#854 Bitcoin Hash Rate Has Never Been Stronger w/ Whit Gibbs

Whit Gibbs is the Founder & CEO of Compass Mining. In this conversation, we discuss the hash rate response since China's ban, Biden's recent Crypto Executive Order, Regulation, and the Bitcoin Mining Industry. ======================= Since 2018 Copper has been at the forefront of institutional digital asset development. From award winning custody solutions, to creating the first truly off-exchange settlement function, Copper pioneers technology, products, and services, in lock-step with a rapidly changing world. No other infrastructure provider covers as many assets, across as many exchanges, with the speed and security that Copper can offer. To learn how Copper helps the world’s largest institutional investors secure their digital assets, head over to copper.co Copper - the unfair advantage. ======================= Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Compass was founded with the goal of making it easy for everyone to mine bitcoin. Visit http://compassmining.io to start mining bitcoin today! ======================= Bullish is a powerful new digital asset exchange built for institutions that delivers the innovations of DeFi in a regulated environment. The Bullish Hybrid Order Book pairs the high-performance of a traditional Central Limit Order Book with automated market making. Powered by deep Bullish Liquidity Pools, backed by the multi-billion dollar Bullish Treasury. So, you can trade with certainty and at scale across variable market conditions. Learn more at Bullish.com or follow @Bullish on Twitter. Because the future belongs to the bullish. *Not investment advice. Digital assets and cryptocurrencies are high risk products. Consult your professional advisor before dealing in them. Bullish’s services are available in select locations only and not to U. S persons. Visit https://bullish.com/legal for important information and risk warnings =======================

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. In this conversation, we talk about mining, mining infrastructure, regulation, and nation-state adoption. I really hope that you enjoy this conversation, as I did as well. Before we get into this episode, I want to quickly talk about our sponsors. Today's episode is brought to you by Copper. Since 2018, Copper has been at the forefront of institutional digital asset development. From award-winning custody solutions to creating the first truly off-exchange settlement function, Copper pioneers technology, products, and services in lockstep with a rapidly changing world.

• 0:44Anthony Pompliano?

  No other infrastructure provider covers as many assets across as many exchanges with the speed and security that Copper can offer. To learn how Copper helps the world's largest institutional investors secure their digital assets, head over to copper.co. Again, Copper, the unfair advantage. Check them out at copper.co today. Next up is Compass Mining. Compass Mining is the world's largest marketplace for mining hardware and hosting. With Compass, everyone can mine Bitcoin. Their team makes it easy to start mining wherever you want, at home or in one of their 23 hosting facilities around the world. Through the Compass Marketplace, retail miners can access mining hardware with similar prices and purchase plans as the world's largest mining companies.

• 1:29Anthony Pompliano?

  Compass miners own their machines, they choose whatever mining pool they want, and they mine directly to their own wallets. Miners who don't want to host their machines can order ASICS directly to their doorstep. Simple and low-cost hosting agreements, coupled with best-in-class customer service, are the reasons why Compass is the simplest and most popular way to mine Bitcoin. Start mining your own Bitcoin today by visiting compassmining.io. Again, compassmining.io. Go check them out and let me know what you think. This episode is brought to you by Bullish. Bullish is a powerful new digital asset exchange built for institutions that delivers the innovations of DeFi in a regulated environment. The Bullish Hybrid Orderbook. Pairs the high performance of a traditional central limit order book with the automated

• 2:13Anthony Pompliano?

  market making powered by deep bullish liquidity pools backed by the multi-billion dollar bullish treasury. So you can trade with certainty and at scale across variable market conditions. You can learn more at bullish.com or follow bullish on Twitter because the future belongs to the bullish. Now, this is not investment advice. Digital assets and cryptocurrencies are high risk products. Consult your professional advisor before dealing in them. Bullish's services are available in select locations only and not to U.S. persons. Visit bullish.com/ legal for important information and risk warnings. Go check them out at bullish.com or follow at bullish on Twitter. All right, let's get into this episode. I hope you guys enjoy this one.

• 2:52Speaker 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.

• 3:15Anthony Pompliano?

  Wait, my friend, are you there?

• 3:17Speaker 02

  I am. Thanks for having me on, fellas.

• 3:19Anthony Pompliano?

  Absolutely. How are you?

• 3:21Speaker 02

  I'm doing well. How are you guys doing? Good to be back on the show.

• 3:24Anthony Pompliano?

  We got a lot to talk about. First things first, hash rate just continues to explode. What's your read in terms of why is this growing so quickly even after the China ban last year? It feels like hash rate just is defying gravity. I mean, it's just literally growing and not stopping. What's going on?

• 3:42Speaker 02

  Well, I mean, look, I think we all anticipated that hash rate was going to continue to increase. I mean, if it wouldn't have been for the Chinese ban last year, we probably would have seen these numbers much, much sooner or these increases much, much sooner. But what we're seeing this year now is just all of these large public miners who'd placed big orders with Bitmain last year, the marathons and the riots of the world. Now they're receiving these machines and they're plugging them in. So this is all I anticipated. I know that there's been a lot of hash rate predictions from the different research agencies out there, but it's likely we're going to continue to see this climb for the remainder of this year as more and more of these machines finally get shipped from Bitmain to the to the owners here in North America.

• 4:22Anthony Pompliano?

  All right. And when you start thinking about the growth of this hash rate, how much of this is inside the United States versus internationally? And how important is it that it's happening in? The US to any degree.

• 4:32Speaker 02

  I mean, look, since the Chinese ban and now with what's going on in Russia, I think more and more of this hash rate is going to come online in North America. There are certainly feasibility studies and planned projects that are looking at South America and parts of Northern Europe, specifically Norway and Sweden. But it's likely that we're going to see the vast majority of hash rate for the remainder of this year come on in the States.

• 4:54Anthony Pompliano?

  Got it.

• 4:54Speaker 02

  I should say in the States and Canada.

• 4:56Anthony Pompliano?

  Correct. And the United States now has what? It's like thirty, thirty-five percent of global hash rate with about ten percent being in Texas. Is that like general ballpark?

• 5:05Speaker 02

  That's the ballpark. I think you're, we're probably going to see close to fifty percent of the hash rate in, in the United States here by the end of the year.

• 5:12Anthony Pompliano?

  How big of an issue is it that more than fifty percent was in China? And now if more than fifty percent is in the US, like, is there still the same quote-unquote strategic risk in terms of the lack of decentralization to, to the network? Or do people not worry as much because of the belief that the, the US is less authoritarian?

• 5:31Speaker 02

  You know, Bitcoin is non-state money. So I think that fifty, more than fifty percent of the hash rate in any one country's borders poses a risk to Bitcoin. But we're going to see how Bitcoiners respond. I mean, when it was in China, everyone was up in arms, talking about how we can't have that much hash rate in China. But when we have that much hash rate domestically, we're going to see how people will respond. Now, fortunately, the conversations that we've had in Washington and in some of the states, legislators are really keen to get educated. They're not looking to over-regulate it, or so it would seem at this point. So I think that what we'll see is a favorable or, you know, do no harm oversight over the next couple of years out of Washington.

• 6:10Speaker 02

  And of course, Biden just signed his executive order today, which, you know, I think all he really did was call the, the other agencies to arms and say, hey, look, we got to take a closer look at things. So I think we're in a pretty good spot.

• 6:21Anthony Pompliano?

  What was your read on this executive order? It felt like it was more directive, hey, go do a bunch of research, come back to me with reports. But positive, negative, what's kind of your take?

• 6:31Speaker 02

  I think it was a bit of a nothing burger, you know, it's the, effectively, it's the CEO of a company saying, hey, look, R and D, let's go out and see what we have here. And I think that's good. You know, there needs to be a lot more research into the space before there are regulations that come out that could potentially port innovation. So I think it was a smart move, this executive order. We'll see what comes from it. But I think ultimately what's going to end up happening is you're going to have, you know, like the EPA was tasked with looking into, into the space and I'm sure that's going to come down heavily on mining. But what I feel they're going to find is that, you know, Bitcoin miners are actually operating in a much more efficient way and using much more clean energy, air quotes, clean, than has been purported in the press to this point. So I think it's

• 7:15Speaker 02

  going to end up being a big win for, for Bitcoin.

• 7:17Anthony Pompliano?

  Got it. And so when you start to think about how fast you guys are growing, who the hell is buying all of the, this equipment from you? Is this family offices? Is this hedge funds? Is this individuals? Is this nation states? Like who's buying machines to go and mine Bitcoin?

• 7:32Speaker 02

  Well, I will say we're not selling to any nation states at this point.

• 7:35Anthony Pompliano?

  Allegedly.

• 7:35Speaker 02

  But we do have a lot. We do have a lot of funds, family offices and, and retail. You know, one, one of the big cohorts that we've seen come in are retail real estate investors, people who used to purchase an income producing property or, you know, buy a house to flip. They're not bringing those dollars into Bitcoin mining because they're able to see faster returns on their money. And I mean, just like with a, you know, with a property, you're getting an income producing vehicle in this ASIC that you're purchasing and putting online. And I mean, look, we get spoiled in Bitcoin mining, talking about 12 to 14 month ROI periods on your initial investment. There's not another business in the world where you can bring those kinds of dollars and see that, that kind of return.

• 8:14Anthony Pompliano?

  Got it. Joe, John, what questions you guys got? Wit, when you think about long-term, when it comes to Compass Mining specifically, like how big can this be? Do you see this as, you know, there's a certain number of people mining or just talk me through kind of how you see the long-term goal of the business?

• 8:28Speaker 02

  Sure. So, you know, our mission is to help everyone mine Bitcoin. And what we see as this space evolves is we do see more and more people starting to plug in machines. I do think that we're going to get to a point where running an ASIC is similar to running a node. And we're going to have millions of people mining Bitcoin around the world. Where they host those machines, it could be at home, it could be at co-location facilities. Data centers, but I think that as Bitcoin becomes more relevant to more people, they're not only going to want to hold it, they're going to want to diversify and have some some infrastructure that's supporting their underlying asset. They're staking so much of probably their portfolio in at that time. So when we're looking at Compass, we're planning

• 9:10Speaker 02

  for a million miners to be using our platform. We're not looking at the tens of thousands. I mean, we want to help those people along the way, but we really do see this becoming a total addressable market in the millions.

• 9:22Anthony Pompliano?

  And for people who are not as familiar with how at least the process works, like, what are the economics of this? How much does it cost? How much can people generate, etc?

• 9:31Speaker 02

  Great question. So I mean, as it stands right now, you can go online compassmining.io, you can get on there, you can buy an ASIC for around $10,000. That ASIC will be online and hashing within the month. And you're looking at generating about $20 worth of Bitcoin a day from that ASIC once it's online.

• 9:47Speaker 03

  How do you think about all these new technology advancements that are happening with Intel getting involved in making new miners and chips and etc.? What are the repercussions on this industry? Are they net negative, net positive?

• 10:00Speaker 02

  I think it's net positive, right? We've seen Bitmain have basically a monopoly since ASICs came into the picture. I mean, and What'sMiners, you know, been on the board, but in reality, they sell out of their machines so quickly that there's not a lot of them on the secondary market. So Bitmain has this chokehold and pricing power on these ASICs. I think with Intel coming to market, what we're going to see is a substantial player come out, provide something that is American made. It's going to be a big boon for the industry. We need competition in that space because it's going to be better for all of the consumers. As it stands right now, if Bitcoin's price pumps, then the cost of your ASIC goes up, you know, 2X potentially. So having having another player in the game might stabilize these prices a bit and allow more.

• 10:45Speaker 02

  More people to get involved.

• 10:46Anthony Pompliano?

  Gotcha. When you start to think about the business today, as you guys have continued to grow, obviously, we've seen the publicly traded miners, but it also feels like at the same time that the capital markets are evolving and the regulatory market is evolving, this like geopolitical strategic importance conversation continues to evolve. And some of these are related, some of them are distinct and separate. But we've seen, let's say, El Salvador, which has obviously embraced this plug their nation stayed into the Bitcoin network. We've seen a place like China go ahead and say, hey, we don't want to participate in this in, you know, any at least public forum. When you see those two kind of extremes, where do the rest of the countries come out? Are they going to come out on the ends of the extreme?

• 11:29Anthony Pompliano?

  Or do you think most of them are just going to kind of sit in the middle and say, hey, you know what? Let's leave it to the private sector. Let the miners go public. Let the businesses get built by entrepreneurs and like, we don't really have a kind of horse in the race at the moment.

• 11:42Speaker 02

  I think we're going to see third world countries or those that are a little bit further down the ladder, take more aggressive steps to try to move up in their their status among the world leaders. And look, I think El Salvador is positioned quite well over the next couple of decades to to really come out ahead. And I think others are going to follow suit. You know, we look at Belarus, who is reportedly mining Bitcoin with nuclear energy. We look at some of these other countries who are taking an interest in Bitcoin mining. I think that's one way to go about it. In places that have robust capital markets, I mean, namely, the United States, Canada, other, you know, well-developed first world nations. I do not think that they're going to take a big interest from a governmental standpoint and be mining Bitcoin themselves. I think they are going to let the capital

• 12:24Speaker 02

  markets do their thing and have these these large miners within their countries go public. But, you know, anything could happen. I know last time we were on the show or I was on the show, we talked about the United States potentially mining Bitcoin and that that caused a little bit of a of a stir. Whether or not they actually do, that remains to be seen. I do, though, believe that accumulated accumulation of hash rate within your borders is going to be a matter of national security. And we're kind of seeing this play out with Russia right now. I mean, Russia's got about 11% of Bitcoin's network hash rate and it's And now with them disconnecting from the world internet, which again, I don't think is a a big deal. It's leading to a lot of questions like, are they going to nationalize mining? What's going to happen with miners that are located in Russia? There's a bunch of big

• 13:09Speaker 02

  question marks. And if Russia did take that stance, which we don't have any reason to believe that they will, what would that mean for Bitcoin's network? Right? So there's still a lot yet to be proven, but as the world seems to be more tumultuous than it ever has been, at least in my lifetime, I think we're, we're going to see companies or countries, rather, make some pretty big moves to to increase their status on the world stage.

• 13:32Anthony Pompliano?

  So obviously with this Russia-Ukraine conflict, we've seen this huge conversation around energy independence, renewables versus obviously all the oil production that comes out of Russia, natural gas, etc. I've got this wild idea that proof of work mining accomplishes the trifecta. Energy independence, it beefs up national security, and it actually increases renewable energy production. And I can't think of very many other technologies that do those three things. What's your thoughts in terms of kind of the interesting or unique position that proof of work mining sits in?

• 14:06Speaker 02

  Well, I'll say, right now, I'm sitting in Latvia. My average energy cost today is around 55 cents per kilowatt hour. Right? So in the States, you're looking at roughly 10 cents per kilowatt hour. I mean, there are times in the day when I'm paying over a dollar per kilowatt hour. That's like 70 bucks to do a load of dishes. Right? So when you think about the chokehold that Russia has on energy production and supply to parts of Europe, especially Eastern Europe, it is crazy. You're absolutely correct, though. Proof of work mining is the way to bolster the grid, stabilize the grid, help to have off takers of power that doesn't need to be used except for in peak hours, and then feed the grid when there's times of immediate need for power. I

• 14:51Speaker 02

  mean, last year in Texas, when it got cold, we saw a lot of the, a lot of homes lose power. There were blackouts across the state. And this year, it got cold again. And what we saw this time is that because over the last year, so many miners have flooded to Texas and helped to bolster the grid. That they were able to feed that energy back to the grid and solve the problem that was caused last year when there were no natural off takers of power. So proof of work mining is a boon for wherever it ends up. Every state should be fighting to get as much Bitcoin mining within their borders as possible. So should every country be. And I think that the the real winners are those who see this and are going to start incentivizing more miners to call, you know, call home wherever that geopolitical location is.

• 15:33Anthony Pompliano?

  I want to play a hypothetical game. I make you the president of the United States for an entire year. What do you do in terms of Bitcoin mining and the US? What are the actions that you would take as president when it comes to Bitcoin mining?

• 15:48Speaker 02

  I would work on making taxes more clear and then I would stand back and let innovators do their thing. I think that the the most important stance that the government can take in most cases is a neutral stance. Let the markets prove out, let let technology advance, let innovation advance. We cannot stay as the strongest nation in the world if we kill innovation or we push innovations overseas. So if I was president for a year and nobody wants that, including me, that would be the first thing that I would do. Just make sure that people understand how they're going to be taxed on this new business and then step back and let the business grow to where it can grow to. And I think that when you're talking about mining,

• 16:29Speaker 02

  this is a trillion dollar, a trillion dollar business class in and of itself that's going to be able to grow here in the US over the next decades. And with access to capital markets, there's not a question in my mind that North America and specifically the United States will be the largest home for Bitcoin mining anywhere in the world. And we need to do everything that we can to support that.

• 16:48Anthony Pompliano?

  When you start to think about Intel and some of these big kind of producers coming into the market or big, large multinational corporations, can they Compete or they just too far behind?

• 16:59Speaker 02

  Intel can certainly compete. I mean, they've got the bankroll, they've got the knowledge, they've got the wherewithal. They can certainly come to market with a product that's going to be competitive. I think that their most important relationship is going to be with Block, Jack's company. Because what they're going to roll out with, my assumption at least, is something, and I know he's hinted at this, something that can go in the home, something that can help everyone mine at a smaller level. And this is incredibly important for mass adoption because it literally gives everyone the ability to participate in the infrastructure aspect of Bitcoin. And Bitcoin, especially when it comes to mining, it's incredibly addictive. I mean, there's so much more than just the dopamine hit you get when you open your portfolio and you see number go up.

• 17:38Speaker 02

  When you have hash rate running, ultimately what ends up happening is you have this desire to just continually increase your hash rate. So I think that the Jack and Block partnership with Intel is going to end up being their most fruitful. Because that's going to lead to more adoption, which is ultimately going to lead to more sales for Intel, which is going to just encourage them to dump more dollars into the space.

• 17:59Anthony Pompliano?

  Got it. And when you start to think about these large corporations, how much of it is they're going to be reliant on hiring Bitcoiners versus the people who they already have that maybe aren't as familiar with Bitcoin itself, or maybe don't even align themselves with like the ethos of the industry, but they just are very good at electrical engineering and chip manufacturing, etc. Like, how important is the Bitcoin nativeness of the team?

• 18:25Speaker 02

  I think it is less important now than it was before, right? Before, you had to have someone who could approach the board with fervor and really fight to get Bitcoin across the line. But now I think there's more adoption and understanding that Bitcoin is here to stay. And there is a strong business case for why these companies would get involved in the space. So I think that as we see more of these adept engineers and people who have spent years and years, whether it's in telecom or AWS, or some of these other massive data center providers, start to get involved in Bitcoin and Bitcoin mining, it's actually going to be huge for the industry overall because we're just going to increase the brain trust and the quality of talent that is operating within the space. And what wound up happening is just like it does with everyone, you come for the money, you stay for the ethos.

• 19:08Speaker 02

  These people, they'll get involved in the space and they'll, you know, they'll get orange pill. Now we'll have incredibly talented, well experienced leadership that is now going to be within the Bitcoin ecosystem.

• 19:21Anthony Pompliano?

  Got it. What you guys got any other questions? No. No, John, you got anything?

• 19:26Speaker 02

  No, I appreciate you joining us.

• 19:27Anthony Pompliano?

  What?

• 19:28Speaker 02

  I got one more question.

• 19:29Anthony Pompliano?

  I got my other one was where's the goggles?

• 19:35Speaker 02

  So. Damn dude, that's the best photo on the internet. Listen, next time if we ever get to go to Dubai together, I've got a good friend out there. He's got a bunch of dune buggies that we can take out and that that goggle was the before picture. The after picture, I am covered in sand from head to toe. So it's a, it's a good time.

• 19:55Anthony Pompliano?

  I love it. All right, I actually have two more questions. I'm going to allow for a plug of the second best Bitcoin podcaster in the world. Peter McCormick, you guys became a sponsor of, I just say real Bedford, but real Bedford. I think is how it's supposed to be pronounced. It's not real football, right? Cause it's football, but what, what is the deal with, with real Bedford and the deal that you guys are doing there?

• 20:20Speaker 02

  So first off, they're, they're British. So I think it's real. I'm pretty sure.

• 20:23Anthony Pompliano?

  Oh, is it real? Even better. I hope that's real. Wait, was it, is it the Spanish say real?

• 20:30Speaker 02

  Yeah. Real Madrid.

• 20:32Anthony Pompliano?

  Listen, I'm in Miami, you know, we get confused a little bit around here. Go ahead.

• 20:36Speaker 02

  But no, Peter came to us and he said that he had this idea to, to buy this football team. And he wanted some backers and for me, it's just a great story. I mean, this is, this is something that if anyone's ever watched Ted Lasso, it's a, a very funny show. And I think that that art might've sparked this real life interest for Peter. But Peter grew up in Bedford. He's seen this football team, you know, do as it's done for the past decade or so. And he now has the means and the wherewithal to step in and, and take it over. And we wanted to support him in that. We think that there's a very real chance over the next 10 years that he can take them with a Bitcoin standard from where they are now in the 10th league up to the premier league and, and really compete. And the way that he's got this thought out is he's building a Bitcoin treasury.

• 21:20Speaker 02

  And right now the Bitcoin treasury is what it is. But 10 years from now, if Bitcoin does what we think it's going to do, then that Bitcoin treasury is going to be worth just as much as some of these premier leagues have in their treasuries. And he's going to be able to buy the best talent, hire the best. coaches and compete at the highest level.

• 21:37Anthony Pompliano?

  I still think that he's going to struggle to do all this unless he puts one of us on the field. But uh, but, but I'm cheering for him. I actually think he's got a legit shot at this.

• 21:46Speaker 02

  Palm boys on the front line. Is that where, is that how we roll?

• 21:49Anthony Pompliano?

  Which position requires the least running? That's probably the goalie, right?

• 21:57Anthony Pompliano?

  That's the way I would look. I'll score the goals. Yeah, you score the goals and I'll stand back there and say, I taught him that.

• 22:04Anthony Pompliano?

  All right, buddy. Where can we send people to learn more about Compass Mining if they want to go ahead and order some, uh, some mining equipment or, or find you on the internet?

• 22:11Speaker 02

  Fastest way to find me on the internet is at Bitcoin Broski on all platforms. To get to Compass, you just go to compassmining.io, go to the hardware page, select the machine that you like, and we'll get it plugged in and hashed for you inside of this month.

• 22:22Anthony Pompliano?

  Awesome, man. Uh, it looks like, by the way, we're getting, uh, feedback in the chat as to, uh, it, we do not pronounce it real in Britain. We say real.

• 22:33Speaker 02

  Oh, all right.

• 22:34Anthony Pompliano?

  Which, by the way, maybe, maybe not. I'm not sure. But, uh, but, but that is, uh, I don't know. All I know is I'm cheering for that team. I have, I have two sports teams outside of the United States that I cheer for. The first one is, whoa, first one is, uh, Real Bedford. And then the second one is the Australia Perth Heat. Those are my two teams outside the US. Other than that, I'm a, uh, Yankees and a Giants and a Knicks fan. And, uh, we'll just all cry in misery together until that turns around.

• 23:06Speaker 02

  Just like every other South Floridian, right?

• 23:11Anthony Pompliano?

  I will say, we went to a game. It was the Yankees versus the Marlins and it was basically a Yankee home game. Like, uh, it was, uh, yeah, I was like, wow. Yeah, Yankees travel well. Yeah, well, especially South Florida. Awesome, buddy. All right. Thank you so much for coming on. We'll definitely do this again in the future.

• 23:27Speaker 02

  Thanks for having me, fellas. Take care.

• 23:28Anthony Pompliano?

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