have created jobs. We have put a face to Bitcoin mining, and we have brought Bitcoin to people who would otherwise not know it. Because this business is in their town, they become interested, they're trying to figure out what it is that all this economic activity is about, and it gets people thinking about Bitcoin.

• 35:42Speaker 02

  And now we have individuals that maybe didn't know what Bitcoin was a year ago and are now Bitcoin mining maintenance technicians. So we are in pursuit of capturing stranded energy. We are bringing jobs and economic opportunity to rural communities that would not, maybe not otherwise be exposed to that. And then finally, the governance standpoint, we care a lot about transparency. Well, as a publicly traded company, we have to be very transparent. But in addition to that, we put a lot of focus and effort on following the best principles of corporate governance and being even more transparent than would otherwise be required. We put out monthly updates about what's going on, how much Bitcoin we mine, what's constructed.

• 36:26Speaker 02

  Progress, how many people we hired last, how much Bitcoin we have on our balance sheet. We care about getting the information out there and letting the market, you know, make a decision for itself. So the ESG is a very hot topic right now. It is, it is actually amazing like how much attention it gets now than maybe even 12 or 24 months ago. But it's important to remember there's three letters in that acronym, not just one.

• 36:50Anthony Pompliano?

  It's also a really interesting thing because what you just walked through of taking the E, the S and the G. Kathy Wood, I've heard her talk about it, not necessarily around Bitcoin mining, but just Bitcoin in general. And in some way, I think the people who are using it, they're somewhat intellectually lazy, right? Because it's like, oh, there's energy being consumed, so let's use the ESG label. And I actually think that was part of Teal's point was people are using this as a way to create enemies or to create kind of a list of, hey, we don't like these things. But if you actually apply the framework to Bitcoin mining or Bitcoin in general, it checks all the boxes. And I think what the Bitcoin community is starting to do, but no one has really kind of had the courage or conviction to say it,

• 37:33Anthony Pompliano?

  is this is the most ESG friendly thing that could actually happen, right? Who else is driving renewable energy production and innovation, right? Who else is going out from a social perspective? Who is driving this type of governance? Like, there is no more transparent system than the Bitcoin market, right? And so when you start to understand some of this stuff, you realize like, maybe it's a marketing problem, more so than it is like an actual ESG problem of just, we have to talk about it in a way that those folks start to understand like, hey, I should actually be a proponent of this, not a critic.

• 38:02Speaker 02

  Yeah, I think, I think it is a marketing problem and the onus is on all of us in the industry to be out there on education and be out there in advocacy. We focus a lot on that at Riot. We, you know, we, we benefit alongside Bitcoins. So we care about, you know, telling the story about Bitcoin and telling the story about why Bitcoin mining is valuable. And I think that starts with, with that why Bitcoin mining uses energy. Instead of, you know, there are all these other, you know, the whole ESG discussion is important. Like everything I just went through, the impact that we have. But to me, the foundational part of discussion is making sure people understand why Bitcoin mining uses energy. It's not a design in efficiency.

• 38:45Speaker 02

  It's not because devs needed so much energy to be able to find the block. It is an incentive mechanism to drive trustless finance, to drive a decentralized payment system where individuals all over the globe can agree on a valid state of the ledger without having to trust each other. Energy is the mechanism that makes that possible. Humankind has improved its quality of life for all economic classes over the past century by using more and more energy. The correlation is undeniable. And Bitcoin mining, I believe, is the latest use of that. We are using energy, and actually quite a bit less energy than traditional finance systems,

• 39:30Speaker 02

  to give a better outcome, a better system, a more open and free system for everyone. So to us, yeah, it's important to tell that story to make people understand the mechanics of why Bitcoin uses energy. It's not intuitive to people at first. I mean, just like Bitcoin, it kind of blows people's mind. It's hard to wrap their head around it. So you get them that far, then you have to explain the Bitcoin mining component as well. But it's important people understand why this energy use is important, how energy markets work. And I think that will lead to exactly what you said. People understanding that Bitcoin mining, under the framework they defined as ESG, is actually, well, Bitcoin is one of the best, if not the best, ESG tools out there.

• 40:13Speaker 02

  And as a society, we benefit from that proliferation.

• 40:17Anthony Pompliano?

  Last thing I want to talk about is capital markets. Obviously, as a publicly traded company, you guys have been very, very effective at getting access to capital. And if you're an industrial scale miner, it's the lifeblood of your business. It strikes me as this probably wouldn't be as possible or would be much more difficult to have done what you've done in the private market. And so talk a little bit about public versus private and the advantages of not only trading publicly, but also having quite a large appetite for the stock price and also kind of capital markets for these types of Bitcoin miners.

• 40:47Speaker 02

  Yeah, so a real advantage that Riot has had over the years, and another thing that contributed to me seeing kind of this longer term vision during the dark days of what this publicly traded vehicle could be, was how much trading volume was around a Riot stock.

• 41:04Speaker 02

  People tracked very closely with the volatility of Bitcoin. There are certain investors that are looking exposure to Bitcoin, through public markets as opposed to just buying Bitcoin. You know, for whatever reason, they can't custody, they don't want to custody, what have you, and that resulted in a lot of trading volume for Riot stock. Our stock has traded over its total public float multiple times before, which is crazy. So that liquidity makes it significantly easier to raise money, particularly, you know, different types of equity financing. And different companies have seen that over, especially the past 12 months. We went from a handful of publicly traded miners to probably 25 companies,

• 41:49Speaker 02

  either publicly traded or looking to be publicly traded shortly. And they're all going after the same thing. Access to public markets to raise capital. Bitcoin mining is a capital intensive business. If you have more cash, you can buy more miners, you can mine more Bitcoin. That's the whole game right there. And as a private company, that's a lot more difficult. You know, you're maybe not necessarily going to get the same valuation. The pool of liquidity for investment is quite a bit smaller. But, you know, with being a public company, there's a lot more logistics that go into making that as well. Private companies don't have to necessarily disclose everything they have going on. They have more flexibility from that standpoint.

• 42:34Speaker 02

  They aren't preparing audited financials and having all these extra, you know, accounting and legal functions going on. But, so, you know, there's definitely pros and cons. But the benefit of having access to those public markets is pretty big. And that allows miners to scale a lot more quickly. But it is by no means a requirement. There are very, very large, successful private miners out there that are very smart and are very good at what they do. But I...

• 43:09Speaker 02

  Having access to the capital markets definitely, you know, if someone is trying to get there a little bit quicker, that's a tool, but you need to have that liquidity to be successful. You need to, and to get that liquidity, you need to have a good story. You need to actually be, you know, doing what you say you're doing, actually have a plan and the ability to execute. And, you know, the confidence from the market that you are going to execute. So when I talk about 25 publicly traded miners out there, I actually think much less than that are going to be able to execute over time. And I think that skepticism from the market is making life harder on many of those companies than they probably would have expected.

• 43:47Anthony Pompliano?

  Yeah, it's pretty incredible when you start to think about just how much capital has obviously gone in, but at the same time, the financial performance is there and you can see it reflected in the stock prices going from 55 cents or whatever to, you know, 79, $80. That doesn't happen because nothing's working, right? Like there's something here. And I think that as the public markets wakes up to this, we're going to see more and more capital investment, which then leads to more miners and you kind of get this whole positive feedback loop.

• 44:15Speaker 02

  Yeah, yeah, absolutely. And what's been really interesting, I see in the public markets now as Bitcoin has matured, as the concept of Bitcoin mining as a public investment has matured, there are becoming more and more tools for financing that business. So, you know, I tell people at Riot, we do two things. We're focused on two things to be successful. Financing our businesses in the most accretive terms possible and mining Bitcoin. Those are the two focuses of the things we do and everyone on the team contributes to making those two things happen. And because of the former, you know, I think people are,

• 44:57Speaker 02

  a lot of companies are starting to understand that it's not so, that those two components are important. It's not, it's mining Bitcoin, but it's also being very strategic with your financing strategy and the allocation of that capital. So I think we are going to start to see over, over time here that the differentiator is not only operational capability. But capital market strategy opportunity and that is being enabled by the maturity of this market and more and more tools coming out there for miners. You know, there's so many now Bitcoin related companies that offer different types of equipment financing, yield strategies, hedging strategies, the suite of tools is very rapidly growing out there for these Bitcoin

• 45:42Speaker 02

  mining companies and the most effective miners going forward are going to be the ones that are able to put those together and the ones that are able to convince new types of financiers, different types of debt financiers to enter the market and support their growth.

• 45:56Anthony Pompliano?

  Yeah. How much sleep do you get? One of our sponsors is Eight Sleep. Like this is, you're going a thousand miles a second. Like, are you sleeping eight hours a night? Three hours?

• 46:08Speaker 02

  So this is actually a perfect setup. I am an Eight Sleep user.

• 46:11Anthony Pompliano?

  Oh, shut up. Really?

• 46:12Speaker 02

  I love it.

• 46:14Anthony Pompliano?

  Yeah, same, obviously.

• 46:15Speaker 02

  Yeah. Sleep is very, very important to me. I aim for eight hours a night, don't always get there. But the Eight Sleep mattress for me has not only been comfortable, you know, it gets me at the right temperature, you know, my fiance, you know, maybe we each like different temperatures. So we have, you know, we could pinpoint that exactly. I like the smooth wake up. I like having the data on how I sleep. So that, you know, that's very important to me. And I do feel like I get a good amount of sleep. You know, it's, it's wake up till bedtime focused on Bitcoin, focused on Bitcoin mining and Riot. But then when I sleep, I'm pretty good till the next day starts again.

• 46:54Anthony Pompliano?

  Yeah, that's incredible. And then the facilities that you guys are building, you're managing a lot of folks remotely as well, right? From like an actual operational standpoint, how's that been?

• 47:04Speaker 02

  Yeah, it's gone very well. So Riot, I'll kind of give the breakdown of all our offices here. I live in Orange County, California, and we have an office there. We have an office, the company headquarters and the historical office of the company and Castle Rock, Colorado. We have, our biggest corporate office is actually in Austin, Texas. And then we have our facility in Rockdale, Texas, Windstone facility.

• 47:28Speaker 02

  That has over 200 people there. And most recently, we acquired in Denver, Colorado, a company called ESS Metron, which has been one of our biggest partners and suppliers of engineering, electrical equipment for our facility and manufacturing that as well. They help build our, our whole industrial scale immersion cooling infrastructure build out. So people all over, you know, all that adds together about, you know, 400 employees at this point. We try to be very mobile, going around the site, visiting different offices. Zoom is obviously an incredible tool. You know, I think we have been very

• 48:08Speaker 02

  effective at working remotely. But one thing we do value is that in-person time. And, you know, especially in this day and age, I think a lot of companies can start to maybe get complacent with the remote tools. There's, but there's no replacement for that in-person human interaction. That's why, you know, we're here in Miami right now. Being able to get together with so much of our team in one place around Bitcoin, I think is an incredible, you know, bonding experience and good for us culturally. So I'm leaving here. Next week, I'll be out at our facility and our offices in Austin, spending time with our team members there. So we have been, we have been, you know, working through the remote thing with multiple offices, I think successfully, but we certainly value the in-person interaction with each other.

• 48:52Anthony Pompliano?

  Yeah, I completely agree that the in-person is really, really powerful. Where can we send people to find out more about Riot, find you on the internet, or figure out what they could do to help you guys?

• 49:00Speaker 02

  Yeah. So, you know, first up, I think, is encourage people to follow us on Twitter, at Riot Blockchain. My personal Twitter is at Jason Les underscore, last name is spelled L E S, J A S O N, L E S underscore. This guy's got the Jason Elias Twitter handle and won't respond to my DMs to try and buy it from him. If you're out there in Indonesia, please respond.

• 49:24Speaker 02

  But you know, also riotblockchain.com and actually, you know, you'll get exposed to this from the Riot Twitter account, but the CEO of Winston, Chad Harris, his Twitter account, if you look up Chad Everett Harris, he posts videos and updates of what's going on at our facility in Winston all the time. He's an incredible leader in the company. He's built something amazing out there alongside the team that he's worked with to do that. And if you want to get bullish on Bitcoin, if you want to get bullish on Bitcoin mining, follow those social medias and you'll see that material and you'll see what's going on.

• 49:57Anthony Pompliano?

  Yeah, that's awesome. I love the on the ground updates. Like you guys do it, a couple others do it and you just see it and like there's something, I said this to somebody one time and they were like, you're an idiot, pump. But like, there's something when you see the machines running that you're just like, they're on our side. Right? Like, like those babies are literally fucking running and they're protecting purchasing power in a way that's never been possible before. And it's just cool when you see an entire, you know, essentially warehouse full of them just buzzing along and you're like, yeah, that's how this thing operates.

• 50:28Speaker 02

  Yeah. You know, the first time I walked into Winston, I walked into their, at that time, first of three buildings that had been built, each building about 50,000 square feet, walk in 70,000 miners every direction and you hear the fans, you feel the heat and you're like, wow, there's some, there's some Bitcoin mining going on in here. And now it's actually even kind of a different experience in our immersion cooled building. You walk in and it's a very different experience. You now have, you know, in our immersion building, about 23,000 miners and it is dead quiet. You know, I joke with people, we're going to turn this into a day spa, it's so peaceful in here. But it feels, it's motivating from another perspective because it's really cool just to see all these tanks minus submerged

• 51:10Speaker 02

  and immersion fluid, still doing the same way, it's doing the same thing, you know, running non-sis, trying to solve blocks, driving security of the network forward. And yeah, it gets you bullish on Bitcoin for sure.

• 51:24Anthony Pompliano?

  I love it. That's a perfect place to end. I appreciate you coming on. We'll definitely do it again in the future.

• 51:28Speaker 02

  Yes, thank you for having me.

• 51:29Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.