#737 How Everyone Can Become A Bitcoin Miner w/ Whit Gibbs

Whit Gibbs is the Founder and CEO of Compass Mining. One of the fastest growing mining businesses in the industry In this conversation, we discuss Bitcoin Mining, Geometric Hashrate Distribution, Decentralization of the network, and how you can invest and get in the mining game today. ======================= BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp ======================= 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 ======================= Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications worldwide. Circle is also a principal developer of USD Coin (USDC), the fastest growing, fully reserved and regulated dollar stablecoin in the world. The free Circle Account and suite of platform API services bridge the gap between traditional payments and crypto for trading, DeFi, and NFT marketplaces. Create seamless, user-friendly, mainstream customer experiences with crypto-native infrastructure under the hood with Circle. Learn more at circle.com.

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. Whit Gibbs is the founder and CEO of Compass Mining, one of the fastest growing mining businesses in the entire world. Whit and I spent a bunch of time talking about Bitcoin mining, geographic hash rate distribution, the decentralization of the network, and also the difference between institutional and retail miners. I really enjoyed this conversation, I learned a ton from it, and I hope you do as well. Before we get into this episode, I want to quickly talk about our sponsors. First up is BlockFi. BlockFi provides financial products for crypto investors. Those products include a high-yield interest account, a US dollar loan product against your crypto

• 0:47Anthony Pompliano?

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• 1:30Anthony Pompliano?

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• 2:14Anthony Pompliano?

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• 2:56Anthony Pompliano?

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• 3:32Speaker 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.

• 3:55Anthony Pompliano?

  All right, first of all, Bitcoin mining, I want to talk about the industry first and we'll get into what Compass does.

• 3:59Speaker 02

  Okay.

• 4:00Anthony Pompliano?

  Bitcoin mining is on an absolute tear in terms of the hash rate over the last five years or so. There's all sorts of geopolitics that play into it. Just walk me through your analysis of how big is this thing? How important is the actual network and the hash rate? And then any of the geopolitical stuff that you see?

• 4:16Speaker 02

  Yeah, so there's a lot to unpack with that right there. But when it comes to Bitcoin. Bitcoin's hash rate, the growth of Bitcoin's hash rate is incredibly important because obviously as as an asset class, we want to see it continue to succeed and be secure. So we need more machines on the network to further that. The one thing I'll say is it's incredibly resilient, right? We saw China basically cut half of Bitcoin's hash rate off the network in June. And there wasn't a hitch in the giddy up when it comes to Bitcoin. Everything still ran just as it should. Block times continued on. It was a great period of profitability for miners. And now we're starting to see the hash rate climb back up as these machines go online in different areas. But the cool thing about mining is we never know what country is going to go wacky, right? You have China that banned Bitcoin.

• 5:00Speaker 02

  Then you have Russia who started to constrict the the energy supply to Kazakhstan. So Kazakhstan's hash rate started to fall off. So we're seeing all of these different geopolitical things that are leading to increased profitability for any miners that are plugged in. Specifically those in North America that have continued to benefit from the support that they've gotten from different states like Texas and Kentucky that have really fostered the growth of mining within the within the US.

• 5:24Anthony Pompliano?

  How much of this went from people were doing on their laptops to hey, I got one or two, you know, S9s or whatever, kind of plugged away in a closet. So then it became like more professionalized today because it seems like there's really big players now. And we kind of sort of saw that beginning in China was the first time I went with Bitmain and some of these players where I was like, whoa, that's a big facility. Now it feels like this is happening all over the world and people have woken up to the idea of like, I can literally just sell this energy for a very, very profitable margin. Like talk about the sophistication today versus maybe a couple of years ago.

• 5:55Speaker 02

  Well, I mean, now it's now it's an actual business that you can plan on, right? Before, I think there was still just a lot of speculation around whether or not Bitcoin would succeed. You had the real believers who continue to scale up their operations. And those are the guys and gals that went from laptops to GPUs to FPGAs to ASICs. And then focused on, you know, increasing the amount of machines that they had online. But now what's happening is you have people that have large amounts of capital that are just entering the space. And they're, you know, they're bum rushing the Bitmain's of the world to get as many machines as they can because they already have access to capital markets. You look at some of these companies that were already publicly traded and then just pivoted into Bitcoin mining, basically. And they have access to hundreds of millions of dollars. They're able to get up and running very quickly and take a substantial amount of that hash rate.

• 6:40Speaker 02

  And I mean, we've seen their stock prices appreciate accordingly because of how fast they were able to deploy.

• 6:45Anthony Pompliano?

  And when you think about these companies, historically, they've essentially self-funded from the entrepreneur, a very small group of investors, they mined Bitcoin, then they had to sell the Bitcoin, usually a majority of it, to be able to fund operations moving forward. If they got into a bear market, they didn't have capital to kind of weather the storm. We got into the whole, you know, death mining spiral concern, the whole thing. And usually, at the bottom of the bear market, people had to tap out, right? You got below some price and just, hey, I can't operate anymore, I gotta shut down. How has the capital markets changed for miners over the years as well? It seems like now people are very well capitalized, they've got access to debt markets, equity markets, and people on the investment side have woken up to this as well, which makes it much better business at the same time.

• 7:26Speaker 02

  Of course. I mean, when you think about the amount of capital that's available in the United States, especially right now, that's just looking for a home, it needs to find yield somewhere, right? You talk about it all the time on the show, if you don't put your capital into work, it's going to leave you, you know? And now you have access to those markets here in the States. All of these financial products that are available allow miners to not have to sell their Bitcoin in order to increase their operations. They can take a loan out on the value of their ASICs, and then just buy more ASICs, increase their hash rate, increase their profitability. And that's what we're really seeing is a trend. Now, you did have a situation where, what was it, in March of last year of 2020, where we had that black swan event where Bitcoin crashed because of the financial services that were available, and you had a mass liquidation event of a lot of miners

• 8:08Speaker 02

  in China, which led to Bitcoin's price crash. But since then, you've seen a maturity in the space that's allowed people to more accurately plan to avoid those kinds of situations now.

• 8:18Anthony Pompliano?

  And when you start to think about the average person, they're not going to go raise hundreds of millions of dollars and go build, you know, Rockdale, Texas, the big facility. They're not going to try to go figure out, how do I buy discounted miners from somebody shutting down in China and move it to my home country? They're like, dude, I just want to play, I just want to play, right? I was like, get me in the game. I think that's where a compass comes in, right? And you've got a couple of different products. Can you walk us through your business in terms of, what does the product suite look like if somebody wants to get into the mining game?

• 8:45Speaker 02

  Yeah, so when we first started, our whole idea was, we wanted to be this Airbnb for Bitcoin miners. Give them an easy place to source their machines, an easy place to host them at a verified facility where they could feel comfortable that they weren't going to get scammed. And someone was going to run off with their hardware, they'd still get that Bitcoin directly to their wallet. And we've really just built up that product offering, which is essentially just a bundle where we sell one ASIC with a 12 month hosting contract. It allows you to get all of your Bitcoin directly to your wallet. You just pay for power every month. We also sell miners to people who want to mine at home. There are a lot of people right now who have really taken on this idea of mining KYC free Bitcoin. And the only way that you can really do that is to mine at your house. So now there are people who are purchasing machines through Compass. We ship them directly to their door.

• 9:26Speaker 02

  And then they'll work with some of these consultants that are out there to retrofit their home to be able to take on these ASICs. So these are really the two main products. And we do a lot of sales for institutions as well, funds and family offices that want to get into their own mining facilities. They don't want to host with someone else. They want to achieve that cheaper power price. So they'll come to Compass and they'll buy, you know, 1,000 to 5,000 machines. And then they'll build out their own facility.

• 9:48Anthony Pompliano?

  Can you break down in terms of which is the more popular product and like, how do you think about managing your business in terms of? Do you do more sales and eventually you'll build out more kind of self hosting? Is it more self hosting and sales is kind of a growing part? How do you think about the difference?

• 10:03Speaker 02

  So our focus is retail, right? Everything else that happens is a benefit. Like we, we take that as a bonus, but really our focus is helping people that want to get one to five miners. Buy those machines and get them hosted at a facility around the country. You know, for this year, we've basically helped. Put about 45 megawatts of hosted capacity online for retail miners. It's about 95% of our business. But moving into next year, we've actually already secured 280 megawatts. That's going to be available for retail miners. These people that are buying one to five machines. Hosted at facilities around the US and Canada. We also will have facilities coming online in Norway, Paraguay, and we're looking at Peru.

• 10:38Anthony Pompliano?

  And walk me through the economics right now. So let's say that I do self hosting with you. How much do I pay for one miner or the equivalent hash rate? And then what can I actually earn today? Fully understanding, not financial advice, and this changes significantly with difficulty Bitcoin price. It's all moving target. But like right now, what does that look like?

• 10:55Speaker 02

  Yeah. So just brass tacks, when it comes to the numbers, you're looking at machines that'll range anywhere from 10,000 to, you know, we have machines right now listed on our marketplace for 20,000 that. sellers are listening for it's crazy to think that an ASIC is selling for $20,000. But when you're looking at mining, your mining profitability, depending on your rate, your power rate, it's about 30 bucks a day. You're gonna make about 30 bucks a day. Your electricity for the course of a month is about 165 bucks, depending on the machine, but a ballpark. So when you factor all of those numbers in, most industrial miners are looking at a return on their initial purchase price. Somewhere between nine and 12 months. They try to scale lower, obviously, the, you know, the more capital they can put in, the better their economics. But for retail miners, if they're able to get in that sweet spot of 12 to 16 months, that's a good range for them.

• 11:40Anthony Pompliano?

  And that is measured based on the US dollar value of the Bitcoin when I mine it. That does not plan for any appreciation of the Bitcoin as it sits on kind of the balance sheet over time.

• 11:51Speaker 02

  That is correct. And it also doesn't take into account the appreciation, appreciation of the value of your ASIC, right? When you're purchasing an ASIC, that asset is correlated to the price of Bitcoin. So as an example, Compass miners who were purchasing ASICs this time last year, they're buying an ASIC for 3,000 bucks that now is selling for 20,000 on the marketplace.

• 12:06Anthony Pompliano?

  How many of them sell them later on for more versus they just run them until they die?

• 12:11Speaker 02

  So we're a year into operation right now. Our churn is effectively 0%. We do have people that are, that are selling their machines through the marketplace now that prices are what they are. But effectively, those new, those new sales are just rolling into new hosting contracts as well.

• 12:24Anthony Pompliano?

  Got it. So basically, somebody bought a year ago for at $3,000, they've mined for a year. Now they're saying, okay, let me sell my equipment. But when they sell the equipment, they're literally just handing it to the next Compass mining customer. And they're pocketing some difference in whatever the, the underlying hardware cost is.

• 12:39Speaker 02

  That's correct. Because I mean, the whole problem that Compass was setting out to solve is you don't want to get trapped, right? When it used to be that you would buy this hosting contract, you're locked in. You can't sell. Where are you gonna sell? You have to go and figure out how you're gonna sell five ASICs or six ASICs to some random person. It was hard. So when we launched the marketplace, the idea was you can get in easy, you can get out easy, you can make whatever you make in the meantime. But it's just a seamless process. The whole idea is just taking that user experience and making it very simple for anyone to get involved.

• 13:04Anthony Pompliano?

  All right. I got a lot of nuanced questions here because I had my, my fair share of mining in the past.

• 13:10Speaker 02

  Yes.

• 13:11Anthony Pompliano?

  And it actually went pretty well. When you think about the cycles of price to mining, if you had bought a S9, let's say, in 2017 at the top of the market, you paid 2,500, 3,000, $4,000, and you plugged it in.

• 13:26Speaker 02

  Yep.

• 13:27Anthony Pompliano?

  You got crushed. You overpaid for the equipment.

• 13:29Speaker 02

  Correct.

• 13:30Anthony Pompliano?

  Then you ran it right into the teeth of a bear market. You had to mine for a really long time. Hold that Bitcoin and you came out on top if you were able to run the machine for two, two and a half years and hold all the Bitcoin. How do you think about cycles and like, is there timing the market, and I'll put that in air quotes, in terms of when to get into mining and when maybe not to get in? Or do you think about it more as the time in the market of just the longer that you're in the market, the better off you're gonna do?

• 13:54Speaker 02

  So I think that there's two dynamics here because when you're talking about S9s, those machines were at 13 and a half terahash per second. That's just their computational power, easiest way to think of it. But now we're getting to a point where the difference between new machines isn't as great. You know, you went from 13 and a half to basically 100 in the course of two years.

• 14:12Anthony Pompliano?

  Yeah, crazy.

• 14:13Speaker 02

  It's very hard to buy an overpriced 13 terahash machine and ever competitively mine with that, considering your power rates. But nowadays, it's time in the market. So before it used to be timing the market. Now it's time in the market. You want to get in. You want to look at this as a business, right? And we get spoiled in mining because we're talking about an asset that is going to break even in the course of 12 to 14 months. Where else in the world do you start a business and you break even on your initial capital investment in 12 to 14 months? It doesn't exist. I think as the market matures, we're going to see that expectation of 12 to 14 month break even period start to go away. And we will see people start to approach this as more of like a real estate investment of sorts,

• 14:54Speaker 02

  where they're looking at this and you know, instead of buying a rental property, they buy an ASIC that's going to generate them that passive income.

• 15:00Anthony Pompliano?

  Does every energy producer have to get in this game?

• 15:03Speaker 02

  They should be.

• 15:04Anthony Pompliano?

  Yeah, at this point, it's just like, it's such a no brainer. You can sell the energy for more here than you can anywhere else in the world. And so why are you not in the Bitcoin mining game?

• 15:11Speaker 02

  I mean, it's not only that. It's just that they have excess, right? So you're producing this excess energy that what do you do with it? If you're not doing anything with it, do this with it and make money, right? Produce Bitcoin. Even if you don't sell the Bitcoin, you just hold it on your balance sheet. We've seen already companies that hold Bitcoin on their balance sheet. It makes their stock appreciated at a value that is insane. So why not just take what you're already producing, mine some Bitcoin with it, and just let it sit there?

• 15:33Anthony Pompliano?

  Yeah. When you think about the access to capital. Markets, how many of these miners are borrowing capital in order to do this versus using equity based investments? Like is the debt market mature enough now where that's really where people are going more so than the equity market? Or is there still a pretty good balance?

• 15:50Speaker 02

  No, it's mostly debt now, right? The bigger companies are focused on debt. You'll see some equity raises every once in a while, but right now it's basically focused on debt. I mean, there was a grid, grid infrastructure. They raised, I think, 525 in debt, 525 million in debt from blockchain.com. And then they just announced that they're spacking at a $3.3 billion valuation, right? That was all within the span of a, you know, a week or so. So this is the pattern now. We're seeing that this is the way that people are looking to raise the capital to expand their operations.

• 16:20Anthony Pompliano?

  Yeah, and it feels like the more public companies we get in the mining business, the more that sophisticated investors will wrap their head around the business.

• 16:26Speaker 02

  Yeah.

• 16:26Anthony Pompliano?

  And they'll start to understand it's a cash flow business and it's a great cash flow business. How long do the ASICs actually last in terms of if I buy one today, brand new off the shelf? What should I expect 18 months, 36 months? We don't know yet. How do you think about it?

• 16:40Speaker 02

  You can appreciate them over three years, right? But I think usable life is going to prove out to be five to seven years. When you look at the S9s, which are tanks, they're the Air Jordans of ASICs. They're still running, right? Like you're talking about the GOAT. This, these things came online in 2016 and they're still running strong in Venezuela and these places that are not great conditions, right? They, they were coming out of China where if you've seen any of these Chinese mines, they're not the most clean. They look like they're duct taped together. These things are still going strong. When you talk about now data centers that are built specifically to keep these ASICs free from debris, free from dust, very clean. I think we're going to see the new, the new models run for a very, very long time.

• 17:18Anthony Pompliano?

  The Air Jordan of mining equipment. That is a great way to describe them. One of the other mistakes that people make, and I say this because I made this mistake was, I've talked about it now a couple of times. I think I started mining with GPUs first, not ASICs. I was mining ETH. There was a guy JP Barak, who was a young kid, came to me and basically pitched me on mining, not as a, hey, here's what Bitcoin or crypto is just like, there's a cash flow business. You understand data centers or data, but the data center business. And so we started mining and we started mining, maybe it was like 10 bucks for ETH, right? So pretty early on and it quickly went, this is in the beginning of 2017, went from 10 to 30 to like a hundred dollars. And I'm pretty sure that we sold everything or almost everything at like 150 bucks and thought we were geniuses, right? Like, oh my God, this was amazing.

• 18:00Speaker 02

  Sure.

• 18:02Anthony Pompliano?

  In hindsight, that was one of the stupidest financial decisions I ever made, but we didn't know that at the time.

• 18:07Speaker 02

  Of course.

• 18:07Anthony Pompliano?

  How do you think about whether it's GPUs, ASICs, whatever, people holding it on their balance sheet versus selling it because they quote, quote, "think they made a profit" because it's appreciated on the balance sheet? Like, do you talk to miners about how they think about it or how you think about like what they should be doing there?

• 18:25Speaker 02

  So hindsight is always 2020, right?

• 18:28Anthony Pompliano?

  Trust me, I know.

• 18:29Speaker 02

  I mean, look, whatever you sold that for, you rolled it into other opportunities that probably have done very well for you as well. But when it comes to mining, it's different strokes for different folks. If I'm looking at Bitcoin mining, I think it's very safe to hold a heavy percentage of what you mine on your balance sheet because over time, we've, we've seen it, right? Bitcoin, the NGU technology is real, right? Number does just keep going up. So why sell it if you don't have, absolutely have to? When it comes to GPU mining, it's more speculative. I know there's ETH and you know, people think what they think of that, but I started out as a GPU miner. Most of the GPU mining that people do is a speculative play. And in those cases, you don't want to hold it for too long. You want to make sure that you're able to achieve whatever you feel is that comfortable number and get out while the getting's good.

• 19:12Speaker 02

  Because if you don't, you're going to get trapped in that, effectively, you're going to get trapped in a trade that's going to have, you know, not as much liquidity as you're going to need to get out when you want to.

• 19:19Anthony Pompliano?

  Yeah. And then how do you think about servicing these, right? You know, so if I have a big farm, a thousand machines, obviously some of them are going to break, etc. Like, what does that look like? Back in 2017, 2018, if you didn't have the technician there on site, you literally would have to take it, you have to ship it, they'd fix it, they'd send it back and it was kind of a, a pretty big process. Part of, I guess, what the, the cloud mining, if you will, or the hosted mining, is that you guys have folks there that are actually able to do this and the individual retail investor can think of this more as a financial investment rather than like, oh shit, is the power on? Did I have to fix the machine? Is that a way to think about it?

• 19:51Speaker 02

  So there's always going to be problems with machines, right? Fortunately, now the failure rates are much lower than they used to be. The S17s had a failure rate of like 22, 25%, which is nuts if you think about it.

• 20:01Anthony Pompliano?

  Yeah.

• 20:01Speaker 02

  200,000 of your million dollar investment is down the drain. The challenge right now is that the queues are very long for repairs. So if anything does happen, you're looking at a machine being offline for two to four months for it to get repaired. So we do staff up our facilities to make sure that things can get repaired quickly if there's some small thing that needs to be fixed. But the one benefit now, seeing North America's hash rate grow, is that the return process or the RMA process, if there is machine failure, you no longer need to send those machines back to China and wait. There are repair facilities in the United States that are accredited and they've got the certifications to do those warranty repairs here.

• 20:36Anthony Pompliano?

  Got it. What questions you guys got? Is there insurance on repairs like that? Like, do you guys offer insurance for people?

• 20:40Speaker 02

  So Compass is launching an insurance product here in the next 30 days that will be available to retail miners. Right now, everyone is required to have insurance per their hosting contracts, but no one offers insurance to retail clients, right? There is underwriting and insurance policies for people who are purchasing, you know, 100 to 500 to 1,000 machines. But, you know, these people don't want to take on the paperwork to underwrite a $10,000 unit. So Compass is launching that product to help service the customers that we have.

• 21:06Anthony Pompliano?

  And what percentage of your clients are what we'll call like more institutional clients versus retail clients?

• 21:10Speaker 02

  So when we started, it was, you know, three or four big buyers supported our entire business, which kept me up at night because that's...

• 21:16Anthony Pompliano?

  Who were they?

• 21:17Speaker 02

  Scary.

• 21:19Anthony Pompliano?

  Are you allowed to say?

• 21:20Speaker 02

  I can't say.

• 21:20Anthony Pompliano?

  Okay.

• 21:21Speaker 02

  No.

• 21:21Anthony Pompliano?

  All right.

• 21:21Speaker 02

  But now it's about 98% retail. The majority of our customers now are people who are buying one to five units. The average purchase on the Compass website is 20,000 bucks. So you figure two miners. And we are excited for that, right? We hope to scale that business more because we feel that that's what's really going to help to decentralize Bitcoin's hash rate. You know, if you look at all of these big miners, you've basically got, call it 25 boards or decision makers that are controlling the majority of Bitcoin's hash rate. Not really decentralized, right? If you can get all of Bitcoin's hash rate in one room, and let's say somebody was to take that room out and now Bitcoin's hash rate is in jeopardy, not really a decentralized thing. We want a million miners held by, a million ASICs held by a million miners everywhere around the world so that we can truly decentralize this and strengthen Bitcoin for the long term.

• 22:06Anthony Pompliano?

  Gotcha. And what does that liquidity look like on your marketplace should someone want to sell? Say they buy them, six months later, they realize they don't want to do it anymore. They go to sell them. Is that a quick... Does it take longer than a week or so?

• 22:17Speaker 02

  So as of right now, if they're priced appropriately, they sell within 30 minutes.

• 22:20Anthony Pompliano?

  Oh, wow.

• 22:21Speaker 02

  So you post it with a contract that's going to sell within 30 minutes. It depends when it'll go online, but if you've got something that's running right now, you'll achieve a nice premium and somebody will buy it right away. Even the machines that are priced at 20,000, people are buying them right now. So it's a pretty quick process. You'd have to KYC that takes a couple of days. But from the time you start the process to the time you finish, including the sale and the transfer of either the fiat or the Bitcoin to your wallet, it's about a week.

• 22:44Anthony Pompliano?

  And how do you guys think about selling new units versus old units on the marketplace?

• 22:48Speaker 02

  So we do, I mean, we sell new units as well, those that we source from either distributors in China or from the manufacturers directly. But it all just comes down to what people want to sell. So we'll put the new units on there, someone will buy them, they'll hook them up, they'll mine with them for a little while and then they'll sell them as lightly used to a new buyer. But in reality, because of the usable life of these things, even if it's a year old, it's a solid purchase. And you're really not seeing any decrease in price for the age of the unit. If something's a year old, it's going to sell almost at the same price as something that's brand new.

• 23:18Anthony Pompliano?

  And how do the taxes work from a depreciation standpoint?

• 23:21Speaker 02

  So that's a question for a tax accountant, somebody who's going to provide you that information.

• 23:26Anthony Pompliano?

  Just curious, I'm not doing anything.

• 23:28Speaker 02

  But you're able to depreciate that over the course of three years, which will help to offset your income. When it comes to the market as it stands right now, one of the things that's been very interesting is that most ASIC sellers, they don't actually assess taxes. So when we were looking at people who are distributors within the United States, they were basically not charging taxes on a lot of these things. So when we went through and we did a nexus audit on our taxes, just to make sure that we were doing things by the book, it was one of the weirdest things that we saw. You have hundreds of millions of dollars worth of ASICs moving through these different sellers around the country that nobody's assessing taxes on. Eventually Uncle Sam's going to come calling, right? So when we look at our prices versus some of the prices of competitors, you'll notice that ours are a little bit higher. And that's just because of the taxes that are included in there, right?

• 24:12Speaker 02

  Just trying to make sure that we're doing things on the up and up as much as we can, as much as nobody likes to pay taxes.

• 24:18Anthony Pompliano?

  John, what questions you got?

• 24:19Speaker 03

  For the non-technical person, can you walk through just hosting? Like you guys take care of everything, it sounds like?

• 24:24Speaker 02

  Yeah, so basically you go onto the website, you pick your ASIC. Once you add that to your cart, we let you know which facility it can be hosted at. If there are multiple choices, then you can pick which facility you'd like it to be listed at. You add that facility to your cart, you check out, pay with cash, card, crypto, whatever you prefer. And then we notify you about a week before your machine is going to go online. We get your pool information. If you need help setting up your mining pool address or your mining pool account and getting your Bitcoin address connected, we can walk you through that as well. And then, once that's done, you're off to the races. We help you connect everything, you're mining directly to your wallet, and then you just get your power bill every month and you can pay that again with cash, card, or crypto.

• 25:01Speaker 03

  And then Jack Dorsey got into mining recently with you guys. Can you talk a little bit about that?

• 25:07Speaker 02

  So, you know, the cool thing about this, and it's just, it speaks to his character. We didn't even know until the tweet. Like, there was no special treatment. He just went through the website, made the purchase. I found out like a day before he tweeted, and it was really cool. I mean, it validated for us how easy it was for people to use. And also, like I said, it just spoke to his character that he wasn't looking for any kind of special treatment. He just really wanted to get mining.

• 25:30Speaker 03

  He wanted to see the experience of it.

• 25:31Speaker 02

  Yeah.

• 25:32Speaker 03

  Okay, very cool.

• 25:33Anthony Pompliano?

  When you start to think about mining on the geopolitical kind of scale, if you will. So, we've got El Salvador, they're in the game now with the volcano mining. China, obviously, was doing all kinds of stuff. I'm not going to say where I know this from, but Venezuela, they're mining. There's other countries that are mining.

• 25:51Speaker 02

  Sure.

• 25:52Anthony Pompliano?

  Maybe not the most friendly to the United States. What do you think is the milestones or inflection points where we go from maybe countries that are not so friendly to the United States and/or small countries like El Salvador mining to everyone's mining? Like, what's it gonna take for the United States to start mining?

• 26:11Speaker 02

  The United States is already mining.

• 26:13Anthony Pompliano?

  Okay.

• 26:13Speaker 02

  Maybe, maybe.

• 26:15Anthony Pompliano?

  I know.

• 26:16Speaker 02

  They might have like 10 or 20 megawatts running somewhere in the Midwest to test it out. Maybe it's hypothetically speaking, but it's a matter of national security. When it comes to mining, when you're talking about what Bitcoin is, right? Whether it's a store of value, it's a medium of exchange. It is the future financial instrument that many, many things are going to be built on top of.

• 26:38Speaker 02

  Nations would have to be absolutely out of their minds to not be getting some exposure to the underlying infrastructure which supports it. So the US, I think, is on the front foot. We've done, we've had a lot of conversations with the government in DC, state governments to help to educate them, but they are very forward thinking when it comes to supporting this. But I think that what we're going to see, and we're seeing it already, is nations around the world who want to move from the third to the second, to the first class, right? They want to become these first world countries. They now know that being early with this will take them there. The move in El Salvador is going to be a big one that proves out in 20 to 30 years.

• 27:15Anthony Pompliano?

  I want to play a game with you. Let's call, it's called like a story poker.

• 27:20Speaker 02

  Okay.

• 27:20Anthony Pompliano?

  And so I'll tell you one story, then you got to tell me one in return.

• 27:22Speaker 02

  Okay.

• 27:23Anthony Pompliano?

  So I know for a fact that there's a federal law enforcement agency that was mining Bitcoin in 2012, 2013, very early on. And what they realized was they couldn't get the budget to go buy Bitcoin in one of the exchanges and then use that in undercover operations. So what they did was, it was very easy though, to get budget approved by computers.

• 27:45Speaker 02

  Sure.

• 27:46Anthony Pompliano?

  Of course you need computers. So they bought mining equipment, they mined the Bitcoin. It also was untraceable.

• 27:51Speaker 02

  Yeah.

• 27:52Anthony Pompliano?

  It was basically, you know, virgin Bitcoin, if you will. And then they would take that Bitcoin and they would use it in undercover buys, etc. They could trace it. Somebody who participated in this told me this one time after they had left.

• 28:03Speaker 02

  Wow.

• 28:04Anthony Pompliano?

  I was blown away. I was like, man. And not only to be doing it, the way they did it, it made sense, kind of in hindsight as to why they would get computers approved versus go purchase directly, but also to be doing it that early. Very, very good. Your turn. You tell me a story.

• 28:19Speaker 02

  So.

• 28:22Speaker 02

  So this is how you get in trouble. But I will say there is a, there is a North African country that was a hotspot for, for the United States a few years ago. A movie was made about it. There may have been some emails that a person didn't manage properly that caused some issues.

• 28:40Speaker 02

  And they are now getting into Bitcoin mining. And it's actually at the presidential level that they are, they're looking to do this. There's also, you know, I live in Latvia for the majority of the year. There's a very close neighbor of Latvia that, you know, may have stopped a plane not too long ago to remove a journalist. They're mining Bitcoin with nuclear power. So you have countries now that, I mean, Compass can never serve because of lists and sanctions. They are all mining Bitcoin. And I don't believe that they're mining Bitcoin to skirt sanctions. I believe that they're mining Bitcoin because they see it as the future. And they wanna, they wanna boost their economy. They wanna, they wanna grow, grow that wealth.

• 29:19Anthony Pompliano?

  Why aren't they talking about it publicly?

• 29:21Speaker 02

  Why would you? Most, most miners don't talk publicly about their operations because it's just a threat factor. Right? If you're not a public company that needs to pump your stock, why talk about it at all? Stack in silence and just be happy with that.

• 29:31Anthony Pompliano?

  Yeah. All right. I got another story for you. A lot of people don't know that North Korea, one of the biggest revenue sources now comes from either hacking exchanges or mining as well.

• 29:42Speaker 02

  Okay.

• 29:42Anthony Pompliano?

  If they basically have access to it. I've read a number of reports that have talked about how they, they have sanctions. They're cut off from the global financial system. There's ways that they can do other things that end up being pretty effective. When you look at places like Venezuela, North Korea, others,

• 30:03Anthony Pompliano?

  it feels like those countries are doing it out of necessity. Right? Developing nations, they're not bad actors. They're not adversaries necessarily to the US. They're also doing it out of necessity. They wanna move forward their economy, they wanna do all this stuff. When do maybe non-US developed nations? When is France or Spain or the UK? When do they get in the game? Not because it's a necessity, but because like, we're gonna get rich, right? We're, we're going to benefit from this economically. And it is more so the innovator's dilemma. And we're gonna disrupt ourselves on purpose because we see this as the future versus we got no other shot at, you know, leapfrogging all these countries. So like, screw it, let's go all in and see what happens.

• 30:46Speaker 02

  They'll probably be late, right? I mean, this is all cyclical. So you're going to see the countries that are that are the first movers that are forward thinking. They're going to get into the game. And by the time the bigger established countries want to get in, you know, they'll they'll come and they'll throw a bunch of money, but they'll be late to it. So the United States, I think, will be among the first of the developed nations to come out in support of Bitcoin mining, just because it's a massive, I mean, you're talking about a multi-billion dollar industry now within the borders that they're able to tax. They're not going to, you know, shun that revenue or send it somewhere else. France, Germany, the socialist states of Europe is going to take them a while. I mean, they they creep, their government creeps, it moves very, very slow.

• 31:24Anthony Pompliano?

  Yeah, well, they all got suits and ties and act really important. I got two more questions and then we'll let you go. First is talk to me about the energy mix. So we've seen, I've seen all the nonsense about China. Now, we've got Texas is becoming a huge hotspot number places in the Midwest. Here in the US, we've got the Bitcoin Mining Council. We've got people publishing energy mix, like just what's your read on the whole? Is it environmentally friendly? Is it not? Does it matter? What is the mix? Like, how do you think about it?

• 31:51Speaker 02

  So when I think about energy, just in general, right? When you talk about the advancement of any society, it requires the consumption of as much energy as possible. The one thing that we're going to start to see in the United States because of like the decommissioning of of power plants, we're going to see rolling blackouts, right? Business cannot happen if there is no power for buildings. So we're seeing New York and California and other places be impacted and we'll continue to see that. So where I, my read on what, you know, the the energy consumption of Bitcoin is that it's a feature and not a bug. We want the network to consume as much energy as possible. Now, when it comes to the mix that people are using, Bitcoin miners are always going to gravitate towards the most plentiful, cheapest sources of energy. And for the most part, those tend to be renewable, those tend to be hydro, those tend to be nuclear.

• 32:35Speaker 02

  So we're going to see the gravitation towards those naturally. You know, the information that's being put out by different actors, whether it's the Bitcoin Mining Council or these other public companies, they all have motives for why they're doing this. You know, my guess is that when it comes to, let's say, the Bitcoin Mining Council and, you know, Michael Saylor has done a lot for Bitcoin, so not to pick on him too much. But when you think about BlackRock, right, which is A big owner of MicroStrategy's shares, they are big proponents of ESG. And having someone on your cap table or someone that holds that much of your your available shares that's a proponent of something, it's going to force your hand on certain matters, which I think is why he's been involved and he is now on the, you know,

• 33:18Speaker 02

  the front foot, trying to put more information out about the energy mix that Bitcoin's using.

• 33:24Anthony Pompliano?

  Talking about, to finish up, the decentralization of the network. 60% plus was in China and other Asian countries. Now it seems like maybe the US has got like 25% or so of the mining. We've seen Wyoming recently come out, so they want 5% of the hash rate. We've seen Texas come out and said that they want 50% of the hash rate.

• 33:44Speaker 02

  Yeah.

• 33:46Anthony Pompliano?

  We see other countries that obviously are getting in the game. How do you think about decentralization? Is there a healthy percentage that a country should have? Should we be concerned if all of a sudden the US had 75%? Like, would that be a downside? Like, just how do you think about that?

• 34:02Speaker 02

  Bitcoin's non-state money, right? So if you take the ability to print cash from any government, you steal their thunder. I think that it's very dangerous for an overwhelming majority of Bitcoin's hash rate to be located within any country, any country's borders. I think that, you know, before it was 60% in China, we're going, we're going to see it creep up on 60% in the United States. And Bitcoiners will again be up in arms about the fact that there's too much hash rate within America's borders. What we will also see, though, is a diversification out of these two main countries. We'll see some in Canada, we'll see in the United States, we will see in South American countries. And what I think will be the natural effect is that Bitcoiners will then focus attention on new developing nations where they can put this hash rate.

• 34:47Speaker 02

  And those nations will be open to welcoming it because they understand what a boon it will be for their economy to bring that in. So decentralization is very important. Having too much hash rate within any country should worry every Bitcoiner. But I think that as just a function of this market, Bitcoiners will naturally look to to move hash rate out of countries that are amassing too much of it.

• 35:06Speaker 03

  How much of your business is in just the United States versus other international countries?

• 35:11Speaker 02

  So the majority of our customer base is in the United States. The majority of the hash rate that we're managing for customers is split basically between the US, Canada, and Russia. We have a big part of our machines that are running in Russia right now.

• 35:24Anthony Pompliano?

  And do you own the real estate?

• 35:26Speaker 02

  No.

• 35:26Anthony Pompliano?

  Where you're hosting these? You say McDonald's, bro? No, I'm just saying.

• 35:29Speaker 02

  Airbnb, right? Think of it like Airbnb. So these facilities come to us and they say, hey, look, I've got this space. We verify them, right? We make them a super host, if you will.

• 35:37Anthony Pompliano?

  Yep.

• 35:37Speaker 02

  And then they can list on our site.

• 35:39Anthony Pompliano?

  Gotcha. Did you guys raise money?

• 35:41Speaker 02

  Yeah, we did. We raised a small seed round in December, January last year.

• 35:45Anthony Pompliano?

  You looking to raise again?

• 35:49Speaker 02

  We may, we may, we may be in the process.

• 35:51Anthony Pompliano?

  Damn, John, okay.

• 35:51Speaker 02

  We made a valuation.

• 35:53Anthony Pompliano?

  John's got a jackpot, yeah, ladies and gentlemen. John ain't got no Bitcoin out on the show, but John might re-stroke an equity check, all right? Damn. Okay. Seems profitable. How much would it cost if, if each of the three of us wanted to start with just one machine? How much that cost?

• 36:08Speaker 02

  Right now, about $15,000.

• 36:10Anthony Pompliano?

  $15,000?

• 36:10Speaker 02

  Including your deposits. Yep.

• 36:12Anthony Pompliano?

  All right. And you said it's about 30 bucks a day, 35 bucks a day, basically?

• 36:15Speaker 02

  Starting when they go online, which right now, the earliest available time that we have is May. However.

• 36:21Anthony Pompliano?

  Oh, god damn, what y'all doing? Y'all walking to the facility?

• 36:26Speaker 02

  However, we have 135 megawatts that begins to come online in January, and then we have another 100 megawatts that begins to come online in March. So by Q3 of next year, we'll have 250 megawatts online. That's available to sell.

• 36:38Anthony Pompliano?

  And that still means that, uh, people who order today, like May or so is when it'll become a lot.

• 36:45Speaker 02

  That's, that's when we have sold it. Yeah.

• 36:47Anthony Pompliano?

  So, so, uh, here's the best part is I feel like you're under promising, trying to over deliver. Remember that the Tesla, uh, cars that, uh, were supposed to come out in April or May, I just saw that they pushed them back to 2022.

• 37:01Speaker 02

  The trucks?

• 37:01Anthony Pompliano?

  They, they got whistles now.

• 37:05Anthony Pompliano?

  Here's a whistle to buy instead.

• 37:07Speaker 02

  Release another flamethrower just to distract people.

• 37:08Anthony Pompliano?

  No, he just did a, a whistle. So you can blow the whistle on Tesla, paying $50, you can blow the whistle on them. It's pretty good, right?

• 37:16Speaker 02

  He's a good guy.

• 37:17Anthony Pompliano?

  Meme lord right there.

• 37:18Speaker 02

  He is.

• 37:18Anthony Pompliano?

  Um, all right, where can we, uh, where can we send people to, uh, to find out more? Uh, which is compassmining.io?

• 37:24Speaker 02

  That's it. Compassmining.io. Go there, get started. In 10 minutes, you can get your setup going and be online in May.

• 37:29Anthony Pompliano?

  All right. Um, and then what, uh, where can they find you on, uh, on the internet?

• 37:33Speaker 02

  I am at Bitcoin Broski on all social channels. Uh, I still just can't break away from it, man.

• 37:38Anthony Pompliano?

  Bitcoin Broski?

• 37:39Speaker 02

  Bitcoin Broski.

• 37:41Speaker 04

  Got it.

• 37:42Anthony Pompliano?

  If you give that one up and somebody else gets it, they'll never give it back. You two got any more questions?

• 37:48Speaker 04

  No.

• 37:48Speaker 02

  No, I appreciate you joining. Thanks for having me, fellas.

• 37:50Anthony Pompliano?

  You sure?

• 37:51Speaker 02

  Yeah.

• 37:51Anthony Pompliano?

  All right. How long are you in Miami for?

• 37:53Speaker 02

  I'm here until tomorrow and then heading to Austin.

• 37:55Anthony Pompliano?

  To Austin? Yeah. What's going on? Austin seems they're blowing up with Bitcoin, right?

• 37:59Speaker 02

  I mean, I grew up in Miami, so it's nice.

• 38:01Anthony Pompliano?

  Oh, did you?

• 38:02Speaker 02

  Yeah, it's nice to see all of the growth down here. It's awesome to see what Mayor Suarez is doing to bring business here.

• 38:06Anthony Pompliano?

  Very politician answer. Go ahead.

• 38:08Speaker 02

  But Austin is the Bitcoin capital of the United States.

• 38:11Anthony Pompliano?

  Yeah, I actually, right now, I would agree with that. I think that Texas in general. And a lot of it is because you've got the miners.

• 38:22Speaker 02

  It's true.

• 38:22Anthony Pompliano?

  You can replicate investments, you can replicate holders, you can replicate a lot of other things, but you can't replicate the miners.

• 38:29Speaker 02

  I mean, it's also all the energy, right? They have all the energy there as well.

• 38:32Anthony Pompliano?

  In hindsight, it makes complete sense. I think people for a while have thought that this was going to happen. And I think part of what to me has been the most interesting is this isn't Bitcoin trying to infiltrate oil and gas. What you're now seeing is the oil and gas folks say, wait a minute, teach me about this Bitcoin thing.

• 38:46Speaker 02

  That's right.

• 38:46Anthony Pompliano?

  Like you Bitcoiners are smart. I like you guys. Like maybe you can help us, but like we're the oil and gas experts. We're going to go play this game and no one can compete with us.

• 38:54Speaker 02

  That's right.

• 38:54Anthony Pompliano?

  And I think that ends up being a pretty, a pretty defensible moat there for Texas.

• 38:58Speaker 02

  Absolutely.