#1393 Jason Les | Largest Bitcoin Miner Responds To Critics

Jason Les is the CEO of Riot Platforms, one of the largest miners in North America. They are a publicly traded company that is exclusively focused on mining as much bitcoin as possible. In this conversation, we talk about public policy, politicians becoming interested in bitcoin mining, what is going on with the bitcoin halving, hardware updates, rise of AI, competition for power, and much more. ======================= Meanwhile is the world’s first licensed and regulated life insurance company built for the Bitcoin economy. Protect your loved ones with sound money built to manage life’s uncertainty and a broken financial system. Their BTC-denominated Whole Life Insurance policies allow HODLers to pass more BTC on to their loved ones and a tax-advantaged way to access BTC for liquidity during their lifetime. Visit their website at ⁠https://meanwhile.bm/⁠ to join the waitlist for a policy and to learn more. ======================= Buy and sell cryptocurrency in a tax-advantaged crypto IRA with iTrustCapital. Enjoy 24/7 access, lowest fees in the industry, and tax benefits for your retirement. Open and fund an account today at https://www.itrustcapital.com/pomp to receive a $100 USD funding bonus. ======================= 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. What's up guys? Bang bang. Today we've got Jason Less. Jason is the CEO of Riot Platforms. They're one of the largest miners in North America. They're a publicly traded company that is exclusively focused on mining as much Bitcoin as they possibly can. In this

• 0:44Anthony Pompliano?

  conversation, we talk about public policy, why politicians are becoming so interested in Bitcoin mining, what is going on with the halving, how the hardware updates are implementing across the industry, what to think about the rise of AI and the competition for power, how load balancing is working down in Texas, and much, much more. Jason is always at the forefront of thinking through many of these issues. He's built a very large and very interesting company, and so it's super exciting to talk to him. Here is my conversation with Jason Less.

• 1:13Speaker 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.

• 1:37Anthony Pompliano?

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• 2:21Anthony Pompliano?

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• 3:53Anthony Pompliano?

  Jason, I thought a great place to start this conversation is with the having. Obviously, it's a big moment in Bitcoin mining. There's a lot of, I think, FUD and people are worried, you know, kind of what happens there. But maybe you could tell us the having occurred. What have you guys seen in your business? Are you doing anything different now that we're on the other side of it?

• 4:10Speaker 02

  Well, what we've seen and all miners have seen is the worst of mining economics in history. Hash price has reached all time lows. Not unexpected, though. This is the second halving that Riot has gone through. We prepared for this. I think all miners were preparing for this in some way. Really came down to upgrading your fleet, get the more efficient equipment, make sure you have the low cost of power. Everyone leading up into this halving, and you know, it's not just leading up the months towards, it's years in advance, you're thinking, how can I make sure I have the most cost competitive equipment to withstand this period? Think if you look at historical halvings, which a lot of Bitcoiners do now, is signals of how they think the price is going to perform. While past performance doesn't indicate future results, we've seen positive momentum in

• 4:55Speaker 02

  Bitcoin price in the 12, 18 months that follow halvings. May not necessarily happen, like I said, past results don't dictate future results, but it's about for many miners, I think, surviving these periods of constrained economics. So for Riot, we always, one of our hallmarks of our strategy is getting a very low cost of power. We do that with our flexible power strategy. We've been upgrading our fleet and rapidly expanding over the past couple of years in preparation for this halving, and we've kept a strong balance sheet. We want to withstand the volatility and get to the long term. But it's a tough time for all miners. Right now, we're getting Q2 financial results have just started being released last week and then through the next week or so. That's almost

• 5:40Speaker 02

  the first full quarter post halving. The halving was April 19th, so April 20th, and so most of the quarter post halving environment. And we're starting to see, it's tough out there for a lot of these players, but I think everyone has a long-term vision of Bitcoin, at least here at Riot, and we made the right decisions, I think, to withstand and get to the gold in the future.

• 6:04Anthony Pompliano?

  If I remember correctly, you guys reported somewhere around $70 million of revenue for Q2, which feels, you know, pretty strong, especially after kind of that halving. Help me understand, you know, what should people be paying attention to over the next 12 to 18 months? You mentioned that kind of price historically has risen there. Are there certain things outside of just kind of hash price that you guys are paying attention to internally that may be able to give people an understanding of the mining economics?

• 6:30Speaker 02

  Well, you know, hash price is of course driven by really two main variables. The price of Bitcoin and how much competition there is around Bitcoin mining is measured through the difficulty. I think we're very bullish on the future Bitcoin with the introduction of all the ETFs and these major financial firms getting behind Bitcoin now. The fact that Bitcoin has reached the level of national politics and major presidential candidates are not talking about Bitcoin, this all has us very bullish about the future of Bitcoin. Alongside that, we see mass grabs for access to power. That's what Bitcoin miners need to grow. If they want to build new facilities, they need access to power.

• 7:13Speaker 02

  With the renaissance that's going on with high-performance computing and AI right now, they're not just Bitcoin miners and normal data centers competing for power capacity. There's a whole new industry that's competing for power capacity as well. So what we think is that will be a major constraint for Bitcoin mining operations growing going forward. Miners can buy new equipment, they can upgrade and then increase their hash rate, but access to power is going to be the critical constraint going forward. So we think there's a potential, at least in the short term, for there to be a positive mismatch in between those two variables for large in-place Bitcoin miners that as the price of Bitcoin goes up, the difficulty may not be able to increase as rapidly as it

• 7:58Speaker 02

  has in the past because of that constraint, their access to power. For us, you know, we have one major advantage, we have three major advantages that we highlight. Our strong balance sheet, our growing operations, and our low cost of mine. And a low cost of mine is the key advantage that we're trying to replicate over a large scale. Despite the depressed economics, for the second quarter, we had a electricity cost for Bitcoin of about $15,000 net of our whole power strategy. So what our objective is going to be is replicating that on the widest scale going forward. And that's how we overcome the depressed mining economics and really position us up for that positive upside in the future.

• 8:40Anthony Pompliano?

  Now, you mentioned that Bitcoin mining and politics are kind of on this crash course and may have even already crashed together. You were at the meeting with President Donald Trump at Mar-a-Lago. I think you were also at the meeting in Nashville. Can you talk a little bit about the mining policy that is coming out of many of these kind of presidential campaigns, and maybe even Trump specifically, because it sounds like you've kind of had conversations with him about how he's looking at this industry?

• 9:06Speaker 02

  You know, this is a topic that I spend a lot of time on now. I spend a lot of time on it because this industry, Bitcoin and Bitcoin mining, has been under attack for the last few years here. Really ramped up, I would say, in 2022. We have seen an onslaught of hostility from the current administration. And I cannot even remember the whole list off the top of my head. This administration has been pushing against self-custody. There have been changes to longstanding policy where now they're going after wallet developers. There's been multiple proposed tax, 30% excise tax on Bitcoin mining, which would effectively ban Bitcoin mining in the United States. We've seen what can really best be characterized

• 9:50Speaker 02

  as Operation Choke Point 2.0, where banking regulators have pressured banks not to do business with Bitcoin-related companies. The Energy Department has been attempting to extract confidential information from Bitcoin miners on an emergency basis, and then develop a public registry of Bitcoin miners with their proprietary information publicly disclosed. By the way, a riot in other miners sued the Energy Department over that, and we were successful. So, there's been a lot going on. So, in order for us to protect our business and protect the prosperity of this industry in the United States, Bitcoin miners have had to take action. All Bitcoin companies, rather I should say, have had to take action. What that has really looked like is a lot of education, a lot

• 10:34Speaker 02

  of meetings on Capitol Hill talking to lawmakers. The good news is, this is an issue where there is a lot of support. There's more support, I should say, than you would believe. I don't know if we're necessarily up to a lot of support yet, but there's more than you would believe, and there's a good Good amount of bipartisanship in here starting. There are both Republicans and Democrats that see this as a key issue. And the industry is very fortunate to have the key allies that it does in Congress pushing this forward on both sides of the aisle. But the fact is, this administration has been extremely hostile towards Bitcoin. And when you think about a politician's objectives, there is really no upside to being anti Bitcoin, anti crypto,

• 11:18Speaker 02

  which is confusing to why some have chose to make their identity around it. It's talking about specifically Senator Warren, building an anti crypto army and then using her influence within the administration to affect that campaign. There isn't a contingent of voters who are anti Bitcoin that are looking to elect politicians to take down this industry. I mean, there may be some, but that's not very meaningful. On the other hand, you have some 15 million Americans that own or have owned crypto. You have about one in three voters in this year's election that's seen crypto as an important issue for them. So what we have been trying to communicate is, this is an easy issue and it should be a universal one.

• 12:00Speaker 02

  This isn't an issue that has years of entrenched policy, like how people view tax policy or certain social issues or decades of stuff to unwind. It's a new issue and it's an industry that really doesn't need the government in order to be successful. Really what the industry only has asked for is the rules of the road and not to be singled out, not to be singled out amongst other industries and attacked for no other reason than what we do. So it's an industry, it's a very interesting issue for politicians because there are all these voters that care so much about it. And there's ultimately not that much action that's really being asked for.

• 12:40Speaker 02

  As an industry, we are simply asking, do not attack us, do not treat us different than other companies. Allow this industry to use the momentum it has to thrive. Bitcoin will be successful, no matter what, in my opinion. But the business environment is going to be dictated by politics. So it could be. A rough road to a Bitcoin future, or it could be a more pleasant one. And we're trying to push for a more pleasant one. So finally getting to the core of your question about Trump. I just wanted to add that backdrop is, you know, we and others have published a good amount of op-eds talking about this as a campaign issue and talking about the value of the Trump campaign embracing Bitcoin

• 13:23Speaker 02

  because of how important of an issue this is to so many voters and the hostility that we face in this current administration. There's been a lot of behind the scenes to work, but that meeting in Mar-a-Lago was very pivotal. It was an opportunity for industry leaders to sit around the table with President Trump, talk about what's going on, ask questions and answer questions. And I think that was a very productive meeting because the next time we all got together was in Nashville, where President Trump made what I believe was a very positive speech for this industry. I think that was a huge milestone for Bitcoin that no matter what you think of him, a major presidential candidate came to the leading number one Bitcoin event of the year

• 14:07Speaker 02

  and talked about Bitcoin and the values that Bitcoin brings and his campaign's intention to be supportive of this industry and their intention to make the United States a continued leader in this industry. That is very bullish for me. We're very excited about that. We care about promoting pro-Bitcoin candidates and it's really a bit of political game theory that we're trying to get out here because as politicians express a pro-Bitcoin view, that puts pressure on their opponents to also have a pro-Bitcoin view. And we've already seen that, right? From Trump after speaking in Nashville, we've seen rumblings of the Harris campaign trying to get up to speed on this issue.

• 14:52Speaker 02

  Democrats writing to their party saying, hey, we need to turn around on this issue. We're losing a lot of ground and them kind of trying to get back up on the same stage of where now Trump has presented himself. So I think this is very positive for the industry. You know, once again, a lot of people say, Bitcoin shouldn't rely on elected officials, shouldn't rely on politicians. And they're absolutely right. Bitcoin as designed, I believe, will be successful over the long term, no matter what. But as business operators in the United States, as users of Bitcoin, developers, we are in a very tough environment right now. And it is very important that this hostility ends so the United States can continue its positive trajectory and not get on a bumpy one.

• 15:36Anthony Pompliano?

  What do you expect kind of a pro Bitcoin president to be able to do? Obviously, we saw Trump kind of say, I think, all the right things that people wanted to hear at the Bitcoin conference. But for the mining business in particular, it sounds like there's one kind of talk track, if you will, that's, hey, we just want people not to be abrasive to us. But are there specific things that the president could do to help the mining industry?

• 16:02Speaker 02

  Well, I mean, that brings up a good topic. A lot of people have asked me coming out of these meetings, hey, do you think Trump is going to do what he says he is going to do? Can we trust that President Trump would follow through with what he's saying? Listen, all we're asking for, as you kind of just summarized again, Anthony, is we are just asking not to be singled out and attacked. We want to be treated like everyone else. So ultimately, we don't need the president to do anything in contrast to the current administration that is very hostile to this industry. And I have a lot of concerns that is going to continue. So what I need a president to do is ultimately nothing. Now, there are some positive things that they could do as well.

• 16:45Speaker 02

  One of the things that President Trump highlighted in his speech is the concept of creating a Bitcoin strategic reserve, which pairs with the legislation that Senator Lummis, a huge champion of Bitcoin from Wyoming, introduced following his speech. So that could be positive, I believe, for more supply to be taken off the table and to initiate potentially be nation-state game theory withholding Bitcoin. There are some tax benefits as well. I think there are some unfair ways that Bitcoin miners or Bitcoiners are unfairly impacted by tax. Tax policy. Now, that's not something the president done does as by himself unilaterally. No, that's something that's done in conjunction in hand in hand with Congress.

• 17:29Speaker 02

  But there are some positive things that we could do. But ultimately, the the objective is to not have a hostile information, not have a hostile administration. So I'm very encouraged by the statements that President Trump has made. And I believe we would not have that hostile administration with him in the White House.

• 17:47Anthony Pompliano?

  He made a couple of comments that I found very interesting. One of them was something to the effect of like, hey, I want to mine all of the Bitcoin in America. Or, you know, make Bitcoin made in America. I think today that there's about 35 ish percent of all mining already happens in America. I think maybe around 10% or so is in the state of Texas alone. What is there a threshold that you think is appropriate? Should we try to get to, you know, 40, 50 plus percent hash rate in the US? Is it possible? How do you think about kind of this idea of, you know, the US leading versus? Is there some threshold where you say, actually, we shouldn't go beyond this? Because we want this decentralized network from a geography standpoint?

• 18:27Speaker 02

  Ultimately, it's all outside of our control, right? Bitcoin miners are growing all over the globe. And if if there if the market incentive is there, we're going to see hash rate being deployed wherever it's going to be accretive to those operators. So when President Trump made those statements, that was very, obviously, as a Bitcoin miner, I was very excited about that. You know, I couldn't imagine 10 years ago, 11 years ago, someone telling me not only would a major presidential candidate be talking positively about Bitcoin, they would be talking about something even more niche. In most people's mind, Bitcoin mining. So that was that was quite a sight for me to see. I think this is the type of thing where, you know, like many industries,

• 19:11Speaker 02

  we want the United States to be the leader. Is the United States going to have 100% of the hash rate? That is impossible. It's never going to happen. There's competition globally for Bitcoin. I think we get to ourselves to a good place by striving to be number one, just like we've strived to be number one in other sectors and other pockets of the Bitcoin industry. So much of what propels this industry is in the United States. So many users, so many businesses. To me, it makes sense that the United States is the leader in all these other components of the ecosystem, that they're the leader in Bitcoin mining as well. You know, what that number is, I don't, I don't know. I am not concerned about one country necessarily having too much hash rate.

• 19:54Speaker 02

  China had 70 plus percent of the network hash rate at some point. You know, what happened from that? I think Bitcoin was designed to resist any type of attacks that people might be concerned around, around that. At the end of the day, Bitcoin is important and it's valuable because it utilizes proof of work. Proof of work utilizes energy. Energy is a scarce resource that cannot be printed, fabricated, or stolen. So if you think a country is going to harness all of the electricity just to attack Bitcoin, well, I believe, I'm paraphrasing Satoshi's quote, but at that point, they, if they were going to take, develop all those resources to be hostile, at that point, they would

• 20:35Speaker 02

  realize it's better off just to be, to utilize the resources in for the benefit of Bitcoin.

• 20:40Anthony Pompliano?

  I think that makes a lot of sense. And I saw your one tweet, you said, you know, the United States is Bitcoin country, uh, which I think there is, uh, kind of this sense, uh, throughout the industry, uh, hey, maybe there are, uh, politicians, and I would actually argue, you know, I think Republicans have done a great job of, uh, kind of positioning themselves as the pro Bitcoin, pro crypto, um, kind of side of the aisle, but there are, uh, other politicians on the Democratic side who are saying, hey, hold on a second. We don't want to just cede this point to kind of our, you know, political rivals. We'd actually, we want this to be a bipartisan thing, and if they're going to embrace it, we better embrace it too. Um, and so I, I think if I'm kind of reading into your comments here, uh, your expectation is that over time, it will become that bipartisan issue that kind of has full support. It just may take some time and be a little bit of bumpy between where we are now to, you know, that point, is that, is that accurate?

• 21:27Speaker 02

  Yeah, that's right. I would say at this point, it's more Republicans than Democrats are supporting it. That doesn't mean that all Republicans are supportive. That doesn't mean that all Democrats are negative. We have some amazing allies from the Democratic side. Senator Gillibrand, Congressman Nicol, Congressman Kana has been talking a lot about this, Congressman Torres. There's a number of allies on the Democrat's side. And you know, recently, you look at minds being changed, there was a Republican cosponsor to Senator Warren's bill, which was a roundabout effective ban on Bitcoin, or at least crippling the industry in the United States. Republican Senator Marshall was a cosponsor, and after

• 22:07Speaker 02

  seeing the response, he actually just recently withdrew his cosponsorship. So, positive momentum we're seeing here. At the end of the day, Bitcoin is a tool. Whether you think about it as a store of value, or a medium of exchange, using the Internet isn't a partisan issue. Having a bank account, investing in stocks, investing in gold, these things aren't partisan issues. These are just things that people do. And that's what both sides of the aisle are eventually going to get to. There is no electoral upside to being anti-Bitcoin. There is only electoral downside. Don't cede this issue to your opponent. Be a supporter of the industry.

• 22:45Anthony Pompliano?

  Now, one of the interesting things is that you all recently pulled off an acquisition of block mining. And it seems like, you know, you are one of a couple of players who are trying to consolidate the industry to some degree. Talk about, you know, the block mining acquisition in particular, and then is this something that you all will continue to go look for as these M&A opportunities? Or how do you kind of see that consolidation playing out in the coming months?

• 23:09Speaker 02

  Yeah, so Riot's right now, overall company objective is to reach 100 x hash. We have a lot of capacity. I'd venture to say Riot has the biggest organic development pipeline within the industry. But we are out there trying to find additional capacity as well to support our growth plans. We're looking at areas that are friendly to Bitcoin mining, and have cheap energy prices, so we can continue to be a low-cost producer. Bitcoin mining and of course we're looking for companies that have very strong proven teams operating them. And that's what we saw with Block Mining. They operate in Kentucky. Kentucky is a very Bitcoin friendly state and is a very Bitcoin mining friendly state.

• 23:51Speaker 02

  So while we have this big organic growth pipeline, we are out there looking for other avenues for growth. I'm very proud to say I think Riot has the the number one corporate development team in the Bitcoin mining space. We have a very experienced team from different backgrounds, but all experienced in doing transactions and strong believers in the space. They're out there looking at different deals all the time. And with the team that we built up, we're able to dive into these in a lot of detail. And of course, most of them are not ones that we pursue. When we find these really valuable opportunities like Block, we're aggressive about getting them done. Block has a fantastic team. They fit our culture very well. So now, while we have this huge organic growth pipeline in Texas,

• 24:36Speaker 02

  where we are building out our Corsa Cana facility to 1 gigawatt, which should be the biggest facility or any data center, bigger than any data center in the world when completed. Now we have a team independently growing out in another jurisdiction in Kentucky as well. They have a growth pipeline of about getting to 300 megawatts. So now with the corporate backing of Riot, they're able to more aggressively go after their goals. Our hope is to continue to find more opportunities like this, find different jurisdictions that we are friendly to Bitcoin and Bitcoin mining with low energy prices that we can operate in. We believe Bitcoin mining has a very positive relationship with the energy grid where it exists. So we want to continue replicating that strategy and scaling up as wide as possible.

• 25:20Anthony Pompliano?

  Now, talk to me about kind of the hardware. You know, one of the things that I think a lot of people are paying attention to is obviously energy. You need that energy in order to be able to participate. But the hardware has historically been something that maybe is a little bit unpredictable in terms of upgrades there. But also, people may not realize how much miners need to think through. You know, how much kind of life do you get out of the hardware you currently have? You have to kind of demand plan into the future. There's deposits. There's kind of, you know, an entire business practice there. And so any updates on kind of what you guys are doing on that front or things maybe that you think people would find interesting?

• 25:57Speaker 02

  I think the hardware industry has changed dramatically over the past four years since the last halving. If you go back four years, Bitmain was the predominant manufacturer with some MicroBT and Canon behind them. Bitmain is still the dominant manufacturer today, but there are more and more players that are entering the space and we're seeing a lot more competition. The hardware is improving. We're not seeing those huge absolute jumps in hardware efficiency, improvements in hardware efficiency like we did in 2014, 2015. But we're still making strides. So miners are incentivized to continue upgrading to

• 26:37Speaker 02

  make sure they have an efficient, low-cost fleet. When we look at the lifespan for miners, there's kind of two figures you have to think about. There's the accounting. What are the auditors making you put down as a useful life that's going to guide you depreciation schedule? But also, what do you think your economic and operational life is going to be? For us, we believe with our low cost of power, we can keep machines competitive for quite some time. Could be five, six, seven years. So well beyond what our depreciation schedule actually ends up being. The real question then is, how can you extend the operational life of the machine to make sure it continues to operate through that full economic opportunity lifespan? One of the things that Riot has led the industry

• 27:19Speaker 02

  on aggressively pursuing is utilizing immersion cooling. This was a very niche thing a few years ago. Riot has built the largest deployments of immersion cooling. For those who don't know, immersion cooling is a dielectric fluid that does not conduct electricity, so you can submerge electronics in it. And by cooling that fluid, you can keep your machines operating at a cooler temperature than you may otherwise be able to do just in ambient air. We operate in Texas. It gets very hot. It's over 100 degrees by a good margin every day down here in August. So that is a big challenge for Bitcoin miners. By utilizing this immersion cooling, we believe we can improve our overall operating

• 28:03Speaker 02

  uptime and more importantly, we think extending the useful life of these machines. They're operating at a more constant, stable temperature and not subject to being beaten down by the hot air as much. And hopefully, you know, we believe that requires less repair and maintenance over time and a longer useful life of the machine. So now we're actually seeing miners develop, miner manufacturers, developing hardware that's purpose-built for immersion cooling. When we first started doing immersion cooling, we'd have to take apart the machines, remove the fans, do some tweaks, and then put them in the fluid. In our new facility in Corsicana, we have been buying a purpose-built immersion miners

• 28:44Speaker 02

  from a company called MicroBT, which is about second place to Bitmain in market share. And actually, really exciting for us is MicroBT is manufacturing these machines right here in the United States. So we see some diversification for our, the production of hardware. And we're able, instead of chartering huge jets to send these miners from Southeast Asia over to the United States, they're on a truck from Pennsylvania down to our facility in Texas. So we're, it's very exciting how this hardware industry has evolved. And I think with all the players entering it, we're going to continue to see more interesting things happen over the coming years.

• 29:20Anthony Pompliano?

  Now, speaking of mining and kind of power, one of the coolest, I think, developments has been this kind of contribution to load balancing on electrical grids, specifically in Texas, we've seen this. It, I think, has really silenced some of the critics when it comes to, you know, the miners taking so much energy from these grids. But recently, there has been a number of kind of new critics who are saying, no, wait a second, these miners are, quote, gaming the system, is one of the critiques that I saw. And what they're basically saying is, look, they're able to make more money by doing this, and so it's not quite what, you know, they promised. How do you think about those critiques? You know, are miners gaming the system? And is it a net positive, you know, kind of moving forward?

• 30:06Speaker 02

  It's absolutely a net positive. You know, just on its basis, Bitcoin miners are a industrial user of power that are flexible. There aren't other industrial uses of power, large-scale uses of power, that have those flexible properties. Bitcoin blocks come every 10 minutes. That means a miner's work is, on average, at worst, only 10 minutes old. So we can shut off at different times and not lost the work that we've done in the past. We've already mined that Bitcoin. So when you think about an energy grid, there's a constant challenge to match supply and demand. You really have to build a grid out to support peak demand. We live in a modern, you know, first-world country. We need energy all the time.

• 30:49Speaker 02

  It's not acceptable to have energy out at a different time. We have critical infrastructure that always needs power. So you build an energy grid, you have to build it out to accommodate, have enough generation and transmission to meet peak debt power. But those are only a few percent of the hours of the year. The fact is, most of the time, a grid's capacity is not utilized. That is a strain for generation developers. So when you think about the energy challenges that we're facing as a nation, the massive growth in energy demand and the generation needed to match that demand, what you actually need are flexible users of power, like Bitcoin miners, that will buy power in those off-peak times and help improve the financial profile of those projects, and then have the flexibility

• 31:33Speaker 02

  to shut off during those peak times. And that capacity, which might not have been the generation capacity, which may have been uneconomical at off-peak, is now able to provide power to all other consumers and businesses at on-peak. That's very important. So one of the things that Riot has done, which is a little unique, not done at a wide scale in this industry, is we have entered into various power hedges. These are just financial instruments, where we put up financial resources. We essentially took a view on the price of power over the term of these hedges. In our case, they were varied between seven to 10 years when they were executed, and we essentially own that power. Now, first off, that has a positive impact, just

• 32:16Speaker 02

  And this front, we are a predictable buyer of power. Generators who are looking to hedge out their exposure need someone on the other end of that transaction is going to buy them. In this case, you know, that that was right, who bought these hedges over these long periods. So with these hedges, we are able to have the security to continue operating in those off-peak times. And then we can make that capacity available. So this is a good financial incentive for generators to continue to come in the market. If they know there's a buyer on the other side, then they know that there is a greater certainty in their economics. We took a financial risk to do that. We have an ongoing financial risk with those instruments.

• 32:58Speaker 02

  We are subject to collateral requirements that move around pretty significantly. And we have to have a strong balance sheet to post the tens of millions of dollars in potential collateral to handle those swings. So it is something that they notice in these peak hours, critics will notice in these peak hours. Hey, you have power at this price and you and you're able to monetize it when there's volatility and you know, power's at $5,000 a megawatt hour. But what they don't always appreciate is these hedges are a average of all power prices over the period. What that means is actually in off-peak times, we are sometimes buying power, oftentimes buying power higher than the market price.

• 33:40Speaker 02

  But we own that, that since that price is an average, we still own it at those on-peak hours that we're able to monetize. The effect of this is two things. One, we're sellers of power when power is in high demand, which has a, which is a downward pressure on the price. That helps keep prices down, like in any market, sellers drive prices down. The other thing we're able to do with these hedges is participate in something called ancillary services. Ancillary services are where grid operators, we're essentially selling grid operators the right to control our load. This is a very key tool for grid operators, like in our case, Texas, I mean ERCOT in Texas, to achieve grid stability.

• 34:20Speaker 02

  And ERCOT themselves will tell you they can achieve grid stability by controlling load just as well as they can achieve it with controlling generation. So a hedge gives us the opportunity to participate in those programs and give them that control. We're able to offer that at a better price than other products like peakers or gas, a peaker plants are able to do. Gas peaker plants or batteries are able to do. And that in the end gives ERCOT a better price, which through consumers ends up being a lower average price that they would have to pay for those services. So the hedge enables multiple positive things. It is giving generators and other participants in the power market greater certainty over how they're going to be able to monetize their

• 35:05Speaker 02

  load, especially during those off-peak hours where they may be losing money. It gives us the opportunity to participate in ancillary services and give the grid operator control of that load to achieve grid stability. For us, the challenge here is just education. These are nuanced issues. Hey, just as you and I struggle to often explain Bitcoin to people, these dynamics of an energy market, they are very challenging as well. We're out there in the field all the time, putting together material, meeting with people, and I'm positive with the continued investment of that, that detractors and critics are going to see the light on Bitcoin mining.

• 35:39Anthony Pompliano?

  My last question for you is the rise of kind of AI and the data centers. We've seen some of the publicly traded miners say, hey, look, actually, we're high-performance compute, you know, platforms, and we're going to do mining, plus we're going to do AI and kind of traditional compute. Some other miners have said, look, we're just going to do Bitcoin mining. That's our core focus. And then there's kind of this market dynamic where now you've got even more people showing up for power who, you know, may not want it for Bitcoin mining. They want it for just the data center purposes. How have you seen the rise of AI and this kind of high-performance compute affect Bitcoin mining as an industry, both kind of your competitors, but also maybe some of the sites that you guys would want to select or kind of consume power at?

• 36:19Speaker 02

  It's certainly been one of the main topics of discussion in our industry this year. First off, like we highlighted earlier, now we are competing against more buyers of power. We're competing against those other types of loads that are looking for power capacity where it exists. So that, in effect, should reduce the supply of, in theory, reduce the supply of power capacity that's available for growth in all these applications. We believe Bitcoin miners have a better story, though, with the flexible property that we're just talking about. They help grid stability. So I think they have a more persuasive argument for getting interconnections approved by grid operators. But we're competing together nonetheless. There have been some Bitcoin miners out there, Core Scientific in particular,

• 37:01Speaker 02

  that have struck very impressive deals with AI operators. So they're converting some of their infrastructure, utilizing some of their power capacity to provide these AI-focused data centers for a specific client. The economics on those appear very interesting. The result of that deal has got a lot of other Bitcoin miners interested in them. And it almost seems now that there's a positive share price impact for those miners who are expressing an interest in this space and exploring it. For us, we fall into the bucket of the pure-play Bitcoin miners that you mentioned. We have a Bitcoin culture that is ingrained in us here. We're here because of Bitcoin. We want all the upside for Bitcoin that we possibly can get.

• 37:46Speaker 02

  Our access to power is a valuable thing. There's only a limited amount of it, and we want to make sure we can utilize all of that. So we're in position to get all the upside that we can for Bitcoin, because we believe in Bitcoin. A lot of miners are taking different views, and that's perfectly fine. Everyone has a different business strategy. Everyone has different things they want to focus on. Thinking this is an example of different participants in the industry that just have a mix of different strategies. We're a Bitcoin company, and we're going to remain focused on Bitcoin mining.

• 38:18Anthony Pompliano?

  Jason, where can we send people to find you on the Internet or find out more about the business?

• 38:22Speaker 02

  Well, first, check out our website, riotplatforms.com. We're continuing to put more information there about our operations, and we're actually starting to introduce more educational material about some of the things that you and I just talked about, Bitcoin mining's relationship with energy grids. You should definitely follow us on Twitter, at Riot Platforms. We put out a lot of good videos all the time. Myself, I'm at Jasonless underscore. Couldn't get that at Jasonless without the underscore yet, but you follow me on Twitter as well.

• 38:50Anthony Pompliano?

  We got to go find who's got that one and say, hey, man, come on, give it up.

• 38:54Speaker 02

  This is, this is, yeah, he's not giving it up.

• 38:58Anthony Pompliano?

  All right, Jason, I appreciate it very much, and we'll definitely do this again in the future.

• 39:02Speaker 02

  Awesome. Thank you, Anthony.