The world in its current state with the broken money is really going to be difficult.
And I don't want to be dystopian.
I don't want to be all doom and gloom.
But if Bitcoin doesn't succeed, I believe it's going to be extremely difficult for them and everybody in the world to be successful.
The issue is not just the, I sort of call the first order effect, which is inflation and wealth disparity.
But I believe most of the social problems of the world that are blamed on things like racism or ageism or prejudice or, you know, nepotism, corruption, all those sort of things are really the result of broken money.
Hello, guys. Welcome once again to Bitcoin our podcast.
Okay, so now we're back to a regular schedule after that two-part episode that we made with Bitcoin Film Fest about exposing Hollywood and why that system is broken.
Of course, we managed to see why it's everything else connected to broken money.
So I hope you have enjoyed that part two.
and also on a regular episode that we continued last week with actually i won't say the name of
the guest because bob don't want to know about this yet but i hope i just hope that you have
enjoyed this episode hey i have exciting news i just want to say that the trinity is completed
today for guys for you guys that don't know or you have seen the show you know that larry leppard
had been here last year in the podcast we have talked a lot about his book the big prince we
have learned a lot and i know we need to do a second part probably a third part because
those are a lot of conversation but you also know that gary leland he is someone that is very
frequent in the podcast we enjoy the podcast we talk a lot we have learned a lot with him he was
the first person actually of the last season and yeah there's always to learn but uh i don't know
you've heard that there's a very cool show that is called the bitcoin boomers actually i love that
show so what i'm saying that the trinity is finally complete is because bob burnett is here
so welcome to the show hello juan thank you thank you yes um the uh trio of boomers or the trinity
of boomers i guess i like that that's the first time i've heard that the trinity of boomers
maybe we should have named the show the trinity of boomers maybe that would have been a better name
Take it.
That would be fun.
Well, nice to see you.
Now, thank you for making this time and space to be here on the show.
I know that you're an expert on mining, and I know that you have been in El Salvador, so we're going to discuss about that.
But since I already talked about the show, I just want to know how the idea comes to make this good show between the three of you guys.
Well, the three of us are friends. And, you know, at different conferences and things, we've somewhat gravitated to each other often because we're old, right? So you see the other guy in the room with gray hair, you go, hey, I'm going to go talk to him for a little while, right? And Larry and I happen to live fairly close to each other, too. And we both know Gary because Gary's show, BitBlock Boom, which is in April. We're doing this in March.
I'm going to bring this show with you in March, but next month is Bitbop Boom.
Larry and I both speaking there.
Anyway, we realized a couple things.
One, that our generation is underrepresented in Bitcoin,
and we wanted to do what we could to be more accessible.
Because right or wrong, sometimes people that are older
don't pay as much attention when a younger person is talking to them.
By the way, that's wrong, but it's just the truth, right?
that that's what happens. And so that's one thing. The second thing is we think there's a great
misconception about boomers by a lot of the younger generations too. So, and it happens to
me even happened this weekend where people blame boomers for a lot of the problems of the world.
They think that boomers are out of touch. There's all these negative connotations around boomers.
And we want to change that a little bit to say, you know, that's wrong.
It's certainly wrong to generalize, to say all boomers are this way.
So that's why the show...
That's cool.
And what do you normally focus on the shows for the people that normally haven't seen it yet?
Well, we're trying to not get too technical or to stay, you know, get down too deep into topics
because we know a lot of the people are newer.
we're focusing a lot on the economics of bitcoin on the geopolitical implications of bitcoin for
instance the the last guest maybe you saw the show on is a friend of mine his name is john highbush
and he he he's he has no association with bitcoin it's a new name probably for most people but he was
the executive director of the Ronald Reagan Presidential Library.
He worked in Reagan.
That's the one that, sorry to interrupt, the one that dated Lady Di?
He dated Lady Di.
Yeah.
Okay.
And he had to, like, other interesting things in this episode.
He was given the task, somebody, when Ronald Reagan,
there was an assassination attempt, and he was hit by a bullet,
and he had to go into emergency surgery.
People weren't sure he was going to live.
This is while he was president.
And during that process, somebody stole some of his blood
and they were trying to sell the blood on eBay.
Like really a weird, weird story.
And John was tasked by Nancy Reagan to stop the auction
and go find the guy that had the blood and recover the blood.
Like just, you know, so he has some fascinating stories, as you've said.
You know, we're trying to not just all be Bitcoin, but also like we asked questions of John that I'll let people go listen to the episode before.
But we said, what would Ronald Reagan have thought, for instance, of Bitcoin?
I think those are really interesting questions that.
Absolutely.
It's hard to find an expert who could answer that question properly.
So anyway, you know, we've had we've had Dr. Robert Murphy on as well.
I think he, in my opinion, he's the preeminent Austrian living Austrian economist.
And he's a he's a Bitcoiner.
And we have we have other Austrian thought guys like Seyfedine Amos, who wrote the Bitcoin Standard.
We have Stefan Levera. We have some people in the community who are Austrians.
But and I respect those guys. No problem with them.
But I think Bob lives and breathes Austrian economics all day long.
And I think he's probably globally, even outside of Bitcoin, probably the most noteworthy Austrian guy.
So those are the types of people that we have on our show.
Probably a little different than just the same Bitcoiners talking about Bitcoin.
You know, we're trying to be a little broader.
Yeah.
Actually, you know what?
That's something that I'm trying to do, what I mentioned even in the beginning with Bitcoin Felfast.
Because in the end, if you start digging into all the legacy system in every specific topic, you realize that all come to the broken money because it's everywhere, right?
So now that since last year, this, well, now it is also happening again, the trial of Netflix and Warner Bros. and Paramount.
So we dig into it, not just following the news, but also like why it's actually happening.
why Hollywood actually came to this point right now, right?
There's something deeper.
So yeah, I think those things are, as you said,
these are not Bitcoin related,
but somehow it's related to the industry.
Yeah.
Well, yeah, it's true.
You know, part of the reason I do what I do
and that I've focused, you know,
I'm going to be 62 shortly.
And so some people say, why are you even working?
Or why do you bother?
Because I still work very hard.
I spend a lot of time on it.
And it's because I have children, I have grandchildren now, and I believe that the world, for instance, my grandchildren, as they grow up, the world in its current state with the broken money is really going to be difficult.
And I don't want to be dystopian.
I don't want to be all doom and gloom.
But if Bitcoin doesn't succeed, I believe it's going to be extremely difficult for them and everybody in the world to be successful.
The issue is not just the, I guess what I would call the first order effect, which is inflation and wealth disparity.
But I believe most of the social problems of the world that are blamed on things like racism or ageism or prejudice or, you know, nepotism, corruption, all those sort of things are really the result of broken money.
So if we if we fix money, it's very difficult for those other things to exist, at least to the extent that they exist.
So the second and third and fourth order effects of fixing the money, I think, make the world a much, much better place.
And so that's why I spend the time I spend and the energy I spend on Bitcoin because I think it's the greatest gift.
It's the greatest thing I can give to my grandkids.
So I feel like we have to win.
And I think we have one chance, only one chance, because the establishment financial infrastructure and establishment power infrastructure, I'm talking political power of the world.
I think they realized they made a mistake.
They didn't take Bitcoin seriously.
And it surprised them.
And they didn't realize it's decentralized construction properly and that you couldn't just cut it off.
Like they needed to kill it or much earlier.
They let it get too big.
But if the opportunity exists to kill it or to impair it, they will do it and they will
never let something similar happen again.
You know, well, they won't let it happen.
And number two, I'm a very faith-based person.
And I think that this was a gift from God.
Bitcoin was a gift.
It was like a gift for us, for the people, to fight against the evil of these other things.
The conditions upon which Bitcoin emerged are very much like the immaculate conception.
And I don't believe they can happen again.
So we have to cherish the gift.
We have to take seriously its care and security because it won't happen again.
I completely agree.
Yeah, I think there's a lot of misconception around Bitcoin, right?
And in crypto, that's why I think you do what you do, I do what I do.
And all Bitcoin institutions, the occasional ones, are doing what they do, right?
Because I think that Bitcoin and crypto come from the same basket.
They actually know it's fiat and crypto the same basket.
And then Bitcoin is completely opposite.
And it's fascinating that you say that it's like the immaculate conception, because that's something that I also want to explain to friends and someone that when they ask me, yeah, but Bitcoin is not crypto, I always say no.
And I said also about the conditions, right, that everything since the beginning started without, let's say, like without the goal to make it as it is right now in terms of money.
So that's what I say now everyone that wants to, because Bitcoin is open source, you can copy paste and try to do your very Bitcoin, but you won't.
Since the inception, you cannot do that because you are doing it just to make a profit or just to make a company.
But Bitcoin was without any of those incentives, right?
It was just to make something beautiful.
It didn't have any value.
It was just $1 or less.
Correct.
The moment it is centralized.
Yeah.
Correct.
And it has no leader.
And Satoshi, whoever he or she, or even if it's a they, a group of people, the fact that they disappeared and didn't chase fame, didn't chase power, didn't chase wealth and left.
to find i mean i if if it is the most fascinating aspect of bitcoin i'll put it that way the most
fascinating aspect of bitcoin is that there is a person out there or maybe it's a group right but
there's a person out there who has an ego that's small enough that is not selfish that's not greedy
and is able to walk away for the betterment of the world and and the project because it's certainly
you know satoshi had they i'll call him a he but but had he revealed himself bitcoin would have a
leader if he revealed himself he would be famous on par with elon musk and steve jobs and these
kind of people and he would wield power as a result of that that is immense because even if
you look at like how much power and wealth let's say vitalik buterin has from the ethereum side
And, you know, that's just an ugly stepchildren sort of version of Bitcoin, right?
So imagine what Satoshi would be, how Satoshi would be perceived in that same situation.
So I think, as I said, I think it's not reproducible, both because the powers and both the monetary side and the political side will squish any new one that looked like Bitcoin.
And number two, the odds of getting somebody so selfless that creates it are almost impossible, too.
Yeah. So in fact, my wife and I, we spend a lot of time. We talk about Bitcoin a lot, less than I want and more than she wants. We'll put it that way. But we spend a lot of time with that. And, you know, we pondered a lot, like, who was Satoshi? And what we pondered, not so much what was Satoshi's name, but how was Satoshi raised? What was Satoshi's mother like? Who was the woman that raised the man that was that way?
It's very much like, I don't want to be religious here, but you wonder about Christ and you say,
well, the reverence, certainly I'm a Catholic too, the reverence with which Catholics look at the Virgin Mary
is the woman that raised Christ.
And there's an amazing amount of respect that we have toward the Virgin Mary because she raised Christ.
And so you say, you know, who was it that raised Satoshi?
And we actually created a character called Mother Satoshi.
Really?
Yeah.
Yeah, go ahead.
Wow, this is really interesting.
Yeah, so there's something called Bitcoin trading cards.
I don't know if you're familiar with it, but they're trading cards.
Yeah.
And my wife, she's a fitness model, and so she modeled for a character called Mother Satoshi.
And there's a card now in the Bitcoin trading card series called Mother Satoshi.
And it's in honor of her, the woman that raised Satoshi, and paying homage to the work she did to raise this person that could be so selfless.
Interesting.
Well, actually, that's a question that probably people don't ask, right?
Like, who raised Satoshi?
That's a very good question.
Because that comes from the values of their family and then what he learned through his career, right?
and also to the knowledge of everything
in terms of astreons or the way I see the world
because that's also another thing
that is very fascinating about Bitcoin
that when you start learning
and you dig into this deep rabbit hole,
you open multiple rabbit holes
and you question basically everything about your life.
You need to be, I think, in some way,
humble to break your previous knowledge.
How is that in English?
Like your belief system.
Yeah.
Yeah, absolutely.
And actually I want to ask you now that we're talking about this, how do you come to Bitcoin to work in this space and also in mining?
So we can pivot as well in mining.
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money home cheap and fast for bitcoin earn your money destroy fee so i'm an engineer by trade
okay and going going way back to the late 1970s early 80s i started working with personal computers
i got a degree in computer engineering and then i went to work in the personal computer industry
and ultimately i was the chief technical officer for a company called gateway which if you're older
and you were an adult in, let's say, the 90s or early 2000s,
that brand would be familiar.
One of the top 10 computer brands in the world.
So I spent the first 25 years of my professional career
really working in that industry.
And I left in 2005, basically.
I started working.
I left Gateway and I left the industry and I started working.
and I formed a firm that kind of acted as an incubator.
We would fund small startups
and help them kind of get started in the early days.
Okay.
So anyway, I did that for about 10 years.
And then in 2017, one day I got a phone call
and it was from an ex-Gateway person
and they were trying to start an Ethereum mining farm.
And I do want to say I am a Bitcoin maxi,
but I didn't start that way.
Okay.
So I'll preface that.
Me too, so don't worry.
But I got a phone call from somebody saying,
hey, Bob, I'm building an Ethereum mining farm.
Back then, Ethereum was a proof-of-work base coin.
And they wanted 800 servers, each with eight GPUs in them,
NVIDIA GPUs in them.
And they couldn't get, in that time frame,
a professionally designed system,
and they couldn't get access to the NVIDIA chips.
Well, as a computer guy, me and some members of my team could design the systems.
In fact, one of the key members of my team is a guy named Keith Thomas, who was the head of desktop engineering at Gateway.
So together, we were able to design and have built these servers.
And we had a really close relationship with NVIDIA going way back to our Gateway days, too.
So we were able to get access to the chips.
So we built those systems for this client.
We sent them off and we did well financially as a result of it.
And we started going to other people and saying, would you like to buy one of these two?
Well, people started to say yes.
Not big ones, like people would want three or 10 or two or like, it was that kind of
thing.
And they would say, well, I'd like to buy some, but I'll only buy them if you host them for
me.
So we were forced essentially as a way to sell more computers to also start hosting them for people.
We saw that people were making a lot of money with them.
So we started taking our profits and putting them into building units of our own.
So we started mining for ourselves.
So that all happened over the space of, let's say, six to nine months, somewhere in that time period.
And then we started to look more seriously at what Ethereum really was.
And while we were making money doing this, started to examine it and realize, well, it's really not decentralized.
Vitalik decides.
They announced with conviction in that time period they were going to move off of proof of work and go to proof of stake.
Well, that doesn't sound very appealing because that's putting us out of business.
That didn't happen for a couple of years, but they had announced the intention to do it.
at that point we dug deeper into other coins especially bitcoin and realized well bitcoin
really was decentralized and bitcoin really was committed to proof of work and while we didn't
have the resources to design our own chip we were capable of hosting and mining for ourselves and so
we changed our focus to that so you know it was over the period of 2017 we started in ethereum by
the late part of that year, we were doing a little bit of Bitcoin. By 2019, we had pretty
much pivoted the company to focus just on Bitcoin. And as you mentioned, I was going deeper and
deeper down the rabbit hole. In addition to my technical degree, I have a degree in economics,
and although it's obviously Keynesian stuff, but I had also started studying Austrian thought in
about 2003. So I could see what both technically the brilliance of what Satoshi created, the
difficulty adjustment, the having the issuance schedule, solving the Byzantine generals problem,
all these sorts of things that are true brilliance technically. And then the Austrian things of
fixed money supply of a true bear asset, true sound money, all those sort of things.
and obviously the further I went the more impressed I was and so you know here we are today
that's very impressive actually we have a very very similar background because I'm also I'm also
engineer I'm an industrial engineer and also I started with cryptos but I started with uh I
didn't remind not polka dot yeah oh polka dot sure yeah big mistake yeah and then well I start uh
digging into Bitcoin actually in COVID because during the lockdown, we had a lot of time to do
a lot of things. And I like economics, so that's why. And then I realized like, oops, okay, I'm not
in the right path until I discovered Bitcoin. Yeah. So I also want to ask you about misconceptions
now that we're talking about it. And I know you're in mining. So a lot of people think that mining
is just about hashing power.
But what are the biggest misconceptions
that you see around mining,
mining Bitcoin, of course?
Oh, wow, there's a lot of them.
Okay, so one,
the job of Bitcoin mining
is not to produce Bitcoin.
It is to produce block space.
And by the way,
very few miners even know this,
but our job is to produce blocks
every 10 minutes,
be part of that process,
and get paid for producing the block.
But our product is the block space.
And it'll be easier to understand that 100 years from now
when there is no subsidy.
So because at that point,
we're only getting paid for the block space, right?
Now there's, and there's also a lot of ways
to monetize Bitcoin.
Maybe we have time to go into, to monetize block space.
There's more than just one way to monetize it.
So that's one thing.
The second thing is there's a difference between a miner and a hasher.
Okay.
So a hasher and most of the people that call themselves a miner are not miners.
Okay.
Being a miner requires the following.
You must run a node.
You must manage your local mempool.
You must create block templates.
You must receive Coinbase transactions.
And you must hash.
Those are the five fundamental components.
If you use a pool other than ocean or potentially demand pool, you use a pool, you only do one of those, which is hash.
And the other responsibilities have been what I call abdicated to somebody else.
You as a possessor of the hardware have given the power of creating the template.
And by the creating the template means, let's dig that further.
When you create the template, you pick the transactions that will go in your block.
Okay.
It's a very powerful, heavy responsibility because at one point in time, let's say there's
100,000 transactions waiting to get confirmed.
Well, you're going to fit three or 4,000 into the block that you create.
So what is the criteria by which you're going to select those?
Well, that's up to you.
Or you can give it to Foundry or Annpool or F2pool or organization like that, and they will decide for you.
You also, if there are protocol issues or protocol proposals within the community, there's one right now called BIP110, it is the miner who decides to signal or not.
This is like SegWit or Taproot, which activated, where the power of essentially voting toward activation comes from the template creator.
So if you are somebody who has hash rate and you're using Foundry, you don't have any choice in the matter.
The Foundry is deciding, not you.
So the term miner is typically misused in the community.
I would say grossly misused because the miner for most people is the pool.
For most blocks produced, the miner is the pool who is buying hash rate from other people.
That's the way to look at it, right?
So they're the ones connected to the network.
They're the ones making protocol decisions.
They're the ones making template decisions, transaction choices, those sorts of things.
And it is.
So that's a big, that's a biggie.
Certainly there are. And so the two misconceptions I gave you to begin with are ones, I'd say, within the community.
People within Bitcoin even don't understand that it is the job of the miner or the output of a miner, the production of a miner is block space.
And two, the difference between a hasher and a miner.
So obviously outside of Bitcoin, we still fight FUD, if you're uncertainty and doubt, about energy usage.
Bitcoin uses too much energy, that it spews carbon into the atmosphere.
Also that it is causing electrical prices for individuals who are close to Bitcoin mining operations or hashing operations to have increased electricity prices.
Those are all false.
You know, we do tremendous things to stabilize grids, although that gets oversold, honestly.
Talk about that deeper if you wanted.
Yes.
We do a lot of things to utilize stranded energy sources.
That's, by the way, what my company focuses on.
We have natural gas wells that are not able to be connected to a pipeline, but we're able to use that gas directly at the wellhead.
We have an anaerobic digestion facility where we take cow manure from a dairy farm and use it to generate methane, which we then power generators with.
We have a hydroelectric facility that we own and operate.
So these are examples of the mining community finding ways of using energy that would otherwise never be able to be used.
And in some cases, like in the case of the cow manure and the natural gas wells, that methane would eventually leak into the atmosphere, but we convert it and burn it cleaner.
I have seen that example, sorry, in, I think it's in Norway, in Norwegian, that they do it to a hospital or something like that.
There is a village that they use the methane to mine Bitcoin and with the heat, they hit the hospital, something like that.
Well, that's, yeah, they do some cool stuff there where, and you're mentioning kind of the secondary thing, which is we do have a byproduct, which is heat.
And we're starting to learn how to use the heat.
And they have in the Scandinavian countries, they, unlike certainly in the United States,
and I think over most of Europe and Central and South America, they don't heat homes with
individual units.
They have what's called a central heating district.
So you may have one city block and in the middle of it, you have a unit that produces
the heat and pushes the heat into all the individual houses.
So they're using Bitcoin mining to heat the houses.
And there's also what's called a heat punk movement where people are using Bitcoin mining equipment to build things like, well, furnaces for homes and warehouses to do pool heaters, to melt snow on driveways, all these sorts of things.
We actually have a small operation that we work in partnership with a greenhouse in northern Florida where they grow tropical flowers.
And at night, often the temperature drops low enough that they need some external heat to keep the flowers healthy.
And so we have Bitcoin mining equipment around the perimeter of the greenhouses.
And it provides the heat and it also reduces the humidity inside the greenhouse.
house. There's all these sorts of things that, yeah, they don't get much publicity, but fascinating
things going on all over the world to utilize the mining infrastructure beyond just the, I think,
what most people would perceive, which is, I think they just think about Bitcoin miners being greedy,
pay me as much money as possible sort of folks, but it doesn't really work that way.
That's interesting.
And now even I'm just thinking about that Trump said, I think last year, right, that he also wants to compete in the mining industry to hash a lot there in the U.S.
Who is that?
I missed the...
The Trump.
Oh, Trump.
I think.
Well, yeah, they have a company called American Bitcoin that is mining now.
So now they're mining.
That's the one that run his son?
One of his sons is running it, yeah.
Yeah. I think it's Eric, if I remember right. But yeah, it's called American mining. So,
you know, I think that one of the things that's happening though is, you didn't ask me, but I'll
kind of comment on it, is we're starting to see a shift where, so the very, very large mining
companies, and mine was probably, mine would probably be considered a medium-sized mining
company. It's called Barefoot Mining. But the very large ones are, they've honestly been losing
a lot of money. Pretty much if you look at all of them, they've lost a lot of money. They aren't
typically very efficient operators. We're seeing a lot of them pivot toward AI. So they're taking
the energy and redeploying it. And honestly, I think that's healthy for Bitcoin. I think that
these companies typically aren't well operated. They lose a lot of money in Bitcoin. For instance,
Marathon. Mara just announced their earnings a few days ago for the fourth quarter. And they
had an operating loss of about $300 million. And so a very, very large operating loss. And
they also announced in parallel that they were pivoting a lot of their future efforts toward AI
instead. They weren't giving up on Bitcoin, but a lot of their energy going forward is in the AI
area. And we've seen that with lots of the companies that traditionally have been called
Bitcoin mining companies, which were really Bitcoin hashing companies, by the way. But
they're pivoting. And in my opinion, it kind of is going to bail them out because most of them
have lost a lot of money and they're not really prepared well to operate in bear markets. And
we're in a bear market. Well, from the perspective of a miner, we're in a bear market right now.
it's very difficult condition probably the most difficult conditions to be a miner in the history
of bitcoin are right now very hard every single every single bear market until we mine all the
bitcoin thing is going to be more difficult right that's why i think you said that there's a space
to monetize the the block space because there will be a time that i think it's not affordable
to do this or not well that's true and and i should expand on that a little bit too so one
One of the things I think very few Bitcoiners have run the numbers on and have a grasp of
is the scarcity of block space.
So we can go through it real quickly.
Oh yeah, plus this is interesting.
As Bitcoin, I think most Bitcoiners know blocks are produced roughly every 10 minutes.
So if you take that and you extrapolate that to a whole year, what you'll find is it's
about 53,000 blocks are produced every year.
Okay, 53,000 blocks a year.
We have a block size limit of what's called 4 million weight units, but nobody reads it.
It's about 4 megabytes is the maximum.
Typically, it's about 1.5 to 2 megabytes.
But what is pertinent for most people is it's about 4,000 transactions that fit inside that block, 4,000 transactions.
So if you take 4,000 transactions per block times 53,000 blocks, you get just over 200 million transactions per year.
That is the capacity of the Bitcoin network.
And if, for instance, I was a miner, a real miner, as I defined earlier, and let's just say I had 1% of the world's hash rate, I would produce 1% of the world's blocks.
and that means I would produce about 530 blocks per year or roughly 10 per week.
So that as I said that is what I produce So the question then is let project ourselves even 10 or 15 years into the future Right now so today that block when I win it it worth about three and a quarter Bitcoin
3.125 comes from the subsidy, which is the issuance of new Bitcoin into the system.
And the rest, which is small today, about a tenth of a Bitcoin, maybe at best, is from the fees.
If we go forward, let's say 10 years, we'll have had three halvings in 10 years.
In the next 10 years, we'll have three halvings.
So we'll go from 3.125 to 1.56 to 0.78 to about 0.38 or 0.39.
So 10 years from today, the subsidy is going to be like 0.39 Bitcoin per block.
So fees, fees, even if they don't change from today, will be 25% of the miner's revenue.
But the historical norm, interestingly, is about 0.335 Bitcoin per block.
That's the average fees over the history of Bitcoin.
So that means 10 years from now, assuming that averages still occur, that half of the
minor revenue will come from fees and half will come from the subsidy.
So, and then you go four more years.
Now, 75% of the minor revenue comes from fees and you go four more years and now we're at
like 90%.
Okay.
So, so it, it goes down very, very rapidly.
So at that point, a miner will look at it and say, well, fees are unpredictable.
That's a problem.
That's a problem, right?
How?
So hold that thought.
Now, the second side of it, there are 8 billion people in the world.
There are 400 million companies in the world.
There are 220 countries in the world.
There's only 200 million transactions a year.
That's it.
If you believe over the space of whatever period of time, but let's just say the next decade, Bitcoin continues to accelerate as a global asset that we have companies and people more and more operating on a Bitcoin standard.
It doesn't take long for 200 million transactions a year to get Chuta.
So if you are a company operating on a Bitcoin standard, one of the concerns for you will be, how do I get access to block space?
I'll use an example.
If you were an exchange, people are buying and selling Bitcoin.
They're moving it into cold storage.
They're moving it to your platform to sell it, like those sorts of things.
Then access to block space is fundamental to your business.
But you're going to need some certainty about when and how much it's going to cost for that transaction to occur.
The way Bitcoin is currently structured, you don't know, right?
There is no future marketplace for block space.
You have no idea.
But if you're, I'll use Coinbase as an example.
Coinbase, you know, the biggest exchange in the world.
Okay. So I'm guessing, might be wrong, but I'm guessing they do several thousand Bitcoin
transactions a day. They or their users, right? So if they're sitting here today in March,
how are they going to plan, let's say for next October? If they don't know what the cost structure
is going to be, they don't know whether or not they're going to have access. Okay. So it's my
prediction that they will do one of two things, three things, excuse me. The first is they may
become a miner themselves. Why? Not because they want the Bitcoin. They want to be able to create
blocks and decide to put their own transactions and the transactions of their customers into the
blocks with a known cost. That's one. The second thing they might do is they may have contracts
established with real miners where they pre-buy space. And let's say they come to Barefoot Mining
and say, well, Barefoot, we know you're going to mine a certain number of blocks in the month of
October. We want to buy two of them now, and we'll agree on a price now. That's the second thing.
The third thing is, and this is actually something I've been working on for a couple of years,
is a marketplace where a miner could, let's say barefoot,
could go offer into the market right now a block in, let's say, the first week of October
and pre-sell at a certain SATs for V-Bite to users of the market.
Now, if you think about this, what I think you'll realize is that block space is a commodity.
And so miners produce block space, which is a commodity.
It's very much like a farmer.
So a farmer sitting here, it's roughly the spring in a lot of places in the United States, right?
So if I'm a farmer and I'm in Missouri right now,
I might be plowing my fields and getting ready to plant corn.
And I know that the corn harvest is going to be in October.
So what will I do?
Well, there may be on the other side, a company that makes tortillas, corn tortillas.
And so they know that in October, they have to buy a certain amount of corn.
Well, the farmer doesn't want to take the risk of just bringing all of his corn to market in October
and saying, how much are people willing to pay for it then?
The same as the tortilla manufacturer doesn't want to risk the price of corn
and the availability of corn in October.
So there are marketplaces where the corn producer, the farmer, can say, I'm going to offer a thousand bushels of corn at, let's say, $5 per bushel with delivery in October.
And the corn, the tortilla manufacturer can say, yeah, I need 100 bushels of corn in October.
$5 is a fair price.
I'm going to buy them right now, even though the corn hasn't even been planted yet.
Right.
That arrangement.
And the farmer maybe only bought, sold 20% of his expected output.
And the corn, the tortilla guy may have only bought 20% of his expected need.
And then in June, as we get closer, the farmer may see the price of corn.
The futures market is showing $5.50 for October corn.
I've already sold 20% at $5, but I'm going to offer another 20% at $5.50.
And the tortilla guy goes, well, I'm seeing the price of corn go up.
I don't want to risk it.
I'll buy another 100 bushels.
So you see where this goes.
So what I'm saying is a miner is very much like a farmer or any commodity producer.
It's just our product is block space.
But what's unique about block space is there's no way to produce more.
A farmer might say, I'm going to spend, looks like the October market is really good.
I'm going to put extra fertilizer or extra pesticides.
I'm going to try to increase my output by 10% by doing these expensive things.
But there's nothing I can do because the blocks are coming every 10 minutes and I'm going to win.
Let's say I have 1% of the hash.
I'm going to win 1%.
And so that's very, very unique.
For those of you that are into economics, there's something called the Ricardo's theory of rent.
David Ricardo was a famous economist in the late 1700s.
And what he said was he studied the price of agricultural land.
And he basically said there is a fixed supply of prime agricultural land in the world.
And there's nothing that can be done to change that.
And so as demand for agricultural land goes up, his theory was that the price of that land
goes up exponentially.
And block space, I believe, follows the Ricardo's theory of rent.
It's a fixed supply.
And to illustrate that, I have an example I give.
I give some talks on this and I'll say, imagine, I mean, he's a farmer again.
Imagine I'm a farmer and I have an apple tree.
It's the only apple tree in the whole world though.
And every day it produces a hundred apples.
Now, if demand for apples is 99 per day
and I have to throw one away every day,
give it to the pigs, right?
Well, the price of apples is pretty inexpensive.
But the moment that 101 people want apples every day,
the price of apples skyrockets
because one person is left out every day.
There's somebody that wants an apple every day that doesn't get one.
So the change in demand is only two apples, but the resulting impact on the price is dramatic
because the apple tree can only do 100 a day, right?
So now imagine when 110 people want apples, 120 people want apples, and you can only do
100 a day.
That's block space.
That's the power of a fixed supply against increasing demand.
And it's skyrocketing.
So I know I'm long-winded, but to get your head around thinking, the output of a miner, the purpose of a miner is to produce block space.
And that's where the opportunity lies.
Now, we need Bitcoin block space demand to exceed supply.
That's fundamental to Bitcoin survival, by the way.
We must see demand exceed supply.
Yeah.
Well, that's fascinating.
Actually, I'm learning a lot about Bloxplay because I didn't listen or know much about this before.
But it's a really interesting topic.
And so, well, I have many questions.
But before, because I think, yeah, before my questions, because we are reaching an hour,
I told you that there's a game in the podcast.
I think it's the right time to do this, to pause a little bit.
All right, let's go.
So as usual, guys, the audience already know about this game.
So my previous guests have a question for my person, my guest, and you will have also the opportunity to make a question for my next guest.
Yes, I got one already.
Yeah.
So my last guest was Alex Stansik.
Oh, I know Alex as well.
Yes.
Good guy.
Yeah.
So he has a question for you.
Do you think that institutional adoption, meaning corporations, companies like BlackRock, sovereign wealth funds, insurance companies, pension funds, and even governments,
do you think that these kind of entities buying Bitcoin is a good thing or a bad thing?
do you think it's necessary for greater adoption or do you think it's unnecessary?
If you think it is unnecessary, then what is your timeframe for the next wave of early adoption?
My answer would be that it is mandatory for Bitcoin to achieve its goals,
that we can't expect Bitcoin to be the world's money,
the base layer of the world's monetary system
without financial institutions and governments and banks
and all the people that I know Bitcoiners hate,
all these entities that Bitcoiners historically hate.
For Bitcoin to achieve its goal, they have to join in.
Now, I view it as bending the knee, right?
As they come in, it is them acknowledging that Bitcoin does have value, that it does solve real problems, and it is a direct threat to their power and wealth infrastructure.
But it's them realizing that they have to join in because if they don't, it's existential to their existence.
So while I know it makes people cringe, I think it is a sign of Bitcoin success as they come in.
And there is no other way.
So I think we have to kind of celebrate it and embrace it.
But what we have to be on our toes for is what we talked about earlier, which is they would still rather kill it if they could.
And so we have to make sure that we don't somehow put ourselves in a situation where power centralizes such that they can take control because they probably won't kill Bitcoin.
In other words, Bitcoin won't die, but Bitcoin will lose all of its key attributes.
Yeah, it's really interesting because even, I don't know, I have a, I get what you say, but I'm not more into this institutional adoption because for me, there's a lot of, there's a lot of debate on this, right? Because there are some even Bitcoin companies that they say they're Bitcoin companies, but in the end, they are not doing it. Or they say that they're Bitcoin companies just because they have a treasury. But for me, I don't know.
I just think that in the end, companies, if they don't provide value, it won't make any sense.
It's like a company having gold, let's say.
But if you don't produce value, it doesn't matter what you have.
Well, I guess the way I look at it is if it's not about them providing value to Bitcoin, but Bitcoin providing value to them.
I got it.
and so the one thing we can't do in bitcoin is choose who participates right i mean that that
is that is the fiat system chooses who participates and who gains so there's this phrase bitcoin is
for your enemies and i like that because uh whether it's russia or north korea participating
in bitcoin like it's like it's like iran probably has roughly one to two percent of the world's
hash power sits in Iran right now. And there's, so they're, they're probably already deciding
certain transactions. It, it, it gives them a certain economic independence. One, they're
generating Bitcoin, which is a hard currency they can use, but two, they now have the opportunity
to do business. Even if the Western powers try to cripple them by not giving them access to the
financial system, they have a way that they can sell oil and buy oranges and do whatever they have
to do to do the business of their country. So I think it is, I've given a few talks on this,
I'm going to give another one probably a bit, pop, boom on this, that it is the only path
to guarantee the economic sovereignty of a nation. It's like, you know, you talk about El Salvador.
Well, one of the things I think is brilliant about this with El Salvador is as a country that probably has to question whether or not it has strong allies in the West or certainly with the United States.
I don't think it does.
This gives them economic sovereignty, not only because they're building Bitcoin, but because they're making some investments in mining, which gives them this template control.
And now, even in a world in which they're heavily sanctioned and heavily barricaded from this world's financial system, they can do business.
And the citizens and the corporations of El Salvador can do business.
And that's why I applaud what they're doing and its advice I've given to other countries of the world, whether I like those countries or not.
And I don't think it's the role of a monetary network to be a police force.
And I don't think it's appropriate for a monetary system to be used as a weapon.
That's why I think there's nothing we can do to prevent it.
And I think the value proposition is strong.
And ultimately, I think in the long run, any country or large financial institution that doesn't participate is going to die.
That's true.
Because everything is reprised in the Bitcoin.
Yes.
Absolutely.
You have been in El Salvador, right?
I'd remind you that we talked about this.
So if you can expand a little bit about your experience there, that will be really interesting to know from our listeners.
So what was pretty neat about my El Salvador experiences was at the Bitcoin conference in Miami in 2021,
or was it?
Yeah, 2021, where the announcement from Bukele that it was going to become legal tender in the country,
that was June of 2021.
I had already had a little bit of a connection through Twitter with a gentleman by the name of Mardo Tochez.
Mardo is, I think he's the chief counsel for El Salvador at the U.S. Embassy in Washington.
And so I connected to him.
And the day after, he wrote back to me and said, can you come to Washington immediately to meet with us?
And I said, sure.
So I went to Washington.
I'm pretty sure I was the first person from the Bitcoin community in the El Salvadorian embassy in Washington.
And I spent the day and I met with.
That's really interesting.
Mardo, Ambassador Mayorga.
And I talked to them about Bitcoin because they, at that point, really didn't know much about it.
It was kind of a surprise even to them about what happened, you know.
For all of us.
For everybody, right?
And so, you know, what is Bitcoin?
How does it work?
What are the ramifications for our country?
And then shortly after that, they invited my wife and I to El Salvador.
And we went there for about 10 days.
They were having a conference.
So I went to the conference.
I met with a lot of people, talked a lot about mining with different officials.
And then I was invited back again as a guest of the government.
I further met with, I forgot the gentleman's name, he's the head of the Department of Energy.
We were exploring different mining opportunities within the country.
Spent time with Mr Tochez He introduced me to a lot of people And I you know it was mainly of course I did all the things that most people do I went to my beach and I you know uh you know and enjoyed enjoyed the city
Um, this was still, you know, COVID was still, um, kind of active.
It was not as probably free and open as it is today.
I haven't been back for a couple of years, but you know, what I saw was, so my trips
were in 2021 and 2022. And, you know, what I saw was a country on the rise. In my life, I've spent
a lot of time traveling. And back in the early 90s, I started going to Taiwan, for instance.
And Taiwan at the time, say the 1993 or somewhere in that era, was honestly a third world country.
but you could see there were elements of change and it's very difficult by the way for a country
to rise from the second and third world and and go up it seems like it's a lot easier for them to
go down like what happened in venezuela for instance like it's much easier for a country
to disintegrate and that's almost entropy right so we're engineers right so what what is entropy
is the natural tendency toward disorder, right?
And I think that that's what happens
in societies and governments, right?
There's a natural tendency toward disorder.
So El Salvador was attempting something
to reverse entropy, and that's hard.
That's a difficult thing to do.
But you know what?
It's happened a couple times in history.
Singapore did it.
Taiwan did it.
And I could see when I was going there
in the early 90s
that they were starting to reverse the trend. And I saw that in El Salvador. I saw not only,
I saw the will of the government, but I also saw a will of the people and a will of the business,
the will of the business people. And I don't need to tell you, probably people listening,
but it's phenomenal. I'm so happy for that to have happened. I was, you know, really honored to
have been able to be there as this thing was starting. And, you know, hopefully something
I said or did helped somewhere along the line that doesn't really matter. But like, I'm just
so happy to see that because the world needs that. And I told you earlier, my wife's from the
Philippines and the Philippines is a country, it's like 110 million people and they haven't
been able to do it. They have not been able to lift themselves out of this spiral. The entropy
is increasing. And, you know, God bless El Salvador, because I think it's important,
not just for the 6 million or so people who are El Salvadorians living there, but it's important
for the world and especially for that region of the world. And I think now it gives hope to the
people in Venezuela and Honduras and surrounding countries that they can reverse it too. So I hope
It's a virus. There's an El Salvadorian virus that spreads through the region.
And I think, by the way, I think Bitcoin plays a role in that.
Obviously, most of the credit goes to the people of El Salvador and the leadership of El Salvador.
But Bitcoin is part of that because Bitcoin gives you this mentality.
Like you put in the work, you adhere to the values and the rules, and good things happen.
You know, that's what I see about El Salvador.
Yeah, absolutely. And thank you for your kind word for the country. But it's true. I think Bitcoin has also shaped the way that Bukele is leading the nation because he's thinking like long term preference, right?
Yeah.
So, and I think that's the way that I have seen it even in front of people that are doing
educational efforts to like NodeNation that he focused on GITs or even Bitcoin Berlin,
that they managed to replicate what they did in El Sante.
They have this Bitcoin circular economy fully integrated.
So, but I think the challenge and I think it's going to work and pay off is that they're
focusing on kids and they're teaching them Austrian economics because they are learning
about Bitcoin and also they're learning about AI.
So in the end, these kids will have in their curriculum all the things that they need currently
and in the future.
And also they will have a choice with, I think that's for me, as I see, that's the missing
thing probably in the entire world that, as you said, when you studied engineering and
economics, we'll learn about Keynesian, but we don't learn about Austrian.
Some people even don't know, people don't know that there are several types of economy, right?
So I think there will be advantageous because first, the mentality hopefully will change to Austrian.
And second, if not, at least they will learn that there are several choices.
There are two choices.
You can go to Keynesian, you can go to Austrians, and you will see where you want to go.
Because that's also the beauty of Bitcoin, that is volunteer, right?
There's nobody imposing you how to use it.
If you come to it, you can use Bitcoin.
Even as you said, Iran right now, they're mining Bitcoin.
They can use Bitcoin if we are currently at work.
Yes.
So yeah, it's fascinating.
But we're going to start wrapping up because I know we don't have much time.
Yeah, I just want to make you some more questions probably.
And I would love to have a second part because this is so fascinating.
In my mind, there's a big rabbit hole.
Yeah, we can do it again.
Yeah, I have a philosophical question for you that I think I have asked once in the podcast.
But, well, first I want to know your opinion about, you know, that there's a lot of debate about what's going to happen with quantum computing.
But there's also the question that I think there will be a point that, of course, Bitcoin with this, Indiana is software.
So software is updated.
So somehow we'll be able to update everything in some sort to defy quantum.
But of course, there is the Bitcoin that belongs to Satoshi and the wallet.
And the question is that it was sort of like, what is our responsibility with those coins
and with his wallet?
Should we leave it that way or do something with it?
So what is your opinion on that?
That's a great question.
It's one I'm pondering.
I'll tell you where I sit right now, but I reserve the right to change my mind because
it's a hard one.
I believe fundamentally Bitcoin is about property rights.
And I think that either freezing Satoshi's coins or restricting the movement of Satoshi's
coins is a violation of property rights.
So my natural tendency right now is to say we leave them be and let happen whatever happens.
That said, I am seriously thinking about some of the proposals.
There's a project called Hourglass.
There's a version two of it right now that those are interested in that topic I can go
read about.
And I interact with that group on a semi-regular basis.
I actually just wrote a little piece on the Bitcoin dev mailing list on this where there's
a proposal right now that says, well, we won't restrict the keys, but maybe we allow a maximum
of one Bitcoin per block from those keys to move, to slow down.
So if the quantum keys were discovered and I actually made a proposal, two proposals as a modification of that just over the last couple of days where I said, well, maybe what we could do is use the halving schedule.
So we say we start with maybe a maximum of two Bitcoin per block.
And then with every halving, we reduce the number of Bitcoin so that, again, it takes
a long time and it takes longer and longer and longer for these keys to move.
But then I think my favorite one is actually my other proposal, which is the opposite of
that, that we start by saying maybe it's only a million sats, one-tenth of a Bitcoin per
block.
But on the same schedule as the halving, we double it.
So over time, we allow more and more of the coins to come out.
And the reason for that is that if there is a quantum computer that can break it, obviously,
there'll be a first one.
Well, the first guy with a quantum computer can only get a tiny amount.
But it takes maybe several decades to get where there's a lot of Bitcoin that could
come out in a block.
But by that time, there would be multiple quantum attackers who would have to compete, much like the miners, to get them.
And now the economic incentive gets really difficult because these are expensive computers that consume a lot of electricity, and it follows the same pattern as the miner.
You know, so I'm warming to, obviously that was my idea.
I'm warming to it a little bit.
So which would be to restrict it to a small amount in the initial blocks and then use a doubling schedule to ultimately be to the point where it's unlimited.
But by that time, the number of quantum computers would be so great that it would be difficult for any one quantum attacker to actually get them.
There would be multiple quantum attackers who could do it.
Oh, that's very fascinating.
So I asked a philosophical question, but you actually had some answer about it.
Yeah, yeah.
That's interesting.
Okay.
Bob, I won't take more of your time, but first, thank you for stopping by on the podcast.
that we have learned a lot.
I have learned a lot
and I know the audience
will learn much more.
So thank you for your time.
Thank you, Juan.
My best to everybody
in Barcelona
and El Salvador.
Thank you very much.
So guys,
that was it.
Hopefully we'll have
a second episode with Bob
and probably we'll bring
Gary or Larry.
Oh, we could do that.
We could do one with
the Trinity.
Sure.
The tree.
Take the name,
the Trinity.
And please say hi to them
now that you're going
to BlinkBot.
All right.
Bye, guys.
see you next week.
That's it for this week.
Ciao.
Thanks.
Thank you.