#1344 Greg Beard | Bitcoin Miner DESTROYS Bitcoin Halving Myth

Greg Beard is the CEO of Stronghold Digital Mining, the only environmentally beneficial and vertically integrated public bitcoin mining company. In this conversation, we talk about the macro situation of bitcoin and the US dollar, potential structural problems, bitcoin mining, impact of bitcoin halving, BlackRock and bitcoin ETFs, and tokenization. ======================= In this podcast, we dive into the revolutionary concept of PropyKeys, an application that allows anyone to mint home addresses all over the world on blockchain. PropyKeys.com is a part of the Propy ecosystem, that has a grand mission to make homeownership more affordable and user friendly. We will explore the journey of Propy’s founder and how this innovative technology provides benefits for homeowners, and for the real estate industry. Join us as we discuss the Propy’s latest collaborations, including Coinbase, and its new fun project PropyKeys. X (Twitter): @PropyKeys Website: Mint an address at propykeys.com. dApp: ⁠⁠⁠⁠⁠⁠⁠https://dapp.propy.com/⁠⁠⁠⁠⁠⁠ ======================= Get the freshest price feeds free for 12 months. Join Supra’s early integration program for zero-cost access to the fastest oracles and dVRF across 50+ blockchains: ⁠⁠⁠https://supra.com/pomp⁠⁠⁠. Earn $1,500 by referring Web3 projects to use Supra services. The projects get the fastest services for free, and you earn $1,500 for every referral. Learn more at the link above. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

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. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is with Greg Beard. He's the CEO of Stronghold Digital Mining. In this conversation, we talk about the macro situation for both Bitcoin and the US dollar, and why Greg has a unique view as to all of the doomsayers

• 0:44Anthony Pompliano?

  may not be correct, but there still could be structural problems. We also talk about Bitcoin mining, the effects of the incoming halving, the role of miners in the market, how the Bitcoin ETF and BlackRock's success may actually be something to be worried about, and why he sees tokenization being able to pull back some of the spotlight from artificial intelligence back into the Bitcoin and crypto world. Greg is a well-read, very interesting person, and today he shares tons of insights that I think that you will find very informative. I enjoyed talking to him, and I'm excited to hear what you all think. Here is my conversation with Greg Beard.

• 1:20Speaker 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.

• 1:44Anthony Pompliano?

  Today's episode is brought to you by Propy. Imagine a world where you could buy and sell your home, wallet to wallet. With Propy Keys, you can mint your home address and upgrade it to a real-world asset. This not only protects your home's title from fraud, but when you are ready to move, you could sell it through an NFT auction as well as through the traditional way. There's optionality here. Propy Keys is part of the Propy ecosystem. Their mission is to make home ownership more efficient, affordable, and user-friendly. Propy Keys is a fun entry point to placing title on the blockchain. Now, anyone can start their on-chain journey by minting home addresses via Propy Keys and staking them for profit until they are ready to sell their home. Visit propykeys.com to learn more. Again, that's propykeys.com to learn more.

• 2:29Anthony Pompliano?

  Today's episode is brought to you by Supra. If you're building anything in Web3 or crypto, you likely need Oracles and verifiable randomness, too. Supra's offering the fastest Oracles and DVRF free for 12 months at supra.com/pomp for a limited time. Supra delivers the freshest Oracle price feeds across 50-plus blockchains. Critical price levels or liquidation triggers? Beat your competition to the punch with Supra. It's as good as having the first mover advantage on every price update. Supra is more secure, easier to integrate, and runs on up to 12x lower gas per feed than other Oracles. So you'll want to bank on this 12 months free offer as soon as possible. If

• 3:10Anthony Pompliano?

  you're just listening and know any builders, you can earn $1,500 by letting them know about this deal. They can get the fastest Oracles for free for 12 months, and you get $1,500 for every referral. Visit supra.com/pomp to learn more. That's S-U-P-R-A.com/pomp.

• 3:31Anthony Pompliano?

  All right, guys. Bang, bang. I've got Greg here with me. Greg, you've got some very nuanced and unique thoughts when it comes to the macro environment. Most people in Bitcoin, and even in the gold world, you know, the world is ending. Go buy your asset today and prepare for hell tomorrow. Maybe it's not that simple. And so help us walk through, like, how do you evaluate the macro economy and specifically through the lens of people who are holding Bitcoin?

• 3:55Speaker 02

  Yeah, so that's a big part of the Bitcoin narrative is it's protection from the debasement of the dollar. And that's absolutely true, but that's a generational story. So, you know, when you do the math, and I've got, and I'll thank Christian on my team to put all of this together for me today. But hey, right now, we've got like 34 trillion in debt. That's, that number has doubled since Bitcoin was invented, you know, in 2008. We are running a deficit of 1 to 2 trillion a year now. And like even so, that we're, we're on the top 10 lists of the most levered countries. Like, the next one up is number nine, Italy. You know, Greece is on that list, Venezuela, Sudan. It's not a list of heroes.

• 4:39Speaker 02

  We just got downgraded, you know, by Fitch, our dollar, you know, government from AAA down to AA. So it's sort of, it's happening. But even so, over the next 10 years, our debt's projected to only go to 50 trillion. Our economy's going to grow to, you know, to mid 40 trillion. Governments receipts will still be there. So we're not, like, the currency isn't in trouble. So this isn't a rush to Bitcoin and a panic. But like, making a mistake, we have a long-term problem, but it's going to take a generation or two for that to play out. So and how does that play out? Well, hey, there'll come a day where the government

• 5:20Speaker 02

  will go and sell, try to sell bonds in the auction, and they won't sell. Or they'll have to go back and, and, you know, sell for a higher interest rate. So like, the cracks in the foundation is, you know, represent themselves as, hey, right now, we're taking, our government takes in around, you know, 4 and a half trillion a year. And interest is more than a billion dollars, a trillion dollars, rather, big, big numbers. So it's, it's, it's just not, it's not a, like, I'll still plead with our government, do not deficit spend. You know, I'm 52, we've had about four years in my lifetime when we haven't. Or at least, if you can't do that, make sure that the economy is growing more quickly

• 6:05Speaker 02

  than the, than the debt is growing. So that's, that is the way out of the mess is fiscal responsibility. But I think just given the political messes that we live in, you know, it doesn't seem probable. Like, Joe Biden is not going to be alive when the US debt crisis hits. So he's incentivized to, to keep spending, so that can impact him.

• 6:31Speaker 02

  I'm 52, as I said, probably in my lifetime, we'll have a crisis. All of this, these deficit spends will cause a crisis. But I think if you're interested in Bitcoin, hey, that's a long term. You know, what I would describe as a generational issue.

• 6:48Speaker 02

  And it's happening, but I think the Bitcoin story works better for countries that are even less responsible than the US. You know, I was in Egypt over the Christmas break. They're suffering with 35% inflation. And I think they're more of the norm. So I think in a way, hey, while yes, the US is failing, you know, our, all the citizens by deficit spending. Hey, we're sort of, and we're on the top 10 list of most levered, right? So we're not looking great, but it's not a crisis yet like it is elsewhere. So it's a, uh, but I think, hey, what's driving like the Bitcoin price?

• 7:31Speaker 02

  I think every, everyone you have on your show talks about like the macro and the debasement of the currency. And that's true, but hey, this, this is going to take a long time to play out, like decades and decades to play out before we have a, a crisis related to debasement.

• 7:48Anthony Pompliano?

  When you, when you wake up every morning, what are the things that you look at? Either metrics or trends in the traditional financial system. So not Bitcoin or mining related, but like, what are the things that you kind of check to see, hey, how are we doing today? And are things getting better or worse?

• 8:04Speaker 02

  Yeah. So the things that are pushed on us are, hey, where is the stock market futures that upper day? We didn't have an upper day down, you know? What, what's pushed on us is what is the Fed doing? Will the Fed ease, you know? And we all know the narrative, hey, we, we had them, you know, which they tend to do. They had, we had multiple, you know, what, seven raises and quickly, you know, try to tamper down inflation. And actually, when you look back at Fed behavior, that's how they normally do it. You know, they don't go 25 basis points and wait a year to go another. They hit you pretty hard and that's, so they, they behave like they normally do. If you looked at past Fed actions. So now you're saying, hey, the, the words being pushed on us is what will the Fed do? When will they ease?

• 8:48Speaker 02

  And obviously then look at inflation data that will then inform you know all of the pundits for what the Fed is likely to do. But I'm running a Bitcoin mining business, so I can't help it but to look at Bitcoin, look at hash price. That's what most impacts my day to day business.

• 9:10Anthony Pompliano?

  And when you begin to think about kind of this macro environment, we sitting in the United States tend to think of the US economic situation. How much do you think the international markets or specific countries internationally where you know currencies are being debased at a faster rate, there's inflation rates that are measured in you know kind of high two or even three figures. How much of it is a you know US story versus maybe internationally this is a common problem that people are facing and some are dealing with it better versus others?

• 9:44Speaker 02

  You know, I think the best way to answer that is to say that hey, we're still really in the early days of Bitcoin adoption and use and just the utility of Bitcoin today is it's more has more utility in countries that are debasing their currencies that are suffering with high inflation. But the quantum of dollars in our retirement system, and I'll go to an example of like of what I think the impact of the ETFs is likely to be or BlackRock is likely to be on Bitcoin price. But I would describe hey, there are a myriad of issues that I would say are kind of ripples on the water, including yeah, countries like

• 10:29Speaker 02

  Egypt or Nigeria or pretty much you know, the list is long. Most countries have no choice but to print more than they take in. But that's, that's just, that's ripples on the water versus the wave of US ETF money potential, the wave of US retirement savings potential, and still just the relative scarcity of Bitcoin. So like, my example there is sort of, I guess, going, hey, what will Bitcoin price do? And like, my answer to that is, you know, as I said, it's a long wait to wait for the dollar to crash. We don't want it to crash anyway. It's not good for Bitcoin, not good for the world if the dollar doesn't do well. So I can say Bitcoin can do well,

• 11:13Speaker 02

  even if the dollar does well. But in the short run, the wave is really related to BlackRock. So they've got 17 billion now in their ETF. It's three, three, only three months old. We're about to have the halving, and the halving means we'll only be making, as an industry, 450 coins per day. And that's, that is the supply. So this is a, there's a bunch of noise. At the end of the day, this is a supply demand problem. We're capped at 21 million coins, and we're only supplying 450 new ones a day. If BlackRock, next month, they go from 17 billion to 18 billion, that is more than 500 coins a day of additional

• 11:55Speaker 02

  demand from BlackRock alone. So from what I've heard, and the way I would behave about them, is to be very measured. It's like, hey, they are going to end up with the biggest Bitcoin ETF. Grayscale is shrinking, BlackRock is growing, so they can rest easy knowing they have the market, and managing almost 10 trillion. The, the size of their ETF growth should be measured, like, meaning they shouldn't go out to all their clients and have a big push to try to create, you know, 10 billion in a month of additional demand. That's, there isn't the supply. You know, we only see about, less than 2 million coins now trade on exchanges. I just don't know, the coins aren't available, right?

• 12:39Speaker 02

  So they're gonna, if they were to do that, they would buy themselves, cause a price bubble, hurt their own clients, probably have egg on the face with the, you know, the regulator that, that let the ETF through after almost, you know, 10 years. And so if, I, I think if you think about Bitcoin price in the short run, the wave is ETF capital and how these guys behave in terms of controlling their, the, the spigot of demand, because the supply is fixed and known.

• 13:12Anthony Pompliano?

  What, what do you think are the downsides if BlackRock, um, you know, kind of didn't slow play this and slow play sounds hilarious when you say it's a three-month fund with, you know, $17 billion in it, but in, in terms of maybe, let's just talk about, uh, you're an asset management firm, there's people knocking on the door, obviously you probably can slow play how much outbound sales and marketing and stuff you're doing, but like, what are the downsides if everyone just says, screw it, I want as many assets as possible, then like, let, you know, let's go?

• 13:40Speaker 02

  Yeah, I think, I think because the supply Bitcoin isn't there and those that have it, you know, those that, that have it trading on exchanges, that's obviously more liquid. If you, if you added a lot of additional demand, you're going to see like really outsized upward price movement that then create the potential for a bubble. And I think bubbles are bad, you know, in any industry. And it'll, the implication would be it could, it could lead to additional regulation. If a bubble is burst, you'll have then, you know, the investigations like, hey, what happened? Why did Bitcoin go to, you know, 500,000 a coin, then, then retreat back to 100,000 a coin, you'll have a bunch of unhappy investors that, that participated

• 14:25Speaker 02

  in that, um, a fresh regulatory look. It's just a, it's a bad idea to create a, a demand related bubble, if you can avoid it, right? And of course you have, you know, BlackRock isn't the only ETF, like many others are scrambling and doing their best to create, uh, demand on their platforms. But it's just, it is tough to compete. With the largest asset manager in the world.

• 14:52Anthony Pompliano?

  So let's talk about miners. Obviously, the business that you guys were in on a day-to-day basis, and you probably think maybe the most about. There's some similarities to what the asset managers have to think about. Like, that cut from 900 Bitcoin a day to 450 doesn't just affect the asset managers, doesn't just affect the investors, it also affects you all. And so, how do you think today about kind of where miners are and what is the impact of the halving coming up?

• 15:16Speaker 02

  Yeah. So, hey, we're different than most miners in that we own our own power assets and own our own data centers. So I think if you're, and we call that vertical integration. I think other miners will own their mining fleet, might own their data center, might not, but the vast majority, like maybe only one or two others own their power assets. And so if that's your circumstance, like your revenue is about to be cut in half, because that's what the halving means. The reward will go from 900 coins a day down to 450. Maybe we'll see a decrease in the number of people competing for those rewards.

• 15:58Speaker 02

  So we could see an increase in hash rate related to that. We're having a side on hash rate in a moment. But it really means you have two choices. One is you can upgrade your fleet by buying more efficient machines to get more hash rate out of your existing power supply, or you can try to drive your cost structure down as low as you can by lowering your cost of power. So this is, there aren't that many variables. So it's really just two, as I said. So what we're thinking about is both. We're both working on ways to upgrade our fleet, to make it more efficient, to get more hash rate out of our existing plugs. And then we are working on a variety of ways to drive down our cost

• 16:38Speaker 02

  of power. So in our model, we are in PJM, we own two plants in PJM. Interestingly, PJM has among the cheapest power for the next two years. So if the price of power is so low, which it is right now, that we can buy the power from the grid cheaper than we can make it, we'll shut our plants down and buy that power from the grid. In fact, it's cheaper than ERCOT for the next two years on average. So it's, you know, we are positioned to be one of the lowest cost miners just based on grid pricing. If the cost of power is high, like so high, we can shut down the data center and sell power to the grid.

• 17:22Speaker 02

  So last year, you know, I was quite proud of ourselves. We shut down the data center a few hundred times because the economic benefit to selling power to the grid was better than mining. And then everywhere in between, we generally will, you know, will run the data centers and either have the plants running or not. So the ways we can drive the cost of power down in our space. One is we have a very interesting carbon capture project that we announced late last year. And that's really a result of, as a part of our process in making power, we are reclaiming waste that was left behind by hundreds of years of coal mining.

• 18:06Speaker 02

  It's the waste that was left on the surface is toxic. There are like 800 piles, I talked about this on that last time we met. And it turns out that because we have to add crushed limestone to the fuel mix to take out the sulfur emissions, that creates an ash that is beneficial use ash. So we can use it as fertilizer, it's non-toxic. It has in it calcium oxide, which acts as a sponge in pulling carbon dioxide from the environment to create calcium oxide.

• 18:42Speaker 02

  So by weight, we can, we can capture, you know, just slightly more than 10% by weight of carbon from the air. So if we make, you know, 100 pounds of ash, we can capture 10 pounds of carbon dioxide through direct air capture as a result of the carbon sponge properties of the ash. So the net result is we will end up with a, you know, as we roll this project out, it's going to lower our net cost of power. And in the Bitcoin mining space, the only, you know, you have Bitcoin price, you have hash price, and you have the cost of power. And that's really, and then you have the efficiency

• 19:25Speaker 02

  of your machines, and that will, they will dictate what your margins will be. So we're pushing on, you know, cheaper, cheaper, lower emissions types of fuel. We're working on upgrading our fleet, and we're working on creative things like carbon capture. Ultimately, to lower our cost of, of power.

• 19:45Anthony Pompliano?

  How do you think about, uh, capital allocators judging or kind of making a decision between, you know, I have $1, I can go buy Bitcoin direct, I can buy the ETFs, I can buy, uh, Coinbase or MicroStrategy and kind of like indirect exposure, levered exposure, uh, or I can buy a miner. And it's like, what do you think are the, the pros and cons of miners in those comparisons?

• 20:07Speaker 02

  Yeah, so a miner is going to have an, an outsized benefit from Bitcoin price running than buying, uh, on the, in the spot market or buying Bitcoin directly. So we'll have a lot more margin expansion, um, with a higher hash price. So just as a, you know, reminder for everyone, Bitcoin miner share the, the mining reward among the whole group, and we all, we pool our, our hash rate and then get our pro-rata share of the work that would contribute to the pool. Um, and there's a big deal about, you know, the halving, but in reality, the, the hash, the amount of, of hash rate globally, that's increased, you

• 20:48Speaker 02

  know, four or five times since the last halving. So we're already, we are already sharing the rewards, um, you know, they've been cut by a fourth or a fifth, just by, uh, a lot more miners competing for those rewards. So the, the halving is a, you know, yet another, um, diminution in, in sort of the, the economics of mining, but that still, it still works well because the hash price, the Bitcoin price has gone up enough to make it a, a worthwhile endeavor. Um, but I think if you were to believe that, hey, if you buy Bitcoin on the belief that it's going to go up, you will see more, you know, a, a pretty dramatic

• 21:29Speaker 02

  margin expansion for the miners that should lead to a, an outsized, uh, gain in, in mining stocks versus what you just get from owning, um, Bitcoin directly.

• 21:41Anthony Pompliano?

  And when you begin to think about, there's the block subsidy, there's also transaction fees. And at times we've seen that become pretty meaningful. At other times it's been negligible. How do you think about transaction fees moving forward? And is that something that you can kind of model out and depend on as a business? Or is it more so that's like icing on the cake and hey, if fees spike, it's great to have, but we're not going to base our business on it?

• 22:06Speaker 02

  Yeah, like looking backward, that's how we benefited from the spikes that occasionally happen. But on a, you know, the future, it will have more havings in it. And so I think we're going to be driven to more efficiency. But transaction fees will become a bigger percentage of the economic offering for the work related to mining. So I think it has to, it has to be considered more in the future. But looking backward, it's not something that, that I think most modeled in as a, as a big contributor to margin.

• 22:42Anthony Pompliano?

  Another topic that everyone seems to be very worried about or constantly talking about is the economic, or I'm sorry, the environmental impact of miners. And some of this is like, what power are you sucking in? Some of it is like, what are the emissions on the way out? And then a whole host of things that, you know, my words, not yours, kind of made up concerns that frankly are just like a waste of everyone's time. But what do you think are maybe the environmental topics that are important? And you're like, hey, you know, actually we spent time thinking about these and we do think that they're fair things for us to be held accountable to. And then how do you think about, you know, maybe the areas where, look, everyone's talking about this stuff, but we don't see it actually playing out in reality?

• 23:23Speaker 02

  Yeah, so I think, I think first, first off, if you looked at the, at the top, you know, five or even 10 miners in the world, the projected growth rates of hash rate imply another two and a half or three gigawatts of power need in the next like 18 months to two years. And that's a, that is a tremendous amount of power. You know, that's a

• 23:49Speaker 02

  And my view is it's improbable that all the predictions of all the miners come true and they'll be adding that hash rate because it is it's a lengthy process to build data centers, it's a lengthy process to get things permitted and built. And Bitcoin miners are the best data center builders in the world, the fastest, the cheapest. And so I think, you know, I think that's a that we'll probably see a, you know, a merge between those building these big data centers and Bitcoin miners at some point. I think we've seen it a little bit already, but that's that's part of the future. But I would sort of flip the answer a little bit by saying, hey, we as a country, we don't dictate the highest and, you know,

• 24:34Speaker 02

  if something's perceived to be bad for society, we don't say, well, hey, we're going to tax your power differently than we tax someone who's sort of good for society or deemed to be good for society. Obviously, hey, those listening to your podcast probably believe that Bitcoin is good for the world and society. But, you know, hey, should we be taxing the power for data centers that run social media servers or distilleries or casinos? Like, it's a it's a dangerous thing to do to start to have the, you know, to have government judge who they say is good and bad and then charge a different rate for power. It's a free market

• 25:15Speaker 02

  system. And, you know, those that that want to participate in buying power from the grid, that's a a good thing. And I think that those that are making power have benefited from the build out of of the demand from Bitcoin, a benefit from the continued build out in data centers that are, you know, that's one of the biggest growth businesses in the in the country now is to build out of data centers, like unrelated to Bitcoin. But Bitcoin is different in that it's decentralized. So I think if you were to call Google and say, hey, Google, we want to build a data center. Do you mind if it cycles off a few hundred times a year to benefit the stability of the

• 25:59Speaker 02

  power grid and to help suppress pricing in the grid? And they would say, no, I want to use the power regardless of the price all the time. Because, you know, my customers don't want to have intermittent service.

• 26:13Speaker 02

  Bitcoin miners can easily stomach intermittently turning off the data center. So like we turned off one of our data centers a few hundred times last year in response to high grid pricing. Texans, I think, do it even more often than that. You know, I was with one of my, you know, peer CEOs last week. And he said, I bragged about 200 times, I was like, hey, how about 1,000 times? And so the effect of cycling a data center, even, you know, you don't have to take it to dark, just put the miners in efficient mode or put them in a sleep mode so they're not like rapidly cooling and degrading the equipment.

• 26:57Speaker 02

  The impact of that is the grid, even upon just a price response, will end up being much more stable if that grid has access to instantly, you know, 50 or 100 megawatts from a data center cycling down. And it's not talked about enough, but the impact of solar and wind, which are both intermittent sources of power. It's a, I'm for it. It's greening the planet. That's, that's a, you know, it's heavily subsidized, but it's still, you know, a carbon-free source of electricity.

• 27:40Speaker 02

  To make a, to make the grid function like it function with a baseload fossil fuel, you need a, like a grid scale battery and grid scale batteries are dirty. They don't last long. They're dangerous because if they catch fire, I'm going to put that out. And they only last a couple hours. And so I think a, you know, without thanks and even without any really recognition, Bitcoin miners are already acting like grid scale batteries. And the grid can't tell the difference. All the grid knows is, hey, we had a spike in the price and all that within seconds, a lot more power became available. And that's what would happen with a battery and that's what Bitcoin miners are doing.

• 28:25Speaker 02

  And it's stabilizing the grid and that's to the benefit of, of society in the form of lower power prices because we respond to those prices and we supply that power to the grid. And it else isn't talked about, like a much bigger impact than Bitcoin mining on the price of power for consumers is the forcing of renewable energy onto the grid. It's just, it's, it is, it's not, when people say, hey, solar is on power on par with, with like natural gas in terms of, of cost. Well, it's not because it's not apples to apples. For you to, you know, if, if, for you to recreate a hundred megawatt power plant

• 29:07Speaker 02

  in the solar world, you would need a giant battery and probably a, you know, a gigawatt of power to feed the battery to run at night when the sun isn't shining. So like we've been fed a story that's apples and oranges, but I think the tell is that if you looked at the most renewable heavy grids in the world, they are also the most expensive power in the world. And that's just because you need effectively two grid, you need two sources of power. So you're doubling your base. And it, it results in, in, in a more expensive power pricing. So like a man's answer is really, hey, we're, we're already.

• 29:50Speaker 02

  A solution for a problem that we have created by the introduction of the intermittent sources. So Bitcoin mining can be an intermittent user and an intermittent curtailer. And I hope that that's how it can be viewed because that's that's a way to prevent. You know, we're going to get more brownouts and blackouts, the more solar wind you add. And so I think you really ought you want you want to have Bitcoin mines in in those areas where you have a lot of solar wind. It'll help stabilize the the marketplace.

• 30:28Anthony Pompliano?

  Another aspect is carbon and being carbon negative. Talk a little bit about how you all see kind of the environmental component around carbon kind of ingestion.

• 30:39Speaker 02

  Yeah, so I think we we clean up.

• 30:44Speaker 02

  Waste piles. So here's what happened. So before 1975, coal miners could they would they would mine the coal, bring it up from beneath the surface. They the good coal, they would take and turn it into power or use it to make steel. And the marginal quality stuff, which is about 30 or 40% of what came out beneath the surface, was left on the surface. And that is highly polluted. It's it's having sulfur, you know, mercury, all the cancer, the truly cancer causing stuff.

• 31:17Speaker 02

  Is is left on the surface that that is causing a massive amount of groundwater and and pollution in Pennsylvania, which is our biggest sort of coal mining state. And there is no, you know, the youngest of these piles is about 50 years old now. So there is no other solution to clean them up. If you leave them as they are, the methane emissions. Which are, you know, methane emissions are multiples of of carbon in terms of greenhouse gas effect. It's, you know, up to 50 times more impactful than carbon when released into the air. So leaving them on the surface is a greenhouse gas.

• 31:58Speaker 02

  Plus like of the 800 piles, maybe more than 50 of them are on fire right now. So they're burning, you know, without emissions control. So we, we are carbon negative versus leaving the piles in their current state as they are. Um, so we, we go in with, you know, we partner with the Pennsylvania DEP to identify these sites. We get grants to clean them up. Uh, we earn renewable energy credits to, you know, when we create the power as a part of the, the, uh, the benefit to clean up the piles, we, we get that. Um, and so, yeah, our, our carbon negative, um, role is really just a result of the waste that we're cleaning up being so bad

• 32:44Speaker 02

  that it still makes sense to burn it with emissions controls than it does to leave it on the surface. And that's, that's, that's not including the benefit to the communities when they, you know, right now, you know, you'll go to a neighborhood and they'll have a, you know, a row of houses backing up to a, you know, a hundred acre waste site. It's just, it's not a, uh, it's not kind. The mine is gone, the companies are gone and the state is left to, to clean up the mess. And so that's, that's really what we're, what we are, our task with doing. Um, and we have a purpose built facility. This is not a thermal coal plant, the things that we run. These are purpose, purpose built plants,

• 33:26Speaker 02

  specifically designed to clean up this legacy problem. And we've got like another 15 or 20 years left and all the stuff will be cleaned up. So, you know, if we end up, you know, not doing it, I think this, this waste will be here and the water pollution, air pollution will be here for another, you know, 500 years. It's just, there's no other way to do it.

• 33:46Anthony Pompliano?

  Do you guys get incentivized to do the cleanup? Or is it pretty much, uh, hey, we, there's like a, a market force that incentivizes you by it's cheaper or more efficient or something?

• 33:57Speaker 02

  Yeah. So the, yeah, the market force is we, we, um, we sell the power into the market or use it to convert to Bitcoin. Um, we get renewable energy credits, which is a market-based system that Pennsylvania set up, but that's still a system that if, you know, if government didn't create the system, then they wouldn't get that benefit. And we get a small benefit.

• 34:19Speaker 02

  Just on per ton for cleaning up the waste. But I'd say the big benefit is to the communities. Like I think if you go to our website, you'll see the before and after pictures. And you're sort of, you know, they're ashamed that this country industrialized and left what we left behind. Um, so it's important that we, that we clean up the mess.

• 34:42Anthony Pompliano?

  Now, talk a little bit about, um, kind of Bitcoin and, um, the amount of Bitcoin you're able to mine based on the current hardware. And it seems like every couple of years, hardware and machines and even the software that, you know, is going to run. We get these like efficiency and innovative gains.

• 34:59Speaker 02

  Yep.

• 34:59Anthony Pompliano?

  Should we expect that to continue? Is there some sort of like mental model you all use when thinking about, you know, hey, here's the fleet we have today? How often are we going to replace this? What does that cost look like? Just how do you kind of think of capital allocation when it comes to, uh, the hardware and the fleet?

• 35:13Speaker 02

  That's a great question. So right now we're running about four X a hash. If we were to replace our fleet with, um, brand new machines that are the most efficient, that have a higher hash rate per, you know, uh, power used, we could be at seven X a hash. So that's, that's sort of our, our potential in today's terms. And of course, I think I would expect efficiency gains to continue. Um, as long as it's a, as long as mining stays an economic business like it is today. Um, and as I said, hey, the other way to make the same money is to just drive your costs down. So like if you, I think if there's a surprise coming to the market, it's if you looked at where mining is likely to go.

• 35:57Speaker 02

  It's in my view, it's likely to go in jurisdictions where power is cheap. You know, energy is abundant. Um, and jurisdictions where people are looking to get out of dollar dominance. Um, that would be a popular thing to do. So like, hey, well, we're going to find out that Russia has been, been mining and growing their mining activity. I would be surprised if the answer is no. You know, I think they're, um, I, I hear like China has, has quietly, you know, started to add mining again, even though it's, it's banned. Um, the Middle East, I think it's, it's known publicly that they're growing, you know, mining activities.

• 36:40Speaker 02

  And that's not a, we should not be surprised by any of those. So I think it's a, um, I would expect, you know, global hash rate to continue to grow, including in places outside the US.

• 36:55Anthony Pompliano?

  Now, when you look at those places, are there geopolitical concerns or should we want competition? And I go back to one point, China had, you know, 60% of hash rate. I think people are like, ah, it's China, they have 60%. We don't like that. They kind of self-inflicted wound, bunch of people unplug the machines. Now the US has, you know, upwards of 30, 35 plus percent, 10% in Texas. Like, could the US have too much hash rate? You know, if we got to 50 or 60% in the US, would that be concerning? And how do you just think, David, about the geographic, both competition and also, you know, partnership of a distributed or decentralized system not being too concentrated anywhere?

• 37:38Speaker 02

  Yeah, so it's obviously, it's important that it stay decentralized. That's, that is the, you know, the, the key to the attractiveness of Bitcoin is it's, it is the largest decentralized network in the world. I still, as, as much as we all criticize sort of the, the US, we still have the best capital markets in the world. We still have rule of law here. And even if in New York, it occasionally takes a detour. But I don't, I don't think that, that a concentration of mining in the US would, would constitute a threat to the network. So I, I would not be, you know, in spite of what, you know, the occasional letter from

• 38:23Speaker 02

  senators that we all get, I don't, I don't predict a, a ban on mining here, or a, there is no like imminent tax that, that would, would cause mining to be unattractive in the US. And I don't think that would change. But I, I think it's, it is because it's a truly global.

• 38:50Speaker 02

  Store of value and we want to see, you know, I'd like to see activity of use in Bitcoin and, you know, around the world. I think it's, it's good for adoption, good for awareness.

• 39:06Speaker 02

  And I think you can also benefit other power grids.

• 39:10Speaker 02

  You know, I think I was, uh, like I, I saw a preview of a movie called Dirty Coin. I don't know if you've seen that one yet. If they're mining in Africa and using the sort of excess power at night. Is what subsidizing like micro grids for African communities that wouldn't get access to that power otherwise. So, yeah, everybody said that that's a relatively small component, but, and, and you, you've obviously have heard about, you know, stranded gas, being converted to Bitcoin, being converted electricity than Bitcoin. So that's a global thing. So I, I'm for a, a global

• 39:55Speaker 02

  product, global awareness, global utilization.

• 40:01Speaker 02

  And I think it's generally good for the ecosystem.

• 40:05Anthony Pompliano?

  And then what are the areas that maybe people are not talking about in mining, but you think are really important? They could be internal operations. They could be, you know, how these companies are being funded today, or it could even just be like market developments over the next 12 months that, you know, you want to wave a flag and say, hey, everyone pay attention to this, even though you're not yet.

• 40:23Speaker 02

  Yeah. So obviously the, it's the allocation of capital question. It's do you, you know, I, I think there probably isn't quite enough transparency with the public market as to, hey, is it a good investment to buy a new machine? Or is it a better, or is it better to, to have the old one run with lower margin? Like what's the real return on, on capital that we have?

• 40:48Speaker 02

  That we could, that we can achieve in this business?

• 40:52Speaker 02

  I guess going back to the, the, the predictions for what people are, are expected to grow in the next couple of years. You know, to add almost three gigawatts of power. That, that's, that's going to take, you know, it's, it's, it's a five to $10 billion investment for the industry to grow. As it's projecting it's going to grow and that's between power, data centers, new machines. And I guess the, you know, what I'd like to see, you know, for all of us miners is just the proof that, hey, this is a good return on capital. Does it make sense to use,

• 41:37Speaker 02

  you know, internally generated cash flow to buy those machines? Or should you issue more stock to buy the machine? Should you issue debt? Like, what's the best way to to grow?

• 41:47Speaker 02

  I think a few guys are sort of growing for growth's sake and being silent on whether or not this is a positive return on invested capital. And so I think that's what I would hope to see is a just the discipline. A capital can be scarce. And I think, you know, discipline and transparency is what I would hope we can see.

• 42:10Anthony Pompliano?

  Talk a little bit about tokenization, which I know is something that you thought about. AI took the, you know, kind of center stage after crypto had 2020, 2021, AI kind of got 2022, 2023. But you think that Bitcoin plus some of the work that's going on in tokenization could potentially bring back the spotlight?

• 42:32Speaker 02

  You know what? That's right. I thought that. And then and BlackRock had yet another announcement on sort of a tokenization fund. And like, we're going to see like the low hanging fruits. Like, hey, who doesn't want to buy a minority share of a sports team? Like, you know, sports fans, that's that's easy. Who doesn't want to buy a, you know, a tokenized portfolio of real estate or aviation leases, like any financial project

• 43:01Speaker 02

  that that can be securitized, can be tokenized. But like even beyond that, I got when I, you know, my first job was at Goldman Sachs in 1993. And the big theme of that, like the annual employee get together was derivatives. That's what, you know, all the bankers were said, hey, here's what a derivative is. And your clients may not know that they need it, but you know, they, if they want to hedge a certain risk, they can, Goldman can, could then create a new product for just that, that client. And we'll sell, you know, break out the risk and sell to a different client and Goldman being in the middle could create a new market.

• 43:45Speaker 02

  I really view tokenization as the next step in how to make derivatives available while really shrinking the role of the middleman. And so like these example, that would be like, I think the first insurance company. To say, hey, I wanna, I wanna go underwrite a, you know, a, here's, here's a basket of insurance risks. And I want to sell that to the, to the public or to other investors. Tokenize it. Cause you can then, you know, the insurance company will say, hey, here's the, here's the product. They'll essentially be the, that would have been the underwriter. They can make their fee for underwriting. But the insurance company doesn't even need to own that risk anymore. They can tokenize it.

• 44:27Speaker 02

  And, and share it and there can be a return for that. So I think, I think we're going to see like the low hanging fruit. Of things that can be securitized to be easily tokenized. But I'm, I'm actually more excited about the coming change to, you know, what I think will be almost every industry. For what it can mean to get access to less friction. Um, once you do a deal underwriting.

• 44:55Speaker 02

  Which I would say is just next generation derivative transactions without the middleman. That's, that's what I think, you know, and that'll, that'll be a, a 20 year benefit. To.

• 45:08Speaker 02

  And evolution of the, you know, fintech. So I think it's, yeah, as you, I'm sort of disappointed to say, hey, we sort of crypto had its moment in the sun for about, you know, an hour and a half. But it's far from like, that excitement is not misplaced. It's gonna, it's still gonna show up in industry.

• 45:27Anthony Pompliano?

  The, um.

• 45:29Anthony Pompliano?

  Beauty of Bitcoin is that it was adopted by individuals first, then kind of, you know, financial organizations, corporations, eventually nation states. Do you think tokenization falls the same path, or is it more top-down, where you need the financial organizations to do things that either are more, you know, kind of financial, or they are more regulated?

• 45:49Speaker 02

  You know, the easy way is would have to be top-down, right? So, and I think there'll be margin for the first mover. But hey, once the first mover happens, like in insurance, in my example, everyone else is going to be required to do the same thing, because it's going to impact cost of capital. And that insurance is a cost of capital business.

• 46:10Speaker 02

  And so it's, I think we'll have, in this, in this instance, which I know is different than, than, you know, traditional crypto, it really, it can be easily dominated by incumbents. That I think will find a, a good reason to enhance margins for doing this. It's just a, you know, when, when the first guy goes in the industry, it'll be a race.

• 46:34Anthony Pompliano?

  And then, when you think of your company and kind of the team and how you all are positioned, when you talk to folks, like, what are the things you think give you an advantage in the market? Or you say, hey, look, this is where we really think we've got like this wedge or advantage, and we're going to try to exploit this throughout this bull market?

• 46:51Speaker 02

  Yeah, so that's a great question. So, hey, we're, we're the only vertically integrated one of scale. And so, hey, we're, right, right now, at one plant, we have it, we have it idled while we're buying power from the grid, because power is so cheap. The other plant, we're making power cheaper than we can, can buy it. So we're, you know, we have that, that arbitrage to make. So I think we're the most effective

• 47:15Speaker 02

  power pricing arbitrage vehicle of the miners. That makes us different. I think we have,

• 47:23Speaker 02

  unfortunately, you think the market is really just valued, you know, scale and growth rate more than, than, than that ability. So I think we've, you know, we have not benefited from a stock price standpoint, like we, we think we should have. I think, I think people don't really understand our asset, or a model as well as, as we'd love them to. But I think as a market, there, there are more than 20 Publicly traded Bitcoin miners today. And my expectation is that post having, we're going to see consolidation. So it's a, um, you'll have those, you know, being a public is an expensive, uh, way to go, you know, as, as an enterprise.

• 48:07Speaker 02

  Um, so to the extent you can see consolidation and synergies between companies, I think I would expect to see that this year.

• 48:16Anthony Pompliano?

  And then if we look back, I don't know, maybe in three to five years and you guys execute how you, you know, plan to execute, what does that look like in terms of market dynamics? Is there a lot of consolidation in the industry and you guys would eventually look to kind of buy up other firms as part of that consolidation? And maybe you don't think there'll be consolidation like, like, you know, you get credit and we'll give you the benefit of the doubt, you're going to do everything you say you guys are going to do and your roadmap and everything executes perfectly. How do you interact with the rest of the market?

• 48:49Speaker 02

  Yeah, so if, if we, if we execute well, we're going to drive our cost of power to, to, you know, to a, a super low point where it'll be, it'll be clear that even with, with less efficient machines, that we'll end up with a, a, uh, better margins than what's possible elsewhere without having to constantly reinvest new capital in, in more efficient machines. So that's, that, that's the, so that's, that's the best thing we can do is drive our cost of, of power down, which we have a carbon capture project we're doing to do that. As I said, we're working on new fuels that can also have that same impact.

• 49:30Speaker 02

  And so I think that's the, our best way to execute, which is different than others, is we have the ability and levers to drive our cost of power down, um, given that we make it ourselves. So that, that, that would be a, an achievement. And, and with that, hey, we probably will continue to upgrade the fleet and it just makes sense to, um, to push on that front as well.

• 49:53Anthony Pompliano?

  Got it. Where can we send people to find out more about you, about Stronghold and what you guys are doing?

• 49:59Speaker 02

  Yeah, so I'm on LinkedIn, Greg Beard, and Stronghold Digital Mining has a website that has a bunch of great case studies and all of our publicly, public information as well. So yeah, please have a look.

• 50:11Anthony Pompliano?

  The, the, uh, one thing I will say is that people go to the website, uh, the videos are pretty cool in terms of the communities. I think there, if I remember correctly, there's one where it's like a reclaimed site and there's been, uh, soccer, football fields and baseball fields. And then there's some that are, uh, it appears like the vegetation is growing back, all this stuff. And so pretty cool to kind of hear what you guys are doing and the thought process, but then actually see it visually in photos. Uh, I remember saying, wow, that, that's, uh, pretty just awesome to see that happening in a community.

• 50:41Speaker 02

  No, thanks. Now it's thousands of acres cleaned up. So I'm really proud of the, you know, the, we're really a reclamation business. Coupled with Bitcoin mining business and, you know, both are very important activities for us.

• 50:56Anthony Pompliano?

  Awesome. Well, Greg, thank you.

• 50:57Speaker 02

  By the way, congratulations to your big announcement today. I'll be, uh, looking forward to, uh, you know, more, more of your, your thoughts and what you come up with, uh, on a daily basis. So thank you.

• 51:09Anthony Pompliano?

  I appreciate it very much. We'll definitely do this again in the future.

• 51:12Speaker 02

  Yep, you bet. Thank you.