Well, everybody was distracted with the yen carry trade blowing
up and the and China printing an enormous amount of money.
Did you miss the Coin Telegraph article that quietly circulated
online last week showing that China is still the biggest
Bitcoin mining player in the world despite their 2021 mining
ban? As crazy as it sounds, that's
not the only eyebrowsing thing that's going on in Asia right
now. Only last week, Bhutan got
exposed for being the fourth biggest Bitcoin holder after
they've been mining Bitcoin in secret for the last four years.
In fact, they have 1/3 of their entire GDP in Bitcoin.
For everyday simply Bitcoin listeners, the Bhutan you should
not come as a surprise. But until now, it's just been me
and Opti doing our best, adding commentary to what is a very
complicated topic. So today we figured we'd give
you a proper deep dive by bringing on an expert from the
mining industry. Our special guest for today is
Adam Sullivan, CEO of Core Scientific, one of the leading
publicly traded Bitcoin mining companies with a market cap of
3.16 billion. I'm going to bring stage and of
course I have my life Co host with me on on off to the side
like always. Optimus Fields.
Adam, how you doing? Doing well, thanks for having me
on. I can't, I can't publicly
disclose the first time that me and Adam met each other, but
let's just say that it was awesome.
So I just want to jump into the the beginning detail and it's a
very kind of interesting article.
It dropped September 23rd and it says China still controls 55 of
55% of the Bitcoin hash rate despite the mining ban.
So Adam, what's your take on that?
Like, you know, specifically like it should that worry people
because, you know, China obviously is not exactly
friendly. I know they're they're playing
some games with Hong Kong and using Hong Kong as some type of
proxy, but should that worry people at all?
Yeah. I don't know if the number is
that high. I mean, I think it's probably
based on mining pool data, right?
I think from my perspective, it's probably like 25 to 30% of
the total network. But it shouldn't come as a
surprise at all. I mean, what we saw after the
mining ban in China was there was a temporary shutdown, but
then people started turning on their minds again pretty
quickly. And from what we've heard, a lot
of old machines are also still going back into China outside of
just new machines. So, I mean, it doesn't really
come to come as a surprise to me really at all that there's still
a significant amount of mining going on in China.
Yeah. And and let's talk about that
because according to this University of Cambridge, it's
estimated that 21% of the hash rate is still located in China
despite the ban. What's your take on that?
That they said 21% is. 21% of the hash rate, yeah.
Yeah, I mean, I, I, I know for a fact there's still a lot of very
large mines running in China right now.
How's that? How's that working?
How's that dynamic working despite the ban from the from
the government? Well, it's all based on
jurisdiction. I mean, the other part is too
look at the amount of renewables that are being built in China.
I mean, they're building more renewables than the rest of the
world is combined. So from a deployment
perspective, they need to figure out how to make a lot of that
renewables and especially solar deployments profitable.
And so there is a lot of different jurisdictions across
China that are allowing Bitcoin mining to occur.
And it's, you know, frankly, we can see that see this based on
the data for where all of the electrical infrastructure is
going. So I know for a fact that
there's still mines being built in China.
It's not like it's just previous mines that were, you know,
existed before. It's new mines that are still
going up today because they're still getting low voltage or low
voltage Transformers being sent all across China, which means
they're still building new mines today.
So I think over time, I think that number is going to stay
relatively constant. But I mean, it's other countries
right now that I think are experiencing more growth from
from a China perspective. It's really just they're still
building new mines. But I would say that percentage
is probably relatively constant. It's probably been there for the
past few years. Yeah, absolutely.
And Speaking of new countries that got into the fold, and by
the way, this was secretly unveiled due to the Celsius
lawsuit. This news was not supposed to be
revealed, but it came out that the Kingdom of Bhutan has been
secretly mining Bitcoin for the last four years.
And if you look at the data, 1/3 of their GDP is currently
allocated in Bitcoin, which is absolutely crazy.
There was a legacy media clip that we played earlier on the
week and it was basically making the case that, you know, the
Kingdom of Bhutan likes to prioritize happiness over
wealth. And, and I'm just like putting
Bitcoin and happiness together. And I'm like, that's so poetic.
So I wanted to get your take on that because that was some
pretty big news coming out of this very small Himalayan
Kingdom that, as you know, has a tremendous amount of
hydroelectric power capability, which makes it, you know, the
the Nirvana for Bitcoin mining. What's your take on the Kingdom
of Bhutan? I mean, don't you really think
the Kingdom of Bhutan is similar to many of us Bitcoiners in the
sense that they restrict the number of people that can come
into the country? They make it, you know, they
make that very challenging to enter.
They're kind of, you know, they're pretty isolated.
But when you come in, they're extraordinarily welcoming when
they finally let you in. I mean, it kind of feels like
they fit the Bitcoin ethos better than most people in this
world. 100% agree with that. So when the China ban occurred
in 2021, coincidentally right when the bull run was happening,
right, a lot of the hash rate decentralized in the process and
a tremendous amount relocated to the United States.
And now I believe if you look at the latest data, it's around 37%
of the hash rate is located in the United States.
It's getting pretty high. Like obviously as Bitcoiners, we
want decentralization. Does that concern you a lot at
all that 3037 to 38% of the Bitcoin hash rate is located in
the United States. And I have a follow up question,
which is do you see any benefits of the hash rate relocated to
relocating to the United States versus a country like China?
Well, I think what you're going to see is this occur over the
course of the next 20 years. I mean, anytime a country
becomes available for Bitcoin mining there, there's going to
be an excess amount of mining units or megawatts being
utilized for Bitcoin mining in that country.
So that's what we saw in the United States after the China
ban. But I think we're actually going
to see that number come down over the course of the next few
years. We've kind of extracted most of
the power that you could possibly get in the United
States for Bitcoin mining, especially with this more
competitive data center race that's going on across North
America. So I think what we're going to
see over the course of the next few years is continued
decentralization. And what you're going to see in
the United States are a lot smaller Bitcoin mining
facilities actually going up versus these mega sites, because
the mega sites were were coming to the United States in 2021 and
2022 because there was large amounts of power available.
Those large amounts of power are not available anymore to build
these new mega sites. So I think that story's played
out in the United States. And so over the course of the
next 10 years, I think you're really going to start to see
that number start to come down as a percentage of the overall
network and you're going to start to see more facilities
come up all across the world versus the United States.
Gotcha. And what are your what was your
take on because this is the first time that this election,
you can make an argument that is somewhat the the outcome of this
election will have some type of impact on the industry in the
United States. What's your take when the
Republican candidate, Donald Trump is going out?
First of all, he had a lot of of miners at Mar a Lago and he's
basically coming out and saying, you know, I want all this
Bitcoin being mined in the US as a Bitcoiner believing in the
game theory, you're looking at that you're like, this is great
when when countries compete for your business, you win as a
sovereign individual. So what was your take on that?
Did it surprise you at all? We were anticipating that this
was inevitable, but we were anticipating that this was going
to be happening in 2028, not not 2024.
I think that the Biden administration, due to their
policies, I think expedited this, made this a a political
issue when it shouldn't have been one.
But what's your take on on Trump's comments regarding
wanting all the Bitcoin being mined in his voice, of course,
all the Bitcoin being mined in the United States?
Yeah, I mean he's pro, you know, pro energy generation.
That's a matter of fact, right. And so that's huge for the
United States, not only for Bitcoin miners like core
Scientific, but also all industries.
So, you know, it definitely came us a surprise that he latched on
Bitcoin industry like he did. I think it's more of a surprise
that we really haven't heard much out of the Harris campaign
related to Bitcoin. And I think that is causing a
lot of concern amongst many of us in the Bitcoin community is
what is she going to do if she is elected president?
And so for Trump to come out and be very positive on it.
Obviously, we love candidates who are very supportive of the
industry that we operate in. And so I think we were, you
know, we were generally very excited and we did participate
in that, that round table at Mar a Lago.
And, you know, Trump was speaking about Bitcoin in a way
that it seemed like he had been reading up on it significantly.
He'd become very educated on the topic.
And I think that's something that, you know, a lot of people
are missing is that he's actually getting more educated
on the topic. He's not just latching on to
this industry because he thinks it's an area where he's going to
be able to raise additional capital to buy more votes.
Gotcha very, very I I love the the insider take.
I'm really excited about today's episode guys.
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At the time of recording, the Bitcoin price is 60,660
thousand. 270 sats per dollar 1659 block height 863,982
Realized monetary inflation 1.33% market capitalization 1.19
trillion Bitcoin versus gold market cap 6.44% money supply
19,762,226 BTC percentage issued 94.1%.
Again, my favorite stat here is the realized monetary inflation
of Bitcoin continuing to take Fiat currencies to absolute
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guaranteed to go down forever, forever.
Anyways, I do want to take advantage of the fact that we
have Adam on the show today to talk about other mining news
that broke recently. We have Japan's largest power
company TEPCO is mining Bitcoin using renewables A little bit
more context Tokyo Electric Power Company, Japan's largest
electricity provider, has begun mining Bitcoin through its
subsidiary agile energy X using excess renewable energy that
would otherwise be wasted with. With over 27 million residential
and business customers, TEPCO established Agile energy in 2022
and now they're exploring Bitcoin mining powered by
surplus renewable energy. The subsidy has installed mining
rigs next to solar farms in Japan's Gunna and Tochichi
prefectures. I hope I pronounced that
correctly. Also on top of Japan, we have,
of course, freedom country, the Bitcoin country, we have El
Salvador. El Salvador has my nearly 474
bitcoins adding to state crypto holdings in the last three
years. So I'm Adam, maybe call me
crazy, but I'm I'm starting to see a pattern here where
different nation States and different countries are looking
at Bitcoin as a potential way to monetize otherwise wasted
stranded energy. What's your take on this?
I think we're going to continue to see more.
I mean, this is the, this is the narrative we've all been waiting
for, which is large energy companies across the across the
world and governments are going to be mining Bitcoin, right?
I mean, that's exactly what we thought was going to happen.
Everyone thought this story was going to happen earlier, but now
we're sitting here in 2024. And I mean, those are just two
examples, right? I mean, there's, there's only
more examples. It feels like across the world
right now that, you know, large, large energy companies and
governments are mining Bitcoin. It's just the it's the nature of
people wanting to control block space.
What is, and that's really interesting you said about it,
which is control block space. I remember seeing a video, I
believe it was from one of the CE OS of the public minors
talking about how it's a national security issue that the
United States has to be a leader in, you know, securing a
percentage of the hash rate. And this came on the heels of
the news coming out from Russia or Russia did like a 180 and
they legalized Bitcoin mining officially.
Now we know that it was happening, you know, like
somewhat like happening in China right under the hood.
But they made it official by that we're we're going to
legalize Bitcoin mining. I suspect China's going to
change their minds very, very soon, right?
They are, you know, they are competing against the United
States technically. So what's your take on this?
I think Max Kaiser actually coined a term.
He calls it the global hash. What is it?
Opti Global. Global hash war.
Or global hash war? So what's your take on the
global hash war? Do you see a continuation of the
trend? Is Russia getting back into
Bitcoin? Bullish.
We know they have a tremendous amount of untapped energy.
Yeah. I mean, it's going to be come
down to bit large national superpowers control trying to
control at least 20% of the box base or 20% of the network hash
rate because then you at least have a shot at confirming
transactions when you want to confirm them.
And I think this is something that obviously Russia's probably
at least 20% of the hash rate we are trying to that's 20% of the
hash rate. We have the United States that's
over 20% of the hash rate. Like these are all very
important things for governments to have at least, you know, they
want to have half rate in their country because then at least if
they ever come, if they ever want to have some sort of exert
some sort of control, then they at least can, you know, know
that they have a certain percentage of the network.
Obviously, I think that's a bigger concern on a go forward
basis, like looking forward to, you know, 20302040, especially
in the United States where I think it's probably going to be
a more challenged environment for Bitcoin miners from a
regulatory perspective, unless we have, you know, it's a
multiple supportive presidents in a row Bitcoin mining.
But for folks like Russia and China who are trying to push
through transactions that might not necessarily be confirmed
through the normal banking system, that's something that I
think is a net positive for Bitcoin.
And being a, you know, censorship resistant network, I
think that those types of miners are actually enforcing the
freedom of Bitcoin. They're very, very, very
interesting. It, it, it's almost as if we're
seeing the game theory play out in real time.
And it it's, it's, it's just fascinating because the aligned
incentive structure of the Bitcoin network makes it so that
like normally, normally adversarial players just
pursuing their own incentives are actually making the network
stronger. I don't think we've ever seen
something like this ever. Yeah, you wouldn't necessarily
expect that, right? Yeah.
You know, you're advocating for more nation states to enter the
Bitcoin network, to make it more secure, to make it more
censorship resistant. I mean, that's the.
I think that's actually the real key.
If there's some type of regulation that comes down the
pipe in the United States where Bitcoin miners have to censor
certain transactions, I think that's a huge issue for the
Bitcoin network, and I think that's actually one of the risk
factors for us right now. Yeah.
And, and, and when that happens, right, that's when China and
Russia would come in because they would allow those blocks
into the blockchain, right. Do you do you foresee a
potential fork happening? I hope not.
But. It's not the first time we've
gone through this type of battle before.
Yeah, and and we've been. Go ahead.
Sorry, what are you thinking? I I've been making the case and
this has been somewhat unpopular.
I would say 50% of our audience is is positive on this and 50%
of our audience has been negative on this.
But I've been making the case that Bitcoin has been living in
the shadows for a long time. And now it's entering mainstream
political discourse where, you know, unfortunately, a lot of
people don't like politics. But I believe that this election
coming up will have an impact. And, you know, you were saying
it earlier, right? And we've been covering this
tremendously with Nick Carter's done incredible work.
Caitlin Long's done great work as well.
You know, Trump is saying, you know, you know, mine, what is
it? Mine baby mine right.
And you know, at the end of the Bitcoin speech, he says have fun
with your bitcoins. He's having Bitcoin miners at
Mar a Lago and the other party, to put it nicely, Let's just say
you know, they have some little press releases here and there
with some vague language, but you know, it's it's not very it
doesn't come from a place of confidence from my perspective
given. The regulatory record over the
last 3 1/2 years, metaphorically hitting us with a three by four.
So Adam, to you, I guess the question is, you know, what is
your take on that? Because that is something that
has been quite divisive for our audience a little bit in the
sense that that this election does matter.
I, I come from that perspective. Opti comes from that
perspective. What's your take?
I think long term this election doesn't matter, but if you're
focused on what Bitcoin's going to do over the next eight years,
I think if they push, if Democrats are elected, it does
push us back, you know, four years in terms of where
Bitcoin's going to go. So it's going to slow the growth
trajectory. But I think over the long term,
I don't think it necessarily is a major hindrance, especially on
the time horizon that I think about Bitcoin.
But I also think, you know, if Republicans are elected in this
upcoming cycle, I think it could be a huge net positive for
Bitcoin in the United States. So long term, I don't think it
matters. Short term, it definitely
matters. And it could affect, you know,
the next four years could affect Bitcoin for the next eight years
or 12 years. You said something really
interesting, which is I completely agree, right, Like
Bitcoin. You know Bitcoin's a honey
badger, right? Bitcoin doesn't need any
politician. I would make the argument
politicians need Bitcoin right to get elected.
My, my my question to you is so if it stopped, let's say it
hinders the industry in the United States.
Does that mean that there is a risk that the industry goes to
other countries, other jurisdictions that are
potentially more favorable to the to the to Bitcoin mining and
are Bitcoin and is core scientific prepared to go to
more favorable jurisdictions depending on the regulatory
environment? Yeah.
I mean, we have to be, right. I mean, we have a lot of very
early Bitcoiners that work for Core Scientific.
They know exactly. They've seen the entire, you
know, thesis kind of play out multiple times.
So from our perspective, you know, if Bitcoin becomes more
challenged in the United States, which frankly, we've already
seen it be more challenged in the past 3 1/2 years, we've seen
it be more challenged not only due to whoever is in office, but
just broad regulatory policy across certain states have
really clamped down on Bitcoin mining.
And so this is something where it kind of fits into my longer
term thesis on Bitcoin mining profitability.
Regardless of the fact of, of regulations, really from a
profitability standpoint, you have to be looking
internationally, you have to be looking at smaller sites because
you're going to achieve economies of scale, not
necessarily on the size of a single site, but on how you
operate lots of smaller sites. And that's really going to be
what's necessary to be profitable in Bitcoin long term,
in Bitcoin mining long term is you're going to have to find
these small pockets of energy that are profitable.
And so regardless of regulatory policy, regardless of who's in
office, the decentralization of Bitcoin mining is already
occurring and it's occurring much more rapidly than people
realize because everyone wants to talk about mega sites that
some of the publicly traded mining companies own.
The mega sites don't really matter that much.
It's all of these this this proliferation of smaller sites
across the globe where people are going to find long term
profitability. That, that's really, that's
really great to hear. I think it was Bob Burnett that
made a great report. And he calls them the bigger
sites, the elephants, the smaller sites the, the horses,
and then the even smaller sites the, the rabbits.
And he's basically making the case that look, it's, it's a lot
easier to catch an elephant than it is to catch a horse than it
is to catch a rabbit from a regulatory perspective.
But this is the first time I've, I've heard from a public miner
executive that you are bullish on horses essentially these
perhaps these not large mega scale mining operations, but
smaller scale, but you're going towards these isolated energy
pockets all around the world to take advantage of that cheap
electricity. I, I, I, I didn't know that,
that, that, that is something. But what about the economies of,
of scale, Adam? Because the, it, it, it's quite
expensive to deploy a site, right?
So what is the threshold that you're looking like?
What is the minimum electrical threshold capacity for these
smaller scale sites? Yeah.
So something interesting. We, we operate at 8 facilities
across 5 states. You don't necessarily find
significant economies of scale. Where you find economies of
scale is being able to manage a large number of sites versus
managing a single site. And so from our perspective,
it's much easier to have a lot of sites where you can actually,
it's actually cheaper to run from an operational perspective
a lot of smaller sites. And so on a long term basis,
even though upfront cost might be a little bit more expensive
and I'm not saying that they always are because in certain
situations it's much cheaper to build a smaller site, but on an
ongoing basis, you're actually seeing operational efficiencies
occur at smaller sites, not at larger sites.
Interesting, fascinating. All right, ladies and gentlemen,
we're going to continue this conversation.
During the news segment, we're going to talk about all things
core scientific. There's almost 1000.
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All right everybody, let's continue the conversation.
Let's talk about core scientific.
Let's take advantage of the fact that we have the CEO of core
scientific joining us today. Adam, what is core insight?
What is core scientific? What makes you guys different
than all the other publicly traded Bitcoin mining companies?
Why should you know? Stock investors look at core
scientific stock. What should they value?
What's your pitch? We're the first institutional
Bitcoin miner in North America, started the company back in
2017. We currently operate the largest
operational infrastructure fleet of of eight sites across 5
states, currently operate about 800 megawatts and that's enabled
us to be the largest publicly traded Bitcoin miner for the
past three years. We've recently announced a few
deals on the artificial intelligence side for high
performance computing as well. We'll be converting some of our
sites to high performance computing and some of that's
related to the fact that Bitcoin mining is becoming more
challenged in North America. And we have an opportunity to
centralized and create a much more profitable Bitcoin mining
business in North America via this shift to high performance
computing for certain facilities.
That's awesome. And, and, and let's talk a
little bit about AI, right? So you can make the like, aren't
ASICS supposed to just be ASICS? Or are you taking advantage of
the fact that the infrastructure is already there and you're just
basically switching out ASICS to, I'm assuming GPU's?
Yeah. So we're actually popular rises
about core. We were one of the largest
toasters of GPUs from 2019 to 2022 because we also hosted some
of the largest Ethereum miners in North America.
And so we do have significant experience in hosting GPUs.
And if it is a significant and expensive process to go through
for converting facilities. But if you look at our
facilities, they don't look like the facilities that most Bitcoin
miners run. And that's because when we were
the first institutional Bitcoin miner in North America, we built
what looked like more traditional data centers and we
essentially created them to be, I would say, much more flexible
in terms of what they could operate.
Obviously, we've publicly announced that it costs like 5
to 8 million to per MW to convert a facility to hosting
high performance computing. But you know, our facilities are
are best in class. And that's the reason why we
maintain higher efficiencies than other Bitcoin miners.
It's because we build the best facilities in the industry.
Gotcha, gotcha. Man, that that's fascinating.
I'm just looking at some of the pictures showing the audience
right now. I mean, it's I, I actually a
little known fact my so I got into Bitcoin in 2016 and I got
into the industry through mining.
I didn't get into the industry through media.
I got transitioned to media in in 2019, bane of my existence.
I wish I stuck it out, but 2018 was was a little bit brutal, a
little did I know? But yeah, so I remember and I
think every Bitcoin miner goes through this.
I ended up, you know, having that one room in the house that
was excessively loud, excessively hot.
And I built holes in the wall and, you know, put little like
vents so that, you know, the, and it was the, the, the machine
of the, the, of the era back then was the of course, the,
the, the famous S 9. And just, you know, it turned,
it turned one of the, the back rooms into like a little mining
thing. Then of course the power goes
up. And then you, you know, you have
to, you figure out how to scale from there.
But compared to what you guys have, you know, mine look like a
disaster. So these are, these are
beautifully, you know, beautifully built there.
I don't see any wires whatsoever.
Whoever you have for cable management is a guru because I
don't see any wires there. So this is this is very, very
nice. Well, let's see that is the out
or that's the the hot aisle. So the hot aisle, all the wires
are in the cold aisle. Yeah, but I'm sure that even the
wires in the cold aisle are are are, you know, they have the
little zip ties and you know. You take a bunch of data center
people who build, you know, it's like cable porn, I think they
call it. Where on my credit, like all of
those guys are really into ensuring that all of our
facilities look like they would be, you know, up to data center
quality. So that's a huge, huge shout out
to our team. They've done an exceptional job
of making our facilities look amazing.
You know, and and and it really, really looks like it as well.
So a question for you, Adam. Bitcoin mining is frequently
under scrutiny for its energy consumption.
Can you share how Core Scientific is approaching the
integration of renewable energy into its operations, and whether
you see the Bitcoin mining industry leading or lie or
lagging in the global push towards sustainability?
Bitcoin miners represent the main reason why renewables can
come online in many jurisdictions.
Most renewables are not profitable and often times
renewables are located in areas that are not on major
transmission lines and people have a hard time bringing that
power to major metropolitan areas.
It's the nature of the fact that Land's cheaper.
You need a lot of lot of land for either solar or wind.
And so when I would say probably one of the worst things that we
are bad at in the United States is regulation around
transmission lines. And so you can take, we have one
cruise line in Texas that's essentially our main
transmission line. There's been no transmission
line even though it's been trying to be permitted for the
past 20 years, taking power from the Moses Saunders Dam up in the
top part of New York State down to New York City, which which
significantly lower power prices.
You can find these examples all across the United States where
we are atrocious of building transmission lines.
And so that creates a huge vacuum of where it's cheapest to
actually create power, generate power and where the power is
needed. And so Bitcoin miners represent
the opportunity to bring renewables online locations that
otherwise would be unprofitable. Well, we go through the process
of building transmission lines to actually start bringing power
to the major metropolitan areas. Now, of course, scientific,
we're all on grid mining, so we have no behind the meter
opportunities. But in locations, we generally
choose locations where or I'd say we choose locations where
there's low cost, abundant power and that's usually created due
to excess renewables on grid. And so we're located in states
where there are higher than average, generally speaking,
higher than average renewables on the local grid.
Gotcha. And that leads me to perfect
segue to my next question, which is what are some of the biggest
misconceptions about Bitcoin mining that you think the
general public still holds and how does core scientific work to
address these concerns? Are these misconceptions better
said? I would say we spend a lot of
time on the local level, not only with local politicians but
in the community, because most people don't really understand
Bitcoin mining and what what we're doing.
They think it's a facility with no people inside that is just
running machines. And in fact, that's not true at
all. We have a lot of employees at
all of our facilities. We have a career development
program where people understand their growth trajectory.
Most of our site leads actually started as temps in our
facilities, made their way to data center technicians, worked
their way up to site leads and site managers, and then we've
actually brought people from the sites into corporate roles as
well. So many corporate roles are
fulfilled through the site level employees.
And so that's something that we're really proud of.
And I think a lot of people don't really understand how much
technical training is needed to operate a Bitcoin mining
facility. I think the other part is
related to the power. And they think, you know, we
just consume power and we're the reason why power shuts off when
demand gets really high. But that's not true at all.
In all of the locations that we operate in, we participate in
programs that we turn off when the grid needs us to turn off.
It's not just Texas. With Texas are most people are
familiar with, you know, people trading around power.
You know, many other folks have spoken frequently about their
power trading strategies in the state of Texas.
But in other locations we turn off when power costs or power
demand exceeds supply. And so that's something where
we're actually a lever that acts like a battery on the grid.
Many people utilize this analogy, but in reality, we're
just the, the grid doesn't care whether it is demand coming down
or supply going up. And so when power is in high
demand, when we pull off the grid, we represent a major
contributor to power being available to every every person
in the community that most people don't recognize how big
of a deal that is because our smallest facility is 100
megawatts, that's about 40,000 homes.
And so that means when we turn off, we supply enough power to
power about 40,000 watts and. And, and, and it's, it's like
it's, it's, it's obvious if you're in Bitcoin.
I think the other conception, which is like Bitcoin uses a lot
of energy. The misconception is what energy
is Bitcoin using? Like that's a very important
question which they conveniently leave out for some reason, even
though we've informed them in 100 different ways.
But but yeah, I think that the more the public, did you hear
the news by the way of of that town in Norway that banned
Bitcoin mining and then their their power bill increased by
like 27%. Yeah, I saw that.
Yeah, that happens. I mean, like a great example is
in one of our locations, we came into a location that was an old
industrial area and they had old transmission lines and the old
transmission lines didn't work for us.
And so we actually paid to upgrade the transmission lines.
And then we became the one of the largest taxpayers due to the
amount of power that we are drawing, which allowed them to
upgrade the rest of their electrical infrastructure in the
town, which actually lowered the power cost and increased up time
for all of the homes in the community.
And so that's like a perfect example of how Bitcoin miners
actually contribute to the local community outside of, you know,
all of the acts that many of the Bitcoin miners are doing today,
being actively involved, bringing new salaries into the
community, high paying jobs, training, you know, we can
actually, we're actually a net positive for many of the grids
that we enter into from a power price perspective.
Absolutely, 100%. So this leads me to my next
question. Looking at the future of Bitcoin
mining, what new technologies or innovations are you most excited
about that could drastically improve mining efficiency and
profitability? I would say it's probably
smaller mobile deployed sites. I think it's something that
people have been trying to attack in the industry for many
years and we've kind of been atrocious at it.
Not core scientific, but us as an industry.
And I think being able to tap into power that might only be
available for two years or four years is actually something that
is going to be a major contributor to global network
hash rate in the future. I think it's something that
we've been, I would say we've been much bigger on building
these big monolithic sites. But in the future, there's going
to be a lot more mobile deployments and it's going to be
much cheaper to do those, especially as we get much better
at. Changing form factor of these
machines because right now we're designing facilities around shoe
boxes and that's the way the industry's been dating back to,
you know, the 1st S1. And so as we look forward and as
we start to move towards this more of a hash board style
deployment, I think that's something that's actually going
to radically change the industry because it's much easier to
deploy hash boards. They travel much better, they
travel much safer with less damage.
And so that's something where I believe we'll be actually be
able to generate a lot of hash rate out of mobile deployments
that are temporarily set up that can move very quickly as the as
power markets and as Bitcoin prices adjust.
Gotcha. So this leads me to my second to
last question. But before we get to it guys,
there is 1200 of you guys watching live right now.
If you guys are enjoying the show, make sure to smash that
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get the message out there. If you guys are just tuning in,
we are here with Adam Sullivan, the CEO of Core Scientific and
we've just been talking about Core Scientific for the last 30
minutes or so. So last two questions, Adam.
First, we have been in a little bit of a mining bear market,
specifically after the halving, you know, the rewards got cut in
half and the price has been chopping sideways.
You know, 58K gang forever I guess.
And what has Core Scientific been doing to navigate this
pretty hostile mining environment?
Yeah. I mean, let's talk about that,
right. Q1 we had 9.2 cent hash price.
Hash price is essentially the dollar denominated revenue per
Terra hash that you generate out of your facility.
And so for us the 9.2 cent hash price was representative of a
very strong market today in QO and our and now we're in Q4 I
guess for three days in Q4, but in Q3 you know that was low 4
cent hash price. So it was more than halved in
terms of the profitability on a per tear hash basis.
And so very challenging environment for us that's that's
meant greater intermittency at many of our facilities, meaning
we turn off at much lower power prices than we did in the past.
And then also we've been going through this shift in our
infrastructure base. There's actually been locating
machines at much cheaper power cost sites.
And that's because half price and hash are in economics right
now for Bitcoin mining are very challenged.
I mean, look across the industry Q2 for numbers for publicly
traded mining companies. Most had negative gross margins,
which means that Q 3 is going to be even worse.
And so I think, you know, we're in a market today where if
Bitcoin price doesn't continue to perform the way it's done in
previous halvings, many publicly traded mining companies, many
miners across the world are going to feel the pressure to
start turning off facilities. They're going to run out of cash
on balance sheet. And we know that some miners are
mining on economically right now, but that doesn't last
forever. And if you can't afford the next
refresh cycle, you're out of the Bitcoin mining game.
And so that's something where we saw that actually occur.
You know, looking back to 2018, we saw this occur.
Many sites shut down, never turned back on.
And if half price continues to trend lower, I actually think
we're going to be in that environment much sooner than
people think for many sites, not only in the United States, but
globally. And so unless people can afford
to upgrade to the newest machines that have a much lower
break even hash price, I think we're going to see a lot of
facilities start to shut off starting at the end of this
year. Do you, do you think that people
got ahead of it, ahead of themselves because the hash rate
like continues to go just parabolic to the moon despite
the having, despite the very, very, you know, let's just say
not a very great environment to mine right now profitably.
Why, why does the hash rate continue to go up?
Do you think that's just people anticipating for, you know, if,
if Bitcoin follows its previous cycles, it's expected to perform
very well, very well in 2025? Are people just making bets?
I think it's mainly driven by the fact that people are
replacing J Pros at 100 Tera hash with newest 20 ones that
are 200 Tera hash. And so you're doubling,
effectively doubling the amount of hash rate for the same amount
of power draw and that's driving a lot of this growth in the
total network cash rate. I think the other part is too,
we're seeing a lot more facilities come online across
the globe and some large ones in places like Russia and China and
that's also driving up network cash rate.
And so I think this is going to be a global phenomenon.
We're going to continue to see half price trend lower and
that's the nature of the industry.
Like if you look back, hash price used to be much, much
higher, but the break even hash price for a machine at a higher
efficiency, I should say really a lower efficiency, but a higher
number, you know, that is essentially similar to gross
margins. And as hash price starts to turn
lower and as your break even hash price also starts to trend
lower, you're generating a similar amount of gross margin.
But soon we're going to be at a point where a lot of the network
in terms of what's online today is, I would call it XPS are
worse and XPS are even being challenged in certain economic
or in certain power price environments.
And so I think this is actually a massive challenge for the
industry. If Bitcoin price doesn't react
positively coming up in the next really like 6 to 12 months is
you're going to see a lot more miners be much more uneconomic
than I think many people expected.
Do you like an an Afghan of where we're heading into
speculative territory? But you know, after all, we are
an entertainment. When do you anticipate the
Bitcoin bull market for miners to come back?
I know that I don't know if you can answer that question as the
CEO of a publicly traded Bitcoin mining company, but you know our
our viewers would love to know if you if you could answer it.
As I I don't know where Bitcoin price is going and I don't
really check it that often, mainly because if I did I
probably would have gone crazy like 8 years ago.
I know how I felt in 2018 watching my net worth slowly
dwindle away, but I was fine. So it's looking forward to the
next. You know, I would say 3 1/2
years until we get to the next having Bitcoin price has to
perform in order for many Bitcoin miners to be profitable.
Otherwise we're going to see a lot of them tread water and
probably a lot more bankruptcies, a lot more
facility level sales. You know, a lot of people in
North America are going to try to sell out to data center
businesses just for their available power capacity.
It's going to drive further centralization on the network
and I think it's going to force a lot more people to find
smaller facilities that have power prices that are more
defensible, that are very, very cheap.
And you're going to see greater intermittency.
So I think you're going to see a lot more hash price volatility.
And that's going to be driven by the fact that people are going
to be going to locations where they might only be online 40 or
50% of the time. And so that's going to cause a
significant amount of volatility on on the hash price and it's
going to cause a significant amount of volatility of
difficulty. I think if we start to see a lot
of hash rate or a lot of hash rate turning off for extended
periods of time. Gotcha.
So last question for you, Adam, before we transition to AV
culture segment, what are the plans for Core Scientific for
the next 5 years? You have anything coming down
the pipeline? I know you were talking about
focusing on smaller scale sites, you are focusing on AI, but
anything that you can reveal to the 1300 people watching right
now? Yeah, it's a shift in form
factor. I think that's the big, that's
the big plan for on the Bitcoin mining side of our business
right now. We've been in an environment, I
talked about this earlier, but we've been in an environment
where we've designed facilities around shoe boxes and that's a
really challenged environment to be in.
Looking forward, we signed the deal with Block for 15X hash of
chips. This is going to represent a
major shift in Bitcoin mining going forward.
The shift towards developing your own hash boards and be able
to just replace hash boards in a facility versus the entire
shoebox of fans, control boards, etcetera.
All of those things are a significant amount of CapEx
dollars that have to be deployed every single year.
When we shift to hash boards, this is going to represent
lowering the amount of CapEx we have to spend to be able to
maintain a certain percentage of the network.
And so this is something that I think we're really, you know,
core scientific, we're really excited about.
Our research development team is extraordinarily excited about
this potential shift. Our finance team is excited
about lowering the amount of cap X dollars to just refresh
machines. And I think this is going to be
a market where we're going to see a lot of fast followers come
behind us as part of this broader shift in the entirety of
the Bitcoin network. Awesome, awesome, ladies and
gentlemen, Adam Sullivan from Core Scientific.
If you guys want to find out more, check out
corescientific.com. And of course, if you're
interested in investing, the ticker is CORZ.
Again, you can find it on NASDAQ CORZ.
Stay tuned for the culture segment.
We're going to talk to Adam about the bid acts.
So stay tuned, ladies and gentlemen, we will be right
back. Here we go
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Anyways, I this is the culture and we do have Adam Sullivan on
O'Sullivan on the show. Adam, what do you think about
the bid ax Man I? Think it's great.
I think it represents something that's actually more interesting
that people don't think about, which is in the future if you
want to produce heat, utilizing Bitcoin miners is actually
probably one of the most interesting ways to generate
heat while also, you know, it's obviously consuming additional
power, but it also represents an opportunity to stack more SAT's.
So the Bid X is a really interesting opportunity for
people to do something like that.
And I've actually chatted with a lot with the big bid X guys.
I think what they're doing is great.
I think the longer term question for people is, you know, what is
the profitability look like if the profitability matters.
Yeah, and, and I think, and that's a, that's a big question,
'cause we like, you know, you're not going to make money on this.
It's, it's kind of like a, it's, it's like a, it's like a, like a
trinket. Like you're supporting the hash
rate somewhat. It's also a lottery ticket.
You are supporting decentralization of the hash
rate, even if it's on a very small scale.
But it is, it is, I think it is a very interesting project.
Now my question to you, Adam, is what's your personal mining
setup? I don't have one anymore.
I did. I used to mine in Brooklyn.
I had 17 cent power. I consumed more power than my
building in the building next to me.
I used to have a four foot fire escape window open in the middle
of the winter and I had to put AI would have to replace the
towels in front of that window because it was producing so much
heat. Yeah, after you do it at a large
scale, your personal setups feel like they're just a little weak.
Let me ask you something. So $0.17 that's better.
So when I was doing it at home like in in Miami, it was like 7
cents. So it wasn't that bad, but still
obviously not like economical, if you can reveal this, like
what is like a economical price? Like what?
What are you searching for? Are you searching for two cents
per kWh, three cents per kWh, three cents per kWh?
What is that magic number? Sub four cents with the ability
to bring that much lower based on intermittency.
You need to have power programs that you can be turning off
machines during very difficult times, very difficult half price
environments and also give you an opportunity to run older
generation units. And so that intermittency
component to bring down power price is critical to Bitcoin
mining facilities. Do you, do you believe the era
of, of, do you believe the era of individual miners is over?
Do you believe that it's not because it's like the reality is
to to set up a site, you know, it's it's out of the economical
hands of most people, like most people can't, you know, put up a
quarter $1,000,000 set up a, you know, a semi semi decently sized
site. Do you think that home, the era
of home mining is over? That's why I brought up the bid
acts in the beginning because it made a comeback in a way that
obviously isn't going to break the bank because before, you
know, people were making heaters out of S nines and stuff like
that. But do you believe that the era
of the home miner, the so-called pleb miner, is over?
I think we're in a little bit of a wall period right now.
I think, you know, Jack Dorsey and some other folks have some
ideas about how to bring or put ASICS on more devices across
your home. I haven't necessarily seen that
come to fruition yet. So I think we are definitely in
a, we're in a dark period for, for home mining at the moment.
It is very challenging. We're like the dark.
We're in the dark ages of home mining.
You know, Renaissance, I mean, I I like and it reminds me because
in 2018, I wish I stuck around, man, I wish I stuck around.
But anyways, we are getting to the top of the show, so I do
want to give an opportunity. Opti, do you have any questions
for Adam? Well, since we're talking about
bid X and I, I just saw the chat and so I'm kind of ripping off
what the chat was saying. And you are coming from Core
Scientific, one of the biggest public Bitcoin mining facilities
or companies in the world. What are your thoughts or
concerns about the centralization of mining?
Because I know that's all the hype right now on Bitcoin
Twitter is the centralization concerns.
And I think this is where the efforts coming out of bit bit
acts are kind of trying to or also, you know, Jack Dorsey and
the whole Ocean team trying to push back against the
centralization of Bitcoin mining.
So looking out maybe, I don't know, five years from now, what
are your thoughts on Bitcoin mining becoming centralized?
It's becoming more decentralized as we speak.
Economics are forcing that. And So what we're seeing are a
lot more sites really start to pop up all across the world and
on a much smaller scale. I mean, that's the reason why we
think this is a a growth factor for core is that we're seeing
the most profitable sites actually be smaller sites, 5 MW
sites, 10 MW sites, 15 MW sites that are located all across the
world. And they're in these small
pockets where people aren't necessarily attacking those
types of miners from a regulatory perspective because
they represent a small portion of the grid.
So I actually think economics today are going to drive further
decentralization. If we go into a massive bull
market like take 2021 for example, that's what brings in
these mega sites. That's what brings in massive
amounts of capital into all sorts of companies.
I think right now we're actually moving into a much greater
decentralized network than we've had over the course of the past
four years. And as we look back, I mean,
mining has gone through multiple forms of, I'll call it
centralization, but that's part of Bitcoin.
It's going to go through these cycles as countries open up to
Bitcoin mining in a large way. And when the economics allow for
it to occur, you're going to start to see pockets of
centralization. But Bitcoin has a habit of
always finding the paid trade for Bitcoin miners, and that
flushes out a lot of not only large scale miners, but a lot of
new capital that's come into the mining space.
It always has a habit of falling to a point where a lot more
people have to shut off than you'd expect.
And we're at that point right now.
And that's what's driving this further decentralization.
So bid ax is, yes, they're a great part of the broader
narrative for driving decentralization, but also
economics right now are driving decentralization purely because
a lot of larger scale miners aren't going to be profitable.
They don't have line of sight to when they're going to be
profitable and they're going to run out of cash on balance sheet
to fund negative gross margins. And that's going to be a point
in time where you're going to see even a further drive to
decentralization on the network, which is a net positive for for
the Bitcoin network and for Bitcoin security going forward.
Beautiful, beautiful. Well Adam, we are getting to the
top of the hour. There's currently 1500 people
watching live right now. If you have any final words for
everybody watching, what would they be?
Stack more stats, something that you can, you can you will always
regret in the future. That is, that is my, that's my
thesis. Wait, wait, wait, wait.
I could attest to that. Ladies and gentlemen, Adam
Sullivan, CEO of Core Scientific.
To find out more, go to corescientific.com today and
check out the NASDAQ. The NASDAQ ticker is CORZ Coors
CORZ. Alright everybody, if you guys
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