Latest / Simply Bitcoin / Ben Gagnon | Proof of Work CEO of Bitfarms | Simply Bitcoin IRL

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Ben Gagnon | Proof of Work CEO of Bitfarms | Simply Bitcoin IRL · Simply Bitcoin

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Yo, welcome to another episode of Simply Bitcoin IRL.
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Today we have a very special guest.
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We have Ben Ganion. Ben Ganion was just named the
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CEO of Bit Farms. Bit Farms is one of the world's
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largest publicly traded Bitcoin mining companies.
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I also consider him a really good friend as well.
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So I'm really excited for this conversation.
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But before we jump into it, I do want to give a shout out to
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today. All right everybody, no more
0:53
delay doing up Ben on stage. Ben man, good to see you again.
0:58
Welcome back on the show. I don't think we've ever done a
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one-on-one interview, bro. So I'm I'm kind of kind of
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looking forward to this. How you doing?
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Kind of looking forward to this, man.
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I've been looking forward to it all week.
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So I'm glad you're kind of looking forward.
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To it oh man you went up you went up me on the looking
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forward to it anyways dude a lot has changed to say the least in
1:18
your life in the last you know couple of weeks.
1:23
I got to say, Bitcoin Twitter anticipated this.
1:26
You know, if you just been paying attention, a lot of
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people have been rooting for this as well.
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So you just were named the CEO of Bit Farms.
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How do you feel? It feels amazing.
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I mean, this is something I've been working towards for several
1:42
years now. It's been my personal ambition
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for a couple of years and you know, I never thought
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necessarily we we'd be here. So it's amazing to be here in
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the spot to be leading this team at this incredibly exciting
1:57
time. You know, we're coming in here
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at the cusp of, you know, or right in the middle of doing the
2:03
biggest growth we've ever seen. And you know, we've got a lot of
2:07
opportunity and a lot of excitement within the company,
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you know, internally, externally about, you know, the the new
2:13
change in leadership here, you know, Sky's the limit for for us
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very exciting. Absolutely, man.
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And then I'm excited for you guys as well.
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And I, you know, and maybe I'm a little bit biased because I
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consider you a friend. I think you are the right man
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for the job. And you know, Ben, you've been
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in the industry for, you know, for quite a while now, right?
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So you, I would say that you're, you're, you're, you're a well
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earned veteran man. Like you've, you've, you know,
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you've earned your stripes. So can you talk a little bit
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about, like in the early days, how you got into the industry in
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the 1st place and how it LED up to you becoming the CEO of one
2:54
of the world's largest publicly traded Bitcoin mining companies?
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Yeah, I mean, I've told the story a few times, but I missed
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out on three TS to buy Bitcoin in college.
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I found out about Bitcoin when it was sub $1.00 and people were
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using it to trade files and software on this on this
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website. A lot of my my friends in
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college like to use. And there was actually a friend
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of mine who was or a classmate of mine who was mining Bitcoin
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on his fraternity PC and he wanted to sell us some Bitcoin
3:24
for beer money. And we were looking at buying
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$100 worth of Bitcoin at about $0.70.
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This is back in 2010. And we thought we were getting
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screwed because we thought hey, you know, this is like a cool
3:37
thing. It's really neat, but like, what
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are we going to do with $100 worth of Bitcoin?
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You know, obviously we're getting screwed here and this
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guy's going to take our money. He's going to go buy beer and we
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should go buy beer with it. So, you know, my friend and I
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went out and bought beer with, with 100 bucks instead.
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And the next year Bitcoin went from about $0.70 to like 1100
3:58
bucks. And we said what the hell did we
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do? You know, we could have been,
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you know, crazy rich. We could have bought all the
4:06
beer we wanted and it really starts to make you question your
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life choices. So a little while after I
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actually tried buying my first Bitcoin miners off Butterfly
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Labs in I think it was 2013, I sent them 5000.
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They never sent me my miners. The year after that I went and
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bought bitcoins on a Bitcoin ATM just like Bitcoin.
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Well and had my first bitcoins in 2015.
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Etherium came out and when I saw Etherium coming out, I realized
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this was my chance to, you know, get in on the ground floor of
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something that was, you know, looked to be really, really big
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and like the next big thing. I started mining Ethereum.
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We, we did it in my house in Hong Kong.
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It worked out well building out our, our first rig.
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We put every dollar we had into it.
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My, my girlfriend and I at the time and flew off to Taiwan.
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We built an Ethereum mine in her, her family home.
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We had some problems with that because we kept getting raided
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by the police for using electricity.
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They thought we were growing marijuana.
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We were just mining an Ethereum. And they they couldn't
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understand that, you know, we were consuming so much power in
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this small residential house. And so after several months of,
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of weekly visits from the police and scaling up the business, we
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actually moved everything off into mainland China and I built
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up a Bitcoin mine, an ether mine in mainland China that was
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really good in, in 2015 and, and 2016 and the first part of 2017.
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But, but towards the end of 2017, it was getting much more
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difficult to operate in China. There was a lot more attention
5:44
towards, towards Bitcoin miners. And so I had to pivot and, you
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know, move out of the space. I, I sold all of our equipment
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kind of in October, November 2017, which turned out to be a
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really, really good time to do that.
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I pivoted into a manufacturing business for a few years.
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And then I, I joined Bit farms in 2019.
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So I've been here five years. It's, it's been, it's been quite
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the path for me. I've been in following Bitcoin
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at this point for 14 years. And you know, I've been mining
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actively for a full 9 almost, almost on my 10th year now.
6:18
Yeah, man, that's crazy. And then that's also like an
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inspiring story, man. You started from literally the
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ground level. You know, you paid your dues.
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You call it paying the price of tuition.
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There's been so many. I think as a coiner, you
6:30
definitely have to have at least one or two stories of you just
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doing something like like, bro, I could have just bought a
6:39
hundred Bitcoin. It was so much easier.
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And I didn't because I did this instead.
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And you look back and you're like, wow, that was millions of
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dollars. What was I doing?
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But I feel like it's almost like a rite of passage in a way.
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So I feel like, you know, it is a tuition cost that you have to
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pay. I don't think I've ever met an
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OG who didn't have regrets in terms of not selling Bitcoin or
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not stocking hard enough, just because back then it was a lot
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more uncertain. No one knew what this thing was
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going to be. It's so easy to say this in
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hindsight, but you know, back then it was a lot more
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uncertain. Like Mount Cox, the exchanges
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were sketchy. The mining industry was just
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getting started. Like people were still kind of
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transitioning from GPUs to the ASICS.
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Like it was, you know it. It's a lot easier said than done
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type of thing, man. So it's an inspiring story.
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You definitely earned it. You've worked for it now.
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How has it been in the hot seat these last two weeks?
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You know, I feel like you've you, you're already in the
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executive level, but what has changed since you've taken up
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the role as CEO? I mean, well, my first two weeks
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really I've spent almost the entirety of it of it on the
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phone talking to people. I'm talking with investors, I'm
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talking with analysts, I'm talking with, you know, every
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manager in the company, any person who's kind of like a key
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decision maker I'm speaking with.
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And So what I'm doing is, is I've got a very clear vision for
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what I think we as a company should be doing and where we
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should be growing and, and how we should be moving forward to
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position ourselves not only for this year, but through this
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entire having epoch cycle all the way up to till 2028 in the
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next having. But, you know, what I need to do
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is I need to, you know, validate those assumptions.
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I need to speak with investors to make sure that, you know,
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everybody's aligned here in terms of the vision that we're
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going to and how we're going to create value and what's
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important here. And also speaking with, with all
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the employees and getting from their perspectives, you know,
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what they think we're doing right in the company and how
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they think that we can be improving.
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And so for the, the first two weeks, it's been having a lot of
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these calls. And I think that the biggest
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thing to change is really just the excitement and the energy
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that's in the air right now. You know, over the last couple
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of of months, there's been, there's been some level of
9:05
uncertainty and there's been some, you know, some people
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worried about what's going to happen.
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And now that, you know, I'm in the seat and one, I'm a, I'm a
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trusted face. I'm a, I'm a known entity, but
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also, you know, I have gone all the way from building and
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assembling racks and taking racks on and off miners and
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programming the software and working on the debugging of
9:29
things. And I mean, I've worked on every
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single aspect of this industry and, and climbed my way up.
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So I think people feel a lot of a lot of comfort and I think
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people are really, really excited about what it means to
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have an operating, you know, CEO in the seat here.
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Everybody's very, very optimistic about the future.
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And you know, so like we've never had, you know, I can
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honestly say this, like, I don't think we've ever had a better
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future ahead of us. We've got so many opportunities
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that we can tap into and now really it's about hitting the
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gas pedal and and going hard. Absolutely, and when you said
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something there, you super, very interesting, which I completely
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agree with, which is this idea of a, of a proof of work CEOCO
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that you know, you, you put you grinded it out right.
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You know, you, you climbed yourself, you crawled through
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the trenches, figuratively speaking, and you got yourself
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to that position. And I completely agree.
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I see the happy. I think I was like sending you
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the tweets from the, there's been this huge community that
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just really came out of nowhere in the last two years of a big
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community of people that are very passionate about publicly
10:39
traded Bitcoin miners. And, you know, I saw a poll was
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like, who should be the, you know, the CEO of Bit Farms?
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And, and it was, of course, it was Ben Ganion, right?
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And you won that. I sent that to you.
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And I'm like, it had suspicions in my head.
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And yeah, I think the the community absolutely received it
11:00
very positively. Now there has been some
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consolidation in the industry, some ups and downs, not to
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mention the the halving that just happened.
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Obviously, you know, you kind of lose half the amount of Bitcoin
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you're mining, even though the price of Bitcoin has stayed
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relatively the same. So how are you?
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How are you guys navigating that?
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Yeah, I mean, I think the the big thing for a miners, you've
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got to be thinking ahead of the curves.
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You know, there's a big, I think there's a big push in our
11:33
industry to be really, really reactionary.
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But really in order to win at this, at this game, you need to
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be thinking beyond, you know, right now you need to be
11:42
thinking not even this year. You need to be thinking 18243648
11:47
months out because you need to be aligning your strategies.
11:50
You need to be getting yourselves in the position to
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take advantage of of the cycles that you know are are going to
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play out. So when you look at kind of how
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do you navigate something like I have an event, well, you don't
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navigate it, You know, in December of 20 of 2023 or
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January 2024, start working on that in 2020.
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And you started thinking ahead about where do we need to be
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with our energy prices long term?
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And you know, how competitive is this thing going to be when the
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Bitcoin reward gets cut in half? And are we still going to be,
12:25
you know, efficient and are we still going to be able to
12:27
operate competitively? And when are we going to need to
12:30
be making those upgrades in our fleet to best take advantage of,
12:34
you know, the scality that that keeps playing out every single
12:38
every single having epoch. So for us like said this for for
12:44
a while, but like we really started working on this back in
12:46
2020, getting ready for the having with the strategic view
12:50
of of where we need to be with our geographically diversified
12:54
portfolio of energy assets, how those energy assets need to be
12:57
competitively priced in terms of this environment.
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And also thinking about how we're getting the most out of
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our machines and and getting the most out of these out of these
13:06
upgrades. So you know, like that's what we
13:07
did. Like some of the machines that
13:09
we bought actually the the best machines that we bought over the
13:13
last having epoch cycle were the ones we bought right at the
13:15
beginning. And the reason for that is
13:17
because, you know, you bought those or we bought those in
13:19
advance of the rising Bitcoin prices.
13:22
And because of that, we were able to capture all that upside
13:24
from rising Bitcoin and we were able to pay off the equipment
13:27
really quickly and still generate huge amounts of
13:30
positive free cash flow. So you know, some of those
13:32
miners that we bought back in 2020, the M 30s and the M31S,
13:36
they paid themselves off between 5:00 and 8:00 times over and
13:39
they were still generating positive free cash flow when we
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pulled them off rack and we were upgrading them with T20 ones
13:45
earlier this year, right? So you know, nothing in our
13:48
space happens overnight. If if you're looking at, hey,
13:52
you know, the having's coming the next three months, what are
13:55
we going to do? You know, unfortunately, it it
13:57
it might be too late for you. Maybe you can pivot and maybe
14:00
you can do some, you know, some, some changes.
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But really, if you want to play this game and you want to out
14:07
out compete and out perform, you know, you need to be thinking
14:12
ahead and you need to be paying it in in some ways.
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You need to be anticipating what what is going to be coming in
14:20
every single cycle and getting ready for.
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It absolutely Ben there it is a highly competitive space, right.
14:27
You have multiple, you know, publicly traded Bitcoin miners.
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How does bit farms and especially now that you are in
14:36
the the CEO seat, how does the company plan to differentiate
14:40
itself from the other Bitcoin mining companies?
14:44
I, I think that's a great question because when you know,
14:46
especially when you look at the publicly traded Bitcoin mining
14:50
universe, and I think the number one question everybody is asking
14:54
is, is why would you buy bit farms over any other Bitcoin
14:57
mining soccer? Or why would you buy, you know,
14:59
Marathon over Cleanspark or Cleanspark over Marathon or, or,
15:03
you know, whatever it is that you're looking at.
15:06
You know, we're, we're highly commoditized.
15:08
As you said, you know, you've got to choose the counterparty
15:11
and the strategy and the portfolio, the assets that you
15:14
think is, is going to do best. You know, the way that we look
15:17
at it, you know, here at bit farms is, is we understand that
15:22
investors are looking to outperform Bitcoin on when it
15:26
rises, right? Nobody is buying into a Bitcoin
15:28
miner because they think the price of Bitcoin is going to go
15:30
down or it's going to stay flat like that.
15:33
That kind of I, I think investment thesis doesn't exist.
15:39
So people are looking at, you know, we want exposure to rising
15:42
Bitcoin prices. Well, why don't they just buy a
15:44
Bitcoin ETF? Well, they don't buy Bitcoin ETF
15:46
because the Bitcoin ETF can only track spot price.
15:49
So, you know, just just going through this kind of simple
15:52
logical questions, you, you end up at a position where, OK, the
15:55
reason why you buy a a publicly traded Bitcoin miner is because
15:58
you want to outperform Bitcoin. And then now you need to choose
16:01
which is the right counterparty to do that.
16:04
I think when you look around at the space, valuations are are
16:08
all over the place. There is no consistent way to
16:13
value the different Bitcoin mining companies that are out
16:16
there that you can say is, is like, you know, universally
16:20
applied across all of the different miners.
16:22
And so I think what you need to look for are areas where you've
16:25
got relative value and, and areas where you know, the
16:28
investor can have a higher probability of outperforming
16:31
Bitcoin for, for, for right now at least.
16:36
You know, we are, I think incredibly undervalued.
16:40
I don't think the market has really recognized the strength
16:43
of our, of our growth plan and the significance of our growth
16:46
plan. I mean, we are improving our
16:48
energy efficiency 40% this year while tripling our hash rate
16:52
and, and almost doubling our energy capacity.
16:56
Like these are huge, huge numbers.
16:58
It's the biggest numbers that we have ever put out.
17:00
And in terms of a relative growth, you know, it's not going
17:03
to put us at the as the largest Bitcoin miner at the end of it.
17:06
But in terms of where we started the year and even where we are
17:08
now compared to, you know, what's coming later in this
17:12
year, you know, we're delivering some some very, very strong
17:16
relative improvements that I don't think the market has has
17:18
priced in beyond that. You know, what we need to think
17:22
about is, is how do we make ourselves better Bitcoin miners
17:26
by by not being just Bitcoin miners because this space is, is
17:30
too commoditized to just say, hey, I'm going to do, I'm going
17:33
to buy all the same machines as everyone else.
17:36
I'm going to pay all the same, you know, cost of capital as
17:38
everybody else. I'm going to pay the same
17:40
electricity price as everybody else.
17:41
And I'm going to have an edge. I think those days are
17:46
completely over. And, and what you need now is
17:48
you need to figure out how do you make the most out of your
17:52
operations and how do you get an edge?
17:53
And really the, the reality is, if you think about it like a, if
17:57
you think about it like a normal distribution curve, you know,
17:59
the, the best place to mine Bitcoin is not in the middle of
18:03
that curve. It's on the tail ends of that
18:05
normal distribution curve. It's on these outlier scenarios
18:08
where Bitcoin mining can be used as a tool, not only to secure
18:12
the Bitcoin network and process transactions, but to monetize
18:16
some sort of inefficiency in a system.
18:20
You know, whether that be an imbalance between the energy
18:23
supply and the energy demand, whether that be, you know,
18:28
energy price volatility that you're tapping into, whether
18:31
that be some sort of of synergy in terms of recycling the heat
18:35
or monetizing some sort of a waste product.
18:37
I think you need to be pushed further and further towards
18:40
these outliers. And So what we're looking to do,
18:43
you know, over the the next couple of years is we're looking
18:45
at ways that we can diversify and expand and grow our business
18:49
beyond just Bitcoin miners in a way that, you know, we can tap
18:53
into these other revenue streams that make us more competitive
18:56
and better at being Bitcoin miners.
18:59
Absolutely. And that's something that I've,
19:01
I've, I've continued to hear. And then with a strategy that
19:04
I've heard from some of your competitors is, is just
19:07
venturing into kind of like the AI space as well and perhaps
19:11
providing value there. I don't know if that's something
19:14
that Bit Farms is considering or something that you can give us
19:17
insight into about what, what, what are those potential
19:21
alternative revenue sources? If you can, if you can hit
19:23
towards it. If you're not, we can, we can,
19:26
we can tackle another question. I think the areas that are most
19:29
interesting are energy generation, energy trading, heat
19:35
recycling and repurposing. And then, you know, the, the,
19:38
the most different one out of that bucket is going to be the
19:40
HPCAI. Each one of those areas or each
19:44
one of those, those, those businesses can play a very
19:48
interesting part in managing a portfolio of energy assets.
19:53
You know, obviously if you've got the energy generation, you
19:55
have the ability to supply your own power and control your own
19:57
cost. And you can have that, that
20:00
reliability and that cost effectiveness of that.
20:03
You know, if you've got the energy trading, you can trade
20:06
the volatility and you can control your energy pricing to
20:09
the point where you know you should never consume a kWh that
20:13
is unprofitable. If you're talking about the heat
20:16
recycling, you can monetize your waste product out of your miners
20:20
and you can, you can put it to good use and sell it, you know,
20:23
to to another business or to a district or, or some sort of
20:26
system that that needs that heat.
20:29
You know, when we've got a large amount of our portfolio in
20:33
Quebec and the the province, well, it's it's almost entirely
20:38
powered by hydroelectric instead of still, it still does consume
20:43
a lot of natural gas for for heat.
20:46
And there's all these programs around converting over the heat
20:50
that's generated with Nat gas into electric heat and Bitcoin
20:55
mining. You know, it's going to be a
20:56
perfect Ave. for that, where hopefully we can recycle a waste
21:01
product, improve our economics and make our make our actual
21:04
cost of production and operation a lot more cost effective.
21:07
And then the last one is that HPCAI and you know, these are
21:11
completely different facilities than than Bitcoin mines and
21:15
Bitcoin data centers. But what they do have in common
21:20
is that they both have an insatiable demand for power
21:23
right now. It has a very, very different
21:26
kind of outlook, right? With Bitcoin mining, you know,
21:30
we don't have any sort of stability in the revenue, but we
21:32
have this tremendous ability to generate an incredibly fast
21:37
return on invested capital and we get exposure to rising
21:40
Bitcoin economics. With HBCAI, you know, you don't
21:44
have any of that. What you have is you've got a
21:47
very, very high revenue stream and a high margin revenue
21:50
stream. But you don't have an incredibly
21:54
rapid return on invested capital.
21:56
There's no way that a well a well timed investment into
22:02
Bitcoin mining is actually going to pay off in a slower way than
22:06
than an investment in HPCAI. And then you also don't have
22:10
this exposure to upside in Bitcoin prices.
22:13
And so the way that, you know, you could incorporate HPCAAI
22:17
into your into a Bitcoin mining business, I think it's really,
22:21
really specific. And I think it's targeting those
22:23
energy assets, which, you know, honestly might have been like
22:27
legacy energy assets for a lot of people.
22:30
These are the energy sites, which maybe are, are higher
22:33
reliability and higher cost and are no longer as cost effective
22:37
in, in mining Bitcoin, which would be really, really good for
22:39
conversion over to a higher, a higher revenue and a higher
22:42
margin source. And in some ways that you can
22:45
look at it as just providing a base load or a base layer of, of
22:49
cash flows to sustain normal business operations so that you
22:52
can invest in that upside, you know, exposure while minimizing
22:56
the downside. And I think I think that plays a
22:59
really interesting point when you're trying to when you're
23:03
trying to create a, you know, a company that's that's giving
23:07
investors that asymmetric exposure to Bitcoin, you know,
23:10
you need to have some some risk mitigation to the downside.
23:14
And that could be accomplished, I think by having a portfolio
23:17
that includes some amount of HPC and AI revenue.
23:20
Absolutely and and that's the it's fascinating and one one of
23:24
the things also been that really stuck with me.
23:26
I never forgot this and you we, we were, I forget we were, we
23:31
were in, I believe the Dominican Republic.
23:33
And you looked at men told me like Nico, Bitcoin, Bitcoin
23:38
mining is like a leverage long, right?
23:40
So yeah, to the upside. It's like everyone wants to be a
23:43
part of that, but it's how do you convince investors to stick
23:45
around for the bear market, right?
23:47
Which, in my opinion, that's where the biggest opportunity
23:49
presents itself. But like you said, alternative
23:52
revenue sources could potentially provide that.
23:54
It's very, very interesting. I'm very, very excited to see
23:58
how that plays out. Now Ben, my next question to you
24:02
is what are the, what are the biggest challenges bit farms
24:07
currently faces in the competitive landscape?
24:10
And now that you're CEO, what is your plans to tackle them?
24:16
Biggest challenge we face in this competitive landscape,
24:20
that's a good question. You know, I think we're very,
24:23
very well positioned when it comes to our team and our
24:26
operations, our portfolio of assets.
24:28
I think we're very, very well positioned when it comes to our
24:32
minor purchases and, and how we've timed them and how we
24:34
strategize them. You know, I think maybe you
24:37
know, the areas where you know, we've, we've really lacked
24:40
performance or what haven't been asked competitive is really just
24:44
in getting the market recognition for, for everything
24:47
that we've we've accomplished. Part of that is, is you know,
24:52
the fact that the space is a lot more crowded now.
24:54
You know, when Bitform started, there was four companies that
24:58
were, I think it was three or four companies were publicly
25:00
traded because it would have been big farms, Riot Hive and
25:03
and HUD Aid. So yeah, they're really about
25:05
four companies. You know, now I think there's 21
25:10
or 22 publicly traded Bitcoin mining companies.
25:15
You know, there's 12 or 13 different ETFs.
25:18
There's micro strategy, there's all these different ways now for
25:22
investors to get exposure to Bitcoin in, in these public
25:26
markets. What we need to do now is, is
25:29
really we need to, as I was saying earlier, we need to go
25:34
beyond just being a Bitcoin miner and we need to identify
25:37
and develop those, those those unique competitive
25:41
differentiators. And you know, for the last five
25:45
years, we've really been focused purely on on Bitcoin
25:49
specifically and growth. And I'm by no means saying we're
25:53
going to pivot away from Bitcoin mining.
25:56
You know, we've always been Bitcoin miners.
25:58
We always will be Bitcoin miners.
26:01
What we need to do though, is now we need to be, I think we
26:04
need to look beyond just plugging in machines on racks
26:08
and we need to understand and develop all those different
26:11
competitive, you know, advantages like I'm talking
26:13
about with energy trading and energy generation and HPCAI and
26:18
heat recycling. So we can be, we can be better
26:21
and we can attract those, those really, really competitive
26:25
merchants. And, and do you think, do you
26:28
think, do you believe that? And, and obviously it's, it's
26:32
incredibly obvious to me as a Bitcoiner, I think energy and,
26:35
and Bitcoin mining go hand in hand.
26:37
But could you elaborate a little bit more on that, Ben, for
26:40
people that perhaps are are are not initiated on the matter like
26:43
how does a Bitcoin mining company get involved into, you
26:48
know, energy generation like for anyone who just not familiar
26:52
with the subject at all? I mean, energy is, is everything
26:55
you go, right? Like energy is, is, is
26:58
everything like this. How humanity has advanced.
27:01
It's how societies have competed.
27:04
It's, it's why countries have competitive advantages over
27:08
other countries. Is, is their access to energy
27:10
resources and their ability to extract energy resources.
27:14
I mean, you see it all over the world, you know, even even tiny
27:18
countries, you know, like the UAE or Qatar or Bahrain, you
27:24
know, these countries have massive energy resources and
27:27
they're able to do, you know, tremendous things as a result of
27:31
that energy. Then you might look at, you
27:33
know, another country, I don't know, trying to think of a very
27:38
large country that's lacking energy resources.
27:44
It's a hard one to think about. I mean, every country has some
27:47
amount of energy resources. I mean, maybe you can think of
27:49
Australia as a, as a decent example because it's a very,
27:53
very large country. And while it does have energy
27:55
resources, it doesn't have necessary a lot of energy
27:59
resources developed. And a lot of their energy
28:02
resources are things like coal, which, which you know, they want
28:06
to phase out and they don't, they don't want anymore.
28:09
So energy is everything. It's how we've evolved from
28:11
Cavemen, you know, cooking meat to building war machines and,
28:18
and sailing off to, to fight in Europe and World War 2:00 and
28:21
all these different things. Bitcoin mining is just the
28:23
latest evolution of that. And, and maybe AI is, is, is the
28:27
next part of this. But every time there's a major
28:31
revolution, it's, it's often driven by the ability to harness
28:35
that energy to a new productive means.
28:37
And so energy is always the, the primary asset.
28:40
It's something that we've, we've known at bit farms for a long
28:43
time. It's not our Bitcoin miners and
28:46
the, the, the mining machines that are the assets.
28:48
It's the energy that's powering them and it's the right to that
28:51
energy that's powering them. That's the primary asset.
28:54
So what you need to think about as as a miner is how do you
28:58
manage this portfolio of energy assets to get the maximum
29:01
utility and the maximum value out of that portfolio of assets.
29:05
And you know, there's, there's going to be changes in
29:07
technologies, there's going to be evolution in in market
29:10
conditions and there's going to be the creation of new markets
29:13
like what we're seeing with HPC and AI.
29:15
And I think, you know, when you look at how a lot of companies
29:20
are, are approaching the HPC and AI space kind of have two
29:23
buckets. You have the business model,
29:26
which is very similar to how Bitcoin miners are operating
29:28
right now, which is, you know, let's buy all the equipment,
29:34
let's build it and let's operate it.
29:36
And then you've got the companies who are saying, you
29:39
know, let's just build out the infrastructure and, and we'll
29:42
let somebody else monetize the energy.
29:44
We're going to just sell off the energy.
29:47
And and this can play out in in two ways.
29:49
One, you can look at it as like the hosting model versus the,
29:53
the vertically owned computing model.
29:55
The two, you can also look at it from like the sources of energy,
29:57
right? So, you know, if, if, if we want
30:00
to host for a Bitcoin miner or host for an HPC client, you
30:04
know, you need that access to to energy, How do you do so in a
30:07
cost effective way? And how do you make sure that,
30:10
you know, your margins are able to sustain, you know, both their
30:14
operations and, and the company, and it'll be attractive for
30:17
investors. Part of that, you need to make
30:20
sure that you've got fewer people making a margin, you
30:22
know, And so by by putting that vertically integrated with your
30:25
chain with energy generation, you know, you can bring a lot of
30:29
that control and house. And I think especially when it
30:31
comes to what we see or what I see is like a a world that needs
30:38
exponentially more energy resources and a society that is
30:45
almost, you know, fundamentally opposed to really putting the
30:52
investment in that's necessary to build out these energy
30:55
resources. You end up with a big, big
30:58
mismatch between supply and demand.
31:01
And I think who whoever has access to that energy is, is
31:04
going to be the ones who who really, really benefit.
31:07
You know, maybe maybe the best use for it is not Bitcoin
31:10
mining, maybe it is HPCAI, maybe it's something all together
31:15
different. But whoever has access to that
31:17
energy is is going to be really, really key.
31:19
You know, you're obviously going to have to build up those
31:21
resources internally and you know, for, for most Bitcoin
31:25
miners, you can either do that at really small scale or, you
31:29
know, you partner with a company or you acquire a company that
31:32
has those resources and you bring them in house.
31:34
But you know, theoretically, when you're thinking about the
31:38
the logic behind things and the strategy behind things, the
31:41
economics and, and the importance of having that power
31:44
are so fundamentally clear, You're going to figure out how
31:47
you can bring those competencies in house and into your business.
31:50
Absolutely. Ben, you said something earlier
31:53
which really interesting. I kind of want to double back on
31:55
that point, which is the, the idea that your share value is,
32:00
is underpriced. And I, I agree.
32:02
And the reason that I agree with that is because I'm biased and I
32:05
believe it's because Ben is now the CEO.
32:08
But other than that, what if you were to give a, a pitch to
32:12
investors and stockholders and shareholders, What would be the
32:16
case? Like why is bit farms currently
32:19
undervalued compared to everybody else?
32:23
I mean, obviously I think the, the big real change here is, is
32:27
the growth that we're having this year and the fact that we,
32:30
we don't really see that being impacted in our shares.
32:34
You know, when you look at how people are growing this year,
32:37
you know, people are adding exa hash for sure, but you know, a
32:41
lot of people are not growing, you know, multiples of of what
32:44
they were at the beginning of the year.
32:46
And and a lot of people are not improving their energy
32:49
efficiency in the way that we are.
32:51
You know, a lot of people made that upgrade to X PS the year
32:56
before, they already had a big up, a big leg up on on the
32:59
energy efficiency side of things.
33:01
You know, we're really patient and we're really disciplined
33:03
because we're trying to strategically time our entrance
33:07
into this market and we're trying to make sure that, you
33:10
know, we're buying in the most cost effective hardware that we
33:13
expect to be able to run for the longest period of time.
33:17
You know, bit forms takes things in a very strategic way.
33:20
And and sometimes, you know, I think the market hasn't really
33:23
understood the strategic aspects of how we're growing, why we're
33:27
growing and when we're growing because the market has, I think
33:32
the market prioritizes much more linear results.
33:36
They want to see a company that is able to every single month
33:40
have more extra hash, have more bitcoins mined, have more
33:44
bitcoins on the balance sheet. But you know, the reality is, is
33:47
that Bitcoin is inherently volatile and it it's really not
33:53
your best strategy. You know, as as a company who's
33:56
investing in something like Bitcoin mining to be dollar cost
34:00
averaging linearly over time. We need to be, excuse me, we
34:04
need to be strategically timing our our bets.
34:08
And I think that's something that I really hasn't been fully
34:11
understood by the market. And I think it's really led to,
34:14
you know, an under an undervaluation of our growth
34:18
plans, of our strategy and you know, of our results.
34:22
Do you do you that that is unique to bit farms, you know
34:27
just being strategic where you said timing your bets is that is
34:30
that a unique strategy to bit farms?
34:33
And then my follow up question to that is how do you plan to,
34:37
for lack of a better word, market that to investors?
34:40
So is it something like, you know, I don't have to market it,
34:43
let the let the you know, let the proof of work speak for
34:46
itself. What?
34:48
What would your response be? You know, you're always going to
34:52
have to market for sure. I and I, I think that's one of
34:55
the areas where we're really going to be a lot more
34:57
aggressive as well. You know, we have I think for
35:01
several years, you know, really focused purely on, well, not
35:06
purely, but we, we put almost all of our effort on the
35:08
operations. That's paid out dividends in
35:12
many, many ways. But you know, there's, it's not
35:16
necessarily all that we as a company, you know, need to do.
35:21
We need to be thinking beyond just the actual operations, but
35:24
we need to be thinking about how we communicate that, that story
35:27
and that message. I don't think the, you know,
35:30
being trying to be strategic with your growth and your
35:33
purchases is, is necessarily unique to us.
35:36
I think amongst the, the biggest Bitcoin miners, it's relatively,
35:41
it's relatively unique. And I think when you look at our
35:44
discipline, I think you see that our discipline is very strong.
35:48
You know, there's a lot of people who there's a lot of
35:51
people here who are seeking in our industry the largest number
35:55
possible and they'll do anything and they'll pay anything to
35:59
achieve the largest number possible.
36:01
And you know, it's, it's, it's a hope and it's a dream, you know,
36:06
but I think if you really want to achieve truth freedom, you've
36:10
got to have the discipline and you've got to be pursuing
36:12
discipline in your operations. And I think that's, that's the
36:14
thing that we've done that builds a lot of value over the
36:19
long term. I just don't think it's been
36:20
recognized yet. So now we need to, we need to
36:23
communicate that. We need to explain it and we
36:26
need to educate, you know, investors in the market at large
36:29
why that is so important and and why that is so advantageous.
36:34
I think we can do that. You know, I think especially
36:37
with me here in the seat able to, you know, understand both
36:42
from, you know, the the operational side, but also from
36:45
the economic side. This is something that you know,
36:47
we can start communicating a lot more effectively.
36:50
Absolutely. And I think you've done an
36:52
incredible job at that by becoming a public figure and
36:56
really kind of spearheading that and making your name known.
36:58
And I think a testament of that was just the the community's
37:03
reaction to you being named as CEO.
37:05
And before that, like they, the, the market smelled it right,
37:08
which which is pretty, pretty interesting.
37:11
So Ben, I kind of want to pivot the conversation a little bit.
37:15
It seems like this year Bitcoin has kind of entered into kind of
37:21
like the political discussion a couple weeks ago.
37:25
You know, the Republican presidential candidate,
37:27
candidate Donald Trump held a fundraiser, fundraiser at Mar a
37:31
Lago and there was a lot of of publicly traded mining
37:35
executives there. So it seems like the industry is
37:39
is jumping the cosm, so to speak.
37:42
It's it's, it's it's now becoming, you know, it's
37:46
donating to certain political parties.
37:48
Now as a Bitcoiner, of course, I would want this to remain
37:51
bipartisan. I think that this was something
37:54
that was created by the you can make the case the regulatory
37:58
hostility. Do you have any, do you have any
38:01
thoughts on that, like on that specific subject specifically in
38:05
the United States? I know that you guys are spread
38:07
geographically, but what is your plan, you know, as the CEO to
38:12
tackle? You know, I'll put it nicely,
38:16
perhaps politicians that are well-intentioned but but have a
38:21
negative view on the industry as a whole.
38:25
Yeah, I, I, I think you nailed it pretty well when you said
38:28
well-intentioned but have a negative view.
38:30
You know, I really don't think there's a ton of hostility out
38:35
there because, you know, they've got all the information and
38:38
they've, they've analyzed everything and they've come away
38:41
thinking that this is such a terrible thing.
38:43
I, I think it's, it's quite the opposite.
38:45
I think for a lot of people, they've made their opinions up
38:48
on a few headlines and, you know, that's really informed
38:52
their, their opinion, you know, beyond anything else.
38:57
You know, we've done a lot of work over the last couple years
39:00
in, in the different regions that we operate.
39:02
You know, we had a situation in, in Canada two years ago, right
39:06
where we had the Ontario protest, there was freezing of,
39:11
of bank accounts and then there was a, an immediate reaction by
39:16
the Canadian Bitcoin community to start donating to the
39:19
protesters with Bitcoin. You know, within 24 hours of
39:23
that happening, the Canadian, the Canadian Parliament
39:27
introduced, you know, well, dusted off some old legislation
39:30
that really had been put aside in 2018 and hadn't been looked
39:34
at for, for four years since and introduced it, you know,
39:37
immediately, effective, effective immediately and also
39:41
with a period of retroactivity. And, you know, it was obviously
39:44
a move that didn't have anything to do with, you know, hey, what
39:50
is Bitcoin mining's actual impact on, you know, the
39:53
communities that they operate in or, or the economy or the
39:57
environment. It was really a a political
40:00
move. You know, it took us years to to
40:05
organize an effort to educate Parliament and to educate policy
40:12
makers on this. But we were successful.
40:13
Like, you know, bit firms led the effort here in in putting
40:16
together the called the the Fair Tax Coalition.
40:19
And we pulled together every single major, you know, Bitcoin
40:22
miner of scale in Canada with with the exception of one.
40:26
To, to work together to provide a, a cohesive and a unified
40:31
voice and to explain, you know, really what we're doing and why
40:36
it's not something to be afraid of, but actually why it's a net
40:38
benefit to, you know, not only the communities we're operating
40:42
in, but but the country as a whole.
40:44
And, you know, when we first had those discussions, we people
40:48
were very dismissal. A lot of those conversations,
40:51
you know, they'd start with, oh, you don't need to explain
40:54
Bitcoin to me because I used to work at Google or I used to work
40:57
at some other company and I understand tech.
41:00
And, you know, 45 minutes into this conversation, they're
41:03
asking, can you actually show me a photo of one of these Bitcoin
41:07
mines? Because I've never seen them,
41:09
right? And so like, this is that was
41:11
the level of, of getting started.
41:14
But you know, the age of Bitcoin miners hiding under the table, I
41:19
think is over. We are not going anywhere.
41:22
We're here to stay. And I think everybody realizes
41:25
that there is a, a significant value in collectively working
41:32
together as an industry to educate people on the benefits
41:37
and the merits of, of what Bitcoin is and what Bitcoin
41:40
mining is and, and what it means where the people in the
41:42
community is that that they serve.
41:46
We were very successful with that in Canada.
41:48
You're now starting to see a lot of that happening in the United
41:51
States as well. I mean, we've got multiple
41:53
different NGOs and, and private groups who are, you know,
41:57
lobbying groups who are working to educate senators, policy
42:02
makers, bureaucrats, staffers. I've been out to DC and, and
42:08
done meetings on the Hill, you know, multiple times.
42:11
You know, there is an interest there, I think across the
42:14
industry to to educate and to inform because there is no way
42:19
that this cat is going back into the bag.
42:21
And the only way to move forward is really to be treated just
42:26
like how any of our industry would be.
42:29
And I think this really represents Bitcoins constant
42:33
maturity and, and, and constantly improving maturity.
42:37
I've said this, I've said this multiple times, you know, like
42:39
I, I look at every having epoch as a maturity cycle.
42:42
And the first one was, was obvious miners.
42:44
The second one was entrepreneurs.
42:46
The third one was people taking it to, to scale for for really
42:50
the first time. The 4th one was a
42:53
corporatization of of Bitcoin miners with all the huge launch
42:57
of of the publicly traded Bitcoin miners and how they've
43:00
really changed the game for publicly traded or for for
43:03
Bitcoin miners in general because of their access to
43:05
capital markets and investors. This current having epoch that
43:09
we're in right now is about an institutional adoption.
43:13
And there's no way that, you know, we could be here at this
43:17
level of the maturity cycle without having won the previous
43:22
four cycles that built the foundation for us to be here
43:25
right now. But we also can't push this
43:27
forward unless, you know, we engage like every other industry
43:32
with, with politicians, with regulators, with with
43:37
bureaucrats, with, you know, staffers in order to make sure
43:40
that they understand what we're doing, the benefits of why we're
43:44
doing it and, and why this is something to be encouraged
43:48
instead of fought against. So I'm very optimistic about all
43:52
of this. There's been a lot of really
43:54
good efforts here to to push forward education.
43:56
You know, we had right. I had a debate with Debris even
44:01
about a year and a half ago and got him to admit, you know, his
44:04
model breaks down during periods of of quickly rising Bitcoin
44:07
prices, which is exactly when everybody who's wanting to look
44:11
at his model, you know, so, so we're doing really, really good,
44:15
I think on the educational front, but there's still a
44:17
tremendous amount of work that needs to be done.
44:19
I, I completely agree. And I think you made a really
44:21
good point. And I think that's something
44:23
that just culturally to some Bitcoin Bitcoiners came as a
44:28
little bit of a shock because it was like we're lobbying.
44:31
I thought the politicians like what's going on?
44:34
It's like, yes, our industry is getting bigger.
44:36
It's getting it's getting more influential and eventually it
44:41
gets to a point where how do I say this?
44:44
Like, of course, you know, of course, like every other
44:47
industry, we have to lobby, you know, we have to donate to
44:51
certain candidates that are going to be pro the industry.
44:54
And I think that was a little bit of a of a culture shock to
44:57
some Bitcoiners. But I think shout out also to
45:01
the team over at Bitcoin magazine.
45:02
They've done an incredible job, you know, really pushing this
45:05
forward. You know, I think that that is,
45:09
is we're getting the first tastes of that.
45:11
And I don't think that is going to decelerate.
45:14
I think it's going to accelerate as these years go by.
45:18
And, and, and like you, I'm also incredibly excited.
45:21
I mean, the fact that the RNC has made it part of their
45:25
official party platform to protect Bitcoin miners, protect
45:30
the right to self custody. I think is, is, is extremely
45:34
bullish to say the least. But anyways, Ben, I do want to,
45:39
you know, but we have about 15 minutes or so left and I do want
45:43
to be respectful of your time. And I just want to kind of
45:45
inform and educate the viewers what, what should they be
45:49
watching out for? What should they be looking out
45:51
for? Like what are key performance
45:53
indicators that you focus to measure your competitive
45:58
success? Key performance indicators
46:02
across the industry, you know, widely are, are exa hash and,
46:05
and walk per Tera hash. I think about it a little bit
46:07
differently from an operator's perspective.
46:10
And my two main key performance indicators are going to be
46:15
what's your operating cost per Tera hash or per PETA hash.
46:19
So this is this is your hash cost and how does that relate to
46:22
hash price? And then the, the second KPI
46:25
here that I think is really, really important is going to be
46:28
what's your marginal cost to grow the company?
46:31
You know, there's, there's two kinds of growth in this company
46:34
in, in, in our industry. There's, you know, the organic
46:38
growth where you're, you're starting a Sprite from, from
46:41
scratch or, or maybe you're acquiring something that was
46:43
blank and you're adding all that, then increasing compute.
46:47
But then there's also the growth that comes out of your upgrades.
46:50
And, you know, when you're upgrading your minors, I think
46:53
this is the, this is the area where it's really easy not to be
46:57
competitive because there's such an emphasis on, you know,
47:02
upgrade your minors as fast as possible and, and put your hash
47:05
as high as possible and have the highest efficiency.
47:07
But you know, what we know from, from our operations and from all
47:12
the data and that, that we've analyzed is that you need to
47:15
make the marginal cost very, very justified to grow the
47:21
company. Because if we've got to go out
47:23
there and we've got to raise capital and we've got to spend,
47:26
you know, the money that it requires to raise that capital.
47:30
Capital is not free. It comes at a cost.
47:33
And then we were going to go and grow the company in a way that,
47:36
you know, it's too expensive to grow the company.
47:38
It doesn't justify it. We'll never see that actual
47:41
return on the balance sheet. I think that's when people
47:43
really start to, to be uncompetitive as a business.
47:47
I think that is one area where if, if I was an investor, I
47:50
would be paying a lot more closer attention to that because
47:54
it's something that most companies don't don't compete
47:58
on. And it really should be.
48:01
It really should be one of the areas that give you a a very
48:06
clear understanding of how that operator is thinking about their
48:09
growth, their cost to grow and and when is a good time to grow
48:14
that. That, more than anything, is
48:16
probably the most telling KPI. And what's really interesting
48:19
about what you just said, your statement is, is that it's it's
48:23
almost as if you have a unique view or a unique perspective of
48:28
viewing at viewing this this way compared to your competitors.
48:33
Is is that unique to Ben Ganion? I think that's that's unique to
48:39
the farms. I mean, I'm the person who, you
48:41
know, instills this, this idea, this way of thinking at, at the
48:45
farms, or at least I, I did originally.
48:47
But I think this is well understood within, within our
48:49
company. You know, I think when, when
48:52
you're looking at last year, when everybody is upgrading XPS,
48:55
you know, we have so much demand to upgrade to XPS from, from
48:59
investors in, in a lot of retail.
49:02
But the reality on the ground is like, Hey, look, I've got, I've
49:05
got, you've got one XP unit. The XP unit is physically about
49:09
the same size of two M 30 units. And we had a lot of facilities
49:14
that, you know, we had M30 ones running and those M30 ones were,
49:18
you know, still generating positive free cash flow.
49:20
They had paid themselves off numerous times over, but they
49:25
weren't really performing a whole lot of, they weren't
49:28
really giving us a whole lot of margin over a lot of of revenue.
49:31
But for me to upgrade those given, you know, the what was
49:36
available on market, I would have had to pull down to minors
49:39
at 76 Tera hash to plug in one miner at 140 Tera hash.
49:44
Now there is an efficiency improvement obviously from from
49:48
40 down to the the 21 1/2 that the XP is rated at.
49:54
But if I'm going to pull down, you know, 2 units at 76 Tera
49:59
hash to plug in one at 4140. I'm actually only growing the
50:02
company 12 Tera hash, right? I've improved the energy
50:05
efficiency, but I only grew the company 12 Tera hash compared to
50:09
where it was before. And you know, I've got to pay a
50:13
very, very large price to do that because those XPS we're
50:16
trading at $24.00 AT. So you multiply that by the 140,
50:20
you know, you're at like $3300 per unit.
50:23
Now you got to divide that $3300.00 / 12.
50:26
You know, we would never make that money back, right?
50:29
And what we did was we, we understood that math.
50:34
We were patient, we were diligent.
50:36
We said we're going to wait for better minors at lower prices
50:39
and, and the market didn't like that message until we bought
50:44
those newer miners at the lower prices and the higher evision.
50:48
And then the market was like, oh wow, that was a really smart
50:50
move. So you know, those are things
50:55
that, you know, I think we're very, very competitive on and
50:58
we've been very, very disciplined on.
51:00
And I think that's a huge, a huge part of our success over
51:04
here at Bit Farms is the fact that, you know, when we grow and
51:08
when we do something, it's because we know it's going to
51:11
generate huge amounts of shareholder value and long term
51:14
value for the company. We're not growing to pump the
51:17
company for, you know, a weekend.
51:20
You won't see press releases out from us that are specifically
51:24
designed to pump the company, you know, and, and make sure
51:28
that everybody is, is running the share price up today.
51:31
No, we're building long term value here because we know that
51:35
the way that we win in this game is by seeing ahead of the cycle
51:39
and anticipating that you don't want to chase the wave.
51:42
You want to be ready to ride the wave, right.
51:45
You know, if you're, if you're a surfer, like you can't catch
51:48
that wave, you'll never catch that wave, right?
51:50
You got to be in place ready to catch that wave to have a good
51:53
ride. I, I think that's really what
51:56
we've done. I mean, if you look at just kind
52:01
of the, the, the that like leverage long bet on Bitcoin
52:06
price that, you know, I, I had mentioned earlier and you had
52:09
reminded me of, you know, I think there's, I think there's
52:14
two ways that people are are going to be looking at this at
52:17
this having epoch, you know, this whole four year period up
52:20
until 2028. And I think right now the
52:23
emphasis is really going to be on who's going to have the the
52:27
best exposure to rising Bitcoin prices in the bull market.
52:31
But I think in 2028, the thing that's going to identify who won
52:37
this having epoch is not going to be who rose the most during
52:41
the bull market, but who navigated the bear the best.
52:45
Interesting. And and that's something that,
52:48
you know, I that takes a lot of of forward thinking and a lot of
52:53
planning and a lot of times it's going to take doing things that
52:56
the market may not understand at the time.
52:58
Yeah, and and and I and it's interesting because the whole
53:03
like and and I have some some insights into just on ramps and
53:08
of course the media side of things.
53:11
The bear, the the year of the bear is the year of survival for
53:15
the entire industry. The entire industry feels it and
53:19
it's it's like you, you have to prepare for the winter.
53:21
Winter is coming. And yeah, yeah, exactly.
53:27
So Ben, what is the ideal situation?
53:30
You're, you're, you're in the commander's seat, my friend.
53:33
Now what is the ideal situation? Where do you see, where do you
53:37
envision Bit Farms five years from now?
53:41
You're in, you're in control, you're in the driver's seat.
53:45
You know what, what message would you share with with
53:48
investors? Where is Bit Farms five years
53:51
from now? Five years from now, we're going
53:55
to have, you know, thinking hypothetically where I want to
53:59
take it. This isn't obviously a promise
54:01
on the future. Like, you know, what would be an
54:03
ideal scenario would be to have a, a, a much, much larger energy
54:08
portfolio, a huge concentration of that in the United States,
54:12
but but exposure to probably every single continent other
54:16
than Antarctica. You're going to want to have a,
54:20
a mixture of of energy providers and of of energy strategies,
54:26
right? You're not going to be want to
54:28
tied up to one location, one site, 11 fuel source.
54:33
And you're going to want to have a huge diverse basket of
54:38
different revenue streams that that help you be a better
54:41
Bitcoin miner. So, you know, I'm looking at
54:43
things like, you know, thinking about how do you even even on
54:49
the energy generation side, you know, how do you even do the
54:53
energy generation side properly And how would you structure
54:56
yourself up properly to be the best in a Bitcoin mining
55:00
situation? There's kind of two scenarios
55:03
when you're looking at energy generation.
55:04
You know, one you want to derive the lowest possible cost for
55:08
yourself. The other is you want to derive
55:10
the highest possible price out of each unit of energy that you
55:13
sell, right? So you're going to have to have
55:15
a, a very, very diversified and well managed portfolio of these
55:18
energy assets. And I think that, you know, if,
55:22
if, if we do our job right here over the next couple of years,
55:27
we should be the best position to navigate the bear market that
55:33
always comes after the bull market and we should be best
55:36
positioned after that to tap into the subsequent bull market.
55:41
That's, that's kind of how we need to think about things.
55:44
You need to think about things cyclically and we need to
55:47
understand how we can, we can navigate and we can manage that
55:50
exposure for the investors because the, you know, the
55:55
investors are always going to want upside and, and upside is,
55:59
is fantastic when it's a bull market.
56:03
But there are certain times when you do need to hedge out your
56:06
risks and that's going to come every cycle, you know, and and
56:09
the if you're going to stay with one strategy through the entire
56:14
four year cycle as market conditions completely change,
56:19
there's no way you're going to come out on top.
56:21
Yeah. And, and do you believe 'cause
56:22
that's one of the, the narratives that that you hear on
56:25
in, in the community, which is this idea that the halvings are,
56:29
you know, the cycles, the cycle theory is dead.
56:31
You know, the halvings are, are, you know, it's a thing of the
56:34
past. You know it, it sounds like you
56:37
know tonight, by the way, I'm in that camp as well.
56:40
No, of course they're still here.
56:41
They still exist. So what would your response be
56:44
to someone that believes that you know, the, the, the, you
56:48
know, the cycles are, the ETF is here.
56:51
You know, the cycles are no longer going to play a role in
56:53
this. What would your response to them
56:55
be? And this, you know, you can, you
56:59
can try and fight a cycle as much as you want, but it's not
57:03
really a a winning strategy. Usually the, the winning
57:06
strategy is to is to is to ride the wave, you know, and, and
57:10
this is, this is something that is, is pretty mathematical,
57:13
right? When you look at just just like,
57:18
let's say 1 minor, like what is what is one T 21 worth?
57:23
Well, one T 21 is is worth the amount of bitcoins that you
57:27
expect it to generate over the next, you know foreseeable
57:30
period and whatever that value is in into U.S. dollars.
57:34
And then you've got a present value discounted back to the
57:36
machine right now, right, like the machine is worth a
57:40
predictable amount because it spits out a predictable cash
57:43
flow. When you look at how the Bitcoin
57:47
miners trade, you know, like when you look at like how these
57:50
these markets function, you know, when you look at the hash
57:55
price over every single epoch cycle, you break it down each
58:00
having epoch for a year period, what you'll see is the same
58:03
thing. And in the last three cycles,
58:05
the first cycle you can't really use because you know, there was
58:09
no market there when Bitcoin first got started.
58:12
There was no real data and there was no real industry on the
58:15
mining side. But for the last three cycles,
58:17
what we've seen is from exiting out of that having event in that
58:21
first month where you know you're adjusting to the hash
58:24
price and the the peak of the bull market cycle, which happens
58:29
12 to 18 months later. We've seen the hash price go up
58:32
between 300 and 400%. That's happened in each of the
58:35
last three having cycles. Now, obviously history is no
58:39
guarantee of the future, but if that were to happen in this, in
58:42
this situation, that would imply a hash or a hash price of let's
58:48
see here like 15 to $0.20. Now to have a hash price of 15
58:53
to $0.20, we've got to have a Bitcoin price that's probably
58:56
180,000 to $250,000 without a massive increase in the in the
59:01
network hash rate. It's it, it's a lot of growth.
59:03
And what happens is when you've got stable energy prices like we
59:07
do and you've got a competitive electricity, you know, you
59:10
combine those two into that hash cost that I said earlier.
59:13
Well, that hash cost, if your energy is stable and your, your
59:16
efficiency is stable, that hash cost is stable, right?
59:19
So, you know, right now we've got a 25 Watt per Tera hash
59:23
efficiency. We have roughly a four cent
59:25
average electricity price. If you multiply $0.04 by 25
59:29
watts per Tera hash, you get out to about $25 per PETA hash or
59:33
two point $0.05 per Tera hash, right.
59:36
Compared to the 4.5 to 5:00-ish, you know, cents on, on hash
59:41
price, you know, that's a really nice margin.
59:43
But as that goes up to $0.08 to $0.10 to $0.15, even, you know,
59:49
$0.20 if it, if it historically does the high end of, of what it
59:53
has done, you know, you're still sitting there at that operating
59:57
cost of 2.1. And you can see how how your
1:00:00
margins are growing exponentially, right?
1:00:03
There's a leverage long bet here that's embedded into the math
1:00:07
itself that is inescapable. And so, you know, you can try
1:00:11
and and argue with the math and you can try and fight the math
1:00:14
and you can try and fight the wave, but I don't think anybody
1:00:18
wins that way. What would you say to, you know,
1:00:23
it's every, it's so funny. Every cycle there's a, there's a
1:00:25
different theory, right? What would you say to in this
1:00:28
cycle? It seems like the, the
1:00:30
diminishing returns narrative is very strong, right?
1:00:33
What would you say to those individuals, right?
1:00:36
This does, and let's say diminishing returns are a thing.
1:00:39
I mean, it is a fact of life, right?
1:00:41
It's a lot harder from bit for Bitcoin to go from 100K to 200K
1:00:45
than it was for it to go from a dollar to two dollars.
1:00:49
You know, the law of big numbers comes into play.
1:00:51
But does that affect the Bitcoin mining industry?
1:00:55
Like do you see bitcoins price of appreciation slowing down to
1:01:00
a point that perhaps it's it's not attractive to be a Bitcoin
1:01:04
miner anymore? What's your perspective on that?
1:01:08
So as a Bitcoin miner, we can't control our costs, right?
1:01:12
The cost is a function of Bitcoin price and network cash
1:01:15
rate. Neither of those things are in
1:01:17
any Bitcoin miner's control. You can do some hedging, you
1:01:21
know, you can hedge out on the Bitcoin price.
1:01:23
You can hedge out with some hash rate derivatives like like the
1:01:26
products that Luxor has. But unless you're using some
1:01:30
sort of intrument, you don't control your revenue.
1:01:32
What you can control is your cost and it becomes incredibly,
1:01:36
you know, more and more important, you know, as the
1:01:38
years go by and as having epochs take place and as that block
1:01:42
reward reduces for you to control your cost more and more.
1:01:46
You know, I think in the future, and it's not going to happen,
1:01:49
you know, this cycle or probably not even the next cycle.
1:01:53
But what we see is an inevitable trend of miners moving towards
1:01:58
marginal cost energy. And you need to get to this
1:02:01
scenario where you need to understand too that this goes
1:02:05
back to this normal distribution curve that we talked about at
1:02:08
the beginning of the show where you want to be on these these
1:02:10
tail end outlier scenarios. You know, if if you get to the
1:02:14
point where your energy cost is effectively free, then your
1:02:19
revenue doesn't matter as much, right?
1:02:23
You're now monetizing a waste that that's coming out of, you
1:02:26
know, an energy source that otherwise could be utilized and
1:02:29
has to be has to be used or, or lost.
1:02:32
Right now you're going to end up in a situation where there is a
1:02:35
mutual win between whoever is giving you that energy for free
1:02:39
and you providing that equipment, who's going to be
1:02:41
able to monetize it for some amount greater than 0.
1:02:43
And so, you know, when you look around at like, what are the
1:02:47
opportunities for growth, like energy is always the bottleneck
1:02:50
for growth in our industry. But it's not as if it's not as
1:02:54
if there isn't energy available on this planet.
1:02:58
There's so much energy that's available.
1:03:01
Really what the the issue is, is about making sure that the
1:03:05
energy is available at the point and place in time where it's
1:03:09
wanted and where it's needed. And if it's not there at that
1:03:12
point in time, it may not be able to be used.
1:03:15
And so when you look at like, what's the number one area of
1:03:19
waste for electricity generated worldwide or what's it, sorry,
1:03:22
what's I already gave away the answer, what's the number one
1:03:24
use of electricity worldwide? It's waste because they're like
1:03:28
17% of all the electricity that's generated worldwide
1:03:32
cannot effectively make it to a place for it to be consumed,
1:03:36
right? There's, there's imbalances in
1:03:38
the system and there's, there's oversupplies and, and the demand
1:03:42
is constantly changing because you never know when anybody's
1:03:45
going to turn on or off the light switch.
1:03:46
And so, you know, you need to be, the industry is going to
1:03:49
move towards this place where the monetization of these, of
1:03:55
these accesses, of these ways of these inefficiencies will be the
1:03:59
primary driver of, of all the growth going forward.
1:04:02
And if your cost is 0, the revenue doesn't matter anymore,
1:04:07
right? It's it's your input is 0 and
1:04:10
you're monetizing it for something better than 0.
1:04:12
Like you know, there are still and and and I don't know if
1:04:15
your, your audience knows this, but like they're still actively
1:04:18
running S nines today, right? And you know they're.
1:04:22
On Venezuela. Not only in Venezuela, they're,
1:04:25
they're in places like Australia and Chile, right?
1:04:28
Like these are places where, you know, they built out this huge
1:04:32
amount of renewable solar capacity and they don't have any
1:04:37
customer for it and they don't have the distribution and
1:04:39
transmission for it. And they overbuilt relative to
1:04:42
the to the demand. And now you've got a situation
1:04:45
where, you know, the energy that they generate on those panels
1:04:48
has to be literally ran into the ground, which is actually not
1:04:51
good for the environment either. So what they're doing is they're
1:04:55
buying S nines and and they're buying S nines because it's
1:04:59
basically the cheapest thing and most, you know, cheap, reliable
1:05:02
piece of equipment to monetize something that you value at zero
1:05:06
as at above 0 right. So S nines are still being
1:05:10
profitably run all over the world already in this scenario.
1:05:15
And I think you're going to see a lot more of that.
1:05:17
You know eventually those guys are going to upgrade from an S9
1:05:20
to an M20 or an M 3rd, right? But their cost is still going to
1:05:24
be 0 and their operating costs then is going to be labor,
1:05:27
parts, maintenance. And as long as the revenue is
1:05:30
greater than those, you know you're going to be generating
1:05:33
profit. And, and you know, the, the,
1:05:36
that figure, I, I did not know that, right?
1:05:38
17% that's a massive amount of electricity that's just going
1:05:44
poof for. I don't know if electricity goes
1:05:45
poof, but I guess the expression still makes sense.
1:05:48
I think that's the exact sound it makes is.
1:05:51
Does it go anyways? Ben Gagnon, it's an honor to
1:05:57
have you on the show. First time CEO bit farms on the
1:06:01
show, really simply bitcoins. Honored to have you.
1:06:04
Thank you so much for coming on the show.
1:06:06
Where can people find you? Where, where where can people
1:06:09
follow you? And where can people find out
1:06:11
more about bit farms? You know, So stay, stay on top
1:06:15
of what's going on over there. You go to ourourbitfarms.com
1:06:19
website, you know, is our is our only official website.
1:06:23
We've got our bid farms, under score IO Twitter account.
1:06:26
We've got a few bid farms, multi language accounts.
1:06:29
So we've got a bid farms, I think under score ES for Spanish
1:06:32
and under score Fr for French and then my my Twitter handle at
1:06:37
hash override. So you you can find out, you
1:06:41
know, follow me and and the company and all of our
1:06:43
activities at those little areas.
1:06:46
Awesome. Alright guys, well, I hope you
1:06:49
guys enjoyed another episode of Simply Bitcoin IRL.
1:06:51
You can, you could follow Ben and you could follow bit farms
1:06:54
and all the stuff that they're doing, all the great stuff and
1:06:57
really, really excited. I think Bitcoin miners are going
1:06:59
to take over the world, specifically bit farms.
1:07:01
So definitely go check them out. All right, everybody, if you
1:07:03
guys enjoyed the show, you know what to do, Smash the like
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1:07:19
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1:07:21
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