Welcome to the Bitcoin Playbook, where we discuss proven strategies for using Bitcoin
in your business. I'm your host, Josh Friedemann, and our guest today is David Gamble, who's
the head of institutional sales at Blockware. Today, we discuss Bitcoin mining, especially
for businesses, as well as how the recently passed big, beautiful bill made Bitcoin mining
even more advantageous. Here is David. David, welcome to the podcast.
Josh, thanks for having me, man.
So I like to start off every single interview with a few questions that help us to get to know you a little bit better and give us some insight for our own lives.
Are you ready for these?
Yeah, absolutely. Go for it.
Question number one is this. When and how did you first learn about Bitcoin?
Oh, man. You know, for me, this was 2014.
So actually, I got introduced to Bitcoin a little bit prior to that, but I was an undergrad
in Alabama A&M University.
I had a buddy of mine who owned a cell phone repair shop, and he was super into the weeds.
So his first introduction to me, and this is the person who got me into it on the mining
front actually, was buying mining rigs.
right? So he had some mining rigs established. We later went on and bought about a megawatt or
so of miners in 2018. These were like dragon mints back in the day, right? So it was pretty early on.
But man, I just got captivated by it. I thought that the STEM aspect, the science, the tech,
you know, the math and then kind of commingle that with the finance aspect.
It just made a lot of sense for me being a, you know, I was getting my bachelor's and pre-med
buyout.
So a lot of those things just kind of made sense for me.
Question number two is this, what's an insight or fact about Bitcoin that you wish everyone
understood?
the a fact of bitcoin that i wish everyone understood it really comes down to simple
supply and demand um i think that this this this really logical fact it go it just it's people just
overlook it right a lot right like there will only be 21 million that will ever be made um
ever in existence and a simple supply demand strategy here. It's going right down a fair
way for you. I think it does get overlooked quite a bit. Question three, what's the Bitcoin resource
you most recommend to other people? Yeah. Bitcoin resource, I would say,
You know, blockware intelligence is a big, big tool, along with, you know, Glassnode.
That might be a little bit more granular for the guys that want to go super in the weeds.
But, you know, just staying active and understanding who the main players are in the industry,
whether you can kind of pick up some information on X or, you know, other socials.
But that's a big it's a big tool.
Question number four, beyond Bitcoin.
What's a resource tool or idea that's been helpful to you or your work recently?
Reading and really just going into different, you know, different starts of different of different regimes.
And what I mean by that is, you know, it could be it could be from the from the Fed.
Right. Like the Jekyll Island book. Right.
Or it could be something a little bit less correlated, but still related.
and really kind of going into the first introduction of digital assets, which was pre-Bitcoin.
So we're talking Bitgold, eGold, DigiCash, all these things, right?
Like getting familiar with Bitcoin isn't the first, it was just the one that did it the
right way, right?
And I think that's a big, big, big point because many people just think that Bitcoin just came
out of thin air.
But this has been something that's, you know, digital assets in the form of digital currency has been something that's been attempted several times prior to, you know, Bitcoin's now success.
Now we have our final, what we call our arbitrary but insightful question.
And it's this, as a general life principle, is it better to ask why or why not?
For me, I think it's better to actually ask how.
you know, you know, along with, you know, the wives, right, you know, always having,
having that, that science kind of, that science background, right, and that science forward
thinking in terms of, you know, really building out hypotheses, and just trying to figure out,
like, what's, what's the why? Why does this work? And how does this work? You know, applying to your
day-to-day life or even further on what this looks like in the future.
So David, we're here today to talk about Blockware and the services they provide, particularly
the mining as a service aspect, and even more particularly how business owners might think
about using mining for their own businesses.
So I'll kick it over to you first.
Could you give everyone a quick overview of Blockware?
Yeah.
Yeah. So, you know, quite simply block where we're just a mining as a service company,
right? So you buy the computers, we place them in our facility. We do all the heavy lifting. So
we're quite literally doing the management for you. You know, we're doing the services,
the technical aspect, you know, the repair aspect. We do all of those things for you,
you know, within our facilities. And we give you and we give you access to industrial rates as well.
Right. So it really just kind of embodies this whole kind of like white glove as a service aspect.
So it allows you to go from, you know, having no miners to having, you know, and scaling up to thousands, if you'd like, you know, and being able to rely on a custodian like Blockware.
And where do you guys have the miners? Plus, what is your particular role in the company?
So, yeah, so we have, you know, we have several facilities throughout the U.S.
Our flagship is over in eastern Kentucky, West Virginia area.
It's about 50 megawatts there.
Then we have other sites throughout the U.S.
Our most recent being at West Texas in the Saluna site, which was announced in their
publicly traded company.
But we partner in and have several sites through Oklahoma, Georgia, North Dakota, all throughout
the U.S.
Um, yeah.
And as far as like my role within, within block where I'm the head of institutional sales.
Um, so primarily, you know, a lot of account executive work.
So I work alongside many hedge funds, family offices, uh, syndications, um, you know, the
regular, regular Joe wants to get from the regular Joe who wants to get into the industry
to, you know, um, again, right.
Like a little bit more astute investors, right.
accredited investors as well that have maybe have like small businesses or are seeking to
kind of get into the space with a little bit more with a little bit more strategy.
Yeah. What is the strategy? So if I mean, it's one thing if you're like a family office,
I suppose. But if you are some other institution, I'm thinking in particular, a small business,
why would you potentially consider mining for your operation? Let's just say if you're just a
mom and pop shop, you know, doing your normal day to day, you have nothing to do with Bitcoin or
mining. Why would you consider mining or maybe, you know, purchasing a share, purchasing some
miners from Blockware? Yeah, it's a great question, right? So, you know, especially now, you know,
we just, we just got this introduction of this big, beautiful bill. And, you know, we're seeing
a ton of activity in terms of just questions, you know, resorting to what's going on with this whole
bonus appreciation. And it's a very, very big, big point, right? And I think this applies to so many
small business owners. The reality is, is that, you know, many people are seeking to actually have
and get and acquire more Bitcoin, but may have their day to days that kind of come into play as
well. And this is the best introduction for you to get into Bitcoin, simply because you're
able to now, because of this big, beautiful bill, you're able to now potentially offset
some of those capital gains or offset some income and buy hardware In other words you have your tax planning going
throughout the year, your small mom and pop business, and at the end of the year, it's like,
hey, you have $100,000 tax bill, maybe you allocate that towards buying some hardware.
And that hardware intrinsically is correlated to Bitcoin. So it's producing, it's these money printers that allows you to start building inherently your Bitcoin stack.
Right. So as a business, what that can do for you, you know, is is simply just give you a little bit more of a of a of a strategic kind of flow towards this industry because you're able to now have some diversification.
Right. And what that what that might kind of come down to is, you know, we're seeing we're now seeing this huge, you know, this huge influx of boomers that are that are that are potentially considering to sell their businesses.
You know, and this will come, you know, with our generation as well, Josh.
In the future, there'll be mom and pop businesses that want to sell their business.
Alongside that business, something that might raise the EBITDA, so to speak, is, hey, I have some Bitcoin here that we've been able to accumulate through the years, and this is now tied to the business.
It allows you to participate in the market.
It allows you to offset some potential tax responsibilities that you might have towards the end of the year and allows you to kind of keep moving forward and potentially have more of a multiple on that exit if you so choose to exit in the future.
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So from what you just said, I have a couple of follow up questions.
The first one is the big, beautiful bill, or as I like to call it, the alleged big, beautiful bill.
There are a lot of things in there that aren't that beautiful about it, in my opinion.
But, you know, I didn't realize that there was that much that's good for mining.
So could you break it down a little bit more specifically or clearly what the big, beautiful bill made possible when it comes to Bitcoin mining?
Yeah. So, you know, one one thing to really kind of go in here and it's not just resorting to mining specifically, it actually goes into other HPCs as well.
So we're talking artificial intelligence as well.
And if you remember, earlier in this year, I want to say it was like early, first couple
months of the year, possibly like the end of last year, there was this big, big push
for the UAE to come in to the United States.
And they have now committed to deploying about a trillion dollars in the industry as far
as HPCs and data centers.
Now, this is all correlated, right?
And the reason why this is all correlated, of course, is because, you know, you have a
bill, right, that's specifically geared towards 100% bonus appreciation, right?
That's the focal point as far as like minors go.
I won't go into any of the other details.
But as far as what matters to us, it's like, you know, you are now able to, you know, utilize
what used to be a one-time situation where you can take 100% bonus appreciation first year,
and that's going to carry on, you know, that's going to carry forward, right? So, you know,
being able to take, basically take, you know, that hardware, you know, that machine, those machines,
and apply it towards, you know, your everyday life, as far as, you know, what, whatever,
you know, whatever you have in terms of, you know, your tax responsibilities, it's a huge step
forward, right? So, and I, and I, and I tie that into the whole AI aspect, because, you know, one
of the things that the US does have that we have, right, is, you know, some of the largest and best
tech companies in the world, right? And it's something that we, that was put into play
strategically, as far as like a leverage point, in my opinion, for, for, you know, these large,
these large institutions to kind of come into the United States and be able to participate in this
market. So I should probably know this, but what is 100% bonus appreciation? What does that mean?
I feel like I'm relatively well versed in a number of things related to finance. But when it comes to
taxes. What is what exactly does that mean? And I'm hoping that I'm not the only person, you know,
who's listening to this conversation that has the same question.
Yeah, yeah. So, you know, for I will say this, you know, you should definitely talk to your CPA,
and, you know, kind of kind of go into the tax strategy. But really, all bonus appreciation
means that you can, you know, you can buy that hardware by those assets, right, the machines,
and you're able to offset potential income
that you're receiving on a day-to-day
throughout the year, right?
So what many astute investors and business owners do
is they put into play a lot of tax planning
through the year.
So these aren't things that just kind of comes into play
at the end.
You know, this is all throughout Q1, Q2, Q3, right?
They're planning for this.
And the significance of that is like,
hey, you're now able to potentially look at mining, right? Because these are machines,
right? Aside from the fact that I call them computers for just the plebs out there, but
these are ASICs, these are machines. And these machines have one responsibility,
and that's to validate transactions and to create revenue each and every day, right? They're the
best employees that you'll ever have. And, you know, as far as like the bonus appreciation aspect,
you know, prior to this, and I prior to this, you know, you'd have, it would go from 100% to 80 to
60 to 40. And, you know, that's what you were able to use, right. But now it's 100%. Right. So,
you know, this, this opens up the, the, the, the floodgates to a lot of, a lot of guys and a lot
of business owners, family offices, hedge funds, corporate finance, so to speak, that are seeking
to not just get into potential strategic investments that might be able to help you
not have to pay as much to Uncle Sam, but it allows you to also inherently build your Bitcoin stack.
Yeah. And so is it appreciation or depreciation?
Depreciation.
So depreciation. Okay. So the next question I have is, you know, we have these roundup episodes every other week.
John Gordon and Trey Sellers join me and we talk about what's been happening.
And one of the, you know, obviously one of the major things you're talking about on a week to week basis is these Bitcoin treasury companies and how they're affecting the market.
Things like that. Now, it's frustrating because corporations have access to capital that, you know, smaller private businesses.
but you know just in general smaller businesses don't have access to so you know for your local
mom and shop your local mom and pop shop doesn't have access to the capital that a public corporation
does so i i guess the question here is what does it cost to mine a bitcoin and this might be
something that is blockware specific or it could just be more uh general to the industry but my understanding is it generally costs less to mine a Bitcoin than it does to purchase a Bitcoin So it almost seems like this whole mining thing might be a
great way for smaller companies, smaller businesses to get access to Bitcoin in a way that even though
they're not getting the capital that you would get in the public market, you know, a public,
a larger corporation, you're still able to get Bitcoin for maybe a better price than if you
simply purchased it on an exchange. Am I thinking about it correctly? And do you have numbers
connected to that? Yeah, absolutely. You're thinking about it the right way.
So when you're mining Bitcoin, and I'll speak specifically with blockware,
you're mining Bitcoin at about a $50,000 price point. And this can vary based on the efficiency
of the mining rig. But in general, ballpark figure, you're mining at about a $50,000 price point.
So if you're looking at some of these more efficient rigs, you're almost looking at it,
and a good analogy here is for those who trade options. You're looking at this from an in-the-money
call option, where you're spending a little bit more money on the premium. So you're buying
you're buying efficient hardware, but it's giving you that protection as well.
So you're in the money. Whereas you also have mining rigs that are kind of like the out of the
money call options, where you're spending like $800 or a thousand bucks for a mining rig,
but you're mining Bitcoin at like 95K. So each mining rig is different. They all kind of carry
their own risk associated. But the way I like to look at it is risk adjusted return. So when we're
looking at Bitcoin mining, especially for mom and pop businesses that are seeking to get involved
in this space, you are mining Bitcoin at a $50,000. And this is part of the reason why you're actually
able to generate such large cash flows. So this is, and specifically, S21 pluses,
you're buying those mining rigs for about $4,500. And your cost on those is about $200.
You're generating a revenue at present at about $400 or so. It's going to be a little bit more
than that because Bitcoin has now seen some newer highs. So I'm just giving you some pretty
directionally accurate math here. It's about $400. So your cash on cash return is about 100%
on a cash on cash return, and your net return is going to be about 55 or so percent over the
course of the year. Now, with mining, you also have that ability to be able to... The payback
period is typically going to be anywhere between two and a half to three years. But in hyper bull
markets, that payback period could be condensed significantly. We're seeing the appreciation of
Bitcoin today. And who's to say it doesn't go to 200,000 tomorrow? Well, for those who've been
mining or decide to get mining today, and it's not too late, you have to keep in mind, it's like
the why mine Bitcoin aspect, right? If you buy mining rigs, because of that protection,
you can also buy spot Bitcoin. But the difference there is that it's binary. So, you know,
Bitcoin goes up, you make money, Bitcoin goes down, you lose money. And as you know, there's
really only two ways to actually accumulate Bitcoin. And, you know, that really just kind
of comes down to you can either buy it or you can mine it, you know, or mine. Yeah, or ornate,
which is mining, right? So yeah, or yeah, and other aspects too, you can earn it as well,
right? So like, so when you're when you're mining Bitcoin, you're, you're, you're able to have this,
this, a little bit more of a risk approach, you know, risk adjusted approach towards this,
simply because you are mining Bitcoin at that $50,000 price point. Bitcoin was to go down 40%
tomorrow. If you had bought Bitcoin and you're just sitting in spot Bitcoin, well, you're holding
onto that trade. Whereas in the mining side, not only have you now been able to offset some of that
income that you have due to the bonus appreciation and the big, beautiful bill that we were discussing.
But you're now, you're inherently dollar cost averaging into Bitcoin at the best possible
price that you can, and you're still profitable. So it allows you to take a little bit more of a
step back approach towards the market and really focus on what's real. And what's real is that
this market is, we're at a $3 trillion market. And what's been shown is that we are anticipating
to see this market go to a $10 trillion to $15 trillion market cap over the next decade,
which is pretty conservative, I think, given where we're at. So having the ability to take
that step back approach, because it's so volatile, many people get into this apprehension like
They're hindered towards getting into the space because it is so volatile.
But with mining, you really are able to kind of take that step back, you know, really focus
at what's in play and understand that you're working in the industry, right?
There is no such thing as Bitcoin without mining.
So you are in this space and, you know, you're going to benefit in this space over the long
run.
And I think that's one of the most powerful aspects of mining Bitcoin.
is that you are able to take that long-term approach
and have a little bit more of a laxed feel towards the market.
If you are hit by a bus right now,
could your family access your Bitcoin?
When's the right time to stop hot link
and use Bitcoin to impact your family's lives, not just yours?
What if Bitcoin doesn't reach the value you expect
or it takes longer to reach that value?
Do you have a plan?
Do you have the proper trust structure to avoid probate,
maintain your privacy, and minimize taxes? Do you want to avoid taxes to stack more sats
or leverage your stack without selling? Should you add Bitcoin to your business's balance sheet?
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wealth management for Bitcoiners by Bitcoiners. So I believe you said it was $4,500 right now
for S21s. Let's say you get 10 of those, $45,000. You said it costs about $55 to mine a Bitcoin.
So with 10 or 11 S21s, how long did you say it would probably take to mine a Bitcoin?
So to mine one specific Bitcoin, capital is a factor here.
So more capital you're able to deploy, the less amount of time it takes for you to mine one full Bitcoin.
But if we're talking about what's your payback period in terms of the full 45,000 in that
example that you shared, it's going to be around two and a half to three years.
And that's the typical payback period on an efficient mining rig.
But again, that can be condensed based on the current market dynamics.
So recently we had hash rate, the difficulty go down about close to 10%.
This is a net positive.
So we're seeing volatility monitors.
So we're seeing Bitcoin price go up, difficulty still sowing that it's at the same or lower
than what it previously was, which is a net positive for miners over the long term.
And the question that comes for a lot of people is like, well, what happens when everything gets
mined? And this is the beauty of Bitcoin mining. When you're looking at it from a miner's
perspective there really four components that create your revenue And what those are is the block subsidy And what that means for those who don know is just the reward So that 3 that you currently seeing along with the
transactions, so the transaction fees, the difficulty, and the price of Bitcoin. So all
of those four things is really what allows you to see what your forward-looking revenues will look
like for your mining rigs. So at the end, when Bitcoin is all fully mined, the concept here is
that transaction fees will take a bigger push. So as this industry starts to develop more and more,
we'll start to see more people utilize Bitcoin. Maybe it might come from institutions, but this
payment highway that we're seeing will always require tolls. And you're just a new toll.
Right. In this, in that analogy.
So, you know, a lot of it comes down to if you're thinking with Bitcoin as your unit of account, which a lot of people probably don't.
But if you are, there's always that that that question of if I put in the 55K now versus, you know, will I have more Bitcoin if I go ahead and buy 55K worth of mining rigs and mine?
And there's really not a great way to know that.
Probably there's like these different levers you can pull on, different times you can buy.
The mining rigs might be cheaper at certain points.
And there's a lot of different levers, I guess, or a lot of different factors to consider.
But the one thing that you know you get if you have miners is the tax benefits, right?
So I feel like that's probably one of the key things, especially for a business to consider.
It probably doesn't affect individuals in general quite as much.
Is that correct?
For individuals, I would say every individual should – and I'll go with this in two buckets.
Each person is different obviously, and their economics are a little bit different.
With that, you have to keep in mind all of the tax benefits that you do get by simply creating an entity for yourself.
So you forego a lot of tax benefits if you aren't incorporated as a business, even as an individual.
So I think that this actually has huge implications for the regular person out there who is seeking to even potentially buy real estate.
So when we're thinking about it from that perspective, it's like, hey, you amount five, 10 years of your life when you're coming out of college to accumulate some wealth and to potentially buy your first home.
right? And that's typically going to be 20, 25,000 or so is what you're going to come out of pocket
of, you know, out the door, you know. But, you know, for mining, you have this new introduction
where you aren't dependent on credit. You aren't dependent on, you know, Sally Mae, right? Or,
you know, anyone or Fannie, right, for that matter, to be able to get into that next home,
right, you're able to deploy, you know, four or $5,000 into something that's going to start
giving you the groove of actually seeing, you know, cash flow, right. And I think that's,
it's a really big teaching tool for, you know, our youth, because many people just don't know
what it means to actually, you know, see something that's going to provide you some,
some level of income on a month to month, day to day basis, you know, without having to overstretch
over stretch themselves. So on the other side of that, and I will say, going to your example,
45,000, on that 45,000, your expenses each month is going to be around $2,000 a month.
So you buy 10 mining rigs, you're going to come out of pocket about, let's just use round math
here, you're going to come out of pocket 50 grand. Your out of pocket expense is going to be 2,000
bucks a month. And for that investor who's like, well, maybe I should have bought, maybe I should
have just bought more Bitcoin. Well, you got to keep in mind that when you're mining, like you
said, you have the tax benefits, but now you're actually able to, you can look at it also from
the perspective of, hey, each month you're deploying $2,000 of your capital, which can come
from the revenues that you're generating in Bitcoin mining, or it can come from your own
out-of-pocket expense towards dollar cost averaging into your mining rigs. And it just so happens
that when you're spending this $2,000 per month in this example, you're getting Bitcoin at a $50,000
price point. So you're able to look at it from that perspective if you so choose. But then also
So the other side of that is that, and something that we haven't really discussed, is the
appreciation of the mining rigs itself, right?
So when you're mining, not only are you creating, you're generating revenue month on month, day
on day, right?
But you're also having this dual asset exposure where the mining rigs also can appreciate
in value based on the price of Bitcoin, right?
So the salvage value of those things are pretty impactful, right?
So as an example, not to belabor it too much, but as an example, last bull market, we've
seen S19s, we were able to buy them for $1,700, call it $2,000, a mining rig, right?
At the height of the market, 69K Bitcoin, those same mining rigs were being sold for
you know, 13 to $15,000 a piece, right?
Meanwhile, you're generating revenue via Bitcoin,
which is in Bitcoin that you hold,
you know, all throughout that cycle.
And then you're now able to,
because of what we have at Blockware,
you're now able to seek exit liquidity
on those same mining rigs.
So not only have you, you know,
participated in a market on the upside,
just on a pure Bitcoin perspective,
you know, owning that, having that spot Bitcoin,
but you're now able to seek that exit liquidity on the hardware and not have to sell your miners
on eBay or figure out how to even sell these things. You can do these things. You can do these
transactions from the comfort of your home and really plan it out. There's a lot of benefits here.
Well, you've given people a lot to think about for sure. Maybe if you could share a final pitch
or just in general, final thoughts, especially for business owners, as well as where people can go
to keep up with you if they're interested in following up or just seeing more of your content?
Yeah, yeah. Final pitch, I think, is really two things. Really get off of zero,
right? So find a way to get off of zero. And the second is, it doesn't always have to be
binary, right? It doesn't have to be one or the other. You don't just have to buy Bitcoin,
or you have to mine Bitcoin. You can do a marriage of the both. Right. And I think
business owners can really appreciate that. You know, you can split the baby, you know,
mine Bitcoin, buy Bitcoin, you know, and find a strategic way for those two things to really
kind of help you in the future. Yeah. Perfect. Well, and where can people go to reach out to you
if they're interested in following up? Yeah, yeah. You can find me on LinkedIn,
David Gamble. You can find me on xdgamble331, socials, that crypto guy, David, there as well.
But really, also shoot me an email, give me a holler there, david.gamble at blockersolutions.com.
I'm happy to have a conversation with any person who wants to really just kind of dive into the
ways and see what it's about. Perfect. David, thank you so much for your time today. It's been a
pleasure. You're very welcome. It's been awesome. Well, friends, it's a wrap. Thanks so much for
listening to this episode of the Bitcoin Playbook. If you want to reach out to either me or David,
you can find those links down in the show notes. And be sure to check out Blockware's
mining as a service solution. As always, keep building, keep growing. Until next time,
Keep living and leading well.