Latest / TFTC: A Bitcoin Podcast / Bitcoin Mining Pool (de)Centralization | Mark Artymko, Center of Hash E004

Transcript

Bitcoin Mining Pool (de)Centralization | Mark Artymko, Center of Hash E004 · TFTC: A Bitcoin Podcast

• 0:00
  Mark. Hey. Welcome back to Bitcoin Park. You were here at the Texas Energy Mining Summit.
• 0:06
  Yep, I was. The first one. And you were also last week at the Proto launch.
• 0:11
  Yes. How was that? Oh, that was wild. Yeah?
• 0:14
  Yeah, it was incredible. Lots of amazing things happening on the hardware side. And I think it's
• 0:22
  going to be a step change for how manufacturers approach mining.
• 0:27
  well that was some big news square's launch of the the proto rig and software to helping
• 0:34
  decentralize mining you guys have been hard at work at ocean decentralizing mining so joined
• 0:40
  today by mark artemco who's the co-founder and president of ocean mining which is a mining pool
• 0:46
  but before we get into the specifics of the pool business of what you guys are doing at ocean
• 0:53
  You have a long background in engineering and specifically grid systems and engineering systems to interconnect large loads to power grids completely prior to any of your work on Bitcoin and Bitcoin mining.
• 1:11
  Just talk a little bit about your background and how you think about Bitcoin as a power consumer within the broader energy system.
• 1:19
  Yeah. So my my pre Bitcoin life dates back to 2004 ish. So I spent about two decades pre Bitcoin working in the utility industry in Canada and then in the United States up in Michigan.
• 1:35
  But I'm an electrical power systems engineer by training, and I basically cut my teeth in the design and engineering aspect of the power system, doing everything from single line diagrams and electrical arrangement, essentially building the blueprints for what a substation and a transmission line look like at the utility level.
• 1:59
  mainly high voltage networks so anything higher than 115 kilovolts which is what most bitcoin
• 2:07
  miners would tap into basically worked different capacities you know rose the ranks in those
• 2:14
  utilities to senior leadership roles and did everything from designing the designing the
• 2:20
  grid the substations building them multiple hundred million dollar projects as well and then
• 2:27
  finally operating them. And I actually, one of my probably favorite positions in that whole
• 2:33
  two decade period was spending a couple of years on shift at the 24 seven control room where we
• 2:42
  managed the power system for all of Ontario. So about 20,000 megawatts worth of energy
• 2:47
  flowing in and out and through various interconnections with the United States
• 2:52
  and different provinces in Canada and serving load and just being part of that, the machine,
• 2:59
  which most people don't realize, but the electrical system is literally one big machine
• 3:03
  that spans all the way from, you know, across in different interconnections.
• 3:09
  But the continent essentially is one huge machine and everything's interconnected.
• 3:16
  So through that time, I really got a very deep level of familiarity and experience building and operating the systems.
• 3:27
  But then finally, really realizing how it ultimately impacts the end user, which in the utility system, the end users are called loads.
• 3:37
  So it's not very customer friendly, but loads are, you know, any Bitcoin miner listening, if, you know, in the halls of the utility,
• 3:44
  They, you know, you're referred to as a load, 100 megawatt load, 50 megawatt load.
• 3:48
  But just knowing being part of the connection process from the utility side is, is it's just so it's so involved.
• 3:57
  And there's so many studies and to essentially make the entire grid work and continue working without error for for every additional load that joins and for every additional generator that joins.
• 4:10
  So it's kind of like operating on or maintaining an airplane mid-flight and never landing.
• 4:19
  So that's what the utilities do, either by adding new elements onto the grid or maintaining old ones.
• 4:26
  And so the majority of my professional career has been in the utility space.
• 4:36
  So I'm always looking at things from that angle.
• 4:39
  And I spent about 20 years serving loads like Bitcoin miners.
• 4:46
  And now I'm on the other side of the fence.
• 4:48
  And now I get to not necessarily, I'm not involved with the connection aspects running
• 4:53
  a mining pool, but I know the kinds of challenges that miners are facing when they're connecting
• 4:58
  to the grid and looking for capacity and dealing with outages.
• 5:02
  so um i like to think it gives me a good perspective yeah for sure what what time
• 5:09
  period was that that you were working the power industry yeah so that was like early 2000 so
• 5:13
  priests pre satoshi 2004 to you know about about five years ago so um so just a few years prior to
• 5:24
  co-founding Ocean.
• 5:27
  Yeah, yeah.
• 5:28
  So after going through the utility stint
• 5:32
  at a couple of different companies,
• 5:34
  I jumped into a Bitcoin mining startup
• 5:38
  based out of Michigan.
• 5:38
  And I did that for a couple of years.
• 5:42
  Rode the price down all the way to $16,000.
• 5:44
  An actual miner, like a proprietary miner?
• 5:47
  Yeah, it was a small outfit doing Bitcoin mining.
• 5:51
  And this is like...
• 5:54
  This is the truth podcast.
• 5:56
  So I did other things as well.
• 5:57
  I was involved in some other cryptocurrency mining and different things.
• 6:02
  And as this was part of my exploration into Bitcoin and through that process, I became a Bitcoin maxi.
• 6:12
  But my door into Bitcoin maximalism was through different colors.
• 6:17
  You know, people call us purists, but, you know, people take their own journey.
• 6:22
  It just matters where you end on the, from a destination perspective.
• 6:26
  Yeah.
• 6:26
  Yeah.
• 6:26
  Mine was more, I don't know if you guys listened to Giacomo, but my, I was drawn, I was drawn
• 6:31
  into that blockchain technology thing first.
• 6:33
  And, uh, I dabbled in number of different consensus protocols.
• 6:38
  Um, mining was one of them and, and there was some other stuff as well, but that didn't
• 6:43
  last long.
• 6:44
  Um, and that kind of like, that's sort of where Luke enters the picture because he was, he
• 6:49
  was instrumental in sort of my conversion over into bitcoin maxi land before we get into to that
• 6:57
  one of the things that i've come to appreciate about particularly the the grid and power systems
• 7:04
  but also you know more broadly in that energy systems of you know the upstream complexities is
• 7:11
  that not until i really got into bitcoin and understanding the power aspects of it did
• 7:16
  I really understand the complexities of power that everyone takes for granted and everyone who has working money generally takes it for granted because it's always just worked. And the same is true of power, but it's a highly complex system.
• 7:33
  from the perspective now that you have
• 7:39
  as it relates to Bitcoin mining
• 7:41
  and looking back on the power industry
• 7:43
  and saying you worked in that 24-7 control room
• 7:46
  where loads and generation are constantly being balanced
• 7:49
  and either loads are coming on or coming off.
• 7:54
  How do you see Bitcoin solving a problem,
• 7:58
  specifically the flexibility of its load?
• 8:01
  well the the thing i think most people take for granted is 60 hertz like the lights aren't
• 8:11
  flickering right now everything's running you plug something into the wall it just works and
• 8:17
  that means that the electricity the voltage specifically is oscillating 60 times a second
• 8:25
  up and down, up and down, up and down.
• 8:27
  And if you add a large load, it gets slower.
• 8:32
  It's less than 60 hertz.
• 8:33
  If you add a generator or you triple load, it gets higher.
• 8:38
  It's above 60 hertz.
• 8:40
  And if you change the frequency, you're going to damage machines.
• 8:43
  And behind the curtain, behind the scenes,
• 8:47
  there are thousands of operators looking at predictive tools
• 8:52
  and signals like ACE, area control error, where ACE is a measurement.
• 9:00
  It's like a leading indicator to frequency.
• 9:02
  And if ACE is going in a certain direction, that triggers the system operators to do something,
• 9:08
  take some type of corrective action.
• 9:11
  And so the complexity behind the scenes is just, it's mind boggling how much is actually happening.
• 9:19
  Right now, as we sit here today, it's happening.
• 9:22
  And it's a system that never shuts off.
• 9:25
  Traditionally, system operators have had usually only generators at their disposal to manage the load.
• 9:32
  And frequency can change due to load coming on during the day when everybody's waking up and plugging in their coffee machines and the different patterns that happen throughout the day.
• 9:50
  And so there's response to that.
• 9:52
  And then there's response to outages if a generator trips offline.
• 9:57
  And traditionally, system operators have only had generators at their disposal to increase the output of the generator to help respond to frequency.
• 10:08
  And so you'll have some generators on spinning reserve and responding to signals from the market.
• 10:14
  And then you have more drastic measures like if if there's an outage, you know, every region is responsible to maintain its own frequency.
• 10:26
  And if it can, it has to procure it from neighboring regions.
• 10:29
  So a lot of a lot of region or all the regions will have some like peak replants and stuff that will can be fired up within a few minutes of an outage.
• 10:40
  And so you have regions have responsibility to get back to where they need to be.
• 10:46
  And and then in extreme scenarios, you don't have enough generation.
• 10:50
  You got to start you do things like voltage reduction, for example, you know, reducing everybody's voltage by five percent or three percent.
• 11:00
  Power is voltage times current.
• 11:03
  So you reduce the voltage, you reduce the power, you reduce the energy.
• 11:07
  So that's one way of dealing with shortfalls.
• 11:09
  nobody wants that because you see you see brownouts and you see your light stem
• 11:14
  and then the the worst scenario is and nobody ever wants to go there but all system operators
• 11:20
  train for it is rotational load shedding where you take a substation that has low voltage feeders
• 11:27
  and you just pop the breakers one by one by one either manually or you do it in an automated
• 11:32
  sequence everybody shares a bit of the downtime and that's like there's not enough electricity
• 11:38
  to go around. The golden rule is frequency can never go below. You know, we're talking like 59.5
• 11:46
  Hertz is devastating. We're not like, this is not 55 Hertz territory. We're talking like
• 11:51
  fractions of a Hertz can totally lead to cascading blackouts. So what do you do? Last
• 11:57
  worst case scenario, you tripped the load. So for the first time ever, you now have a load that says,
• 12:05
  hey, you can trip me off. I don't care. I'll do it if I'll save some money. And I tell everybody I
• 12:14
  meet that utilities have been searching the world for a load profile that doesn't care if it has
• 12:21
  dual supply. It doesn't care really about anything. It's rugged, it's durable, it's resilient. And
• 12:29
  And utilities are like they're always looking for technologies to help ride through those bumps, whether it's battery storage or pump storage or solar.
• 12:42
  So having a load looking kind of like flipping the problem on its head and instead of looking at generation as a solution, look at shutting load off as a solution.
• 12:53
  Right.
• 12:53
  So this is a paradigm shift in the utility industry.
• 12:56
  It was like unfathomable to suggest actively taking load off the grid as as like a first level response is just a new way of thinking.
• 13:08
  And so a lot of utilities out there, I'm friends with a lot of my well, I'm still friends with my old co-workers who are now, you know, gone on to various high level positions at utilities.
• 13:20
  And the knowledge of Bitcoin is is growing, but it's not there.
• 13:24
  And the knowledge of what Bitcoin mining can do and can be as an asset to the grid is still, I think we still have a huge opportunity to do some education.
• 13:33
  But I see it as God's gift.
• 13:35
  Bitcoin mining, I see as God's gift to utility operators because it's another tool in their toolkit that actually works much better.
• 13:44
  And it's very economical.
• 13:47
  yeah from my vantage point the there's the question for operators it's like hey if all
• 13:56
  these things are true that would be amazing but the question of is it true of like hey will these
• 14:05
  miners actually respond this way and then needing to have some grounding in in the actual source of
• 14:11
  demand to know that it's reliable and sustainable such that it will actually be there on the grid
• 14:19
  if they build a strategy around it to come off.
• 14:23
  You know, and I don't, you know, one of the things I'll do as part of this podcast is
• 14:26
  learn more about other regions.
• 14:28
  But in Texas, we have real time pricing and a deregulated energy market.
• 14:33
  And so the price signals are, you know, particularly in those periods that you described, if there's
• 14:39
  scarcity events. That's when power is most expensive and Bitcoin miners are this perfectly
• 14:47
  economic consumer of power that they're not refining it further down the line. And they
• 14:52
  have every incentive to shut off in those periods. And so I agree, there's a lot of education to go,
• 14:58
  but that it's kind of understanding why it exists in the way that it's flexible, but also that it
• 15:04
  will be there, but that if you start to grok that, then it's like, well, hey, the more of this
• 15:09
  that's on, the more impactful, you know, it can be as a lever. The last question I'll ask about
• 15:16
  the power side before we shift to ocean Do you have a perspective on given the nature of Bitcoin mining whether it will you know at least what on the grid whether it will gravitate to being co with generation like not necessarily
• 15:31
  saying like are the power companies going to be bitcoin miners but just in terms of physical
• 15:35
  location is there a benefit in terms of cost as well as the operation of the grid system
• 15:41
  to be um co-located next to a generator i think that yeah there's a huge benefit like the um
• 15:48
  A lot of the power that's generated, well, a lot of times generation is done at where the source of the energy is.
• 15:56
  If it's hydroelectric, for example, or you have like a big wind farm in the middle of the plains.
• 16:02
  And transmission was, it's a really prominent part of the grid.
• 16:08
  And it costs money to move the electricity from the generation to the load centers because it's not common for to have like a subdivision next to a nuclear power plant.
• 16:19
  So it's very expensive to move the power.
• 16:22
  And there's also you lose some of the energy due to line losses.
• 16:25
  and um so being able to completely collapse that distance and put the load next to the generator
• 16:36
  it saves all that capital expense and um uh and and you and it's more efficient because you you
• 16:45
  lower the line losses or you've reduced you eliminate them so you're behind the meter
• 16:49
  Kind of the same way or the inverse way that DERs transformed the renewable space, distributed energy resources.
• 16:58
  So rooftop solar, you know, micro grids, like any kind of like localized generation.
• 17:08
  It changed the traditional model where generation was happening over here.
• 17:13
  Consumption was here.
• 17:14
  And then you had to step up the voltage, send it 500 miles and then use it.
• 17:19
  And with DERs, you generated it locally and it became more efficient.
• 17:24
  And so that spawned a whole area of development and research in microgrids, for example.
• 17:35
  Bitcoin mining is like, it enables the opposite to occur.
• 17:38
  You just pick up the load and put it where the generation is.
• 17:41
  And so that has a lot of cost savings.
• 17:43
  But I think utilities can use it strategically as a way to enable projects and generators can use it strategically to enable the deployment of sites.
• 17:56
  If I think, if I'm not mistaken, probably the biggest limiting factor in bringing on a large generator is not building the generator.
• 18:05
  It's building the transmission line to accept the load because transmission lines are going through like your backyard and my backyard.
• 18:14
  And it takes a long time to get those environmental permits and approvals.
• 18:20
  And so you have the potential to generate, but no lines to generate it onto.
• 18:25
  And so you don't. And then now you have this opportunity cost. Somebody sunk $100 million into a generator that's doing nothing. So Bitcoin mining can actually enable whoever owns that to liven it up quicker, start making money until the lines are there and ready to accept the power.
• 18:45
  So I see mining as kind of like an enabler of that.
• 18:50
  And it's kind of what Gridless is doing in Africa by building up mining to enable the build out of the local community distribution networks.
• 19:03
  And I was in Tokyo last year with Luke and we visited Agile Energy X.
• 19:11
  It's a subsidiary of TEPCO, Tokyo Power.
• 19:15
  And they're doing that. They have like pockets of Bitcoin mining all around their region because they either have too much energy and no lines to put it on.
• 19:28
  So they just, well, let's mine Bitcoin with it. Or the Bitcoin mining was actually solving a congestion issue that they had.
• 19:37
  Interesting. That's a generator in Tokyo? Or in Japan?
• 19:42
  Yeah, so it's a subsidiary of Tokyo Electric Power Corp, TEPCO.
• 19:48
  Their subsidiary is called Agile Energy X.
• 19:52
  Kenji Tateiwa, if you're listening, shout out.
• 19:55
  But he's doing great.
• 19:55
  You need to get that guy in here.
• 19:57
  He's got a degree in nuclear engineering, so it's going to be a deep discussion.
• 20:02
  Yeah, you're going to have to make the introduction.
• 20:04
  Yeah, okay.
• 20:05
  All right, well, we could do a whole episode on power, and we might have to do one.
• 20:10
  but one of the things that's another key theme of the podcast which is what you know really what
• 20:17
  you guys are um you know as a principal foundation of oceans project i'd say is mining centralization
• 20:27
  and decentralizing mining and on past episodes we've we've talked at a high level about kind
• 20:36
  centralization and hardware and centralization and pools.
• 20:40
  And at the top,
• 20:41
  we talked about the release last week from square on the hardware side,
• 20:45
  you guys,
• 20:46
  um,
• 20:48
  or ocean had a predecessor,
• 20:50
  but ocean,
• 20:51
  you co-founded it with Luke dash jr.
• 20:53
  In 2023,
• 20:54
  just talk about like why you're,
• 20:58
  you're building ocean,
• 20:59
  like how you see the landscape of mining,
• 21:03
  how you see the effort that you're working on through ocean,
• 21:06
  helping to decentralize it, but really that initial inspiration for why work on this,
• 21:10
  why spend your time working on ocean? Yeah. Um, like Luke has always, he's always worked his whole
• 21:19
  like life's work is about protecting Bitcoin and making it better and more resilient and able to,
• 21:27
  to be here for the next thousand years. And so there's always, there's always, um,
• 21:32
  threats to this, to a new system and Bitcoin is no different. And when Luke and I were going into
• 21:39
  business together, the, the, um, like the foremost issue that was a concern to both of us was
• 21:46
  centralization of mining at the pool level. And, um, and, and that it was not like, it wasn't
• 21:54
  like a highly talked about topic and the general consensus at the time around bitcoin circles was
• 22:03
  that bitcoin mining was decentralized because you had hash rate all over the world and there's no
• 22:09
  problem but um if if you look at it from the anatomy of of mining and like what mining actually
• 22:17
  entails, it actually looked a lot scarier.
• 22:22
  And if you kind of unpacked mining is not just the, running the ASIC is one component
• 22:29
  of mining, and it's the last component of mining.
• 22:32
  But right from the early days of Bitcoin, mining was built to be creative.
• 22:40
  It has creative components and brute force components.
• 22:43
  And the creative component of mining was entailed building a local mempool, running a full node, first and foremost, running a full node, building a local mempool, building a block of transactions from your local mempool, and then turning that into a block template and giving that block template to your ASICs.
• 23:07
  And you could see in that, if you look at it from the functional perspective, the Bitcoin miner had complete sovereign control over their node and complete sovereign control over what went into their block and what they eventually mined.
• 23:26
  and um and this is what it was like in the early days of of mining i wasn't around back then but
• 23:33
  for whoever was you ran you ran the bitcoin client and there was a button and it said get bitcoins
• 23:40
  and with that feature turned on you would actually be making a block template unique to you
• 23:47
  complete complete diversity from anybody else's block template providing your own hash power
• 23:54
  And so the whole concept of decentralized mining in those early days was thousands of miners all around the world.
• 24:02
  Thousands at the time, miners and node runners were synonymous.
• 24:07
  And censorship was impossible.
• 24:10
  It was a joke.
• 24:11
  Like, you can't.
• 24:12
  You couldn't censor.
• 24:13
  But since mining pools came onto the scene to essentially solve for cash flow, right?
• 24:20
  Difficulty was increasing.
• 24:22
  Miners needed to get paid.
• 24:24
  volatility variance was a real thing. So miners grouped the hash rate together to solve for this
• 24:30
  cash flow need, but in the process outsourced the intelligent parts of mining to the pool operator.
• 24:37
  And that happened pretty quickly in the beginning and it's only gotten worse. And we sit here today
• 24:43
  and the majority of blocks found on the network are found essentially by two different entities.
• 24:51
  They operate under different names on the surface, but behind the scenes, it's really just two entities.
• 24:57
  So hashrate is spread across many countries around the world, but everybody's getting their blueprints from the same two CEOs.
• 25:07
  Like that's that's not a decentralized Bitcoin.
• 25:10
  And Luke believed that Bitcoin survival requires that we we change that.
• 25:17
  And so we set out essentially launching Ocean to build the tools to allow miners to take back control of that very important intelligent part of mining by building their own block templates.
• 25:30
  And pre-Ocean, pre-Datum, the tools just, you know, weren't readily accessible.
• 25:38
  And the know-how on the miner side wasn't there also.
• 25:42
  So, so, um, it's as much an educational thing as it is a product.
• 25:47
  Yeah, for sure.
• 25:48
  I talked to a lot of miners and just the energy side and facility side requires so much time
• 25:56
  and energy that then thinking about things that exist outside of that is, uh, I think,
• 26:04
  you know, again, one of the important parts of education about why it's important, you
• 26:09
  know, to the, to the people that are out there hashing.
• 26:12
  But if I understand it correctly, then were you and Luke discussing different business ideas and talking about like where was most important to work within Bitcoin and then gravitating to pools and pool centralization?
• 26:27
  Is that kind of?
• 26:28
  Yeah, we became friends through a pretty cool turn of events and not turn of events, but just introductions.
• 26:40
  And, yeah, we we we wanted to we know we wanted to work together and go into business.
• 26:47
  And essentially it was all right.
• 26:49
  Like we found the right people and we started looking into Bitcoin and where where our respective talents could be best used and put to good use.
• 27:00
  And and what areas of Bitcoin needed the most attention at the time.
• 27:03
  So it didn't take long to look at the mining space.
• 27:08
  And I had a very brief background in mining, but a huge energy background before then.
• 27:13
  And Luke practically wrote most of the code in the mining ecosystem from the early days.
• 27:19
  So it kind of quickly emerged as the obvious choice.
• 27:23
  And part of that was the fact that Luke had operated the Eligius mining pool from 2011 until 2017.
• 27:31
  and I think he kept that sort of on the back burner,
• 27:36
  ready to go in case Bitcoin ever needed it again.
• 27:39
  But back in those days, he ran it as a hobby pool,
• 27:43
  zero fees with one other guy, Jason Hughes,
• 27:45
  who's on our team now.
• 27:47
  Miner's familiar with him back then.
• 27:50
  He went by WSKIV, WK057.
• 27:53
  But no, that emerged as like the obvious choice
• 27:56
  and the thing we needed to do.
• 27:58
  And it didn't take us long to come to that conclusion.
• 28:00
  And then we basically set up a company real quick and we put together a team of people that we felt could get the job done.
• 28:09
  And we've been slowly growing on the personnel side, but rapidly growing on the products and the hash rate side ever since.
• 28:18
  So before we get into the specifics of Ocean, how do you think about the pool function today or in general within the Bitcoin mining supply chain in terms of the important parts of specialization that have naturally caused setting variance and payout structures aside, the core functions that pools provide?
• 28:48
  to miners well looking at the most simplest simplistic role of a pool it's to solve for
• 28:56
  cash flow it's to provide a mechanism for miners to come together group their hash rate and and
• 29:04
  essentially share the variance that that was that's why pools existed that's that's why
• 29:11
  we created allegiance and and all the early pools started was a collective effort to to help
• 29:16
  everybody mine and get paid and not wait around for 80 years to hit a block.
• 29:21
  And over the years, the pools have turned, the modern pool, the FPPS pool, prototypical
• 29:30
  pool has become like a Swiss army knife of products.
• 29:34
  And it ranges from variance reduction to insurance, guaranteeing payouts and, you know, financial
• 29:42
  products and derivatives and financing for, for miners and pools of kind of like the FP,
• 29:51
  the typical FPPS pool is I think grown in scope far beyond what, what a pool really should be.
• 29:58
  And, and I'm not sure really what caused that and whether it was a demand like, you know, this,
• 30:04
  the, I, I, when you mentioned before the complexity of running a modern mining operation, I get it.
• 30:09
  Like I spent boots on the ground years building sites and, um, and miners are sitting there
• 30:16
  worrying about, you know, equipment fans, ASIC fans breaking and transformers overheating
• 30:22
  and rising power prices.
• 30:24
  And so the complexity of, oh, let's, let's build a node and like they have the capacity,
• 30:29
  but it's, it hasn't, there are so many other worries to do.
• 30:33
  And and so kind of outsourcing all that to the pool,
• 30:39
  I think it just kind of like happened very naturally but the pendulum has swung so far to the other degree where pools are in a position of power right now They are the power players in the mining space
• 30:54
  They dictate what goes in the chain and what doesn't go in the chain.
• 30:59
  And it's a far, far away from where we started.
• 31:03
  Yeah, I think that one of the things that I talked about in the last episode with Phil Geiger is that over time,
• 31:10
  as Bitcoin grows over long time horizons,
• 31:14
  Bitcoin scales,
• 31:16
  everything should naturally decentralize.
• 31:20
  And if I were to have gone back five years ago or seven years ago,
• 31:26
  and I've only been paying attention to Bitcoin for nine years,
• 31:32
  that there's probably a natural limiting factor in terms of the number of
• 31:38
  pools,
• 31:38
  but that
• 31:40
  I would have expected
• 31:43
  increasingly
• 31:44
  increasing decentralization versus what has actually
• 31:47
  happened from the pool's landscape
• 31:49
  of essentially consolidation
• 31:51
  and centralization
• 31:53
  and again
• 31:58
  there's a saying that everything's good for Bitcoin
• 32:01
  and there are economic incentives and people will follow
• 32:03
  those economic incentives and so
• 32:04
  I'm confident over the long time horizon
• 32:07
  and that that will be true, but it will only be because of people like yourself
• 32:11
  building the competitive solutions that deliver a differentiated value.
• 32:18
  But in the current state, if minor centralization at the poolside were to be a risk
• 32:26
  in terms of materializing, how do you see that happening?
• 32:33
  like in terms of like is it the 51% attack is it the censorship is it changes to bitcoin
• 32:40
  like what like just your own your own perspective on it's like hey centralization is a problem but
• 32:47
  if it materialized to actually harm the network or harm the incentives or harm the interest of
• 32:53
  the individual miners that were pointing to these large pools of hash rate you know how do you see
• 33:00
  Like, where do you see the most material risk?
• 33:04
  Well, it's, we're sitting here and like,
• 33:07
  your question reminded me of one of Luke's,
• 33:10
  one of my favorite sayings from Luke,
• 33:11
  which is Bitcoin isn't censorship resistant.
• 33:14
  It just happens to not be censored right now
• 33:17
  because we have two entities that
• 33:20
  at the push of a button could censor transactions.
• 33:25
  And I guess you could, you know,
• 33:28
  There's lots of – you could think your way around that in terms of miners switching pools, but the fact that it can happen means that we're in a really bad state.
• 33:38
  I think censorship is a big one.
• 33:43
  Is Bitcoin – when – not if, but when Bitcoin becomes – like when the world is on a Bitcoin standard, do you think access to block spaces is going to be non-competitive?
• 33:56
  It's going to be extremely competitive and acquiring the design rights for the majority of the network, like to be able to rewrite the chain, do a 51% attack or sensor.
• 34:13
  I think it could be like a huge, huge tool.
• 34:17
  So I don't really know.
• 34:19
  It's hard to sort of pinpoint what it's going to look like, but the fact that it can happen right now.
• 34:24
  today we're sitting here we're one phone call away from censorship on the network like yeah
• 34:30
  and when you say that one's one phone call away you're talking about like a phone call from
• 34:35
  president trump phone call from president trump to the ceo of a foundry for example
• 34:41
  they could do some major damage and and the um the phrase 51 attack
• 34:49
  a common misunderstanding is that you need 51 percent of the hash rate to carry it out but
• 34:57
  that's not true 51 percent is is the point at which you are guaranteed to get away with the
• 35:02
  attack but you can actually start the attack at 20 to 30 percent hash rate so we're already sitting
• 35:07
  in in this state where um we're just in a vulnerable position so well one question i
• 35:14
  would say there just to clarify it's like if you had 51 there's still the probability that you could
• 35:18
  have bad luck over a period of time and expend resources and and fall behind right but sure i
• 35:24
  see your i see your point over the long term on the other side you don't have to have 51 to
• 35:31
  potentially you could like you could do major damage to to the blockchain yeah with 20 and so
• 35:39
  yeah so one phone call away when you have one entity that designs the block templates
• 35:44
  for thousands of miners,
• 35:46
  it's essentially the same block template.
• 35:48
  It's one.
• 35:49
  It's as if every miner on those pools
• 35:52
  is literally one big miner.
• 35:54
  In that relationship, the pool is the miner,
• 35:57
  and what we call the miner
• 35:58
  is just providing the hash power
• 35:59
  for that single miner.
• 36:01
  One of the points, at least the way I see it,
• 36:03
  is that there's two...
• 36:05
  I see the risk of censorship
• 36:09
  and the risk of changes to Bitcoin
• 36:11
  being greater than the 51% attack.
• 36:13
  Okay.
• 36:13
  but I agree that those are like the three primary surface areas that there's
• 36:21
  the idea that,
• 36:22
  Hey,
• 36:23
  if you got these two massive pools and maybe marathon,
• 36:28
  or maybe you don't even need marathon to sensor transactions,
• 36:31
  then,
• 36:33
  you know,
• 36:34
  when I posed the question to,
• 36:35
  to Phil in the last episode,
• 36:37
  it was like,
• 36:37
  well,
• 36:37
  you might go offline for a period,
• 36:39
  but you,
• 36:39
  you start solo mining.
• 36:41
  But the perspective is if mining is centralized and it's not this massive game of whack-a-mole, then it's not like the pools are just doing it on their own volition.
• 36:54
  They're doing it because there's some regulatory pressure, some jurisdictional pressure.
• 37:00
  and to think that if you start from a centralized world and you want to peel off and that you're
• 37:06
  not going to be easy to be a mole that's whacked is unrealistic i think in my perspective and that
• 37:13
  if you you know if you wait to that point to to solve that most critical risk of thinking of an
• 37:19
  individual miner being like hey the value of your asset the asset value it's like the energy
• 37:24
  infrastructure is the integrity of the system that you can't wait to for that call to be made
• 37:30
  to by that point it would be too late yeah is what you're saying yeah yeah um and so i think
• 37:36
  that there's there's all you know there's the question of well i could just switch and but if
• 37:39
  right but if they're all getting the same phone call then it's like okay well i'll go start a new
• 37:44
  pool but you're like well what is the circumstance looks like and is that realistic and maybe there's
• 37:49
  some other geopolitical interest that's a state actor that has an interest not to
• 37:53
  to respond to similar requests,
• 37:57
  but it's not a good state to be in.
• 38:01
  And if you're thinking about the individual minor incentives,
• 38:04
  everyone has to act in their own self-interest,
• 38:07
  but with the integrity of the system as a whole in mind
• 38:11
  because their assets are tied to that system.
• 38:18
  Now, when it comes to what you're actually working on at Ocean
• 38:21
  and how you guys are helping to solve a problem.
• 38:25
  One is providing another pool.
• 38:27
  So more pools, less centralization.
• 38:32
  But what would you say most differentiates ocean as a pool
• 38:37
  other than just being another pool?
• 38:39
  Yeah.
• 38:40
  Well, what differentiates us is we,
• 38:45
  if you think of a pool as in the traditional sense,
• 38:50
  like the other pools were, we're not really like a pool.
• 38:53
  We're more of a payment coordinator between miners.
• 38:57
  So we've, we've created a mechanism through Datum for miners to take back
• 39:03
  control of the intelligent parts of mining and become solo miners in a sense.
• 39:10
  But.
• 39:11
  Way before.
• 39:13
  So Datum is decentralized alternative.
• 39:17
  If you get it right, I'll give you a shirt.
• 39:20
  No.
• 39:20
  You give it to me.
• 39:23
  You already gave me a hat.
• 39:24
  Decentralized alternative templates for universal mining.
• 39:27
  Okay.
• 39:28
  Yeah.
• 39:29
  So think of it, if you can picture a traditional centralized pool,
• 39:34
  is you have Bitcoin and then you have the pool running,
• 39:38
  who runs the full node, peers with the network,
• 39:41
  pool builds a local mempool, pool builds block template,
• 39:46
  turns that into work, SV1 stratum work,
• 39:50
  and then gives it to the miner.
• 39:51
  Miner does the work, but goes straight up through the pool back to Bitcoin.
• 39:56
  But all decisions are made by the pool.
• 39:59
  And when the block is hit and the Bitcoin is created into existence,
• 40:06
  it goes to the pool and flows down to the miners.
• 40:09
  So they control the upstream work and the downstream payment.
• 40:12
  ocean through datum we've completely taken ourselves to the to the most practical extent
• 40:21
  possible out of the equation and we let miners interface directly with bitcoin so the miner has
• 40:28
  the hash power the miner runs a full node the miner builds their own block template and they
• 40:32
  peer with bitcoin directly and they all do that and in a sense they're all solo miners because
• 40:39
  solo mining is being sovereign and choosing your block templates.
• 40:44
  The role of ocean is really a payment coordinator.
• 40:46
  We come along and say, Parker, you were 10% of your 10% of the pool.
• 40:53
  I'm 10% nachos.
• 40:56
  What are you?
• 40:57
  80%.
• 40:58
  So Parker, if you find this next block, you need to pay 80% to nacho, whatever 80% of
• 41:05
  the block subsidy and reward is and pay 10% to yourself and 10% to me.
• 41:10
  And we essentially give, we give the miners the payout slip that says, if you find a block,
• 41:15
  this is who you have to pay.
• 41:17
  And this is how much you have to pay them.
• 41:19
  And we come up with that by looking at the work done over a period of time.
• 41:23
  And we just, we just maintain a spreadsheet essentially of who did what work and how much
• 41:28
  of a payout that would translate into if, you know, it's, and it's updated in real time,
• 41:34
  essentially we don't make the block template and when a block is found the money goes directly into
• 41:40
  the miners wallets it doesn't come into ours like we're non-custodial so does the
• 41:47
  and i don't know this answer but the payout structure does it go to the individual miner
• 41:54
  that actually solves the block and then from there after 100 blocks does it get distributed or
• 42:00
  Or is it paying out to all the...
• 42:03
  No, it's paying out to the miners directly in the generation transaction.
• 42:09
  So in the generation transaction is the first transaction when a block is found.
• 42:18
  And the list of outputs in every other pool, the list, the output UTXO is the pool's Bitcoin address.
• 42:27
  For an ocean block, the output address is 60 addresses.
• 42:30
  belonging to the top 60 miners on ocean so if you're 10 of our hash rate you get paid
• 42:38
  0.3 bitcoin immediately directly from the network without going to the pool first
• 42:45
  and then how did how are the smaller miners good question so um that is a function bitcoin has the
• 42:54
  capacity to pay many, many miners at once, but firmware is generally the limiting factor.
• 43:01
  So in the early days of, um, of Allegius, when Luke ran it, he would pay hundreds of miners.
• 43:09
  And again, the subsidy at that time was 50 Bitcoin. So, but 900 and something was the top,
• 43:15
  like you would 900 individual miners were getting paid directly in the generation transaction.
• 43:19
  But over time, the firmware from Bitmain essentially was just not maintained.
• 43:26
  And so there's a limit to how much data you can.
• 43:31
  Ocean's giving miners the payout information in the Coinbase.
• 43:36
  And so you can only put so much data before the firmware just kind of chokes up.
• 43:42
  So depending on what miner found the block, you can have more or fewer output addresses.
• 43:49
  The worst case scenario in an ant miner, it's like 16 addresses.
• 43:55
  In a what's miner, it's closer to 60.
• 43:57
  And hopefully as firmware gets better, then we'll be able to push that number.
• 44:02
  And all of those miners are getting paid UTXOs directly from the network.
• 44:08
  So zero hops.
• 44:10
  You can touch Bitcoin from it, basically.
• 44:13
  And everybody who's below the threshold, they get paid out in a secondary transaction that
• 44:18
  Ocean sends.
• 44:19
  So temporary control, but never custody of that funds.
• 44:23
  And we have a minimum payment threshold of about a million sats.
• 44:28
  But we also have Lightning, Bolt 12.
• 44:30
  I was going to ask the question.
• 44:31
  A lot of our miners are already configured on Lightning,
• 44:37
  and essentially they're getting paid out daily every time we have blocks via Lightning.
• 44:44
  Okay, that was for my own education, but hopefully others would probably have the same question.
• 44:49
  But in a worst case scenario, it's effectively like, say, the 15 large, if it's an ant miner, the 15 largest miners, it all goes out direct.
• 45:01
  And then the percentage that's remaining gets dealt with.
• 45:06
  And that's like 99% of the block reward goes out in those top 15.
• 45:11
  Yeah, yeah.
• 45:12
  Because the majority of hash rate is aggregated to a few large miners.
• 45:17
  Right, versus it all going to one.
• 45:18
  Right.
• 45:19
  and then and then being distributed so you mentioned datum and that
• 45:27
  one of the key distinction is that every miner is like every miner is actually running their own
• 45:36
  node that's part of ocean is that correct um if you're running not every miner but i would say
• 45:42
  the majority are so we okay so so so you enable them to but they don't have to yeah we're we're
• 45:47
  really big believers in your your hash rate your choice if you want to if you
• 45:52
  want to run our node you're more than happy to send the hash rate just send it
• 45:58
  to mind out ocean dot XYZ and if you we encourage you to run your own note and
• 46:03
  if you do there more work involved in it entails running a node and a datum gateway but I would say right now I think about 90 of our hash rate is on Datum And there a few miners who don want to do it and that fine
• 46:17
  But most of them are, and we're making it super easy as well.
• 46:21
  It's available through a number of different clients and platforms like Start9 and Umbrella.
• 46:28
  And so the other thing that you mentioned was when you were drawing the comparisons between how Ocean is structured,
• 46:35
  allowing Bitcoin miners to peer directly with the Bitcoin network
• 46:41
  versus doing all the work and then pointing back up to the pool
• 46:46
  where ultimately the funds get paid out to
• 46:49
  in the context of a foundry or an ant pool.
• 46:54
  Just talk a little bit about the differences between the Datum protocol,
• 47:00
  which Ocean runs, and that piece is open source,
• 47:03
  in stratum but also the differences between um datum and stratum v2 so in in um datum is is uh
• 47:15
  just another protocol that that we wrote to kind of enable this decentralized mining to happen today
• 47:23
  um but communication with the with the with the asic servers are still done in stratum stratum v1
• 47:30
  So essentially the flow is, if you're running Datum on site, you would have a box, you'd have like, you know, a mini PC or Intel NUC or something larger, but it's something that's large enough to run a Bitcoin node, full node and sync and, but Datum on, and then you have a full node, you install the Datum software on top of it.
• 47:52
  And the flow essentially is your node peers with the network.
• 47:59
  The Datum gateway turns the block templates into Stratum work.
• 48:05
  So essentially it's a Stratum server.
• 48:07
  And then it communicates with the ASIC servers over Stratum v1.
• 48:12
  And Datum on site communicates with Ocean's Datum, which we call Datum Prime, over the Datum protocol layer.
• 48:20
  So it's an encrypted protocol and we built it from scratch in order to solve a very particular problem, which is miners don't have the tools to make their block templates today.
• 48:32
  And we need them to make their own block templates in order for Bitcoin to be censorship resistant.
• 48:37
  So when we launched the company, and if you go back to some of our earliest pitch decks and PowerPoint presentations, there was no datum in there anywhere.
• 48:50
  We were actually intending to use Stratum v2 because it was the predominant protocol and project in the space.
• 48:57
  and um we uh our engineers um primarily jason hughes um i would say we launched in november of
• 49:06
  23 and we we launched as a centralized pool so we didn't have datum yet everybody was using our
• 49:13
  templates and we got to work really quickly about building building out the next phase which is let's
• 49:19
  let's build the tools and push it off to the miners outsource the control back to the miners
• 49:24
  and um yeah jason dug into the code and um and the inner workings of stratum v2 and just kind
• 49:33
  of came to the conclusion that it wasn't the best tool for the job right now at this time
• 49:38
  um i'm not a developer myself so but from from his perspective he needed something that was
• 49:47
  lightweight, um, that was purpose built for decentralization in mind. And it was easy,
• 49:56
  uh, easy enough to deploy in a variety of hardware configurations and rapidly scale.
• 50:02
  And those, those things just weren't possible with stratum V2. And, um, and so Jason,
• 50:09
  it was also written in a language that he, he's, you know, he's a C guy, he's a C maxi. So he,
• 50:16
  He basically said, look, we need to decentralize mining in a jiffy.
• 50:21
  And this protocol, while the intent is great, and I think we're all fighting for the same thing in terms of decentralization,
• 50:29
  it was originally a protocol that wasn't designed.
• 50:35
  It wasn't intended to be a decentralizing protocol.
• 50:39
  It was proposed early on after Stratom v1 to fix the lack of encryption.
• 50:43
  And over the years, different features were added.
• 50:46
  Security, privacy.
• 50:47
  Yeah, privacy.
• 50:48
  And eventually...
• 50:49
  Efficiency, too.
• 50:50
  Eventually, the concept of decentralization was sort of bolted on after the fact.
• 50:55
  Well, if we have a job negotiator, then we can let miners participate in that.
• 51:01
  But it's a centralized protocol that has ways to allow miners to participate.
• 51:09
  but from the ground up from the from the core that the design was was never a decentralized
• 51:15
  protocol so centralized in the sense that the pool is running it yeah yeah the pool runs the
• 51:21
  main stratum v2 server and has various interfaces with the miners and i'm not sure if the design has
• 51:27
  changed since we first looked at it it may have but at that time it was it was it wasn't kind of
• 51:33
  like consistent with the ethos of giving control to the miners.
• 51:37
  Cause in that system,
• 51:39
  the pool still retained the authoritative decision-making power to say yay or
• 51:45
  nay.
• 51:46
  Miners had a say,
• 51:46
  but it was ultimately the pool's call at the end.
• 51:48
  And that wasn't good enough for us.
• 51:50
  Yeah.
• 51:50
  My understanding from an interaction with Matt Carallo online is that there,
• 51:55
  there,
• 51:56
  there's no concept of a negotiation.
• 51:58
  There was some term of a negotiator,
• 52:01
  but that,
• 52:02
  um the pool may set the template and then the the
• 52:09
  miner would construct you know you know select their own transactions if it fit the pool's
• 52:16
  template you know and so it's like hey well if they're mining off the template it's not like a
• 52:24
  negotiation on a per transaction basis but it still seems to me that there's an input side which
• 52:30
  is they can preset what transactions would be allowable or not and that being set at the pool
• 52:40
  level and so one of the one of the key things that i'm trying to understand is it seems to me that
• 52:49
  the the miners themselves being in absolute control of the templates
• 52:56
  is critical to
• 52:59
  the decentralization
• 53:02
  if the pools,
• 53:05
  you know,
• 53:05
  if working with a pool.
• 53:06
  Is that fair to say?
• 53:08
  And is there an aspect of Datum
• 53:10
  that allows that
• 53:11
  that wasn't in Stratum B2?
• 53:13
  Like, what is that mechanism?
• 53:15
  Because there's the importance
• 53:16
  of the payout going straight
• 53:17
  from the Coinbase.
• 53:19
  But theoretically,
• 53:21
  you know,
• 53:22
  if,
• 53:24
  I mean,
• 53:25
  they would have to design a system.
• 53:26
  that, um, one of the pools, ant pool or, or foundry could, could do something like that in
• 53:35
  theory from a payout perspective, but from an actual construction of the block and being in
• 53:42
  absolute control of that. And then knowing, you know, having some assurance because the payout
• 53:47
  is direct from the miners, the combination of those two things, it seems like that is like
• 53:52
  those two things together is critical to actually putting more control on the miners is that fair and
• 53:57
  and what is the mechanism in datum that maybe allows that or what's the difference between datum
• 54:02
  and stratum v2 that allows that so using your explanation kind of how you framed it the the
• 54:09
  stratum v2 setup would kind of be like pool works hand in glove with miner to come up with
• 54:14
  a template where the pool has a say and the miner has a say and there's there's a bit of a handshake
• 54:21
  and that's kind of like quasi-decentralized.
• 54:25
  But if the pool has any say at all,
• 54:29
  then they're a target for coercion.
• 54:33
  So in our case, we have no say what goes into the template.
• 54:37
  If you're a miner on Ocean and you're making your template,
• 54:40
  as long as it's a valid block, we can't do anything about it.
• 54:46
  the only thing we do is we tell you how much to pay nacho and we tell you how much to pay me
• 54:53
  but what you put in your block is entirely up to you for better or for worse the whole point is
• 54:59
  we want miners making the choice so that so that there's not one throat to choke
• 55:07
  in our world if ocean had a hundred percent of the hash rate theoretically hopefully um
• 55:14
  Maybe not hopefully, but it's a thought exercise, proving the point.
• 55:21
  If we had 100% of the hash rate and every miner was running datum,
• 55:25
  then we would have thousands of individual templates being created by thousands of unique miners whose identities we don't know.
• 55:37
  Because we don't have customers.
• 55:39
  We have Bitcoin addresses.
• 55:41
  When you mine on us, there's no accounts.
• 55:43
  There's no sign up. You just mine with a Bitcoin address. And the mechanism to do that is turn each miner into a solo miner. Each miner runs a stratum server, peering directly with the network, totally sovereign entity with full decision making authority over what goes in their block.
• 56:03
  and if everybody's doing that and we all collectively agree to split rewards with each
• 56:10
  other then then two things happen bitcoin it's become censorship resistant for real because
• 56:18
  there's not one throat to choke if you get a call from president trump to censor like
• 56:24
  there are literally tens of thousands of miners making templates we don't know who they are
• 56:29
  this is this is kind of like where bitcoin needs to go to to be really resilient um but then
• 56:36
  everybody it kind of like in a co-op setting everybody agrees to split rewards so we're all
• 56:42
  sort of sharing in the variance many hands make light work the goal is the goal is to have enough
• 56:49
  people absorbing the variance to the point where nobody actually feels the variance like you you
• 56:55
  brought up um a little bit earlier how it's good to have pools and there's there's um um
• 57:05
  it's actually you can't have too many pools there's a point where too many pools is a problem
• 57:10
  because for a pool to be viable it has to solve a certain number of blocks in any difficulty
• 57:16
  adjustment period and over any time horizon right right like and if you're providing an fpps
• 57:24
  guaranteed payout and and you don't have deep enough pockets and you hit bad luck then you're
• 57:29
  going bankrupt let's talk a little bit about that which is so we talked about datum v stratum which
• 57:36
  kind of at the core of it might be like how blocks are actually constructed and the templates
• 57:41
  um the ability to actually peer with the network versus a system that designed to basically peer
• 57:50
  with the pool itself, but then the payout structure.
• 57:54
  Because that has the, and for people that aren't as familiar,
• 57:59
  FPPS is fixed pay per share.
• 58:03
  And what is run through Ocean is a PPLNS pay per last day
• 58:10
  in number of shares.
• 58:14
  The FPPS pays out, based on the amount of work
• 58:18
  that you do the pool of a fixed amount that varies over time but is a fixed amount per work
• 58:26
  consistently um like say every day number of shares times rate versus ocean structure which
• 58:36
  there and as pools emerged when a slush pool and brains used to to run pplns as well but there
• 58:43
  were different scoring systems and that's another thing that's that's unique about ocean you have
• 58:48
  your your tides in terms of how those payouts are actually calculated um but just talk about
• 58:54
  the difference like and then also how you think about the because i mean this is something i
• 58:59
  genuinely don't don't understand why why the fpps piece is what has caused centralization and pools
• 59:04
  but also just when you think about aligning incentives in terms of the pool to the miners
• 59:11
  and risk why the the more variable payout of just saying hey we're gonna you know pay out as we as we
• 59:21
  solve blocks um why you know why did you settle there but also if you could tie that into you know
• 59:29
  kind of the almost necessary part of that being core to how you know if you have if you're gonna
• 59:35
  have a fixed payout system somehow money has to be centralized so just just talk about the
• 59:42
  differences in terms of the fixed payout system versus what ocean runs and people on us and how
• 59:47
  oceans people on us might differ from say what brains used to run yeah um most minor most mining
• 59:56
  pools run FPPS, like you said, and to kind of like sum it up at the beginning, the value
• 1:00:05
  proposition of ocean versus FPPS or our model is called tides. FPPS optimizes for cashflow
• 1:00:13
  at a very consistent cashflow at a premium and sometimes and oftentimes an invisible premium,
• 1:00:22
  but it solves cashflow and miners are operating cashflow businesses.
• 1:00:27
  So that's kind of like why that became really popular.
• 1:00:31
  Ocean and our, through our payout system tides,
• 1:00:34
  we optimize for maximum revenue because,
• 1:00:38
  because we're not,
• 1:00:41
  we're not a liquidity provider that has a cost of capital in the FPPS.
• 1:00:49
  uh there's a maximizing revenue in terms of maximizing pay payouts in terms x amount was
• 1:00:56
  mined yeah and we are going to just we're going to take our fee and distribute as much of that
• 1:01:02
  that was mined it's it's it's pure bitcoin mining if you're 10 of the pool and we hit a block
• 1:01:09
  the block subsidy plus transaction fees minus oceans fee you get 10 of what's left over
• 1:01:19
  and you can verify that down to the share level,
• 1:01:23
  down to the set.
• 1:01:25
  And it's 100% transparent and verifiable.
• 1:01:28
  And that you only get, you're sharing the,
• 1:01:33
  Sharing in the luck of the pool.
• 1:01:34
  So if we go unlucky, then you don't get paid.
• 1:01:38
  If we get really lucky, you win the lottery.
• 1:01:40
  You get paid multiple times per day.
• 1:01:43
  On average, just like anybody mining Bitcoin, on average, luck trends to 100%.
• 1:01:49
  So luck on any PPLNS-based or luck-based pool goes to 100%.
• 1:01:54
  But you're the closest to the source of the money.
• 1:01:59
  It's like being at the wellhead.
• 1:02:00
  You're the closest to the money and you're getting your share that's verifiable based on proof of work.
• 1:02:06
  FPPS, it's an entirely different system where the pool guarantees payouts based on a bit of an arbitrary formula and absorbs all the luck, the variance from the miners.
• 1:02:21
  and um over time since we launched it's been almost two years since since ocean launched the
• 1:02:29
  data is now coming out that that is a very expensive proposition to to be able to for for
• 1:02:36
  an entity a middleman to come in and say don't worry about any of the variants of this highly
• 1:02:41
  volatile asset called bitcoin that and mining is is extremely volatile as well we'll take on
• 1:02:48
  all of that variance and we're going to pay you a set amount um full paper share every day no matter
• 1:02:54
  what and miners are running the numbers they're running the comparisons and they're coming to us
• 1:03:01
  and saying hey i i ran the test i did fpps versus ocean and i came out ahead on ocean sometimes it's
• 1:03:07
  single digit sometimes it's double digit percentages but um over the long haul if as long as you as
• 1:03:13
  long as you run a test long enough where the luck is able to resolve to 100 there's just more money
• 1:03:19
  in your pocket so it's as we grow that volatility that variance um gets easier and easier and easier
• 1:03:27
  and we're sitting here today almost i guess a one and a half percent of the network and we're solving
• 1:03:33
  almost two blocks a day on average how many exahashes is that we have about 12 exahash
• 1:03:39
  on the pool and growing and growing and growing faster than taking share in the network um yeah
• 1:03:46
  i mean one of the things that again it doesn't make sense to me is that you know when i look at
• 1:03:50
  the fpps system and i'm trying to understand this because the market has largely said
• 1:03:57
  based on where hashrate has gone historically maybe it's a lack of options certainly um
• 1:04:06
  brains is shift from a pplns pool but there there was something different about how they scored and
• 1:04:12
  tides yeah but that effectively that fixed payout per share it is a a hedge to variance that isn't
• 1:04:22
  actually quantified it's like hey there was this total amount that went to the pool
• 1:04:27
  or paying out based on shares and and you don't necessarily know how many total shares there were
• 1:04:32
  it's not this this base okay here here's everything and you're having to trust the pool
• 1:04:38
  and it almost seems like something that should exist as like a separate financial service
• 1:04:43
  that here's the work it's paid out and if you specific mine is participating in the pool wants
• 1:04:51
  to hedge your variance here's an actual hedge that you can pay for and then and it's actually
• 1:04:59
  quantified but you know i think i think part of that is just the the market going through and
• 1:05:04
  needing to have other options um but one of the things because this is the other refrain that's
• 1:05:10
  consistently said is that that pools are terrible businesses like i hear that consistently of like
• 1:05:15
  why are why why is mining on the pool side become more centralized and people will say oh that's a
• 1:05:23
  terrible business and that's why it's centralized and that that's that's not logical to me because if
• 1:05:29
  it was a terrible business. Why are there these couple of businesses that, you know, are seemingly
• 1:05:33
  large and doing very well and part of its capitalization. But to me, when I look at it,
• 1:05:40
  it's a matter of aligning incentives and delivering good software, like having valuable software
• 1:05:50
  and then having the right business model. And one of the things from an alignment perspective,
• 1:05:57
  it's like i can see how hey miners running their own nodes if they want to payouts going directly
• 1:06:05
  um to me at least but which to the market to the side being like hey you get paid out as you
• 1:06:13
  find blocks but one of the things that you know in terms of miners that i've talked to struggle with
• 1:06:19
  is and one of the things we haven't talked about which in my view is a big pro is that
• 1:06:26
  you also can run your own implementation so people can run knots on ocean people can run
• 1:06:33
  core but one of the concerns that i have is like hey if i'm a miner and when i'm talking about
• 1:06:40
  aligning incentives it's there's aligning incentives between miner and pool and aligning
• 1:06:45
  incentives from miner to miner is if i'm mining and and maximizing the amount of fees in a block
• 1:06:52
  and there are other miners that are optimizing for number of transactions in a block and filtering
• 1:06:59
  jpegs and other spam and i have the perception that that's lowering my um you know maximum
• 1:07:09
  potential revenue how do i how do i become aligned with those other miners like how do you think about
• 1:07:15
  aligning interests because it is you know a two-way function between not just the miner and
• 1:07:23
  the pool and those incentives being right but the the incentive from miner to miner just how do you
• 1:07:27
  think about those trade-offs yeah no that's a good question and um it's a really good point to get
• 1:07:34
  right and maybe looking at an extreme example if i'm mining empty blocks and you're not where the
• 1:07:40
  value of our two blocks are going to look different and it wouldn't be fair if we got paid out the
• 1:07:46
  same so the way we've designed datum is is to essentially pay the miner the equivalent of what
• 1:07:57
  they would have earned had they had they've solo mined their blocks over a period of time so if i
• 1:08:04
  if i mine empty blocks with no transactions on average i'm going to solve so many blocks and
• 1:08:10
  I'm going to get the subsidy over a period of the year, over a year,
• 1:08:13
  and it's going to look different from yours.
• 1:08:15
  And we work backwards into the calculation to essentially weight them differently.
• 1:08:22
  So it's miners who bring in differing amounts of value,
• 1:08:33
  basically aren't subsidizing each other for their individual choices.
• 1:08:38
  everybody has their individual choice to do what they want but um it doesn't affect the other
• 1:08:45
  miners around the pool in a negative way and the one question that i just thought of and i'll
• 1:08:52
  continue here but with a pool running stratum d2 is your knowledge that it's all the um
• 1:09:03
  are miners able to run their own nodes and run different ways i mean maybe it's moved if the if
• 1:09:09
  the pool is putting templates in and they could say well you can't include transactions that either
• 1:09:14
  look like this or you can't include this you know a transaction from this address but um how on the
• 1:09:21
  node level or implementation sorry like between the ability to run multiple different implementations
• 1:09:28
  of bitcoin do the two systems compare like between data versus or is there or is there no difference
• 1:09:35
  i honestly don't know how advanced strata v2 is in in that and i don't know if it if it accepts
• 1:09:42
  different node clients i know we do like you mentioned you can run knots you can run core
• 1:09:48
  it's literally your choice like this is this is the the free market like this is this you can run
• 1:09:55
  as long as it's a valid client and you're making valid blocks.
• 1:09:58
  And the key piece here is you can actually run Datum in solo mining mode if you want.
• 1:10:05
  It's free software.
• 1:10:07
  It's open source.
• 1:10:09
  You can toggle a switch at the beginning to say, I want to mine solo.
• 1:10:14
  I just want to solo mine and not split rewards with anybody.
• 1:10:17
  And it's basically a free Stratum server.
• 1:10:19
  the value and kind of the magic is is by operating in split reward mode you get to be independent but
• 1:10:27
  share the rewards so for us it um in terms of how you run your node and how you get paid out it
• 1:10:35
  makes no difference we just look at the work done the proof of work and then tally up all the shares
• 1:10:41
  from minor a and minor b and add them together and develop ratios and then those ratios are
• 1:10:47
  multiplied against the next block so that i mean and also i mean what you described there is that
• 1:10:55
  it makes it fundamentally easier should there ever be an issue with the pool
• 1:11:00
  to yeah and and like right right now there's there's um the shares have to be
• 1:11:09
  the shares that the miner submits are validated by Ocean to make sure that they meet the target
• 1:11:18
  difficulty So there is some degree of kind of like spot checking that that goes on But it it a pragmatic approach because it it a decent It as decentralized as we can make it while still working because we we had you know a couple hundred data blocks in the wild already
• 1:11:36
  This software has been it's been working for 12 months, pretty much without issue.
• 1:11:41
  And some of the biggest companies in the world are using Datum as we sit here today, actively, like consciously choosing it over other implementations.
• 1:11:52
  But we're never like satisfied with where we're at.
• 1:11:58
  So we're actually working on ways to make it even more decentralized and allow individual miners to validate each other's proof of work.
• 1:12:09
  the goal is the goal is to get the pool as far from the position of authority as we can
• 1:12:17
  so that the miners are are the the decision makers so so that'll that'll probably come in
• 1:12:26
  in later um versions of datum down the road i'm not sure how how many quarters that's going to be
• 1:12:33
  But ultimately, we would like to get to a point where you submit work to the miner next to you.
• 1:12:40
  And that miner says, yeah, Parker submitted valid work.
• 1:12:44
  He he should get paid for that proof of work.
• 1:12:47
  And then and then Ocean says, OK, we trust you guys.
• 1:12:52
  Parker gets credit for that proof of work as opposed to us being the ones making that decision.
• 1:12:57
  So the more we can push that and doing it in a transparent way, I think it's we're just enabling miners to to like thrive.
• 1:13:06
  And the pool will need to exist in some capacity because somebody has to kind of keep a bit of a ledger about who did what proof of work in order to get paid.
• 1:13:17
  Yeah. And I have one other question about the alignment of sentences specifically on the filtering of different transaction types.
• 1:13:25
  but um one of the things that how do you ensure that if the my if the payouts are going directly
• 1:13:34
  from the coinbase transaction how i don't understand the mechanism that prevents you know
• 1:13:40
  again like if a miner cheated once they'd be out but like what prevents the miner from just taking
• 1:13:45
  the full reward is that is the is ocean do something to validate that the that um
• 1:13:54
  that each miner is hashing a um a template that has an output that has all of those
• 1:14:02
  addresses yeah so the the um the kind of like supervisory role we have in that scenario is
• 1:14:09
  you're is you're entitled to the split of every other miners blocks as long as you pay
• 1:14:18
  miners from your blocks. And it's, it's like a reciprocal agreement. The miners have between
• 1:14:26
  each other with, with Ocean kind of overseeing it. The moment you don't uphold your obligation
• 1:14:33
  to pay the other miners, then we, we would basically in, in the next versions of the
• 1:14:42
  coin bases, basically you would get penalized through, through the other miners, not including
• 1:14:47
  you're in their blocks. So it's, it's a bit of an honor system that we monitor and, um, it keeps
• 1:14:52
  everybody in check. Like if you essentially, essentially, if you're, if you're running in
• 1:14:57
  datum, you're getting paid from everybody else. And then you just go, essentially, you just flip
• 1:15:02
  the switch and you become a solo miner. You can, you can do that. But if, if you're not solo mining,
• 1:15:07
  um, and you're participating in ocean, but you like switch the payout mechanism, that that's
• 1:15:14
  kind of where we we would come in and and sort of adjust the rewards for everybody else's coin
• 1:15:18
  bases the next go around yeah it keeps it fair and balanced yeah and it is it's like this is
• 1:15:25
  oftentimes how stock exchange works like hey these are the rules and if you violate the rules you no
• 1:15:30
  longer get to participate in it so if you valued the the variance reduction that comes from yeah
• 1:15:35
  pooling resources um you can you could theory you could cheat in theory but you could only do it
• 1:15:40
  once. Yeah. Coming back to the economic incentives, I think there, there are people,
• 1:15:45
  you know, there, there's the ideological side. And I think there's ideological people on either
• 1:15:51
  side of this. And I don't want to talk specifically about like the debate on
• 1:15:54
  opportune, but speaking to minor specifically, there are people that really struggle with the
• 1:16:00
  idea that an economically rational actor could filter transactions that don't result in the
• 1:16:09
  largest amount of fees in an individual block. Not asking you to theorize on how your customers,
• 1:16:20
  the miners who do that think, but when you think about aligning the incentives between the pool
• 1:16:27
  and in miners, you're taking a share of that revenue for your service. So those economics
• 1:16:33
  impact you as well. So thinking about it from the pool perspective, how do you
• 1:16:39
  see the alignment of incentives vis-a-vis a minor to the pool where they might exclude certain
• 1:16:48
  transactions and not monetize a block as much as it could be like how do you think about that being
• 1:16:54
  in you know your collective you know when you look at everything in aggregate they're being
• 1:17:01
  full alignment. Right. Well, I think that, that the economic, uh, incentives is probably the most
• 1:17:09
  misunderstood part of ocean. There's, there's a lot of, there's a lot of discussions and online
• 1:17:16
  debates about, about, um, arbitrary data and the so-called revenue that it brings into the blockchain.
• 1:17:24
  um but that additional revenue is so minuscule compared to the money that miners are leaving on
• 1:17:33
  the table through fpps that it's like it's it's pennies on the dollar it's you know um
• 1:17:41
  and and it's pennies on the dollar the challenge is they can quantify the pennies and they can't
• 1:17:46
  quantify the dollars yeah but we are there's a lot of data that's coming out now like if you
• 1:17:51
  if you don't mine on FPPS and you mine on ocean,
• 1:17:55
  you could earn five to 10% more revenue,
• 1:17:59
  five to 10% more revenue,
• 1:18:01
  like multiply that by your business and the razor thin margins.
• 1:18:05
  That's a lot of money saving, you know, but the, the, the,
• 1:18:09
  and I think the work that we're doing is sort of Sean,
• 1:18:13
  a bit of a spotlight onto that and how FPPS is an unsustainable payout scheme
• 1:18:18
  and how it's an insurance. It's,
• 1:18:21
  it's an insurance product wrapped up as a mining pool,
• 1:18:23
  but it's really primarily an insurance product.
• 1:18:26
  So the fees, the fee discussion is compared to that.
• 1:18:31
  It's not even, it's not even in the same ballpark.
• 1:18:35
  So I would say to be a, to be,
• 1:18:39
  if you want to be economically rational
• 1:18:42
  and you want to maximize profits as a miner,
• 1:18:45
  you need to go directly to the wellhead.
• 1:18:47
  You need to go right to the source.
• 1:18:48
  And right now, ocean is the only pool that connects miners directly to the source.
• 1:18:53
  Whether you include something with a couple of more, you know, sats or a couple of fewer sats, it's like a rounding error and it doesn't have any material impact.
• 1:19:05
  But this is all part of the long, like, again, this is a your hash rate, your choice thing, right?
• 1:19:12
  Like we don't get in the way and miners make whatever choices they want, but we're all here for the long game of Bitcoin.
• 1:19:18
  which is like, as Bob Burnett likes to say,
• 1:19:22
  we're in year 15 of the next thousand years of money.
• 1:19:25
  And, and so we need to have like a long-term view
• 1:19:29
  and Bitcoin needs to survive
• 1:19:31
  and it needs to be adopted and used
• 1:19:34
  as a peer-to-peer payment system.
• 1:19:39
  Yeah, I think that that, you know,
• 1:19:41
  you know, thinking about it in the context of
• 1:19:46
  there's the, there's the fees and there are a lot of other variables that, that go along with it,
• 1:19:57
  that it's not like the alignment of interest is not just marginal fees. And that at the heart of
• 1:20:07
  what you guys are working on doing is putting miners in a position to
• 1:20:15
  being directly at the wellhead having more control seeding more control from the function of the pool
• 1:20:24
  in the broader context of bitcoin and decentralization and the integrity of the system
• 1:20:31
  how important do you think it is that the industry adopt something more like datum
• 1:20:39
  and the structure of ocean and its relationship to miners um like is it enough for
• 1:20:50
  ocean to say get five percent of the hash rate or ten percent of the hash rate
• 1:20:55
  if the other 90% is operating in a very centralized world.
• 1:21:02
  And so, yeah, that's just the question.
• 1:21:05
  Do you think that for the integrity of the system
• 1:21:08
  and for mining to truly decentralize that something like data needs to be adopted as a standard so looking at the bitcoin ecosystem i think 51 of the hash rate should be making their own blocks like that would be a really
• 1:21:26
  good target to have and that ensures bitcoin is uncensorable um it just so happens when you don't
• 1:21:35
  When you don't rely on FPPS, there's more money to be had.
• 1:21:40
  So I think miners who are seeking to maximize their revenue, it would be in their best interest to check it out and go directly to the wellhead.
• 1:21:54
  So I do feel for it's a competitive industry.
• 1:21:59
  It's in many cases really hard to make ends meet.
• 1:22:04
  And there's, you know, Bitcoin miners aren't the favorite type of customer from a utilities perspective.
• 1:22:10
  And so utilities are often very demanding in terms of.
• 1:22:13
  They should be, but they're not.
• 1:22:14
  They should be, but they're not.
• 1:22:15
  And they demand unreasonable utility deposits and miners have to pay their bills sometimes multiple times per month.
• 1:22:23
  And these kind of requirements aren't placed on any other industry.
• 1:22:27
  So it's a difficult business and cash flow is definitely important.
• 1:22:33
  And all I would I want to say and kind of reiterate is that there's there's more money to be had than what than what is being passed through the FPPS system.
• 1:22:45
  And that's by going directly to the source.
• 1:22:48
  As we get larger.
• 1:22:51
  The number of blocks that we find per day goes up, our coefficient, our coefficient of variance goes down.
• 1:22:57
  and at some point we're going to cross,
• 1:23:01
  we're going to sort of pass a critical threshold
• 1:23:03
  where there's really no risk to mining on ocean
• 1:23:07
  and it's all upside at that point.
• 1:23:10
  And I think we're actually really close to that.
• 1:23:12
  Most of the growth that we've seen so far
• 1:23:14
  has been organic growth through home miners,
• 1:23:19
  pleb miners, a few early adopters,
• 1:23:21
  but for the most part,
• 1:23:23
  the really large U.S. publicly traded companies
• 1:23:25
  are, um, they're not there yet, but, um, we're getting close.
• 1:23:30
  And, um, at some, at a very, at a point in the very near future, I think our, our hash
• 1:23:36
  rate's going to hit that inflection point where, um, the, the, the volatility aspect
• 1:23:42
  is not really a concern.
• 1:23:43
  And then, and it's just about, um, the money.
• 1:23:48
  One of the, one of the things that I think is important there is it's like, they're the
• 1:23:54
  economics of the the pplns and the fpps and you know there's in my mind there's no reason why
• 1:24:02
  if you want to fix payout that there can't be a financial service that sits on top of a pplns
• 1:24:08
  pool and basically says this is how the way the pool works but you individual miner want fixed
• 1:24:13
  payouts here's a cost from the pool's perspective and the integrity of you know thinking about the
• 1:24:21
  security business and i think that there's there's two ways to look at this which is when i
• 1:24:25
  was at unchained we looked at security of custody being people hold their own keys
• 1:24:32
  and we can help them but that was our our fundamental perspective on what
• 1:24:38
  results in greatest security if you come from a centralized world it's easier to do certain things
• 1:24:45
  when things are centralized you can pay out different ways and offer different services and
• 1:24:52
  if that is in your culture as a company then it's just well why would we do it some other way
• 1:24:59
  this makes other things so much easier less cost but
• 1:25:05
  the first question was on the minor side but this is on like to the pool industry to to your peers
• 1:25:12
  do you think from a security standpoint and i'm not talking about you know your bitcoin getting
• 1:25:19
  hacked or your data security but in terms of ensuring that that that phone call is not made
• 1:25:25
  that when people look at the landscape that it's also necessary to the pool ecosystem and i'm not
• 1:25:33
  just speaking of ocean but to you know thinking about all other pools that they put themselves
• 1:25:39
  in a position to not be able to be the ones creating templates oh absolutely when we um
• 1:25:48
  yeah like other pools and i strongly encourage other pools to either offer multiple templates
• 1:25:55
  to their for their miners to choose from so the miners have a choice or give the miners the ability
• 1:26:00
  to make their own in the datum software that we um open sourced and it's available on github
• 1:26:07
  you read through the documentation, it doesn't actually mention ocean in the document. It talks
• 1:26:13
  about being, being run with a datum supporting upstream pool. And so our vision is that in the
• 1:26:20
  future there, the goal is, the goal is to get mining decentralized at the pool level, whether
• 1:26:27
  that happens just through ocean or ocean and a bunch of other miners, mining pools, we got to
• 1:26:33
  get there because ultimately we have to protect our most valuable asset which is bitcoin and um
• 1:26:39
  we're all kind of like fighting for the same thing here so yeah i would love to see other pools adopt
• 1:26:45
  datum and use it and um and because that's going to get us to where we need to go faster but at the
• 1:26:52
  same time like i said before if everyone used ocean if every miner used ocean and it and everybody
• 1:27:01
  every miner made their own block templates there's no there's no central point of failure
• 1:27:05
  especially when you factor in the um the the block validation work that we're doing that that would
• 1:27:12
  allow minor a to validate minor b and vice versa there would be well what i would say is there's no
• 1:27:19
  way for somebody to influence what individual miners crave but somebody could call up ocean
• 1:27:24
  and or like seize your servers and then there would be miners being a very precarious position
• 1:27:32
  of not being able to to pull that is a good point so that is a that is an attack vector that we're
• 1:27:39
  not at yet but we should definitely and i'm sure lucas thought about this one yeah because he's
• 1:27:45
  always planning like 10 steps i think the best world would be many pools all using something that
• 1:27:51
  takes the control of the templates out of the hands.
• 1:27:56
  Not necessarily many pools.
• 1:27:58
  I'm not saying many pools,
• 1:27:59
  an infinite pools booth.
• 1:28:00
  That is one thing that,
• 1:28:01
  you know,
• 1:28:01
  someone like Elon Musk even misunderstands when he talks about how,
• 1:28:04
  you know,
• 1:28:05
  we need faster block times that the,
• 1:28:07
  that there was an intentionality in the,
• 1:28:09
  the target of 10 minutes in terms of security of the overall network and the
• 1:28:14
  rate of orphan blocks that then has this natural consequence of if there are
• 1:28:19
  only six blocks an hour and 144 blocks in a day and X blocks in a week.
• 1:28:25
  And you have expenses and working capital and cash flows that naturally to reduce
• 1:28:32
  variance, pulling resources is something that makes sense.
• 1:28:36
  And then within there, there's a big difference between two versus five versus
• 1:28:43
  10 versus 20.
• 1:28:44
  And there might be some limiting factor that says there probably won't be a
• 1:28:47
  thousand or thousands. But I think what you're saying is that if the role of the pool is
• 1:28:55
  less in terms of control, then to, to have effective decentralization,
• 1:29:04
  you still need many, but you don't need nearly as many.
• 1:29:09
  Yeah. And there's also a scenario, a possible future state where where data is, is the protocol that supports pools working together with each other.
• 1:29:24
  So instead of the pools fighting against each other to all find that those coveted minimum number of blocks every two weeks, if every pool aggregated their hash rate together, they would essentially share in the variance.
• 1:29:42
  If you're if you're 10 percent of the network.
• 1:29:45
  I don't know how that would work, but it's like a reinsurance.
• 1:29:47
  It's like, you know, there's a lot of proxy pools, white label proxy pools for Antpool.
• 1:29:52
  and they're all getting their funding from the same source.
• 1:29:55
  Well, if those proxy pools...
• 1:29:57
  And their templates.
• 1:29:58
  And their templates.
• 1:29:59
  If those proxy pools just did what they're currently doing,
• 1:30:02
  but they were on Ocean instead and they were running Datum,
• 1:30:06
  so think of Datum as not a pool but a protocol,
• 1:30:10
  then they could continue to be proxy pools serving their customers,
• 1:30:14
  but they would essentially,
• 1:30:17
  if two pools with identical size were on the pool,
• 1:30:20
  were both using data, I'm splitting rewards,
• 1:30:23
  they would each find twice as many blocks
• 1:30:26
  at half the value.
• 1:30:27
  And if a third large proxy pool joined,
• 1:30:30
  it would lower the burden for everybody else.
• 1:30:33
  So when I say 100% of the network,
• 1:30:36
  part of that future state could be,
• 1:30:38
  there are many pools,
• 1:30:40
  but they're all working together collaboratively
• 1:30:42
  as opposed to opposed to each other.
• 1:30:44
  And I think that's an unstoppable Bitcoin in the future.
• 1:30:50
  Alright, last question. You know, obviously I know what you're doing to help foster decentralization in Bitcoin and mining, but
• 1:31:02
  when you think about the incentives not just aligning incentives that you know the ultimate integrity of Bitcoin
• 1:31:12
  is what's most important,
• 1:31:15
  but everyone also,
• 1:31:16
  because if it didn't have integrity,
• 1:31:19
  then everyone's assets lose value.
• 1:31:23
  But that individual interests,
• 1:31:26
  it's like balancing short-term interests,
• 1:31:28
  long-term interests,
• 1:31:29
  and balancing individual interests.
• 1:31:32
  There's not really even balancing individual interests
• 1:31:34
  with the network interests,
• 1:31:36
  but the marrying of those two,
• 1:31:39
  that they're one in the same.
• 1:31:42
  What do you think, like five years from now,
• 1:31:45
  what do you think the mining pool landscape looks like?
• 1:31:48
  And what do you think the incentive
• 1:31:53
  that tips the scale away from that overcorrection
• 1:31:58
  and reliance on FPPS?
• 1:32:00
  Do you think that it's just one miner
• 1:32:02
  figuring it out after the other
• 1:32:04
  or is it a materialization of the risk?
• 1:32:08
  Is it a financial distress?
• 1:32:11
  You know, like how do you see us going from
• 1:32:14
  and what's the kind of leading driving factor
• 1:32:16
  that says like this is what miners figured out
• 1:32:19
  and realized that they needed, you know,
• 1:32:23
  a combination of more options as well as more control?
• 1:32:28
  Future in five years, I think.
• 1:32:30
  I think it's defined by three changes.
• 1:32:34
  I think we're going to have proxy pools collaborating, like we just talked about, using Datum.
• 1:32:42
  And so pools become collaborators rather than competitors.
• 1:32:48
  We're going to have a decentralized version of FPPS because we're building it.
• 1:32:54
  So maybe we can chat sometime next year.
• 1:32:56
  Good to know.
• 1:32:58
  Um, the money doesn't have, there's more than two entities in the world with Bitcoin.
• 1:33:02
  Yeah.
• 1:33:03
  Every Bitcoin that I did the math that the whole network could like three standard deviations
• 1:33:10
  would like take 2000 Bitcoin or something.
• 1:33:13
  And there's 19.9 million Bitcoin out there.
• 1:33:16
  So, so all the money, all the block subsidies that get paid to all the miners in the world
• 1:33:20
  come from two pairs of hands.
• 1:33:22
  We can, we can spread that out a little bit.
• 1:33:25
  But you need a transparent system and a permissionless system to do it.
• 1:33:31
  So we're building that.
• 1:33:33
  And in five years, I think our perspective on the value of a block is going to be radically different as well.
• 1:33:45
  What do you mean by that?
• 1:33:46
  Well, I credit this way of thinking to Bob Burnett from Barefoot.
• 1:33:50
  But when we think about the value of a block today, you look at how many transactions there are in the block and the fees, and you add it to the subsidy, and then that's the value of the block.
• 1:34:02
  That's like a one-dimensional way of thinking.
• 1:34:05
  But I think in the future, if we have hyper-Bitcoinization and you have institutions all competing for block space, the block space scarcity is going to become a real issue.
• 1:34:18
  and then the value of a block is shifted to who actually makes the block.
• 1:34:25
  Because right now there are two pools that make majority of blocks for every miner in the world.
• 1:34:32
  And if you have settlement on chain for large international deals and procurement
• 1:34:41
  and there's other external factors that are riding on a Bitcoin transaction getting into the layer one settlement.
• 1:34:55
  There's like secondary effects and secondary opportunity costs that need to be considered.
• 1:35:02
  So I think and I think the.
• 1:35:06
  The prominence of of running a block for the sake of getting to populate it with your own transactions is going to be very valuable to miners in the future.
• 1:35:17
  And it's it's something that very few people are talking about now.
• 1:35:23
  And that's something you can do today with Ocean.
• 1:35:25
  You can create your own block template and you can put your own transactions in there at no cost.
• 1:35:30
  and there's not a high degree of demand for block space right now so it's not that
• 1:35:36
  big of a deal but when there is an insane amount of demand of competition for block space
• 1:35:41
  um and you can't get your transaction and you need to get it in because you
• 1:35:46
  you have to make payment in order for a deal to close and the penalty for not paying that is x
• 1:35:53
  million dollars now the value to you of that block is now all of those external factors so i think i
• 1:35:59
  think we're going to go from a single dimensional um assessment of of the value of a block to
• 1:36:06
  three-dimensional assessment with multiple factors and i think it's going to happen quickly
• 1:36:10
  yeah i've talked about about that and i want to have him on hopefully in the next few weeks
• 1:36:15
  job of explaining it than i just did like my view of that piece is that like there is going to be
• 1:36:21
  this if you imagine eight billion people using bitcoin there's going to be fierce competition
• 1:36:26
  for block space is going to have to be serious innovation in terms of you know scaling value per
• 1:36:33
  unit settled on chain and that there is going to be a desire to you know have still have higher
• 1:36:42
  value transactions that are time sensitive i feel like there's going to inevitably have to be some
• 1:36:47
  financial solution to that of like because you don't know what pool or what miner is going to
• 1:36:53
  solve a block so how can you guarantee block space but i think there's there's going to be
• 1:36:58
  markets that emerge that will benefit um miners one thing that i've thought about i'm curious if
• 1:37:06
  you think that the world might go this way do you see large miners like miners always have like a
• 1:37:11
  backup to you know if something happens with their pool to change and we talked before about
• 1:37:16
  why when it when it really might matter you functionally even if you could change
• 1:37:23
  you know the other pools might be censoring too but specifically do you think there might be a
• 1:37:28
  trend of large miners not just having a backup pool but actually splitting their hash rate
• 1:37:33
  and saying i'm going to send 25 my percent of my hash rate to um and an f or not just an fpps pool
• 1:37:42
  but like to send something like foundry and i'm going to send 25 of my hash rate to
• 1:37:47
  the ocean or or other pools because they recognize hey not only is it not in my best interest to just
• 1:37:55
  have one supplier but rather than just a fallback i can actually point and then through that process
• 1:38:03
  they can test that they can they can start to quantify the the differences in pools like do you
• 1:38:08
  see that as a trend i do um it's happening i know i know uh several miners who it's like just
• 1:38:17
  baked into their diversification strategy to mine on multiple pools. And part of it is
• 1:38:24
  they're doing their fiduciary duty of maximizing revenue. So they have to run the test to have the
• 1:38:32
  data to support their choice in the pool. And others are doing it just for that very reason of
• 1:38:37
  not letting any one pool get too big. So I think it's going to, and it should continue like that.
• 1:38:46
  And it would be ideal if the backup pool also gave miners the ability to make their own templates.
• 1:38:53
  Because at that point, all the backups are great.
• 1:38:59
  But right now, a lot of common configuration for Ocean is when you run Datum, you're running a local Stratum server.
• 1:39:08
  So the hardware is on-premises.
• 1:39:10
  Sometimes some miners do it in the cloud, but the majority do it on-prem.
• 1:39:16
  And if anything happens to your server, pool two in your ASIC interface is just our template, which is mine.ocean.xyz.
• 1:39:25
  And then so you have a failback and then.
• 1:39:29
  You know, if you wanted a third failback, you can pick another pool as well, but you at least with Ocean, you have the primary and the backup all baked into the datum and the centralized option.
• 1:39:41
  All right, Mark, I appreciate you.
• 1:39:43
  Well, glad that you're in Austin.
• 1:39:45
  Good to see you.
• 1:39:45
  Yeah.
• 1:39:46
  Um, if a miner is interested in ocean, they reach out on the website, reach out direct to Nacho, where do they go?
• 1:39:58
  Yeah, uh, we have, we have a few, a few different ways.
• 1:40:01
  Um, our, our general mailbox is mining at ocean.xyz.
• 1:40:05
  That's a great way to reach out to us.
• 1:40:07
  And you can also contact any, any one of our sales team.
• 1:40:11
  So I'm Mark, everything we get really simple email.
• 1:40:13
  So mark at ocean.xyz, nacho at ocean.xyz or lily at ocean.xyz.
• 1:40:20
  Awesome.
• 1:40:21
  And Luke and mechanic are easy to find as well.
• 1:40:25
  They might filter you if you spam them.
• 1:40:30
  But no, I really do appreciate you.
• 1:40:33
  It was great to meet in May at the Energy Mining Summit.
• 1:40:39
  We're going to do another one here next year.
• 1:40:40
  And yeah, I appreciate what you guys are doing.
• 1:40:43
  at Ocean.
• 1:40:44
  Yeah, thanks for the support.
• 1:40:45
  Thanks for having us on.
• 1:40:46
  Yeah, thanks for coming.