General Kenobi, welcome to the Bitcoin Affinity Show.
Thank you for joining us.
Luke, thank you.
Knut, thank you.
We are nearly all completely Star Wars themed, actually.
What's your Star Wars name?
Darth something, I guess.
Darth something.
Yeah,
to the enemy!
Well, you're General Kenobi, as opposed to Particular Kenobi, that's what the
specific Kenobi, as a very smart man said.
But, really, why are you General Kenobi, and who are you, and give
us the TLDR on General Kenobi, Obi
long do you want the TLDR to be?
Two minutes?
Five
Well, you don't have to go into the Clone Wars and the midi
chlorians and all of that stuff.
You can, you can just give us the I'm in.
When, when,
Tatooine, me and Anakin.
into the cave and when, when did they promote you as a general and all that?
Yeah, yeah, yeah, so
The funny story with General Kenobi is when I chose the name, I had no
idea it would ever become something.
I just thought it was going to be another pseudonym on Twitter that does nothing.
You know, I didn't expect me to do anything with it.
So then when I first received the first email with like, Hey, General
Kenobi, cause I wrote, I wrote like a thing for a Bitcoin magazine.
And then they like, there was some emails back and forth.
And suddenly I saw something about it.
Hey, General Kenobi, could you please?
And I was like, that's, that's serious.
Like what the, what is going on here?
Like that's serious.
You know, like.
Why not my real name or my, my as I like to call it my government name.
But, uh, I mean it all started back in, um, well, of course
Covid, I'm kind of young.
I'm like from 1999, you know, I like to say best year in the world, you
know, like, because it's before 2000, but if I get to live two, um, the two,
if, if I get to live to 101 years, then I have lived in two millennia,
three centuries and, you know,
Wait a minute, so, so you grew up with, like, the, the, the Disney
Star Wars and, like Yes, yeah.
Oh, I've, my condolences.
With a prequels, okay.
Yeah.
So with J Jar, Darth, Georgia.
Oh, yeah, yeah, yeah.
And, uh, what's he called?
George R.
R.
Abrahams, who made the Disney, right?
Yeah, so the, this is, see if you agree with this list.
It's, number one is Empire Strikes Back, which is like a superb movie.
Number two is the original Star Wars, which is a very good movie.
Number three is the first half of Return of the Jedi, until the fucking teddy
bears show up, and then it starts sucking.
Like, the Jabba's Palace thing is superb.
Then the fucking Ewoks show up and it sucks, and every other Star Wars
thing after that is complete bullshit.
I agree with that.
last sentence, I disagree with the Ewok thing, cause I was like 7, 8, 9, 10
when I saw that, so the Ewoks were the best thing ever, so, you know, you saw
those creatures and they're like some, like quirky but also like effective,
like you see them like smash the
Oh, yeah, yeah.
AT Ts.
with the thing, and it was super fun, I thought that was, I loved it when I was
little, but I understand if you had a
we'll do an interview with you again when you're in your thirties and we'll see.
and then it'll be like, yeah, you're right.
Looking back at it, it wasn't the best.
Like they could have cut it down.
Right.
But they'll come in the future.
For now, I'm still in the phase of like loving it, but going back to the Tldr r
yes.
Sorry for sidetracking.
worries.
No, no,
no.
No,
love it.
Uh, 'cause usually I don't talk to Star Wars people just, okay.
General Cano, that's it.
And they just leave it there.
I'm like, there's so much talk there.
Anyway, also like the whole like, like against the empire, you know, and the
rebels, like we're basically the rebels dispersed, decentralized around us.
I love
Bitcoin is the photon torpedoes fired at the Death Star's fucking core.
That's what Bitcoin is.
And we're the ones doing the firing and trusting the force and stuff.
chances that Satoshi Nakamoto would fire right exactly that it would be
perfectly aligned, like, you know,
he used the force.
Like that's what he did.
He used human incentive structures and it
Exactly, yes, with a bit of the force, and now we're here all, fighting against
the second Death Star, so to speak.
But anyway, so
Wait, what's the analogy there?
What's the second Death
The second, you know, the one that's like half built and then they destroy it again.
Uh, the fact that Satoshi Nakamoto was the first one to throw the first one, like,
uh, it destroyed the first death star.
So like kind of gave us the first opportunity to keep fighting back.
Um,
That's the block size
that's how I see it.
And the block size wars would be the second or the first
No, the first one, right.
That, that's the, that's when we got the first like victory over, uh, over the, the
put it, I would put it as Satoshi Nakamoto was the first one to throw the torpedoes.
Cause it was so impossible, right.
To like hit it exactly,
make it that perfect.
You know, cause I recently read the book by Aaron Van Weerdum.
I never know how to say his last name, but I'm sorry, Aaron.
Apologies.
Um, and first of all, absolutely fantastic.
And when you get to the end, I loved it because it was
like, like it was a long book.
It was, and it was proof of work.
And then at the end.
You just feel ecstatic when Satoshi Nakamoto like releases it.
It's like, yes, finally.
So that was
We figured it out.
how I felt like that moment was the, the torpedo.
That's why I say Satoshi Nakamoto destroyed the first
That's how, yeah, yeah, yeah.
Alright.
but Hey, at the end of the day, it's like art, you know, like,
uh, it's in the eye of the
It's like poetry at rhymes,
Exactly.
Yeah, exactly.
Yeah.
But we're never going to get there.
So TLDR, COVID hits.
I was studying economics in Barcelona, uh, fiat economics,
of course, mainstream economics.
And um,
you weren't studying
exactly.
Um, I was just basically studying Mickey Mouse formulas as one of my
teachers like to say, uh, because there's so many assumptions at that
point, you're just a Mickey Mouse world.
But anyway, um, and COVID hit and I had already been thinking
funnily enough about like.
Retirement.
Even though I was only like 20, 19, I was really thinking about retirement
because I knew what inflation was.
I knew what also what compound interest was.
And I was thinking about retirement.
I also knew enough about investing that I knew that at my age going for
bonds and that shit would not cut it.
Like if I wanted to like get a pension at some point, because we have, we
have also studied in class how the pension system in Spain, we're just
going to get a, thank you very much.
And that's it.
My parents are gonna get like, perhaps a coffee paid, uh, but,
but, I'm not getting anything.
damn good in Spain though.
It is, it is, but still, they worked their entire lives, and they
deserve a bit more, but anyway.
So I was already thinking about myself, and I was like, I need
to figure out something that is high risk in the short term.
High risk, of course, volatility is high risk, but whatever, you
know, at that point, that was my fiat thinking, let's say.
Um, and of course, as I went down the risk curve, the thing that is the riskiest,
but also has the highest reward and long term kind of like, let's say, It has the
best Shar P ratio, risk adjusted Shar P ratio, so returns is Bitcoin and cryptos.
Of course, I got started with the blockchain, not Bitcoin phase.
I even fell into some Ponzi scheme in Spain, very famous Ponzi scheme,
Nimbus Capital or some shit like that.
Yeah.
Looking back, like, I'm like, how dumb was I, but, but I guess
that's the price to pay, right?
I call it my thousand euro master, which back then that was half of my net worth.
I didn't have much more and I put a thousand euros and then yeah, when
it hits up, let's say, um, yeah.
So it cost me half my net worth, but I was also 20 years old.
So it was, it was a cheap learning experience, even though expensive
for the time, you know, had I bought Bitcoin, I still remember.
I bought 0.
1 Bitcoin when Bitcoin was at 10k and I sent it to this Ponzi scheme.
Later on, I had to like fight for six months to get that
You were in Cloud City and Lando sold you out to Yes, exactly.
To the Darth Vader.
Yeah, yeah, yeah.
Exactly.
Exactly, exactly.
No, not our friend land.
Not our friend.
Lando, of course.
No.
Lando Roth Bar.
That's another Lando shopping.
Bit Lambo.
Yeah, we should, we should.
We should . We should get, we should get you and, and Lando.
And are there any other Star Wars Nim out here?
I think
Obi from
yes.
Oh yeah, yeah,
with me.
It's Obi Kenobi, right?
yeah, yeah.
Well, hey, welcome Obi Kenobi.
we, do we know?
Do we know A one?
Uh, Juan.
Juan, that's a
Juan Ai Obi Juan
Kenobi, we'll have to come with Mexican and mariachi stuff, Obi
and you started Star Wars Mariachi band, but
like in Roca, but with a Spanish spin, in next Rocamoto, the Obi Juan Kenobi Knut,
great idea.
sings.
I mean, yeah.
yeah, he does, he does,
play the, you know, good mariachi guitar and yeah.
Yeah.
Or one of those, uh, Mongolo flutes they have in Star Wars like that.
yes.
Sorry,
we keep
sidetracking you.
it's so funny.
Anyway,
your story.
circling back, getting back on track.
Um, I was at the point of, uh, blockchain, not Bitcoin.
I thought I had found, Oh yeah, blockchain is the thing.
And around May of 2021, more or less, I actually told my dad, Hey
dad, I think I figured it out.
I want to get into the crypto space and the, and the, you know, blockchain and, Oh
yeah, you know, because it's the future.
Of course, I still had lots to learn, but, uh, I don't know how
to say now in English, but like.
So has it, life so has it, that at that point, my dad, like two, three days
later Talking to a friend of his at work.
Apparently his coworker, blah, blah, family member, blah, blah, blah.
I was working in a company out of Germany doing, uh, AI, crypto and GPU stuff.
And when I was little, yeah, like, you know, like all of the buzzwords combined
together, you know, just shake it up, have a nice cocktail and see which
investors drink that Kool Aid, right.
Um, but, but, but he had the contact there and like, my dad was like, Hey,
watch out, my son is right now doing this.
So.
Um, he sent over the information to me and it kind of like fit perfectly.
I studied economics.
It was an investor relations position.
Uh, so check.
It was a GPU H high performance computing thing.
When I was 15, I built my computer since then.
I was like kind of like a computer nerd, you know, I'm a PC master race.
I don't know if that's something.
Me too.
You too?
PC Master Race.
That's the way.
Um, so, so, you know, the GPU thing was like, okay, check.
And I had also been not just investing in crypto as much as actually like
learning about the technology and like, okay, how does blockchain work?
What's the, what is SHA256?
What is cryptography?
Yeah.
I mean, in a way, it actually helped me to halfway, I was halfway to Bitcoin, right?
Cause some of my friends, they just like, Yeah, dude, I'm into crypto and they would
just put money in and I was like, but what are you, do you even know what an AMM is?
Do you know what a like different blockchains are?
Do you know how these things work?
And yes, it was a bit very much crypto bullshit, but at least
I was like, no understanding, understanding the technology, right?
And freedom and blockchain, all that stuff.
And, um, and then when they saw my profile, they were
like, yeah, why not come in?
And during those two months, I actually didn't have too much to do.
It was in Germany.
I got in and I was expecting a fully Bitcoin company where
I was going to learn a lot.
And I realized that.
I was the third person out of 60 in headquarters that knew about
Bitcoin and I was like, okay, I guess there's something for me to do.
So I decided to do a presentation on what Bitcoin is and how it works because
I saw my colleagues over at Legal, at Treasury, at, uh, you know, Finance.
Yes, they understood that Bitcoin existed, but they didn't know anything about it.
Basically, just like, you send it, you receive it, and it's
apparently worth dollars, right?
That's it.
But I was waiting for the day that the treasury guy sends like 20 Bitcoins out
into nothingness because he fat fingers an extra C or B at the end of the address.
And then he's like, where's the helpline for Bitcoin?
Can they send the Bitcoin back?
So I was like, okay, let's do a presentation on Bitcoin.
And while I was doing the presentation, the day, I still remember it, it was like
clear as day, the day I understood proof of work, proof of work clicked for me.
Also, it's necessary to say I was working in a, it was a Bitcoin
miner with also Ethereum mining.
Um, so yeah, with that information, people should also know.
And I'm not going to be able to like triangulate which
company I was working for.
Um, but I'll let them do their proof of work.
Everyone needs to do proof of work, right?
But the day I understood how proof of work works, which is a bit of
a mouthful, but you know, like I, I still remember it, dude.
I leaned back.
I like my, my brain didn't shut up for three weeks.
Didn't shut up for three
What was it that did it for you?
Cause this is, this is something that, that I think some people
don't even still get it.
Bitcoiners, I think, uh, it's a, it's a big, big thing.
Yeah.
What did it for you?
Bitcoin,
I think it was the fact that.
When, like when proof of work clicks and you, it's actually not, it's actually
an understanding that that is bringing money back to reality in the sense that
that.
everything in the world that is worth anything, it has proof of work inherently.
You just, the moment I see someone that is fit, proof of work, I know it.
Even if he took steroids or anything, there's proof of work that he hit the gym.
Yeah, I'm going off on a tangent here because we're trying to
promote the concept of proof of results in the book because I think
proof of work is misunderstood.
Yeah, the big, uh, proof of work is misunderstood in the way that, uh,
all the other work, the only work that matters is the correct hash.
So it's actually proof of proof of work because, like,
you, it's still assumptional.
Like, you assume that the work was put in because the odds that it wasn't
put in are so, so high, so, so, yeah.
And the same is true for, like, everything, and in, in real life, uh,
like, you get these Bitcoiners that think that just because they do the
work, their work is valuable somehow.
Like the guy that's writing the word Bitcoin, uh, 40, 000
times in a book or something.
Like, uh, it's like, yeah, but nobody asked you to do that.
The market didn't ask for that.
So, so, so what's true in real life is, is, is the results.
That's, that's what actually matters.
Like, uh, and we use the, uh, example of.
Uh, bill Murray, for instance, the actor who made a whole
career outta not giving a fuck.
It's wonderful.
Like, I love the guy.
Uh, but, but, but it took work to, to, to not work that much.
I guess , but, but, but it's the result that matters.
And, and that's what we're trying to promote.
And even in Bitcoin, like everything in Bitcoin is probabilistic.
The only, the only.
Uh, reason that you think that the work was put in is because the, the
hash starts with that many zeroes.
So you, you see that thing in, oh, this guy probably put in a lot of work.
And that's also like, why, why you own
That's the difference.
Well, almost certain.
But I agree with you.
I agree with you.
No, no, no.
That's what you're a philosopher.
Yeah.
And, and, and just, just the, to, to finish the point, the, all the other
things are probabilistic in Bitcoin too.
So the, the only reason that you think that you own the Bitcoin,
because you know the private key is because you know the odds that.
Someone else knows them is so low that is you practically own them for all practical
purposes And the 21 million limit like you you know that that will not change Because
the probability that all the bitcoiners will agree on changing it is so low.
So everything is probabilistic.
Really.
Yeah.
No,
But then you're getting into quantum, basically, you're
getting into the depths of,
almost
everything is probabilistic at the day, right?
Um, and I mean, that gets into attention of a question that I had cause before
getting into studying economics, I actually wanted to do physics and
particle physics and go to CERN.
That was like my dream.
But then my dad told me what it actually meant.
And that meant sitting in front of a computer 2000 meters below earth,
but like, you know, 400 meters below earth and just repeating the
same analysis a thousand times.
And I was like,
No.
And Bitcoin is the, like CERN is the particle accelerator
for physics nerds, right?
Yeah.
And Bitcoin is the testicle accelerator for, for, for Austrian economics
nerds, . And that's much more fun.
Exactly.
At that point, I didn't know that, but like, uh, but, but one of the questions
that I had back then, and that gets back to this thing of like, is everything
probabilities or everything or is anything certain is the fact that if you just take.
Normal physics, like, you know, Newtonian or like Einsteinian physics,
let's say, like relativity, like higher levels of magnitude than
us, then everything is certain.
Like if I, it's certain that if I threw a ball, it's going to have
this with these initial things, then it's going to end up there.
But at that point, if you think this way, Then if we knew all of
the initial setup for, before the big bang, so all of the, how every
particle was arranged, what their spin was, what the direction was, all of
that, then we don't have free range.
We are just the result of that, right?
But then when you look into quantum, you realize that everything is probabilistic.
We like electrons.
They don't actually spin around the, the, the nucleus of the
neutrons and the protons.
They just are in probabilistic.
Clouds, like clouds of probabilities in different high levels of energy.
And that's also when we get into like chips, that's super interesting
because now we're hitting, um, that, well, people are going to think, well,
why are we going to get into chips?
Does this guy have anything to do with that?
But once we finish my TLDR, which is going to be.
Very
long.
but listen to instead of too long didn't read.
Um, like that's one of the things I'm a Bitcoin mining analyst.
So that's one of the things that I get into.
Right.
And, um, and with this thing of like quantum and electrons being just like, uh,
waves of probabilities, we are now in this day and age hitting the The end of the
Moore's law of tic tac of every two years, you, you multiply times two and then you
improve and then you multiply it times two, the amount of transistors, right?
We're hitting a limit on that because now our gates, our logic gates, as they're
known, they're getting so small, so tiny that there is a non zero probability
that electrons will just jump over the gate and they will not register.
So that's actually a problem, right?
Um, so, so that's super interesting.
And that's leading to now, instead of having just 2D chips, just flat
surface chips, they're starting to, AMD is starting to do stuff like
3D chips where they like stack them up this way in the same die size,
you can have more transistors, but you're going vertical, right?
Anyway, that's a different topic.
Let's finish the TLDR.
What do you want to go into?
Like
Yeah, no, no, that's it.
Yeah, wrap up your, and the proof of work tangent, I mean, the only thing
I wanted to get at was, like, sort of, what's the, what was the thing that
clicked for you, that, that, uh, got you to understand that, so I think
we, I think we tangented, and so,
But I think what Knut said basically is that, like, when you see
someone that is very muscular, for example, that is proof of results.
But that proof of results also implies that there was work, there was
That there was probably work.
Or just very good use.
Stop muddling.
But probably in essence, no, no, but that's a very scientific thing, right?
Science, scientists, they never claim anything is a hundred percent true.
They just claim it's 99.
99%.
It's beyond reasonable, right?
Like with the jurors,
It's
the best theory we have at the moment.
Until debunked.
exactly.
And in this case with energy though, it's kind of like obvious.
If someone hits the gym every day and you see them later on, there will be results.
Unless they're like a total tool that like what you said, right?
Cause you can just go to the gym.
All of these girls just.
Lifting one kilo weight.
There's no results there.
You need to lift heavy, for example.
But then that's just one thing.
But then in anything else, like if you wrote a book, that's proof of work.
You had to sit down and do it.
Even if it was with AI, you had to sit down and at some point, use
calories, use energy to do that.
Anything that's worth anything.
If we're talking, if we're breathing, if we are walking,
if we're thinking, that's watts.
And if that's worth anything, That's energy.
And what is not proof of work?
zero, zero, zero, zero, print.
That's made up.
That doesn't exist.
That's, that's Mickey Mouse economics.
You know?
And that, the moment you realize that that's how our system
works so far, and that's what I realized at the moment, right?
Like we have been living with a Mickey Mouse, proof of nothing,
uh, proof of stake, if you might say, equal proof of nothing, right?
A system.
And we finally, for the first time, we figured out a proper universally,
I don't know, like coherent system.
Uh, proof of work system, like it, it, it aligns with the laws of
physics of everything that we do.
That was the moment.
It ties the subjective world to the objective world.
Like, it's the bridge between human action and physics.
Like, it's, it's, it's, uh, it's beautiful.
Only
though, right?
Only probably.
It probably does.
Yes, exactly.
The thing with probabilistic, it's like, it's connected to free will
somehow, and I don't know exactly how, but like, if the universe was
deterministic, free will couldn't exist.
No, so it's, uh, and maybe it doesn't, by the way.
oh, you mean the whole matrix thing, like we are in a
Well, well, we can't, we can't know if it exists, but, but we have to
act as if it does because we have no choice but to have free will, right?
So it's a, it's a paradox in itself, but like, you're going to love the book, by
the way, but let's not get into that.
Let's finish the TLDR and get on with
now on it's kind of like very quick because the moment I realized that like
I still had a bag of shit coins and over the next two months I just basically sold
them all at a loss or at whatever point.
I just didn't care.
I realized that better to have some sats than have some whatever shit coins,
you know, that yeah, perhaps they're going to pump better and whatever.
But the way I'm going to sleep.
At night, and it was 100 percent true.
I had friends still in crypto when, uh, when 2RO, 3RO's capital
collapsed, when FTX went down.
They were like, Oh my God, what's happening with my coins?
I was sleeping like a baby.
Why?
Because my coins were on cold storage and only on Bitcoin.
That's it.
But anyway, so I, I finished the presentation.
I became a Bitcoiner.
I presented it to the, to the, to the community.
to a team and they were quite impressed.
So they were like, would you be willing to not go to college for
a while and just work with us?
And I was like, a hundred percent, let's do that.
So I just jumped, uh, headfirst into the opportunity.
And over the course of the following year, I didn't go to class.
I in Barcelona or in Erasmus, cause, uh, I was going, I was in Frankfurt,
but I was going to Erasmus in Mannheim.
Uh, so, but I basically did not attend class and, um, and I just worked for them,
uh, dove deeper into Bitcoin, especially, uh, specifically Bitcoin mining, because,
uh, the position that I ended up crafting for myself was like Bitcoin mining
analyst, uh, which encompasses also, like, Knowing everything else about crypto.
But the funny thing is I became like an internal crypto
consultants for the company.
And anytime they would come to me and be like, Hey, what do you think about
starting something with this crypto?
I will be like, Hmm, okay.
Interesting.
Two days later, no, actually no.
Without doing any work, I would just get back.
Like, I don't think it's a good idea.
Yeah, exactly.
Cause it's, it's a shit coin.
Yeah.
And financial advisor is the easiest job in the world for the next hundred years.
If exactly, if you're a Bitcoin , it's your work is cut out for you.
That's that easy.
Um, but yeah, for example, at one point they even came to me, I was like.
February, March of 2022.
So Bitcoin had already touched 69 K, 70 K.
And what's going down peoples, I know, right?
nice number . This, this cycle, we need to hit four 20 K that we just need to,
for the, you know, for the memes, for the lows, uh, Keck, all of that stuff,
Um, but they came to me with the helium, like, oh, we should start
doing the helium Internet of things.
Things, whatever, whatever.
And I was like,
Helium?
it was a shit coin.
And apparently it was like, if you got a node, which they sent you,
it would be like super profitable.
You buy for 300 and in two months you've already done 300 whatnot.
And because you know, it's IOT, all of these things, like, you
know, the volts and the like, uh, yes, it's making so much money.
But, uh,
and, and the funny thing is I told them, yeah, no.
Three months later, it was discovered that they had been lying about
their partnerships with Volt and well, you know, with those like last
mile scooters and with Uber, they had been basically lying about it.
And therefore the coin just basically, weird, it went to zero basically.
So
Big
who would have thought?
I mean, Thank God I told them for some weird reason that it was a
shitcoin, but anyway, but anyway, so then I worked for one year with them.
Um, in between, I also started getting involved with stuff like
European Bitcoiners, you know, at a European level, but also organizing
the meetups in Barcelona, which by the way, you're invited any of you
two guys to come to Barcelona and we'll try to get a meetup together.
Um,
yeah,
I also love Barcelona.
and also the meetup has a, uh, Like the whole story of Barcelona and the
meetup is quite interesting because there used to be one, COVID killed it.
And then somehow we found ourselves again in a new generation, the
new guard, as we like to say it.
And now we're like one of the best meetups in the Hispanic community.
So, and it's, and it's
Did Covid sort of cleanse out the shitcoiners?
Yes.
In a way.
Yes.
Because one of our, a few months after creating the meetup, the new meetup
in Barcelona, actually one of the old guard Uh, noticed us and he was like,
Hey, you guys are doing meetups, right?
And we were like, oh shit.
He's the original guy.
And then he came in and now we're super chill.
He's part of the new guard, so to speak with us, and he's
helping us organize every meetup.
Uh, he's part of the team.
And, um, and he would tell us stories of the last couple of years, you
know, 2017 to 2019 before covid.
And, you know, creative destruction is positive.
This is so great because there's an actual evolutionary perspective to, like, the
COVID measures doing an evolutionary thing and making, like, ANCAPs and Bitcoiners
survive better, like, in the long run.
What is it, uh, Alan Farrington's, um, Only the Strong Survive, right?
Uh, the whole, yeah, 100%.
Anyway, so that happens, but then, uh, I was already organizing meetups,
um, part of European Bitcoiners, like, you know, but this thing is a
bit of a decentralized, pleb driven, volunteer thing, so it's, it's morphed
a bit over the years, yeah, because volunteers come and volunteers go, right?
We don't force anyone, it's like Bitcoin, right?
Uh, which also, like, When you do this type of stuff, it gives you so
much more perspective for how hard it was the first years in Bitcoin,
like trying to get anyone involved.
And that also brings new appreciation for how important Hal Finney was.
Like, like this man, we would not be here today without Hal Finney, like at all.
Like we owe Hal Finney everything, like, or Ross Ulbricht.
Yes.
Um, Hats off if I had one for him and for Ross Ulbricht as well, and for Marty
Malmy and all of these guys, early guys.
But anyway, so it brings you new appreciation.
But then I had been already working for them for a full year, I still
had my studies halfway through, and a combination of Few things like a lot
of social pressure from one end, also from the company, they were like, it's
still German fiat company in a way.
And they were like, we don't want to support someone dropping college.
And, and, and my family also like, are you sure about this?
And the price going down.
And I was also tired of living by myself in Frankfurt.
So I was, you know what, fuck it.
I'll go back to, you know, living the fiat life.
Uh, my mom cooks, I just clean sometimes and, and, you know,
I live at my mom's house.
No budget balancing, no whatever, you know, I just
live life for a minute, right?
So I went back to college.
I recently finished my studies, economic studies, uh, man, was it tough because
the first two years of economics, I was a, I was a fiat economist.
I was full in.
I was actually one of the best in my class, but then
I became like a mid corner.
I studied a bit of Austrian economics, I understood the main things, and
then I came back and I was like.
Aw, shit.
I'm gonna have to lie here.
yes, yes, yes.
Oh, I still remember because I managed to get one of my friends.
Um, I, I turned him into a Bitcoin, I orange pilled him and he was
with me in class and we had a macroeconomics 2 class and at one
point the teacher, we had something about money printing and whatnot.
They actually recognized that one of the revenue streams for the government
was seniorage, which was printing.
And I was trying to, you know, like, It's like poke the bear kind
of, uh, into like saying that, Hey, it's basically stealing, you know?
And, and, and inflation is, comes basically from money printing.
And the teacher was so adamant about like, no, no, no.
And anyway, it was also a weird thing cause like you don't want your teacher
to hate you because then the classes were small enough that they would know
you and how you write and all of that.
So if they wanted to, they could just fail your class all the
time and then you don't pass.
Right.
So this power imbalance made it so at one point, me and my friend, we had
to just like Bitter Tongues and eat the shit and say thank you and then
puke it out the lies on the exam.
And that was a great exam.
You know, uh, we passed by just lying through our teeth.
But anyway, so two tough years.
I still want to do the analysis of my grades of like first year.
What was my average grade second year?
And then see the drop off afterwards.
I mean, just, just unpack that for a minute.
How, how horrible is it that in order to get a degree in economics,
you need to admit that theft is not only okay, but necessary?
Like it's so vile, it's so vulgar.
And it's worse than that because for example, um, many of the changes that
were made to the course over the years, Uh, weren't properly communicated even to
the teachers, like, for example, at the beginning of the, my course, I was doing
economics and English, not just economics.
I'm in Spain, so usually classes and And the universities are in Spanish,
but I chose to do economics in English, so it was more of an elite thing, so to
speak, not elite, it was still a public school, but you know, like, it was a
smaller set and the teachers, they have been doing that for the past seven years.
And at the beginning, there was a course on, uh, history of economic thinking,
so it would present you the Austrian school, the Chicago school, you know, all
of these other ways of thinking, right?
But at some point between the start of the, of the course and
me doing it, um, they scrapped it and they didn't tell any teachers.
So at one point I went to a teacher and was like, Hey, by the way,
like, uh, when are we going to do anything about Austrian economics?
And you know, like the Chicago monitors.
Cause I also kind of want to like study the enemy to like properly understand
them and be able to refute them.
Right.
And also study our own things, you know, Austrian economics
and also behavioral economics.
That's something I've been getting more or less into.
Uh, I mean, my thesis was on Bitcoin and behavioral economics, so that's that.
Um, and, and the teacher was like, oh, you haven't had a class yet?
And I was like, that was in the third year, right?
After going back.
And I was like, no, it was like, oh, there used to be one.
And I'm like, wait, you scrapped it?
And you're not even aware of that?
Like the, the, the college, they just scrapped it and didn't tell you.
And then going back to your question.
So that's one of the first things, right?
This is like, Covert propaganda of like, we're just going to scrap
the things we don't like and keep the things that we like, right?
And then, I mean, it wasn't that horrible because there was no other way.
Like, they build it in a way, they build this world where the answers
that the teacher gives you, because you haven't seen anything else, right?
The Austrian school doesn't exist, the behavioral economics school doesn't exist,
the Chicago school doesn't exist, right?
So, So, the only thing, the only economics that is valid and real is the
ones that the teacher present to you.
And whatever they present to you, that's the truth.
And if they don't say, they just say seniorage, right?
Oh yeah, part of the revenue from the government.
You know, it's, it's taxes, it's, I think it was debt also, even though I was like,
but isn't that also taxes in the future?
But anyway, and then seniorage, uh, which I was like, isn't that also taxes?
But anyway, um, but the teacher didn't say that, right?
And they have, and they have, of course, the authority in the class.
Right.
They come prepared with their line of their story.
They have their story clear, right?
And kind of like properly packaged.
There's a Rothbard book called a history of economic thought which is really good
if you want to study like the differences in way And it goes back to Greek times.
I mean, there's there's a lot there.
Yeah, great book
So you finished your studies, but I assume also this whole time you've
been active in the Bitcoin community and all this, and now you've been
doing a lot of great Bitcoin mining analysis, so where are you now?
What's your status
The thing is, with the Bitcoin mining analysis, it was usually
done for my company privately, so I didn't publish it much.
I would just sometimes do commentary, like for my pseudonym Twitter account.
Which I don't have anymore, like it got suspended for some bullshit and whatnot.
And, uh, now I'm trying to just be on Nostr, which I think, you
know what, that's the way to go.
Um, but yeah, I would just comment on a few things sometimes, like if
someone presented something, like I would read it from my work, right,
and then publish some potentially like some responses back on Twitter, like,
hey guys, you could have done this, or very good on that and whatnot.
And also, like, compilating a lot of, like, Uh, like sources and, and, and,
and, and reports and, and things that people produce and also producing
some for my own company, nothing too high level, but like enough that they
would have a better understanding of what's going on, so to speak, uh,
but of course, private, so that's why there's nothing on Twitter about this.
Um, So then yes, for the past two years while I was studying economics, I was
still going to conferences because that, that was kind of my escape, that
and the meetups from all the bullshit.
And, um, so going to conferences, um, if I could get a speaking slot
perfect and talk a bit about Bitcoin and whatnot, or, or what we're
doing in the meetups or in European Bitcoiners, uh, the community level.
And, uh, if not, Just attend the conference and be around Bitcoiners and
escape the, you understand it, right?
When you talk to a Bitcoiner.
There's no preamble.
You don't need to tell them anything.
They already understand.
They're there because there's proof of
You can skip the formalities.
You don't
skip the formalities.
You're on the same level.
And even if you disagree, there's still a base fundamental thing that you agree on.
Right?
they're above a certain number of thresholds already
exactly.
And you know that this person has done at least a certain amount of work because
there's nothing worse than someone that has just eaten propaganda that comes to
you and says, Oh, but you have no idea because the TV said, and I'm like, That's
your only source of information, the TV.
So, and then you cannot have real conversations about like anything that's
happened over the past four years, or let alone 20 years, 15, 50 years, right?
Like nothing.
Like, so anyway, going to conferences was my, my escape and, um, yeah, that's,
uh, that's also why I'm here now, um, to escape from that type of, you
know, Life, so to speak, but at this point, well, the last semester, they,
my company called me back again, like, Hey, Kenobi, would you like to Come back
on board, start working for us again.
And by the time you're done, be full time with us.
And I was like, why not?
Let's do it.
I mean, this way I can get some sats, you know, keep stacking sats.
And, um, and potentially I could also go to a conference
with my company and whatnot.
This way, I don't have to pay for out of pocket.
I don't have to burn sats myself.
Um, but, uh, once I graduated, I decided, you know, I've been
long enough with this company.
Uh, let's see what's new, uh, what's out there.
And now I'm working for the past kind of week and a half, uh,
cause in Lugano, we actually shook hands on it for demand pool.
The first Stratum V2 pool out there.
So helping decentralize Bitcoin proliferate nodes.
Cause the idea is to have a node on every miner.
People don't know this yet, but miners, they don't have nodes.
So, yeah.
Uh, but yeah, I know.
Yeah, let's really dig into this, because honestly, this is a big
area of discussion for us generally.
We've had a lot of guys from Ocean on, mostly just Mechanic actually.
We've had Mechanic on a bunch
Yeah, but we've had other ocean proponents on
Yeah, exactly, exactly, and I mean, we're really big into this whole
mining decentralization thing and miners being able to select their
own block template and all this.
And so, can you explain anything and everything about Demand Pool, Stratum V2,
I'll leave it up to you to organize it,
Yeah.
So from what I know so far, um, Stratum V1 was created in 2012 and Stratum V2
was proposed, let's say, or like, or like an upgrade was proposed just a few
years later in 2014 15, if I'm not wrong.
In 2018, Matt Corallo came up with BetterHash, um, that was
like the improvement to Stratum V1 or Stratum at this point, right,
because there was no Stratum V2.
And, um, but it had a few missing pieces, so it didn't go anywhere, so to speak,
but it helped set the stage for like, hey.
We actually need to start worrying about this.
I mean, Hey, what happened before 2018?
ASIC boost, you know, uh, perhaps we need to start, you know, worrying about this.
And then around 2020, 2021, the proper stratum V2, like a initiative was started.
The SRI stratum reference implementation.
And it was a collaborative effort between a few independent, uh, Coders, uh,
Brains and Matt Corallo, as far as I'm aware, please don't trust Verify, right?
Uh, that's the story I know so far.
Um, I've only been working for Strataview 2 for the past two
weeks, but I've been following on and off for the past two weeks.
That's why I'm kind of aware of it to this degree.
Um, and then for the past three years, they've been working on
like, you know, setting up the basis and also figuring out all the
problems with implementing it, like kind of game theory, like, like
wargaming it, like game theory, like how, how it, how it pans out.
Because at this point the current setup is basically, Pools have kind of a lot of
power because they create the templates and they also manage the payments.
Um, and miners, yes, they have power in the sense that they can just switch
pools, but at the same time, when half of the pools are just proxies for the
two biggest pools and the other half of the pools, they are, let's say
the same, but with a different color.
Right, because at this point, it's FPPS only everywhere, and to be honest, FPPS is
dying, and it should die, in my opinion.
And the biggest winners will be miners, because they will
get paid more, but anyway.
Um, when that's the setup, miners don't really have that much power.
Like, Oh yeah, but they can just redirect the hash rate.
Yes, they can.
But first of all, there's two types of miners, publicly traded and let's
say public and let's say bigger miners like enterprise miners and say not
smaller, but medium to small miners, you know, more nimble, more agile.
These guys, yes, they can do that.
But the bigger ones, many of them, they have some sort of,
let's say Nash equilibrium where trying to get out of it is a bit.
It's a bit tough, uh, because from a regulatory perspective, from a
tax perspective, uh, they are in this, like, you know, like, like
a false Nash equilibrium, right?
I don't know if you've seen those things of like a hill with like a false, uh,
with like a ridge and then the ball falls there and it just stays there
and it's like a false equilibrium and you just need to get it over to like
then properly go to the right place from a game theoretical perspective.
That's it, right?
And that's where they're at right now.
It's like a false equilibrium.
Where
Too big to fail problem?
kind of not, not really, not really.
It's more of a very big, therefore regulation.
And, and, and then they have auditors and, and, and,
Too big to change.
they're also KYC, right?
Too big to change.
Yeah.
That, I think that would be the way to put it because they, they, they already KYC.
They don't care about KYC and the only thing they care about is, you know, like.
Proper reporting, proper auditing, uh, and also modifying their tax
status like with shortbread, right?
In the UK, it's called shortbread and not just cookies, even though they're
cookies, because I don't remember, I think it was in the 1800s or 17th
century, uh, there was a fight over What it was, because cookies, they were
taxed in the UK at like 12 or 15 percent the exports, but bread was taxed only
at 2 percent or something like that.
So they decided to call it shortbread in order to like have lower tax,
uh, on or lower tariffs, right?
And therefore sell more than cookies.
And the same is happening with miners.
Most miners, publicly traded ones from a tax perspective, they are not miners.
They're just compute providers and the actual miners are
the pools, And by doing that.
And they become just a data center, like any normal Amazon data center, and then
their tax regime, like their taxes, are lower, because if they were, uh, the
miners, they would be selling a finished product to the pool, and then they
would have to pay VAT on that, right?
So Yeah.
That's what they do.
Yeah, like, uh, value added tags, just in case, you know, people
from other parts in the world.
Um, so, but because they're compute providers and it's just a
manufacturing product, which is the input for another company, right?
Then it's not a problem, right?
Um, so that's why, oh, but miners can just change their
hash rate pointer somewhere else.
Yes, technically, technically everyone can do that.
But, right?
Um, but all of this,
so they're not miners.
They're hashing salesmen.
Exactly, exactly, exactly.
Yeah, yeah, yeah.
Uh, they're
And this is, this is like hash salesmen.
That's what, that's what we've been trying to push that, that
kind of explanation for it.
Like in, in so many, that goes deep because you can't really
call yourself a miner unless you know what block you're mining on.
Like, like, uh,
yes.
In a way, but, of course, uh, this is the world we live in, kind of.
Yeah, and so we were on a panel yesterday that went into a whole bunch
of current mining trends and all of this, and you touched on one of the
points that FPPS is dying, and I really like this, I think this ties into both
of these things, like the Stratenvy 2, the decentralized mining and all this,
but why is FPPS not going to work?
And if you could, a little bit on what FPPS is
Yes.
it would be good to start with how pools appeared.
Pools appear because there's 144 blocks.
The way I like to explain it is every day we bake a pie and it has 144 slices.
And then if there's 144 kids, there's a high probability that
everyone will get there and get their own piece of pie, right?
But that's assuming equal hash rate and all of that.
But at some point, if you have a big family and you're 700, some of
the kids will go hungry for various days in a row because they're
not the first ones to get there.
So then they decide to Band together and be like, okay, when you get a piece of
pie, you share it equally with all of us.
And when I get a piece of pie, we share all equally, right?
That's what happened with pools.
The first one was a slush, uh, November, uh, of 2010.
So one year after the creation of Bitcoin, was it?
No, no.
Two years after Bitcoin mining started.
So January of 2009.
Uh, so yeah, about 21, 22 months, 21 months, huh?
Mmm, yeah.
But, um, but yeah, so that was the first pool because at that point, uh,
GPUs were slowly starting to pick up.
That was about eight, seven, eight months from when Laszlo Haniek
published his GPU, uh, implementation.
And at that point, something that most people don't know is that
the first GPU implementations, they were not that more efficient.
efficient, they were more powerful.
Like, but from an efficiency standpoint, they were actually potentially even worse.
They were using more electricity.
okay.
So that's the thing.
But yes, for the same machine, you were getting more hash rates.
So that's why, how Laszlo Hanye managed to get a lot of coins.
But by that point, they Many people had already figured it out.
They were actually starting to be more efficient, therefore more economical,
but there was more competition.
And at that point you can go over the Bitcoin talk forums and people
like, we're talking about like getting a block every four years.
Nowadays, as a solo miner, it's getting a block every 400.
So good old times, right?
They didn't know how good they had it.
Um, but that was the first pool from there they created.
I don't remember exactly what the method for like distribute for like
this, the distribution like, Oh, you bring in so much work, you're
going to get that much amount.
Um, what it was, but basically how modern pools work after
that one, they had some trouble.
Some new pools appeared and they fixed on that was basically.
The way Bitcoin mining works is you have to find a number that is lower
than the difficulty adjustment.
You have to think of it like a limbo, right?
You go underneath the thing, right?
Um, but what the pool does in order to not get all of the trials, because what
your ASIC is doing is just hashing once and once, like, again and again and
again, and all of them, they could, you know, They have some, let's say they're
a proof that they're doing work, right?
And you want to check that people are doing work as a pool, right?
But you don't want to receive all of the trials.
Cause then from a data bandwidth perspective, that would be, you will be
So you want the computing power rather than the hashes.
exactly.
So what you want to do is you want to get a fraction of the hashes.
So what the pools do is, yes, this is the, so this low or let, yeah, this
low is the difficulty of Bitcoin.
So if you get a hash underneath this, like a number underneath this, We are
getting bitcoins, yippee, awesome, good times, but we are 50 people in this
pool, or 50 entities with varying levels of hash rates, and I don't want to be
receiving 2 million, or not 2 million, 400 quadrillion strings of data every second.
Right?
So I want to just receive let's say one, every second from each of you guys.
So what I'm going to do is I'm going to give each of you
a different difficulty level.
And if you get a number that is below that, so here's the Bitcoin
mining difficulty, like the whole network, and this pool is choosing
client A, we'll have it here.
So if you get any shares, So, that are smaller than that one, so below that one,
so that are harder to get, then you're going to send it to me, even if it's not
valid for this, for mining, because what that's proving is you're doing work.
And by knowing your difficulty level and how many shares you provide an
hour, I can calculate your hash rate.
And therefore I can calculate what's your percentage of the work.
And then, but then of course, you don't want to give a Bidax the
same difficulty as fucking Riot.
Because Riot, they're going to give you 400 quadrillion strings either way.
So then you get different difficulty levels for different miners in your pool.
And using that, you're going to get, let's say, I'm making it up, but I think
it's, usually it's like, uh, 10 shares per second, but I don't know, right?
And also every pool can choose a different metric, right?
But let's say one share per second.
If you have not too much hash rate, they will give you a higher difficulty.
And then if you have a lot of hash rate, they will give you a lower difficulty.
So now we have created the concept of shares.
Because shares are hashes that are low enough that you have to submit them.
Or not have to, but you're willing to submit them because they're
worth something, but not low enough that they give you Bitcoin, right?
Because they're not giving you a block in the network.
So then, every pool created a system like that, and then we get into the
first, um, systems using shares.
If I remember correctly, the first one was, uh, PPL, no,
PPLS, Pay Per Last N Shares.
Okay.
Then it was PPLNS.
So per the last, so they're going to look at the last, um, quadrillion shares
provided from all the miners and they're going to see the distribution of them.
So, okay.
You provided this amount of shares with this hash rate.
That means that you will get this.
When we find a block, we will look back into all of the shares that were
submitted in the past four hours.
Okay.
And then we will give you that percentage, right?
And if you provided more shares at a higher difficulty, then you're
getting more of that block, right?
So that's how it starts.
But of course, what's the problem with that?
You only get paid when a block is found.
Because the moment a block is found, they look backwards and they say, Okay.
How much were you guys working on?
Okay, then from this block you get this percentage, this
percentage, this percentage.
That's when we get into the thing of variance.
There's only 144 blocks a day, and if you're less than 1 percent
of the network, so if you're 0.
7 percent of the network, then you are supposed to get one block a day, on
average, because there's 144 blocks, so If you do the math, it's around 65 percent.
But what happens?
It's probabilistic.
Some days, it can happen, you don't get a block.
And it could also happen that the next day, you don't get a block.
And the next day as well.
What are the probabilities of doing that?
You know, then you have to poison distributions and all of that.
It gets very mathematical.
I don't even really understand it, to be honest.
But anyway, um, well, I do understand it, but like, how the math works
behind it is a bit still like, Okay, it works, but like, I don't understand
why, um, but it still can happen.
So if you're not too big, it could happen that for a few days, you don't
get blogs, you don't get paid out.
So then it feels like, and then there were also ways to like, like play it
where like, if a blog was just being found on another pool, you would jump to that
one because of some, anyway, there were some attacks that you could do where you
could like, Scoop off, uh, profitability of pools and therefore like start
like stealing from them, so to speak.
Uh, so then pools and, and, and, and miners, they started
looking for new alternatives.
And the one that they came up with and that has been prevalent for the past
three to five years has been FPPS.
So we went from let's look at the shares that you gave us over the
last X hours, uh, once the block is found and then we will calculate it
to we will give pay you regardless.
Why?
Because the expected value of any hash is the same.
Like any hash could be the hash that gets you a block.
It's like with um, I like to compare it like the metaphor uses the um,
Um, uh, digital marketing, like with advertisements, uh, you know, people,
they pay for, they pay a hundred dollars for a million clicks in Facebook.
They don't know which click will give them revenue, but they know that every
million clicks they can expect at least more than a hundred dollars of revenue.
Otherwise they wouldn't buy it.
Right.
Um, so in a way what you're saying is like the expected value of your hash rate, uh,
so from a probabilistic point of view.
is this amount.
So, so the equivalent, so FPPS is pay per click,
kind of,
kind of.
That's the equivalent in the advertising world, rather than,
rather than a referral, like whenever you get a sale, you, yeah.
Yeah.
I like that.
Thanks for expanding on my poorly thought out
No, that's just how I heard it.
Yes.
Awesome.
Dope.
Cause I hadn't thought those steps extra, but yes, it's that, that
will be the way to think about it.
And it's a very simple calculation.
You just get all of the Bitcoin mined per day at this point, 450.
Plus, uh, transaction fees and divided by the total network hash rate.
And that's it.
You're getting, if you have one extra hash, you should be getting this amount.
The problem is that you're getting paid regardless of
if the block is found or not.
So that were like the, the pools could still have bad, uh, sets of
luck, which then means they have, they have to like, it's almost like
you're withdrawing from the bank, even though there's no money there.
So then they
fractional reserve.
it's, it's worse than fractional reserve.
I was, I think it was Alan.
It's exactly fractional reserve.
They're gonna pay you out regardless if the gold is there or not.
I would say it's worse.
the gold rather
Cause they're, they're working on the promise that they will
find gold because meanwhile
I swear I put it here somewhere.
With fractional reserve, at least.
The gold was there beforehand.
Theoretically, theoretically, lots of air quotes.
Right.
Um, but with this one is like, Oh no, we are sure we're going to get gold.
Right.
Don't worry.
Just, just get paid.
You're welcome.
Um, so it requires a lot of like, um, like financing.
You need to have like big bags in order to like, uh, Uh, to like do
all of this, uh, which leads to this, to the centralization, but
also from a historical perspective, how it evolved is at the beginning
when FPP has arrived, the formulas that we're using were very simple.
Basically, for example, uh, let's look over the last 144 blocks, aka one day.
What was the, the average, like what was the payout to the average of that?
And then that's what your terahash or petahash or exahash.
What's worth for the last day, and we'll pay you that amount.
That's the expected value of your TeraHash for the past day.
Um, and they would also be very fair, let's say.
They would be very close to the actual expected value.
Let's call it 100%.
And then on top of that, or below that, they would give, off the top,
they would skim between 2 and 4%.
That's the pool fees.
Perfect.
Makes sense.
But as the time went on, they realized that The financing needs were so big
on their end and the risk was so big on the pool's end that they needed
more revenue to justify it, right?
Because otherwise they were basically, I would say like picking pennies
in front of a steamroller, right?
To a certain degree.
Uh, so as time went on, they started modifying the formulas and then
suddenly it was not just, Hey, the last 144 blocks, transactions included.
So Coinbase plus transaction.
And that's it.
We're going to actually like subtract the last, the least profitable 10
and, but also the most profitable 10 or, or, or they're good and
they start playing with that.
Right.
And then suddenly they, everyone calls it FPPS, but FPPS from this
pool and that pool and the other pool, they use slightly tweaked formulas.
And then also, to a certain degree, you have to trust them that
they're doing the formula right.
And over time, what started happening is, you know what
happens with exchanges, right?
Like, like you go there and they tell you, Oh, 0 percent fee, there's no fee.
But then there's a spread, you know, that's also a fee, right?
so, so let me get this, see if I got it right.
So, so the longer the time horizon, the more financing you need, but also the
more assured you can be that it's, you're actually going to find the blocks, right?
Like, because the probability that you will, it just goes
up with, with more time.
Yeah.
But also the longer the time horizon, the higher the probabilities that you
will have a bad week or a bad month.
And what a bad month means is that You got less blocks and then you're dipping deeper
into your reserves or into your financing.
That's hence the more financing you need, like that sort of exponential.
exactly, exactly.
Yes, exactly.
Um, so that's where they realized like we need to get more money.
Like we need to get more revenue because this way the payouts are lower.
So there's, we have to pay less out, but also we're creating a bigger
cushion in the good times, so to speak, almost like, you know, Keynesian, like,
Balancing of the thing, of the, of the government revenues and taxes, right?
The theoretical
Keynesian.
which is great in theory, but communism is also great in theory.
yeah.
No, it's not great in theory, but let's not go there.
In theory, yes.
Hey, I'm gonna be honest.
In theory, communism is awesome.
What?
Everyone gets everything and they're happy?
Now do it.
Good.
Luck.
but it's not great in theory because the theory doesn't hold up if you examine
it too much, but let's not go there.
also the theory has big holes like the, uh,
Labor theory of value.
Yeah.
Proof of work.
Exactly, Instead of proof of results.
So, as a Mickey Mouse experiment, communism is wonderful.
But, and FPPs as well.
FPPs as well.
Uh, that's the thing.
FPPs could be seen as like the communism of Bitcoin mining and pool payout
That's a good way to put it.
So what's the solution?
so, the solution is basically, we're Going to see, like with communism,
the system fails by itself, right?
Because what's, what's been happening over the past few years is that
as time went on, the spread, like with, with the exchanges, right?
They tell you, Oh, 0 percent fee or lower fee than the others, but they're
increasing their spread, right?
And so you, you put a thousand euros in, but you get, you know,
Ninety years ago you actually got 990 euros worth of bitcoin.
And then two years later, you actually get 980 euros worth of Bitcoin.
So, even though they say 0 percent fee, they just paid you 20 euros less.
10 euros less before, 20 euros less now.
And that's what's happening now.
The FPPS formula is getting more and more successful.
Weirder and stranger and more complicated and harder to
understand and harder to verify.
That's the other thing.
That's something that at the Manpool we're trying to like, uh, change.
Uh, we have created a system of auditability where the miners, they
can actually challenge us and they can check if we're doing our work
right and in a public manner, right?
So we have, we can't hide, we're making it so that If, like, if demand pool
became, once we launch next year, if demand pool became 100%, like there was
only demand pool, we would be the last suckers because we would have no power.
Like if Anpool becomes the biggest or Foundry becomes the biggest,
ooh, they're KYC, fully controlled, regulated by the government.
But if we become the biggest pool, we have 100 percent of the hash rate.
It doesn't matter because we don't control the blocks and we can also not
steal from miners because at any point they can audit us in a very transparent
manner, in a very public manner.
If we're actually doing something wrong, they'll catch us as quick as, as it gets.
And at that point, you know, the game theory works of going to other places.
So
So, so, do you think other pools are going to start adopting alternatives to FPPS?
Because I think this was the, this was the interesting point
when you said FPPS is, FPPS is
yes, yes and no.
Cause there's so much path dependence on the pool side of things.
Especially if you're already part of Anpool, like there's
pools that they're basically, they started as an Anpool proxy.
That's it.
That's been their whole business model.
They don't know anything else, right?
Uh.
does that work, by the way?
Like, Anpool gives them the template, or what does that mean?
It's an API, basically, to a certain degree.
Uh, a bit more complexity, but basically, Anpool just says, hey,
here's your API, just send it to your, uh, to your, um, guys.
They don't need to care about any of the infrastructure or the
coding or maintaining software or maintaining anything, right?
As a, as a pure proxy pool.
Then of course there's also examples of pools that were, PPLNS or other
forms of payouts that then move to Ant Pool and I don't know how that works
But Proxy is also about the ownership structure of the pool, right?
So that the Bitmain owns the pool, but very in, in very indirect
in a debt
trap.
in a debt trap type of way.
Yeah.
Because if you don't have our platform, So if you're looking for
finance or deep pockets, then you're going to go bankrupt real quick.
Yeah.
Um, I, yeah, but going back, I didn't finish the point about how, um, FPPS dies.
Um, so every time they've been getting a bigger, like they've been
increasing the spread while saying that the fees are the lowest, right?
And miners, because it's hard to check on that because the
formulas are getting bigger.
Harder and harder.
They went from making a hundred percent of their expected value, minus 2%.
That's a fee to suddenly was 2% spread, which they don't say right,
and two, two to two to 4% a fee.
So at that point, the minor is getting between 96 and 94% of the value of
their hash rate to, at this point, the miners are actually getting between.
88 and 94 percent of what their hash rate is actually worth, because
the spread has kept increasing.
So, uh, the pools are getting a bigger share of the pie, even
though they've been giving the same service as the beginning, right?
That's why they're justifying it with, um, Oh, but we're going to give you cheaper
financing or we're going to provide you the machines or ride the whole foundry
and, uh, and, and pool thing, right?
Where, Oh, it's the.
It's the ancillary services that we provide, right?
It's like the support and the after sales support and all of that.
Um, so just by its weight, it's already dying because it's taking so much from,
it takes so much stealing basically to, to keep up that when miners join
pools, like in this case, oceans, and in the future, our pool, they realize,
wait a second, I'm getting more money.
How does that work?
Like, aren't they supposed to be filtering high value transactions and
therefore we should get less money?
No, because these guys, because when you're a PPL, PPLNS, PayPair
Last N Shares Pool, you don't have any financing needs, because you,
you're like a full reserve bank.
The moment that a block is found, it goes into your, into your reserves,
and a hundred blocks later, because that's also something people don't
know, you cannot spend a Coinbase for the next a hundred blocks.
Funnily enough.
Um, but, and a hundred blocks later, or whenever the miner, because then
you create an account on the pool, whenever the miner wants to check
out, we already received upfront.
You're just getting out what you already worked for, right?
There's no, Oh, we're going to pay you in front and we're going to trust that
we're going to get blocks later, you know?
So, so let me see if I get this right.
Hearkening back to the ad paper click analogy.
Yes.
So, uh, what we say FPPS is, is paper click.
No, it's, it's, uh, it's, it's paper click,
Yes.
Like batched.
Like I give you a, I sell you a million clicks.
Yeah, but you have no way of knowing, like they also take the revenue part,
they take your sales profits and you don't know how much you sold, like
you don't know how many sales you got,
Yes.
So
they could just be lying about that theoretically.
But with a, uh, PLL, you get the, you get the actual, you get the
transparency, there are no guaranteed sales, but you see every sale and
you see exactly how much you get.
Alright, so in a way, it's not FPPS, it's not pay per click, but it's more
akin to, okay, you can buy an ad in my magazine for 10, 000 bucks, and
you have absolutely no way of knowing how many people saw it, or if it's
I can tell, I can give you an average of how many people buy my, my paper.
Right.
But I cannot assure you anything and you will not know unless someone tells you
how many shoes that you're selling or, or
No, no, so that they're basically selling your product and saying
that this is the profit, but you never see the sales numbers.
Yeah.
In a way that's a good way to put it.
That's a way, a good way to, uh, understand it.
So to kind of pull this all together then, your thesis somewhat is that
miners are going to choose to move to pools that are open, transparent,
using payout methods that are actually fair, or at least getting
closer to the total expected value.
And so, I mean, the pools that already exist, how do you think
they're going to adapt to this?
Because this is a hard problem, right?
All these pools are already set up with this AppAPS model.
And they have a lot of share of hashrate.
What do you think they're going to do when the hashrate starts dropping?
well, something they can do is they can reach out to us at the demand pool and
we can help them set up a Stratum V2 pool so that they can, let's say, you
know, like Indiana Jones, but reverse.
I like to say Indiana Jones in reverse because Indiana Jones, what
he does is take gold and put sand.
What we're going to do is take sand and put gold.
You know, so they can basically do that with their pool and their miners.
And suddenly, hey guys, you're, uh, you're in, uh, now in a stratum V2 pool.
And, and we don't have these financing risk and we're not
going to go bankrupt tomorrow.
And suddenly you don't get your payouts that you work for, for
the past three, four, five days.
Right?
Uh, so, so I think that's something that if they want to, that can happen.
But if they just want to stick it out and stay at the FPPS, Okay.
While miners slowly realize the truth that, hey, they're stealing from us.
Okay.
you dropped one more bomb in the panel we had, and I think this might
be a good last topic to hit on here.
Was that mining is going to stop 10 years.
Yes.
But there was a nuance to that, so can you
Yes.
So I do believe that Bitcoin mining pure Bitcoin mining
only will not make nominally financial sense in 10 to 15 years.
Okay.
What, what did I just say?
Cause that makes a, that's a lot of words, right?
Nominal financial sense means from a pure balance sheet perspective
or PNL perspective of like, I made 10 in Uh, and I have costs of 5.
That's where we live now.
In the future, you're going to make 10, but your costs will be 12, 15, right?
So from a nominally, like from a pure economic perspective, it's not going
to make sense if you only take into account, um, rational market participants.
But of course, if you're a solo miner or a home miner with like
just two or five tera hash, and you just want to get some KYC free sats.
You don't care if you pay 15 and you get 10 out of it, because those 10, they may
be worth much more, right, than 15 now.
So, so, from a Financial nominal perspective.
If you do your yearly PNL in 15 years and you're a solo miner only doing
Bitcoin mining, it will not make sense.
Like, I don't believe it's going to be profitable in the
regular, in the mainstream, in the classical way of the word.
Not fiat profitable.
Not feel profitable.
Exactly.
Um, so
What, what went into this?
What, what, uh, brought you to
basically the fact that in the past two, three years, All, everyone has
started talking about secondary sources of revenue, either be it by, uh,
doing ancillary services for the grid.
So helping balance the grid or by selling the heat in one way or another,
or doing secondary types of things.
You know, some people are distilling water in, in, in Spain,
actually a guy, super smart guy.
They're distilling water with Bitcoin mining.
So in a way they're subsidizing the electricity costs and then
getting something that actually what every kilowatt hour that
they put in is subsidized by Bitcoin mining at this point.
And it's already in profit, but then per kilowatt hour, the amount of, uh,
industrial output of a set of hash rate, but also if the still water, the distilled
water is 10 times more expensive.
So they sell it for 10 times more.
Right?
So yeah, so at some point, Bitcoin mining, they don't care if, if they're, if Bitcoin
mining only covers 20 percent of the electricity costs or whatever, they don't
care because they're making 10 times more
on the
is, this is the whole energy companies will be miners in the
future and vice versa thesis,
In my thesis is that in 10, 15 years, every grid, national grid operator will
have a Bitcoin mining team, which will be nominally at loss, meaning we're all,
we're always, They're always pumping money into them and they're never giving
back, but on the other end, they're fixing or they're balancing the grid so that
they don't have these like outages and therefore they're saving on maintenance on
destroyed capital and all of that, right?
So yes, they're losing money on paper, but they're saving us a hundred.
So we're pumping 20 million over here, but they're saving
us a hundred million over there.
So, you know, that, that's what I mean, and anyone who's not doing that in
the future, they're not going to like,
They're throwing away money.
they're not, it's not going to be profitable.
Like, we still have like five to eight years where it's going to most
likely make sense still to do pure Bitcoin mining, but, um, unless you
have free electricity or near free electricity, I don't see a future in
10 to 15 years for pure Bitcoin miners.
and, and does this have anything to do with the, the, the, uh, the
block reward is, is decreasing and all this, or, or is this, or is
this even, uh, divorced from that?
I mean, no, it also has to do, but the problem with that is yes, the
blocked, uh, like the Coinbase reward decreases, but also the price multiplies
Yeah, yeah, yeah, yeah,
every cycle, right?
And electricity bills are still paid on dollars or euros.
So, right.
It kind of balances out to that.
Um, but what we're seeing is that Inevitably, the The hash, like the hash
price per kilowatt hour is going down.
It's slowly, you know, like perfect market, perfect
market competition.
Yeah.
And like price equals marginal cost and the marginal cost
of, uh, of Bitcoin mining.
Uh, The global marginal cost is not what the publicly traded miners have.
It's what Gridless has with some places where they have free electricity.
It's what the Venezuelan miners have with free electricity
that the government gives them.
Yes, there's nothing free.
Someone's paying for it, I know.
But for them, from their P& L perspective, it makes sense or it's,
for example, many miners like Riot recently, I think they had, I think
it was in August or July, they had a cost per Bitcoin mine for that month of
negative 7, 000 or something like that.
Why?
Because they participated in demand response programs and they are so
much more lucrative than Bitcoin mining that they got so many credits
that at the end they were getting paid for the electricity that they
consumed at the end of the month.
So, right, so,
So the beauty of this is like, the first reaction I have to this is like,
doesn't this mess with miner incentives?
But the only way it does that is in the right direction.
Because it makes people sats minded rather than fiat minded.
And it makes the miners, it forces them to be sats minded.
Yes.
And it forces them to think in Bitcoin terms because that is
the problem with mining today.
These are fiat companies.
They have fiat incentives.
That's what, that's why we have the centralization issues and it's, it's,
but the game theory still works out.
And this why Bitcoin is beautiful.
And in a way, it also helps decentralize it because, for example, if you live in
Norway, Finland, Sweden, and it's winter, you can either pay 20 per kilowatt hour,
no, 20, that's nice nowadays, but 25 cents per kilowatt hour, which is the price
currently, miners, they're looking for 3.
5 cents, so it's almost like 10 times more expensive, right?
You can pay 20 cents per kilowatt hour.
Uh, to just, uh, get heat, or you can connect an ASIC miner, get part of
that electricity subsidized, and still get the same amount of heat out of it.
So, like, what are you gonna do?
Like, are you just gonna, like, not pick up the money from the floor?
Like it's waiting there for you to pick it up.
Just, just bend and take it, you know?
Um, so, um, it's gonna, it's gonna incentivize many more people to just
start doing small mining operations.
Just two machines in your house, in your attic, which provides heat in the winter.
And in the summer you turn off or you don't, who knows?
Exactly.
So that's,
Well, and Finland also has this, and other countries too, but Finland has
this district heating thing, and so basically the municipalities are just
paying bitcoin miners to connect to their system and provide the heat, and
they need it year round because they need hot water year round, and so it's,
it's just, yeah, seriously, seriously, some interesting stuff going on, yeah.
15 years, it's not going to make sense because there's three main categories of
things that provide secondary revenue.
Those are the ancillary services to the grid, so grid balancing.
Then there's the, acid unshackling, so, uh, flared gas, I know it's a
Oh, yeah, yeah.
It's suspension mechanism in a way.
In a way, yeah, it's a, it's a way to like, hey, you're,
you're just bouncing around.
Just letting millions of dollars flow out of there and you're not getting them.
Just install this and you're going to get them.
You know, it's that simple
Plus, save the thing from being flared,
plus save the fees and the fines from the government and all of that.
Right.
So.
It makes a lot of sense.
Right.
And there was a, there was a third category, which I'm forgetting
now, which I think, I know it's the heat, heat, uh, reuse.
So, uh, grid balancing, um, asset, I hate it.
Flared gas, which could also be a methane right out of landfills.
So, and then also, um, heat reuse, heat resell.
kicker is that none of this is internet bandwidth dependent.
It's just,
Because Bitcoin miners, like I was talking to the guys at gridless and
like, The bandwidth that you use in a month for like one container with 300,
400 is the amount, like, It's nothing.
It's, it's less than a gigabyte.
It's, it's nothing, a month.
could send out, I found the correct hash with a fucking Morse code.
with Morse code if you want,
It's so little.
It's tiny.
that's, that's something that Stratum V2 improves upon, and I'm not sure if
Ocean also does it, but I know we do it, and it's the fact that right now, uh,
and that's also one of the advantages of Stratum V2, going back to that question,
um, the communications between the pool and the, and the miner, so the miner
wants, so the, is, is, is, Unencrypted.
So it's plain text.
So you can actually like intercept the traffic and read it, right?
That's 2002 internet levels, like before HTTPS, right?
Um, so what does that mean?
When the pool is sending the work out, it doesn't matter because
it's just, Hey, do the work for me.
Right?
But when the miner is sending the responses back, the shares that
we spoke about before, right?
Um, there could be a man in the middle attack, meaning someone
gets 2 percent of your hash rate.
Usually people, like when we talk about this attack, we talk about 2,
between 1 and 5 percent because it's low enough that someone would just
chuck it up to something else and not think, Oh, we're being hacked, right?
So imagine you have 10x a hash.
Uh, I don't know how much money that is right now per, per, per, I don't know.
Yeah, 0.
6 Bitcoin per exahash, that's what you're getting.
So you're getting about 40, 000, 50, 000 per exahash a day, right?
You have 10 of them, so you're getting half a million dollars a day.
So imagine now someone knows a man in the middle attack.
Where they're taking 1 2 percent of your hashrate and they're
redirecting it to another pool.
So every 10 shares that you provide, no, every 100 shares that you provide, they
stop one or two of them and they send them to a different pool under their account.
They have effectively now stolen, what is that?
5, 000 a month, more, no, half a million, 1%.
Yeah, 5, 000 to 20, 000 a month and you don't really know because again with FPPS,
the formulas are so weird that you just basically have to don't verify, trust the
pool.
So that's why FPPS is dying and it's going to
for the win.
That's why we're doing this pods in a fishbowl.
I've seen the whole time people passing and doing like caricatures or what not.
It's hard to concentrate, you know.
General Kenobi.
In my, in my experience, there is no such thing as luck as General Kenobi
himself said, like in the, from the first Star Wars movie, right?
When Luke refers to Well, Luke, we got Luke with the Star Wars.
Yeah, yeah, we forgot about Luke.
We forgot about
about the most obvious one.
Anyway, that's a weird transition.
Anywhere you want to send our listeners before, because I think
this has been a great conversation.
It's not for everyone, because it's kind of a complicated topic, but
it needs, people need to hear this.
100%, 100%.
I hope I've done a good job at simplifying it for everyone.
I hope so.
I will hear it from the people.
I don't have a Twitter account, uh, because it got suspended and,
uh, I don't care to go back there.
So, they can go to, I'm on Nostr, so you can find me by just Kenobi, I believe.
Uh, otherwise I can send you my end pop and you can put it on the
Yeah, we'll put it, we'll put it in the,
Yeah.
And then otherwise, uh, demand pool.
We do have a Twitter, but we also have a Nostr.
So find us there.
And, uh, I think that's more or less it.
Um, also support decentralizing Bitcoin mining and, uh,
stay humble and stack sats.
There you go.
Kenobi, this has been fantastic.
Thanks so much for joining us.
This has been the Bitcoin Infinity Show.
Thank you for listening.
Goodbye.
See ya.
Thank you.