{ "episodeId": "SLP522", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "jason_les": { "name": "Jason Les", "role": "guest", "tag": "JASON" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 8.59, "text": "Hi everyone, welcome to the Stephan Livera podcast, a show about Bitcoin and Austrian economics, brought to you by Swann dot com. My guest today is Jason Les. He is the CEO of Riot Platforms. They are one of the biggest Bitcoin miners in the world. They are a publicly listed, Bitcoin mining, company. I'm interested to chat with Jason, and I know you're also- Also have a background in, poker as well, so, welcome to the show." }, { "speaker": "jason_les", "time": "00:35", "start": 34.56, "text": "That's right. Thank you, Stefan. Thank you for having me." }, { "speaker": "stephan", "time": "00:38", "start": 37.8, "text": "Yeah, so let's talk a little bit about that. I think that's interesting. I actually, but not nowadays, but back when I was in Australia, I used to play a little bit myself. Obviously not at the, the nosebleed, high-stakes levels like you were, but, that's certainly interesting. I know there was, there were a bunch of poker guys who sort" }, { "speaker": "jason_les", "time": "00:58", "start": 58.29, "text": "Yeah, and I, I played in poker in Australia myself at the, Crown in Melbourne, a, a couple times. But, yeah, so I started playing poker in two thousand four, when it was really a mainstream phenomenon at that time. Internet poker was just starting to roll out. Chris Moneymaker won the two thousand three World Series of Poker, and that was getting a lot of people, romanticizing with the idea that, wow, really anyone can be good at this game, and that was interesting. Anyone can win at this game, I should And that was, what was interesting to me is that the luck factor in, in, poker gave anyone the opportunity to win, in the short term, but it was a pure skill game long term. So, What I kind of determined is, well, as long as I can play this game better than everyone else at the table, I'm not playing against the house, I can make money. And that led into a, fourteen year career playing poker professionally. Played mainly on the internet, but played a lot of high stakes tournaments and cash games in person as well. And it was through that that I discovered Bitcoin. First heard about Bitcoin in twenty eleven, you know, everyone always has a story when they first heard about Bitcoin, they didn't buy it, right? So I first heard about Bitcoin back then, twenty eleven. there were some Bitcoin, there were some sites accepting Bitcoin that were starting up, and in the poker community, people were like, \"Hey, maybe we should be checking this out.\" I, I didn't think too much of it, but, over time, it just became the best tool for moving money around online, for depositing money off sites, for withdrawing money, for sending People all over the, the world like it was just a useful tool. So a lot of people, people in the internet poker community were first movers on Bitcoin for that utility, not even necessarily having a political or philosophical view of Bitcoin. It was just, it wasn't like a future use case, everyone was like, \"This is what we-- This makes life easier for us now.\" And that's how I got exposed to it, and then over time, I started to learn more and more about Bitcoin, 'cause, you know, I have this thing sitting here and it's going up in value, Bitcoin Coins, you know, technology, number go up, technology at play, and that captured my interest. And then I got to the point where I couldn't focus on playing poker anymore because I was studying Bitcoin all the time. I'd have, you know, one screen with eight tables of poker, then I'd have another screen with Twitter and a podcast and reading Bitcoin Talk and all this kind of stuff, and I'm like, okay, I just gotta pick one thing here to be good at, you know, po- poker was intriguing 'cause I was very focused on being the best in the world. The best I possibly could be, one of the best in the world at the game that I played, and, I just decided Bitcoin was too important. I wanted to devote my life to that, so I started researching and following Bitcoin without any aspirations of working in it. I just wanted to commit my life to, you know, being around Bitcoin because I was so enamored with the transformative impact that it was having, and, it's, it's been an incredible, ride since making that decision." }, { "speaker": "stephan", "time": "03:58", "start": 237.98, "text": "Right, and yeah, there's so many-- It's funny, I, I recall stories where people would, you know, they just use the utility of Bitcoin even because maybe they were traveling and it was an easy way to sort of move the money around. If they had some live winnings, they would try to flip it into Bitcoin and then take it home that way and things like that and all kinds of things. I guess there's certain mindsets that, you know, if you're thinking about like, what's a good value bet in poker, then it sort of-- There's kind of analogies of" }, { "speaker": "stephan", "time": "04:28", "start": 267.5, "text": "And mining specifically." }, { "speaker": "jason_les", "time": "04:30", "start": 270.1, "text": "So my background, my education was in computer science, but before I took on poker as a career, I knew I wanted to be in computer science like my whole life, just dead on, I was gonna be in software engineering, studying things around that. And when I got back into, when I sta- stopped playing poker and started focusing on Bitcoin, I got back in, into that again. So I was interested in, how Bitcoin worked. I was interested in doing software development projects around Bitcoin. Bitcoin and, I've always, you know, liked putting my hands on things and doing, c-computer hardware, doing projects involving computer hardware is very interesting. So With Bitcoin mining, you're-- that, that's what it is, you're, you're buying these machines. I did some GPU mining as well, so I'm buying GPU, GPUs and throwing them together and just getting my hands on and building the infrastructure was really cool to me. it captured my interest because it, it just really, to me, kind of underpinned the, the, the, the, the work behind proof of work. Like it, it was-- this was the, the, the, the tangible, the physical Consequence of a proof-of-work based system, and I really like being a part of that. I like building out the infrastructure and maintaining and, and running all of that. Now, you know, I wasn't operating at a very large scale, very, a pretty, a pretty decent size scale for an individual, but, just learning all of that by trying and failing was, was, was a really great experience for me. I, I think like anything, try-- trying and failing is how you really learn how stuff works, and, that, that was a really cool way" }, { "speaker": "stephan", "time": "06:05", "start": 364.61, "text": "Gotcha. And so then, as I understand with Riot, I don't, I'm not clear when it exactly formed. maybe was it like twenty eighteen or so? And then you became CEO in February twenty twenty-one. Is that right?" }, { "speaker": "jason_les", "time": "06:17", "start": 377.24, "text": "Yeah. So the basic history here is Riot started as a company in twenty seventeen, did a reverse merger with an existing publicly traded entity and became, this Nasdaq-traded Bitcoin slash blockchain slash, you know, other things company. At the start, Riot was mining Bitcoin Bitcoin, right off the bat, but was also investing in other companies, was looking to launch an exchange, a mining pool, kind of a bunch of different things. So I was first just on the advisory board and then joined the board of directors, and I was a part of the board of directors that was really involved with, with management in transforming the company around. And through that transformation, we made the decision to focus on exclusively Bitcoin, which I was very happy about, and s- and the best way that we could see ourselves focusing on Bitcoin was through Bitcoin. Coin mining. So on the other side of this transformation, the board of directors asked me to be CEO, which I was obviously more than happy to do, and it's been, very rewarding building up the company, from here. When I, I became CEO, we had about eight employees, our mining operations were entirely, miners that we owned were being hosted at a, a third party hosting facility in New York. Since then, we've done a, a number of major acquisitions that have built up our in- Infrastructure base, built up our engineering and manufacturing base, and today we have, over five hundred employees and, over ten exahash going on twelve exahash pretty soon here, building out a second site. So there's a, there's a real tremendous opportunity set here, I believe, with Bitcoin, but with specifically Bitcoin mining. So we're, we're trying to position us, position ourselves to, to, to really be in a spot to capture all the upside from Bitcoin that we believe in as a Bitcoin focused company." }, { "speaker": "stephan", "time": "08:06", "start": 485.69, "text": "Right. And so just some context, I, I checked the, the hash rate just today, mempool dot space has it around four hundred and eighty-one exa hash on the network. It just keeps growing. Right. And then if you've got, yeah, yeah, right. And if you've got like ten exa hash, you can think of it like Riot alone is more than two percent of the entire hashing power of the network then." }, { "speaker": "jason_les", "time": "08:28", "start": 508.07, "text": "You know, so- sometimes we say that, you know, okay, as a publicly traded company, you, you can argue our competitors are the other publicly traded companies, we're competing for capital, for investor interest, et cetera. But at the end of the day, our really only real competition is the network difficulty driven by the network hash rate, and, it's a, it, it, it's a, a fight to continue to stay up with that number, like, you know, breaching that two percent, getting beyond that really requires, one- One, an incredible amount of, financing, and then two, an incredibly capable team and, expansion, pipeline in front of you to be able to execute to continue to build there. We, we wanna be a meaningful part of this network, and as the rest of the world is growing its Bitcoin mining footprint, we have to really aggressively continue to grow ours to make that ratio, to continue to have a strong ratio there." }, { "speaker": "stephan", "time": "09:21", "start": 561.09, "text": "Yeah, that's interesting. And I think the curious part for a lot of people, now, I guess it's interesting now because this year, you know, Bitcoin is up some ridiculous percent, right? But last year, it was sort of, it was going down, there was all these miners who were in a lot of trouble, and at the same time, the hash rate was still climbing anyway. So I'm curious what your view is on that. Could you help illuminate that for us? Why, how can it be that, you know, there's all these miners who are in trouble, but at" }, { "speaker": "jason_les", "time": "09:51", "start": 591.11, "text": "So, a few thoughts on that. First, the network hash rate always tends to lag a little bit with price action. So, you know, step back to twenty twenty-one when we had this last bull market and the price was taking off All the miners or prospective new miners that wanted to respond to that opportunity, it takes them a while to actually build out. If you are in, you know, June twenty twenty-one, well, Bitcoin, I think, went down to thirty thousand that month. So, you know, let's say you're March twenty twenty-one, Bitcoin's approaching sixty K, and you're like, \"Okay, this is it, I wanna get involved with mining.\" Well You can't go on and turn on the next day, that's one of the great security properties that you get from proof of work mining. It, it takes a lot of work to be a part of this consensus system. So let's say, you know, in March twenty twenty-one, you wanna get in You're gonna build a facility or you wanna buy miners to do all these things, it's going to take you some time to actually get all that going, and that's what we saw in twenty twenty-one. There was a number of new, mining companies that came forward, a number of companies completed various, corporate transactions to become publicly traded, but a lot of their operations didn't really end up rolling out until twenty twenty-two. we saw a similar thing last cycle in twenty seventeen, lots of investment went into mining and And then crashed down to eight K, I think, you know, pretty fast in the first half of eighteen, twenty eighteen, but hash rate was still going up, 'cause all of this investment, all this capital that was previously deployed was now finally getting executed. And that, that makes it really tough with, with Bitcoin mining is you can have both of those variables going against you, when in theory, yeah, okay, when the price is going down, network hash rates should follow, but it's not always happening, you know, that- Directly in, in these sequences. If you look at something like a having, though, well, then, then it's a little bit different, okay? At the having, less, there's less efficient miners that are out there, they will simply just have to drop off when that happens, and that should address difficulty downward. But that lag is also the opportunity set for us at Riot, and it's why we're so focused on building during downturns in the market, because the building that we did in twenty twenty, twenty nineteen, before- Before the market took off, paid off so handsomely in twenty twenty one because we didn't have to build a new operation from scratch. We had the hash rate there, and hash price explodes, the value of the, the Bitcoin that we're mining, explodes, and, that's, I, I'll tie, tie it back into, that's why having this Bitcoin focused culture is important. We're always thinking about the long term. It's not just about the immediate results. We're focused on what Bitcoin is doing over, you, the, many, many" }, { "speaker": "stephan", "time": "12:46", "start": 765.85, "text": "Right. As you say, there is a lag time between making that decision of wanting to plug in miners and actually being able to do that because maybe you need to negotiate power, maybe you need to set up a facility and have actual rack space, you need, you know, engineering talent, construction, all of these aspects." }, { "speaker": "jason_les", "time": "13:01", "start": 780.94, "text": "Yeah. You know, I'll, I'll, I'll use Riot as an example. We, we announced, a, a new site that we were building in a city called Corsicana, Texas. We announced that in April of twenty twenty-two, around there. And that site isn't going live until Q1 2024. So we bought this site, we've done all this work to get it ready, procuring these buildings, materials, building these buildings, getting the miners, all of that, and it's taken almost two years to get that going. And, you know, this, this is right, we're-- we, we've built a, expertise and track record of being good at this stuff, so there's, there's a, there's a real lag between making that decision and when those miners flip on and start" }, { "speaker": "stephan", "time": "13:43", "start": 823.42, "text": "Right. And from my reading into the Corsicana site, I think the total max capacity there would be about a gigawatt, is that right? Yes, one gigawatt. So" }, { "speaker": "jason_les", "time": "13:54", "start": 833.67, "text": "that, that is, that's pretty exciting. That was approved by ERCOT's large flexible, load task force as well. not sure if there's any other one gigawatt loads that have, been approved. That, that is an example of us finding this excess capacity, at a switch, in the ERCOT grid and having this land That we could acquire and then build out this site from it. So very excited to see all that come together." }, { "speaker": "stephan", "time": "14:18", "start": 858.47, "text": "Gotcha. And so just for context, the current site is the, the Rockdale site, and that has, I think it's up to about seven hundred and fifty megawatts, is that correct? we've, we've, we've" }, { "speaker": "jason_les", "time": "14:28", "start": 867.96, "text": "built seven hundred megawatts of, of capacity there." }, { "speaker": "stephan", "time": "14:31", "start": 871.06, "text": "Gotcha. Right. And so this is, this new site's gonna be, you know, another, you know, almost half on top of the prior site." }, { "speaker": "jason_les", "time": "14:38", "start": 878.19, "text": "Yeah, when, when completed. And, you know, as far as we're aware, our, our first site in, in Rockdale, seven hundred megawatts. We, we believe that's the largest site in North America. I, I think it may be the largest site in the world, like the mega sites in China no longer really exist, and we've gone from this big site to now focusing on building one even, even bigger. Now, the first phase that's rolling out in twenty twenty-four, it's only four hundred megawatts, you know, it'll take future phases of development to get to that full one gigawatt capacity, but we're, we're really excited how that's coming together. Sourcing miners from MicroBT, miners United States and, and shipping over all immersion cooling technology. There, there's a bunch of stuff about this site and how we've approached it that, that we really think is going to, you know, reflect well on us as a company, but also reflect well on how Bitcoin mining as an industry is evolving and maturing." }, { "speaker": "stephan", "time": "15:31", "start": 930.72, "text": "Right, and so Bitcoin mining is a notoriously competitive industry, and so maybe if you could just spell out for us a little bit what's, you know, what are some of Riot's advantages? I guess part of that is, you know, the skill set, and, you know, what are some of the advantages that Riot is bringing here?" }, { "speaker": "jason_les", "time": "15:49", "start": 948.97, "text": "So I think we have three main advantages, scale, size of operation, our low cost of production, and our strong balance sheet. Scale in operations, we were just talking about these big facilities we have and these big pipelines of growth we have within these facilities. we're building out this one gigawatt site, so we don't have to acquire ten one hundred megawatt sites to have a hundred-- to have one gigawatt of capacity, we have the pipeline all right there, and that makes for a very efficient, development process. process where we can leverage economies of scale to the, the most, the biggest extent possible. we have one of the largest hash rates, deployed hash rates, in the industry right now, almost eleven exa hash, going to twelve and a half exa hash, very soon here in this quarter, and once, the first phase of our Corsicana sites developed, with the hash rate we purchased, we'll be up to twenty exa hash. Next major strength is that cost of production. We have a, proprietary power strategy we use where we're leveraging the flexibility of Bitcoin mining to achieve a very low cost of production. in Q2 of this year, that's the most recent period we have financial results on, we had a direct cost per Bitcoin of ninety-three hundred dollars per coin, inclusive of the results from our power strategy. So that's really important because, you know, short of, let's say Say all variables remain the same, Bitcoin could double tomorrow, and that cost would remain co-constant. So we look at that as giving ourselves a leverage position on Bitcoin's upside. We're trying to accumulate Bitcoin for the lowest possible cost below its market, lowest possible price below its market, market price. The final major strength we have is a balance sheet. We haven't taken on no long-term debt, and we've been very prudent in building a strong balance sheet of cash that allows us to, one, withstand the volatility within the Bitcoin market and the power market. with what underpins our power strategy and allows us to achieve that low cost of production are these fixed power hedges that we have. They have bilateral, collateral requirements, though, so it's very important that we have the balance sheet to be able- to withstand if that forward curve moves in the wrong direction. That balance sheet allows us to ride through bear markets, in Bitcoin, which have- You know, happen on, on a regular basis. And, it'll-- that balance sheet allows us to grow and be opportunistic when others are fearful in the market's downturn. So the large scale operations, the very low cost to production per Bitcoin, which is going to be even incredibly, getting more-- incredibly important and getting a lot more focus leading into the halving, and that strong balance sheet, which rides three major strengths." }, { "speaker": "stephan", "time": "18:37", "start": 1117.0, "text": "Yeah, that's interesting you mentioned the, especially the balance sheet point about being able to ride through the cycle, right? Because typically what we've seen, and I'm sure you can, you know, relate to this also, is historically you've seen this kind of dynamic of people who get overly bullish in the bull cycle and they maybe they overexpand or they take on too much debt, too much leverage, and then, you know, the cycle turns and now, you know, it's the proverbial people are left swinging without, you know, like the, that Warren Buffett quote, who's gonna be naked when the time goes out? And then on the other hand, it's kind of being able to ride that bear cycle out or keep expanding in the bear cycle, which I guess that's, that's part of what you were mentioning earlier around actually being able to, you know, sustain that. So how do you actually, achieve that idea of having a stronger balance sheet? Is it more, is it a certain level of conservatism in how you expand or what's the, what, how do you actually achieve that?" }, { "speaker": "jason_les", "time": "19:31", "start": 1171.2, "text": "You know, the, the, there's a few things that come to mind there. You know, first talking about the leverage, we're not opposed to taking on debt. We don't think debt products exist that make sense for this industry yet. The, the, the previous debt options available in Bitcoin miners have just been too expensive. And i-if you're buying the bottom with those, you know, the market only goes up from there, okay, you know, that, that, that may work out, but that's a really difficult bet to make. So we have held off doing any, Financing for now, although we're always looking and trying to pioneer new option out there for the, for us and, you know, to, to help drive the industry forward. and instead, we've relied on equity financing in the past. So, we have a very liquid stock. We have an at-the-market offering program. We issue shares into the public market that become cash. the- Equity financing, you know, w-w-will, will have a higher, will be a higher cost of capital than, what maybe a more mature industry will find with debt financing often, but By doing the equity financing, you know, one, with, with our stock, we're able to keep the cost of that financing down, you know, very low. we aren't entangling ourselves with different obligations, covenants, debt service payments that could impact us going through that bear market, and we are, always having access to capital to, to take advantage of opportunities or do what we need to do. So we focused on always having a strong amount of cash on our balance sheet. And with that cash, we have demonstrated a track record of deploying that into operational results. We don't sit on this cash forever, you know, we keep this cushion here so we continue to be opportunistic and have the staying power to survive, but we are constantly taking the proceeds from our ATM program through our equity financing and putting that to use to building our Bitcoin mining operation. So I think our shareholders are looking for a growing operation, they're looking for a company that is de-risked as m- As much as you can in this industry, de-risk and, and not be, pinned down by so many onerous, debt obligations and, The other part of our balance sheet is the Bitcoin that we hold on our balance sheet. most commodity producers don't hold what they produce. Maybe, maybe diamond producers, but most, people producing copper aren't, you know, holding a bunch of copper and speculating in. It's a bit different here in Bitcoin mining because we are Producing a commodity we believe is very valuable, that has a lot of future value. We are producing the future world reserve asset. So in addition to holding cash on our balance sheet, we hold Bitcoin. We're a Bitcoin company. We wanna have Bitcoin as part of our treasury management strategy." }, { "speaker": "stephan", "time": "22:26", "start": 1345.67, "text": "Yeah, that's really interesting. Now, don't get me wrong, I obviously hold a lot of Bitcoin, hold Bitcoin myself, and, you know, you hold Bitcoin yourself, I'm, I'm sure. But, let's steal man for a second. An investor could say to you, \"Nah, Jason, I just want, I just want the most efficient Bitcoin miner. If I wanna take a Bitcoin position, I just hold Bitcoin myself. Why should my Bitcoin mining company also hold Bitcoin?\"" }, { "speaker": "jason_les", "time": "22:47", "start": 1366.7, "text": "Well, first, the last part I forgot to mention is we sell most of all of our, Bitcoin production on a, on a monthly basis. So most of what we mine, we are taking in paying operational costs and reinvesting into growing the business. our experience is most investors are interested in us having that Bitcoin balance sheet. They look at miners as a leveraged position on Bitcoin and us holding Bitcoin i-is a part of them achieving that leverage. And, you know, i-if you, if you share the common Bitcoiners view on the US dollar, having that Bitcoin is a way of de-risking the company. Holding too much dollars may be deemed by many to be too risky, having Bitcoin as part of that balance sheet de-risks that. We also think that Bitcoin There is this new ecosystem and world that's being built out with Bitcoin, and none of us know exactly what that looks like yet, but we know that we wanna have Bitcoin to be a part of that. So we, we, we don't even know exactly what the future looks like, but if the future we believe is going to happen, it's going to be very expensive to, you know, acquire-- we hold seventy-three hundred Bitcoin right now, to acquire seventy-three hundred Bitcoin in the future at a much higher price. So we, we like de-risking, we like- Building the strong balance sheet by holding Bitcoin, it's a part of believing in what we do, and we like having this piece of this ecosystem that is being developed that we don't exactly know what it's gonna look like yet." }, { "speaker": "stephan", "time": "24:16", "start": 1456.03, "text": "Back to the show in a moment. When it comes to securing your Bitcoin, you need hardware to do this. My favorite is the Coldcard over at coinkite dot com. Coinkite are making a range of products and hardware that you can use as part of your hardware security, as well as some related accessories. The Coldcard has two secure elements. It is really secure. It gives you a fast CPU and fast signing of transactions. It is a very reliable performer and also very configurable. Into different configurations. You can use it in single signature mode with no passphrase, you can use it with a passphrase, you can have it as part of multi-signature, you can use it in a seed xPub setup. There's just so many different ways that you can configure and use this device as part of your Bitcoin security setup. So remember, it's not your keys, not your coins. The Coldcard is an excellent device that you can use today by ordering it over at CoinKite dot com. Use code Livera for a discount on your Coldcard. And next is MemPool dot space. This is the leading Bitcoin and blockchain visualizer. Bitcoin is a multi-layer ecosystem, and mempool dot space is your comprehensive Bitcoin explorer covering this ecosystem. You can see the mempool, you can see the transactions that are there in the mempool, you can see the blockchain and search transactions, the history, the historical record. You can view the Lightning Network, there's even a mining explorer. And with mempool dot space, you don't even have to trust a third party, it's free and open source software, you can host it yourself. So go and check it out, you can find all of Over at mempool dot space and keep an eye out for what they've got coming, which is a transaction accelerator. And now back to the show. And look, I personally agree with you, but, for the sake of, I guess, Listeners who might be curious, they might also think, \"Well, does this change if, let's say hypothetically, right? We're here, thirty-first October twenty twenty-three. The speculation is that an ETF, a Bitcoin spot ETF, is going to come in the US, let's say, late this year or early next year. That's kind of the-- That seems to be the, the consensus in the market right now. Do you believe any of that calculation would change for an investor if a spot Bitcoin ETF were to come, let's say, early next year or late this year?\"" }, { "speaker": "jason_les", "time": "26:27", "start": 1586.74, "text": "I, I, I don't think it changes. I think the ETF would be an incredibly bullish thing from the industry. Some people ask me, \"Hey, do I think that's going to take capital outside of Bitcoin mining stocks a-and into, ETFs?\" I think it's a rising tide lifts all, lifts all boats, scenario. I think what that will do for the price of Bitcoin will be very beneficial to us, and I don't think it, takes away from what a lot of people look at the value proposition of public, to Bitcoin mining stocks, and Play on Bitcoin. we Riot, has underperformed, underperformed Bitcoin in twenty twenty-two when it went down, and we've overperformed Bitcoin this year, when it's gone up, and we've seen that type of price action o-over the years here. Bitcoin miners, by having that leverage position on Bitcoin, tend to be, have results, shareholder return that's a leverage play on Bitcoin. So I think what the ETF doesn't still take away from the fact that holding Bitcoin on the balance sheet Is an important treasury management tool, that de-risk our exposure to the dollar and it gives us upside on the future from Bitcoin" }, { "speaker": "stephan", "time": "27:37", "start": 1656.57, "text": "Gotcha. Yeah. So I think, and, you know, I'm not disagreeing with you, I think maybe the key there is sort of finding that right level of balance because maybe there were miners who went too hard on trying to hold Bitcoin to the exclusion of not actually selling enough to pay their expenses, and then maybe that's where they were falling into a problem when the cycle turns against you, and then maybe that's where the problem comes." }, { "speaker": "jason_les", "time": "27:58", "start": 1677.72, "text": "Yeah, you're, you're, you're, you're right. It, it is, there is a sliding scale somewhat there. I, I, I, I think operators should be very mindful of their costs and, I think selling Bitcoin to pay your operating costs is kind of a basis, a approach that everyone should take. not doing that is taking an even, greater leverage view on Bitcoin, which as a Bitcoiner, I respect, so I'm not, not gonna be too critical of that. But, to, as operating a company, yeah, I, I think it's an important part to ge-- generally, sell the, your production necessary to pay for your cost." }, { "speaker": "stephan", "time": "28:36", "start": 1716.34, "text": "So you mentioned this idea of outperforming Bitcoin in the bull run, and, I'm curious to sort of get your expanded thoughts on that because, I guess I have my own ideas, but could you just ex-explain a little bit of that dynamic? How is it, how is it, and why is it that Bitcoin miners can outperform Bitcoin in a bull run?" }, { "speaker": "jason_les", "time": "28:55", "start": 1734.81, "text": "So going back to what we talked about, kind of on that lag of results when the Bitcoin price changes, you know, just going back to using our Q2 result for an example, ninety-- our direct cost per Bitcoin was ninety-three hundred dollars a coin, if at that time, Bitcoin had gone up to Sixty thousand, so a little over, let's say double the price that was around at that point, the end of Q2, then our cost is still the same. Yes, network hash rate is gonna start to grow and difficulty is gonna start to go up as a result of that, but in the immediate timeframe, our cost per Bitcoin is the same. So we are still purchasing that Bitcoin effectively through the process of mining at a price that is now even less, it'll become even a smaller- ratio of what the market price is. So you go from a, you know, eighty percent margin to a even, even higher and higher margin, you start to get, you know, very close to, ninety, ninety-five percent. So that is how we achieve that leverage position in Bitcoin, and that's what translates into the stock price action on our stocks. You know, take Riot, for example, Bitcoin this year is up, sixty-eight percent or, a hundred and seven percent, and Riot is up- Up almost double than that. So when Bitcoin's gone up 100%, Bitcoin's gone up 200%, and I, I, I believe that's because, our cost, you know, fundamentally stay, stay, fixed, all variables remain equal, we keep that low cost production, and the value of the thing that we're producing has just continued to gone up dramatically. now We, the other side of the coin is in the bear markets, when Bitcoin performs, worse, Bitcoin ma-miners tend to perform even worse than Bitcoin. So Bitcoin could be, I, I don't remember the figures from twenty twenty-two off the top of my head, but, I, I think Bitcoin, you know, could have gone down, around seventy-five percent that year, maybe something around that, and I, I think Riot went down around ninety percent, so would perform worse than Bitcoin. So the leverage position works both ways there in the, in the eyes of the market, but I think investors like, investors are interested in owning companies that have that upside with Bitcoin. They're producing Bitcoin for a very low price, and the price of that Bitcoin is going up, the, the value of that commodity is going up external to the company." }, { "speaker": "stephan", "time": "31:29", "start": 1888.55, "text": "Right. And to be clear, it's not that, you have to be all or nothing, right? It doesn't mean like you have to hold zero Bitcoin and only hold Bitcoin miners. The reality is that you may actually hold a little bit of both, right? You may have your Bitcoin hodling stack and then maybe you have some stocks and some of those stocks are Bitcoin mining companies because you, you, you prefer some of that exposure. So, I think that's probably, in practice how it might happen. And maybe for some people, that's actually part of their journey I," }, { "speaker": "jason_les", "time": "31:59", "start": 1919.43, "text": "I, I would hope so. I would hope that if someone's first exposure to Bitcoin is Bitcoin mining equities, that they develop an interest in Bitcoin, they develop an interest in how Bitcoin works, and they, you know, that leads them to learning how to self-custody Bitcoin and use Bitcoin on their own, and therefore they can kind of switch from, 'cause I, I think a lot of people like Bitcoin mining equities because it's just a safe way to get exposure, you know, and that's why the ETF will be good as well, because people who don't have the Do not have an interest in learning how to self-custody Bitcoin and take advantage of the sovereign wealth properties that it has. They just want to own something in their brokerage account. Okay, that, that's their, that, that's their preference, and equities, ETFs, help, help support that" }, { "speaker": "stephan", "time": "32:47", "start": 1966.95, "text": "So you've also mentioned, this funny idea that, being a Bitcoin miner is sort of like dodging knives. can you elaborate a bit on this idea of dodging knives and, what that's like?" }, { "speaker": "jason_les", "time": "32:59", "start": 1979.1, "text": "Yeah, you know, w-when I said that, Stephan's referring to, a panel at the Pacific Bitcoin, Mining Day, recently. I said that because this is a brand new industry. There's no roadmap of, of how this gets played out, and there's a lot of things that are happening to impact our industry from the outside. On normal business, you're just showing up, you're trying to be competitive and, turn out good financial results for your shareholders. So that's the core Of what we do, but while we're trying to accomplish this, there's all these external factors that are coming up. you know, we can, we can just rattle off a few. Hey, there was that, infrastructure bill amendment two years ago where they're trying to classify Bitcoin miners and, wallet developers as, financial institutions or broker-dealers, brokers by the IRS, definitions. the Biden administration rolled out this proposed damn tax, thirty percent tax on mining. different accounting rules on how you account for, holding Bitcoin on your balance sheet kind of can shift around. there's, we have to come up with whole-- we're pioneering the ways that internal controls over financial reporting work for Bitcoin mining companies. So I, I, I say dodging knives because we're dodging all these things that are happening external to just the core focus of trying to manage the business. Oh, and then add to that, we have a volatile Bitcoin price that's moving all over the place that changes the market around you. things like FTX happen and it totally undermines investor confidence in the whole industry for a bit. So It's exciting, you know, you never get bored in, in Bitcoin mining, I'll, I'll tell you that much. But there are so many external factors that we are trying to deal, manage risk on all the time. And I think it just-- it, it comes with being a part of a new industry. So to me, that's exciting and that's rewarding and that's- You know, worth the cost that we have to pay, to manage all of these all the time, but it, it definitely, doesn't feel like a normal business from that regard." }, { "speaker": "stephan", "time": "35:09", "start": 2109.1, "text": "And speaking of this, there are, well, maybe one other knife to be dodged is, some of the political attention Bitcoin has been receiving recently with, the Israel-Hamas, conflict, and Elizabeth Warren was basically using this as part of her narrative. and I know you recently wrote an article, you did an opinion piece for The Hill, touching on some of this. So do you wanna just explain a little bit of your thoughts on, this narrative of, quote unquote, Bitcoin is being used to fund, terrorism, and you, if you could give us your thoughts there?" }, { "speaker": "jason_les", "time": "35:47", "start": 2146.83, "text": "Yeah, I mean, so this kind of ties in with, you know, wanting deep criticism that outsiders will always levy against Bitcoin. Oh, it's used for illicit activities, that's the only, only use. Well Let's, let's, let's start there. A company like Chainalysis, whose entire business is identifying illicit activity on the, Bitcoin blockchain, estimates that, a quarter of a percent, twenty-five basis points of activity on Bitcoin is, illicit activity, compared to two to five percent of, fiat currencies like the US dollar. so that rap that people try to levy on Bitcoin as a criticism, that it's only used for, illicit finance, is Totally baseless and should not be used as a tool or, a, a reason to introduce adverse legislation around Bitcoin mining. I'm sorry, around, around Bitcoin. so the Wall Street Journal ran an, article last week, or maybe a little bit before last week now, saying that Hamas had raised somewhere around one hundred and thirty-three million with cryptocurrencies, and, you know, pieces like this is what is used in ammunition for politicians. politicians to get the regulatory gears going. The fact is, that was a very misleading figure. that was a misrepresentation of the data that was received. The source of that data has corrected that. But it's, it's one of these instances where, you know, the, the, the lie gets halfway around the world before the truth is, is told. And that was the purpose of writing this opinion piece, to set the record straight. That figure was not accurate, and in fact, Bitcoin isn't an ideal tool for using il— illicit finance. And in fact, Hamas put out a press release earlier this year asking people to stop sending Bitcoin because it was too easily traced. So there's no need to- Introduce legislation, a new regulatory regime on users, wallet developers, miners in Bitcoin in response to, inaccurate articles like this that doesn't solve a problem. As we said, as, you know, head of public policy, Brian Morganson and I coauthored the piece. As we said in that piece, that's trying to solve a problem that doesn't exist. We don't, we shouldn't have users of Bitcoin being forced to register as financial institutions, being forced to register as banks. it's important to set the record straight, and I appreciate, the lawmakers, who are pro Bitcoin who were active the last week in DC, getting that on the record that, that figure, being cited in the Wall Street Journal article of a hundred and thirty million was not accurate, and a lot of the criticism being leveled at Bitcoin, around being used for illicit finance was not accurate. but, there are some people who are determined to go after this industry, and they aren't as interested in the truth as the rest of us. So that's something that we as an industry have to continue to fight against. It can seem daunting at time, you know, another example of a falling knife, being all of a sudden alleged that Hamas is using Bitcoin to do all these things, but it's something that we as an industry have to push back on and make sure the truth is being told." }, { "speaker": "stephan", "time": "39:08", "start": 2347.84, "text": "The leading Bitcoin financial services brand is Swan Bitcoin. Over at swan dot com, you can buy Bitcoin easily and also learn about Bitcoin. Swan Bitcoin is also available on the Apple iPhone and Android app stores. Recently announced with Swan is Swan Vault. This is a two of three multi-signature vault product where you hold two keys and Swan can hold one key and support you and countersign for you. Now, the really cool part here is with Swan, you can buy Bitcoin and then you can stay Back that coin directly into your own multi-signature vault. So currently, the support is going to be using Blockstream Jade as the devices, and other devices will come in the future. The user interface is really slick, it's really easy to get started with multi-signature, because a lot of people have some hang-ups about using multi-signature, but Swan is going to make it really easy for you to do this. So if you're interested in this product and you wanna get on the waiting list, go to swan dot com slash vault. And now Back to the show. Right. And I will also note that, in one of these, hearings, Elizabeth Warren asked this question, and the, the response from one of the respondents, Dr. Schleimut Wagman, I'm reading the notes here, former Director General of Israel Money Laundering Authority, commented saying that most terrorism financing is still using st- fiat, like fiat rails, normal fiat rails, and not Bitcoin. so it's important to note that, various experts in the industry are pushing back. they are saying, Factually correct. Yeah. although I do have some sort of, let me put it this way, I have some hesitation about, sort of trying to rely on Chainalysis and Elliptic because to some extent, what they're doing is probabilistic as well. It's not even really a, a science, that's right. It's kind of, it's sort of yes and no, right? Maybe if there are certain- Transactions done with a KYC exchange and Elliptic or Chainalysis, can peer into that data and sort of look into that, and maybe if it's closer to the transactions that happen, you know, one, one step to and from that exchange, okay, yeah, there's probably something there, but when you get further and further away, it becomes probabilistic, and then we're sort of also opening the door for this kind of Chainalysis and Elliptic-style, regulatory capture. And so I have maybe a little bit of a misgiving around that, but, It's sort of, we're sort of in this awkward position of people pointing to Elliptic and saying, \"Well, hang on, that's not right,\" but at the same time, is Elliptic and chain analysis even correct? Well, who knows, right?" }, { "speaker": "jason_les", "time": "41:40", "start": 2499.96, "text": "Yeah, i-it's very difficult, and we, we would not want to, falsely accuse someone or, you know, overinflate a use of, one way or the other by, by using an imperfect, as you noted, probabilistic analysis. So, you know, i-it's very tough. B-B Base layer is a pseudonymous currency, if you're interacting with entities that, know who you are, then you're creating a record that's, that's tied to, you know, who you, who you are, and that's why Hamas didn't want to use Bitcoin anymore." }, { "speaker": "stephan", "time": "42:16", "start": 2535.94, "text": "Right. and related is this concept of educating the government, educating politicians, I know this is another area that maybe some Bitcoiners are divided on, some people just say, \"Oh, just, just build,\" and then there are other people saying, \"Well,\" Hang on, if you don't educate this government and these politicians and these regulators, there's a chance that they put out laws that are actually really bad for Bitcoin and regulations that are really bad for Bitcoin and bad for Bitcoin miners. What's, your stance and Riot's stance on this kind of question around education, o-of government, politicians, regulators?" }, { "speaker": "jason_les", "time": "42:50", "start": 2569.57, "text": "Our, our, our stance is education, advocacy in this industry is really important. We invest a lot in hiring top tier talent and working with groups to help get the message out there, contributing to groups that are helping with these efforts. first off, I'll say we're a Bitcoin company, so we rely on a positive regulatory environment to continue to- to exist as a company. So we're very motivated, to represent Bitcoin well and to push back on these criticisms and make sure adverse regulation to our industry isn't passed. the- you know, a hardcore Bitcoiner would be correct in saying, \"Hey, you could pass all sorts of laws to, whatever against Bitcoin, and you're not gonna stop it.\" That, that's right. Bitcoin, you know, is censorship resistant, it's decentralized. You could pass law in any one or number of jurisdictions, and it is gonna continue to kind of operate. But doesn't mean it's gonna operate in a way that is, You know, one that's friendly to the businesses that are trying to, to build this ecosystem, and then two, not going to necessarily operate in a way that is easy for more people to get on board and, and take advantage of this technology and take advantage of this new financial system. So We don't want adverse regulation going forward. we don't want individuals, wallet users, miners, software developers to be classified as banks. That's preposterous. We think it's very important to push back against that Not only for what that means for us as a Bitcoin company, but for what that means as people, individuals, and other companies that are a part of Bitcoin. I think it's a battle that's very much worth fighting. I have been very impressed with the reception that we get from doing this. I was just in DC, last week meeting with a, as many members of Congress as I could, with the Digital Chamber of Commerce, had a whole set of meetings rolling. We're trying to meet with as many lawmakers as possible. Possible talking about Bitcoin, talking about Bitcoin mining. I was really encouraged by the level of support from different lawmakers that we have. At times discouraged by some, but I think the amount of, allies that we have, allies to the Bitcoin industry, and the amount of blank slates that exist that are looking to learn more, that haven't informed an opinion, means this is a very worthwhile effort. I'm very pleased with Riot's doing, I'm very pleased with what I see other companies in the industry doing. You know, it's, once again, outside of our core business, we're not The, the capital we're investing in this, we're not making back like we would if we would invest hash rate, but it's very important for growing this industry, and I, I really encourage all companies to be involved in this. There's misinformation out there about Bitcoin, there's people that wanna learn about Bitcoin, it takes good educators, individuals that are excited about Bitcoin to get out there and, communicate those messages." }, { "speaker": "stephan", "time": "45:57", "start": 2756.58, "text": "Right. And I, I have to say, I, I agree with you. I think, you know, I'm libertarian, but I also believe that there is Educating, because I'll, I'll give-- there are examples in other countries where maybe regulators just, or government politicians just made laws, and there wasn't that much input from the people who really cared about Bitcoin, and some of these laws have sort of- Harm Bitcoin in those countries. and so I think it, you know, it's worthwhile if you can influence somebody to, you know, defensively not put in, bad regulations, bad laws that would impact Bitcoin use, Bitcoin mining, Bitcoin node running, Bitcoin holding of keys. I think these are valuable, and so I, I personally do think it's worthwhile. so I, I guess from your perspective, Jason, if you are, let's say you're talking to a listener and that listener is having, you know, difficulty, communicating the value of Bitcoin and the use of Bitcoin mining, what, what sort of answers would you, you know, would you say, what sort of answers have you found that can resonate with people, right? So as an example, you know, the listener is at a dinner party or something and somebody's saying, \" This country, you know, what should we do about that? What should you, what, what should you say?" }, { "speaker": "jason_les", "time": "47:15", "start": 2835.34, "text": "What I would tell people is, what the internet did for the distribution of information, Bitcoin is doing for the ownership and medium of exchanges for money. Bitcoin has these valuable properties. It's decentralized, it's censorship resistant, you can have sovereign control as an individual, you don't rely on third parties, et cetera, et cetera. These are important properties of, of, of Bitcoin, and I think you can talk to someone and point out to many different examples in the world, present day, of why those properties are valuable. the sales pitches just continue to write themselves it appears in the, in the macro environment. So if someone can accept that those properties are valuable and they can accept that Bitcoin has value, it's important to make the connection that Bitcoin mining is how these properties are achieved. Bitcoin mining solved a problem that made a fair distribution of this currency possible, that spread out consensus for agreeing on, the, the, the, the, the state of the blockchain. And that is the tool that's required to do that. So it's not a, you know, can, it can get into a, a nuanced technical argument, but Proof of stake can't achieve those same properties. proof of work is very important for Bitcoin achieving those properties, and it's a very efficient use. You think about Bitcoin's global energy use using approximately," }, { "speaker": "jason_les", "time": "48:51", "start": 2930.99, "text": "twenty basis points of the world's energy to serve tens of millions of people on this system. So you can't look at the energy use, people that are concerned about the energy use, in just kind of isolation, put it in context. That's a very efficient use of energy, and with the flexible properties of Bitcoin mining, it's solving a lot of energy problems and grid instability issues as well. So, that starts to get down another tangent, but if you accept Bitcoin is valuable, if you accept these properties- properties that are unique to Bitcoin or valuable, then Bitcoin mining is how it achieves that. So Bitcoin mining is a valuable tool to ensuring financial freedom, to ensuring decentralized finance." }, { "speaker": "stephan", "time": "49:33", "start": 2972.53, "text": "Fantastic. And so I think that's a great, way to, give people some context about why Bitcoin is using that energy and also putting it in context as well, as you mentioned, zero point two percent of the world's energy, which is, you know, it's not some crazy, crazy huge fraction. and another topic that I think listeners will be interested to hear, some explanation on is Katamal in Texas. And so, you know, if you could explain a little bit about this, how it works, because I think this is another- Another area where maybe some of the news articles were perhaps a little bit inaccurate recently, right?" }, { "speaker": "jason_les", "time": "50:08", "start": 3007.73, "text": "Right. so this ties back to what we talked about earlier. One of Riot's strengths is our low direct cost per Bitcoin. We achieve that through our proprietary power strategy. What underpins that strategy is these long-term Low cost fixed blocks of power that Riot has. In a deregulated mar-market like ERCOT, we have the ability to effectively trade that power. You know, if we're using it, then we're using the power at that rate. if we're not using it, then we are pocketing the spread between our hedge and what the market price of power is. Now, because of- All of the intermittent generation sources in ERCOT, so much solar, so much wind, there can be a lot of volatility in that market. there's volatility of when these generators are generating power, and there's a mismatch with that matching when consumer demand for power is high. the sun might be setting around six, seven o'clock, but people are going home and they're cranking up their AC, and that's why they, they need power. So in these discrete times is when loads like Bitcoin mining, right through our power strategy, are able to provide a service and, make a profit by doing so. So what, what we're really doing is just trading our power into the market of, of energy that's out there. there were misleading headlines like \"rate Texas, power users paying Bitcoin miner.\" That's, that's, that's not how it works. Works, you know, in practice. There's no subsidies in this market. there's, the, these costs aren't, you know, directly passed on to consumers. there's a whole market of energy players in there buying and selling energy. Riot is a very small piece of that. The other big thing that we do is participate in something called ancillary services, and the easiest way to think about this is we are selling insurance to the grid, in this case ERCOT, by giving them the ability to control our load. So we can say, \"You can control this amount of megawatts through these hours of the day.\" We have to make this decision in the, the day ahead, timeframe. We give them that control, and they are able to manage frequency on the grid, manage load. However, they need. So some, oftentimes they keep us running, other times they need us to shut off during different times, and that isn't always price responsive. That's trying to accomplish a, other type of stability goal. So once again, Riot, a very, very small piece of that, you know, very big market that exists in a, energy market as big as ERCOT in a state as big as Texas. So we provide a very valuable service, to the grid operator and to the ERCOT grid as a whole by being a load that is taking power when it isn't high demand and having the flexibility to then make that power available when it is in demand. We commit to buying power over a very long timeframe at a certain price, and that gives generators visibility in what the return is gonna be, and that helps incentivize more generation development. Now, You know, that, that, that fixed price, you know, we're, we're, we are, we're, we're fixing that for many years. So, you know, sometimes people look at that and be like, \"Oh, okay, this company has this deal and they're now, you know, able to sell, power, you know, why, why can't we all get paid to do the same?\" Well, we took a financial risk on this price, you know, not, not all users have that, Have that view or want to take on the risk of having to do that. Most people just want to use power or not use power, but because this is our business, we've taken on that financial risk, we've com- committed financial resources to it. That's why the strong balance sheet is important to us, and we're able to participate in the market. So by doing this, by economically curtailing power when the price of power is high, indicating high demand low supply, by participating in ancillary services, giving grid operators like ERCOT the ability to, curtail We are low load, we are positively contributing to grid stability, we're providing a service that many other energy loads can't, and, because of the way we execute it, we're able to, benefit from that, and then that helps lower our direct cost per Bitcoin." }, { "speaker": "stephan", "time": "54:35", "start": 3274.71, "text": "Right. And, one other question around that curtailment and ancillary services aspect, it requires you to basically turn miners off and on, depending on what somebody else is, you know, if, de-depending on the, the, the market conditions. does that cause any additional wear and tear? Right? In the same way, I guess intuitively people might be thinking, okay, just like if you've got a car, it's easier just to kind of run it straight on the highway. If you're in the, in the city doing Yeah, does that cause more wear and tear on your actual mining rigs?" }, { "speaker": "jason_les", "time": "55:08", "start": 3308.11, "text": "well, first, one other point I forgot to make is, you know, the-- we're not setting these market prices of power. The pr-- price of power is going up based on other conditions going on, and we are sellers into that. Sellers drive prices down. So getting, reducing, helping reduce that volatility, one, one other point I wanted to make there. to your question, Stefan, what we do is put the miners in what's kind of an idle mode where they are still running, just not Full amount of power, so that allows us to be really responsive. We're not turning things all the way off and then having to turn them all the way, off again in an extreme emergency. Yeah, we could flip a breaker and turn everything off, that would cause, you know, wear and tear on the electrical equipment and not be great for the miners. But what we do is we take the miners, they're still on in a more idle mode, not hashing, and then we can ramp them back up when, market conditions change." }, { "speaker": "stephan", "time": "56:01", "start": 3360.58, "text": "Gotcha. Okay, great. and so I'm curious as well, and you've sort of touched on this a little bit with, I guess, the long-term power agreements, is this something you see in the industry where, well, let me put it this way. There's seem, seems to be more development around things like hash rate futures and derivative products. Is that something you see a future for in the Bitcoin mining industry, and, you know, is that something Riot would engage in, or do you see it more like you have other mechanisms to achieve these things where, you know, you can hedge in other ways?" }, { "speaker": "jason_les", "time": "56:34", "start": 3393.79, "text": "we are evaluating those tools to see how they might fit. Not saying we, we aren't gonna do that or, or not, but, we, we wanna be aware of the products out there and we, we think about how they might work. I think, hedging strategies on Bitcoin are particularly useful if you are matching that, with debt and you need to control your downside more. I think that can be a very, useful tool for, miners who are trying to protect their downside there, if they have a more, more leverage balance Balance sheet. but then I think the ultimate question, the answer to your question comes from, what is it that the market wants? What do investors and shareholders want? Do they want a company that is getting all of the upside from the volatility of Bitcoin, or are they more interested in companies that maybe protect their downside a bit more? I don't think we know the answer to that question yet, we are certainly looking at it and that, you know, I, I'm saying that, that could be a part of the strategy in the future, but, that, that's something that we're going to approach very, very cautiously." }, { "speaker": "stephan", "time": "57:40", "start": 3460.17, "text": "Gotcha. Yeah. And you do rightly point out that, in order to protect a little bit on your downside, you're giving up a little bit of the upside. So exactly. As you said, you're sort of, it's not a free lunch, but maybe, maybe it's still useful, maybe it's still, valuable. right. And in terms of the future themselves or is it more about trying to get closer to the energy providers? Is it more a question of just having long-term agreements that give you reliability, because what we've seen in, in this industry as well is this kind of unreliability and in different jurisdictions, right? So as I'm sure you're well aware, after the China, China mining ban, mining ban, there was a lot of hash rate that moved to North America, but there was also a lot that went to Kazakhstan. And funnily enough, I was talking to a guy who had, some operations Regulations and laws there have basically just smashed that industry in Kazakhstan. Basically, the government got too greedy with taxes and regulations, and it just, you know, made it un-unstable. So, do you have any comment around, trying to sort of have stability in your operations there?" }, { "speaker": "jason_les", "time": "58:49", "start": 3529.48, "text": "I-- well, what I was gonna say when you, you know, started listing out, hey, how do I-- these different ways I see the industry manifesting itself in the future, I think it's all of the above. I think it's important to start from the basis that one third of all energy that's generated globally is wasted. That is an incredible inefficiency that we carry as humans occupying the globe. We're generating one third of energy that's lost in transmission, that has to be curtailed, all of these type of things. Bitcoin mining is the solution To that, because Bitcoin mining can be deployed anywhere, it is interruptable, and can be, can the, the, the scale at which you're deploying it is, you know, completely customizable. So I think Bitcoin mining is going to find its way into more and more parts of our energy grid as this industry goes forward. I think like what Riot does today as operating sites that's a flexible response to the grid, I think that is a practice that will continue to be seen as a grid resource. I think generators Will see Bitcoin mining as a tool that they can put behind the meter to help monetize that capacity when, they otherwise don't have a strong market for it. I, i-in Texas, energy goes negative, so generators aren't looking to sell energy at a negative price, but sometimes they are forced to. Having a load like Bitcoin mining that could be, behind the meter at that generator to absorb that, that excess load when the market is otherwise bad, therefore, w-w-would take the- That generate a position where it's not losing, for example, twenty dollars per megawatt hour selling it into a negative market, but could be instead monetizing that, making eighty dollars a megawatt hour on it, mining Bitcoin. So I think many are, are, are, of course, we're not seeing this on a large scale right now. I think a lot of companies are still in a wait and see, approach around Bitcoin and Bitcoin mining. I think the lack of regulatory cl-clarity, isn't helpful. Another reason why, what we're doing with public policy advocacy is, is so important to kind of establish the regulatory, framework around this so we get companies more comfortable. But Over time, Bitcoin mining is going to be this tool that generators use, that's used to balance grid stability, and is used to solve a host of other problems in the industry as well. We see people using Bitcoin mining to capture, flared methane. We see people talking about using Bitcoin to, capture, landfill waste gas. The, the, the uses keep coming forward. And not only is Bitcoin transforming how the world thinks about money, but But through mining, Bitcoin is changing how the world interacts and uses energy, and I think that's a very fascinating and important second order effect that Bitcoin is having." }, { "speaker": "stephan", "time": "01:01:38", "start": 3698.38, "text": "Yeah, it's a great answer, and really, it is all of the above. At, at the end of the day, you need some kind of edge, you need some kind of way to get cheap power if you're gonna be a competitive Bitcoin miner, right? Like, bottom line, that's really what it is at the end of the day, and so one, I guess, final topic area, before we finish up, the halving coming up, right? So projected to be in April next year, I'm curious if you have any predictions or thoughts on how things will go. I guess historically it's probably fair to say that the, you know, the weaker miners historically kind of got cut out and typically, you know, historically what we saw is they would kind of, quote unquote, puke their miners out or kind of sell their mining devices out and other miners would sort of a-accumulate those and sort of, you know, but, but it also depends on where the price is at that time, right? Because I think it's fair to say that if, if we went into" }, { "speaker": "stephan", "time": "01:02:32", "start": 3752.07, "text": "There'd be a lot less miners who kind of make it, but now with price at thirty-four thousand as we speak, it's sort of-- there's a lot more miners who might be able to make it, at this, at this price level. Any, thoughts, any predictions on what might happen this time around?" }, { "speaker": "jason_les", "time": "01:02:46", "start": 3766.98, "text": "Yeah, you know, a way to think about the halving from Bitcoin miner's perspective, from the other side, is when the halving occurs, your direct cost for Bitcoin doubles because you're using the same amount of energy and hash rate, and your block rewards are now cut in half. So, we like to think about it from the cost side too, and that's what gets us so focused on having that low cost of production. I think at the halving, difficulty will go down because there are still so much- you know, mid or later generation hardware that's still out there that is profitable at a thirty-four thousand dollar Bitcoin at a six point two five, block reward, but won't be at three point one two five. So I think, I think we'll see a drop there. But what's very interesting about this having- Is we're pairing it with this potential ETF approval, which I think consensus is will have a positive impact on the Bitcoin price, I think based on what we've seen in recent weeks that an approval alone would have a positive impact on the price, but how that ma- actually manifests itself, the timeline of which we actually see a, sustained, impact on the Bitcoin price may take a little longer. You know, we, we, we don't know how this is gonna play out, I guess is what I'm getting at. So if an ETF is approved and that results in a huge appreciation of price, then hey, like you noted, Stefan, the difficulty's not g-going to go down as much. these previously inefficient miners now can stick around for a little bit longer. but things could get tough, you know? We could have a, buy the rumors, sell the news kind of situation because the actual inflow of capital takes a little bit of time, down the way, you know, the, the, the marketing behind these ETFs maybe takes a little bit more- More time to roll out, and we don't see the price appreciation right off the bat, that will put miners into, position they were in in twenty twenty. In, in March twenty, we had a halving in May twenty twenty. In March twenty twenty, Bitcoin went as low as, flashed crashed to, thirty-five hundred. So, things can get pretty, pretty bad. You have to be prepared for all scenarios. At Riot, we- Do not predicate our business on needing the price of Bitcoin to go up. We believe it will, we're a Bitcoin company, we have a strong view on the future of Bitcoin, but We structure our business to prepare for the worst, so that power strategy, this emphasis on having this low cost of coin, will allow us to continue to have positive operating leverage on Bitcoin, Even if, the price doesn't appreciate and we have to deal through a, a, a tougher market with the halving for a while, so we're, we're, we're trying to be pre-prepared for all scenarios, how things play out, I think it's gonna be very interesting. Twenty twenty-four halving, potential ETF, presidential election in the United States, every, everything's on the table. It, it is going to be a year to remember" }, { "speaker": "stephan", "time": "01:05:42", "start": 3942.33, "text": "Alright, well, I think that's a great spot to finish up. Listeners, you can find, Jason, the website is rightplatforms dot com. I'll put all the links in the show notes over at stephanlivera dot com slash five two two for this episode. Jason, thanks for joining me today." }, { "speaker": "jason_les", "time": "01:05:54", "start": 3954.64, "text": "Thank you for having me, Stefan." } ] }