Interview

Sovereign Wealth Funds Investing in Bitcoin & Bitcoin Mining with Marathon Digital's Fred Thiel

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09
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22
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2023

00:00 Intro

01:21 What's new with Marathon

03:17 Expanding operations to Abu Dhabi

05:07 Working with a Sovereign Wealth Fund

08:26 Bitcoin being used by Central Banks and for trade

14:57 BlackRock and WallStreet Bitcoin Spot ETF filings

21:13 Bitcoin Halving and ETF demand

25:44 Bitcoin mined in 2023

30:55 Preparing for BTC halving in 2024

38:50 Next crypto bull market

This interview covers Marathon Digital Holding's substantial growth in the Bitcoin mining sector, boasting over 23 exahash of installed capacity and expanding internationally, including a significant 250-megawatt installation in Abu Dhabi. Fred Thiel explains that the Abu Dhabi location is strategically chosen to balance the grid's power usage and establish a partnership with a sovereign wealth fund. He anticipates that more central banks will explore Bitcoin mining to attain greater self-sovereignty over their assets, particularly amid concerns about holding U.S. dollar-denominated reserves. Additionally, Thiel highlights the growing importance of Bitcoin exchange-traded funds (ETFs), emphasizing their convenience for institutional investors and their potential to introduce Bitcoin investments to retirement accounts, alongside the significant impact of the FASB accounting change in institutional adoption.

Transcripts are autogenerated. May contain typos.

00:36

before they go public before they do an IPO within their portfolio includes crypto companies AI companies and fintech companies some of the crypto companies you may recognize include Circle Ripple chain analysis Ledger Dapper labs and many more if you'd like to learn more about link2 please visit the link in the description welcome back to the thinking crypto podcast your home for cryptocurrency news and interviews with me today is Fred Thiel who is the CEO of marathon digital Holdings Fred it's great to have you back on the show

01:07

great to be here Fred we last spoke about two years ago I'm excited to hear the latest updates around Marathon digital I'm excited about the Boom in Bitcoin mining in the United States and marathon is certainly one of the leading minors um tell us what's new with Marathon well uh you know compared to two years ago we've grown a lot we're now with you know over 23 extra hash of installed capacity about 19x operating uh just waiting to turn on our Garden City site which should be any day here and uh you

01:42

know we've also expanded it internationally uh so we now have uh 250 megawatt uh installation in Abu Dhabi 50 megawatts of which is up and operational that's all immersion it's the first site that we've designed spec built and um you know operate ourselves fully uh so that's you know very unique conditions it's you know middle of the desert and next to the Arabian Gulf so it's uh or the Persian Gulf so it's very hot very humid conditions but you know we do this we have this great

02:13

relationship with the local grid operators that allows them to balance the grid using our Bitcoin mining uh which they love at the moment which is great and that site should be fully operational by the end of this year and then we've recently announced some additional machine orders so we'll be growing our capacity to around 30 extra hash in the near to Mid future so we're very happy with that um another thing uh we announced a week ago that we were going to um essentially redeem uh about 417 million dollars

02:46

worth of our debt uh for equity which will put our balance sheet in a really strong place we'll end up with a little over 300 million dollars of debt with over 400 million million dollars of liquidity between cash and Bitcoin and coming into the having we think it's really important to have a you know a strong balance sheet with no short-term debt and uh position to take advantage of uh whatever opportunities arise yeah that's exciting um and I'm curious about the Abu Dhabi uh location um was it more of a let's say

03:22

friendliness to Bitcoin mining in addition to let's say low energy costs but also it seems in the Middle East there's more opening up to crypto in general um what was kind of the strategy behind you know positioning yourself there so you know the core desire was a couple of things one balance the grid because in the summertime they use four gigawatts of power in the winter it's only one gigawatt so it's a huge asymmetry in the power need and they had just put online uh new five gigawatt nuclear power plant and so they have

03:57

this Excess power so what do you do when you have Excess power well you find a customer for it and Bitcoin mining obviously being an easy customer to use because we have the ability to be an interruptible load which for their needs is perfect because um in the summer they don't need four gigawatts all day long they only need it in certain times of the afternoon on an evening and so where initially they were going to consider longer curtailment periods they're actually doing it in very short increments now it's working

04:26

so well that they're looking to automate that whole process which will be great because you know we're ready for that automation um and it was super exciting for us the it was the opportunity to work with the Sovereign obviously um the you know our core partner there is a sovereign wealth fund and you know they invested a lot of their own Capital into this project uh which is a core sign of faith and Conference in what we were doing and it's worked out really well it's been a great relationship you know we only

04:54

signed the agreement in February and we were up and operational with the first 50 megawatts already by the end of July so just goes to show how you know effective a good partnership can be when it works well absolutely now you mentioned the partner there is this Sovereign wealth fund now there's been a lot of talks about Sovereign wealth funds um you know investing in Bitcoin and other aspects of the crypto Market I'm curious are they uh as much as you can tell us are they also holding Bitcoin physically uh I know some folks

05:27

are waiting for an ETF but in addition to investing in like Bitcoin mining uh like with your company uh already also holding Bitcoin well yeah I don't know how they're managing their treasury I know we divide the Bitcoin based on ownership and then what they do with it is kind of their own business um but uh you know if you think generally speaking sovereigns especially ones who are commodity producers you know they have historically put their faith in U.

05:57

S dollar-based reserves right whether that's treasury bills bonds Etc and uh more recently because of the weaponization of the dollar and this whole kind of Petro dollar um issue that sort of really started being a problem in the after the 2014 Crimea uh crisis and now more broadly with the Russia crisis a lot of these commodity producers are afraid that their reserves are and somehow going to be blocked um by the U.

06:26

S government and its allies in the event of some global conflict or trade conflict whatever it might be and you know just looking at what the U.S has done to Russia countries like China uh you know UAE Saudi Arabia Etc the brics um Brazil as well obviously in India you know are concerned about holding reserves in U.S dollar denominated assets because that's potentially risky so what have they been doing the central banks to these countries have been buying a lot of gold they're some of the biggest gold buyers in the world today and they're looking at Bitcoin but the

06:59

interesting thing is when they do look at Bitcoin and they do decide to invest in Bitcoin is you know if you're holding Bitcoin but the only way you can trade It Is by selling it on exchanges which could potentially be boycotted by the government of the U.S and its allies they then think okay well if I'm mining my own Bitcoin not only am I producing Bitcoin but more importantly I know that my transactions could get processed but they also need to have their own pool to guarantee that and so you know

07:32

as you may have read recently um Marathon has you know developed its own technology staff we stacked we now have everything from the pool through firmware down to you know immersion tanks and obviously the Asics themselves through our investment in oradine and so this became very interesting for them because they could now mine Bitcoin they could operate their own pool and they could be really self-sovereign over their own uh their own assets so I think we're going to see a lot of other sovereigns looking to do the same thing

08:05

which is mind their own Bitcoin operate their own pool and uh essentially you know control their own uh you know keys so to say so um we're super excited about the opportunities to partner with other sovereigns not just in the region but outside of the region who have similar desires so that is fascinating I did not realize that was something that was going on um wow and it made me think about um you know with as you mentioned the global macro factors and um some folks moving away from using the dollar as as a reserve currency and

08:43

settlement of certain uh assets and commodities um and this seems like a trend like you were saying that could continue Bitcoin being that that asset That No One controls um and they can mine their own Bitcoin and have their own pool that is very fascinating and do you see potentially other countries and maybe central banks starting to do things like that yeah I don't know about central banks quite yet I think over time definitely um you know any asset allocator is going to look at Bitcoin as one of those

09:22

things where when you look on a risk-adjusted basis whether it's 10 years 9 years eight years seven years Etc Bitcoin outperforms a lot of other Alternatives so if you want to have a portfolio model with diversification an allocation of one or two percent to bitcoin makes sense I mean what is the allocation most central banks have to gold for example and think about gold isn't transportable it isn't fungible doesn't have any of the benefits that a digital currency like Bitcoin does plus the fact that Bitcoin is fully

09:53

decentralized no government controls it um you don't have to worry about uh issues you know for these brics countries who are trying to get off of the dollar as a reserve currency in a trade currency you know the problem is does India want to hold Chinese Swan or maybe I don't know you know does the UAE want to hold Indian rupees I don't know and same thing with Russian rubles so you know Bitcoin provides kind of this neutral territory um it's just that because there is a very limited Supply meaning it's capped

10:29

at 21 million Bitcoin and there's very liquid little liquidity available in the marketplace the scale of the assets that sovereigns control kind of way over Shadows Bitcoin you know at five six hundred billion dollars of total market cap for Bitcoin if you include all the Bitcoin that have been produced to date um you know a sovereign who wants to go park 50 billion dollars because they happen to have a five trillion dollar you know uh set of Assets in their overall portfolio um you know that would have a huge

11:05

impact on the price of Bitcoin um and so I think you know what you're seeing today is institutional investors um you know whether it's Fidelity whether it's BlackRock or uh you know Franklin Templeton today just announced that they were going to file for an ETF for Bitcoin when these institutional traditional institutional investors decide that they need to be able to provide their investors with exposure to bitcoin through ETFs and realize that you know if you're buying an ETF or you're buying spot Bitcoin there's no

11:39

difference to your exposure to bitcoin it's about Bitcoin at the end the difference though is that when you buy in ETF you're not worrying about custody you're not worrying about you know what the security is ETC uh there is a unique little difference though when you buy Spot Bitcoin you decide the price at which you're buying when you buy an ETF it's the price that that that Bitcoin closed that day which as Bitcoin trades 24 7 you know each ETF is going to have their kind of notional what's the price

12:11

of Bitcoin at this time on this exchange somewhere that will be their kind of model um but you may not get the benefit of any intraday volatility right right so if you're uh you know think about it this way if you're a retail investor and you want to put a hundred dollars a month in the Bitcoin it doesn't really matter but if you're going to buy a million dollars worth of bitcoin yeah Bitcoin can move three four percent in a day so if you can buy on a dip and I mean timing is obviously impossible to be perfect at

12:44

um but sophisticated Traders could potentially you know set price targets and so yeah I think what the ETFs do is they broaden the market uh appetite for Bitcoin they open it up to more people you can now put Bitcoin into your 401k your IRA so retirement accounts are open to it you know they're trillions of dollars in retirement accounts today a one percent allocation to bitcoin from retirement accounts would have a huge impact so you know obviously optimistic about the impact of ETFs um I think the impact of the fasbi accounting change

13:19

which is something most retail investors have no concept for has a much bigger impact because this affects institutional investors and corporations uh fasbi is the um essentially the body that controls how accountants account for things right they set the rules or the standards and they have now just uh approved unanimously that Bitcoin will no longer be treated as an intangible asset meaning you can only impair it but it will be marked to Market just like equities or gold so the advantages as an Institutional Investor and as a fund you

13:58

can now hold Bitcoin in its transparent where its value is so every quarter when you report your numbers you'll either adjust the dollar value of your Holdings to whatever the price of Bitcoin is at the time as opposed to to an impairment and for corporations this is huge because if you think about Marathon you know we had to do a huge impairment over the course of 2022 as the price of Bitcoin kept dropping right um and we can never mark that up but now with these new rule changes when they take effect which I believe will be uh for

14:30

next year um though there may be some early adopters that get a chance to do it before then um we'll essentially every time we report our financial statements we'll either mark up our Bitcoin or Market down and Fiat dollar terms um depending on wherever it happens to be at the end of the the period we're reporting so I think that is going to open up the floodgates to corporations and institutions buying spot Bitcoin which I think is going to be great yeah for sure um I know you mentioned BlackRock and

14:59

you know last year was tough for the market um you know we had our bear Market cycle macroeconomic obviously one could argue you're in a recession and it's things are not great right now but all of a sudden BlackRock said we're going to file for a Bitcoin spotty TF and then that line grew day after day and week after week um do you believe we've hit a Tipping Point of institutional adoption of Bitcoin where you know in the past it was Taboo in the past they were saying negative things about it I mean even

15:29

Larry Fink himself back in 2017 and now they're all trying to grab this asset in different ways and creating different products uh what are your thoughts on that and do you see that Trend continuing so it's a little bit like the first horse out of the gate is going to get the biggest benefit um you know obviously if an unknown manager were to launch an ETF before BlackRock I don't think they would necessarily beat BlackRock but you know between BlackRock Fidelity Franklin Templeton Vanek uh are all of these guys

16:02

uh all very well known and you're going to see billions of dollars go into these funds overnight because uh you know you may very well see people sell spot Bitcoin that they hold and instead invest in these ETFs because it's just easier you can do it in your brokerage account now right you don't have to have a separate coinbase account I think the biggest impact is going to be to people like coinbase and Gemini the retail Traders you know if the you think about the number of people who hold less than one

16:28

Bitcoin in their wallets uh and on exchanges those are people who will likely prefer an ETF because the cost to trade is tiny it's you know something like 20 basis points right whereas um you know trading on an exchange you know you're going to pay fees going in and coming out so um I think that'll have an implication for the retail side of uh those funds those companies and that's why I think you're seeing coinbase now come up with new businesses and do new and exciting things but go back two years and you

17:03

know towards the middle end of 21 we were all super optimistic about institutional adoption than 22 hits so I'm cautiously optimistic I think that between um the decisions that the judicial branch has kind of handed down recently clearly the overbearing uh you know overreaching regulatory uh regimes that have been kind of impacting the space are being checked um and I think that's an improvement but you know you mentioned it the macro economic environment uh is I think what drives bitcoin price and this is

17:46

something uh spoke on a panel yesterday at the HC Wainwright conference and um I was the the sole contrarian in the room when you know a lot of people say no Bitcoin is going to follow the same historical pattern it has in every cycle and you know that's true but it's not a cycle that necessarily correlates to or has causation in the uh having if you look at Global liquidity Global liquidity Cycles have followed bitcoin's trajectory very closely and I think it's going to happen again the same way but

18:23

Global liquidity right now we're entering a global liquidity crisis right M2 money supply is declining the FED is tightening they're doing QT they're sucking money out of the system interest rates is you know High interest rates are sucking money away from things like Bitcoin so until that changes and you know will that be next year who knows hopefully let's see um but until that changes I think Bitcoin is not going to have this major Bull Run that everybody thinks is timed to the having so I just think it's

18:54

important for people to really understand that you know Bitcoin is the causation of bitcoin's price movements are supplying demand and with the having they'll be less Supply but at the end of the day 900 Bitcoin a day or 450 Bitcoin a day is that really changing the demand Dynamics now um so I don't think the having has a supply impact so much but I do think local liquidity does I do think that you know until the U.

19:22

S dollar starts dropping until um the interest rates start dropping in this country and until the FED stops QT um you know assets such as Bitcoin are going to have a few people chasing them um and so at the end of the day you can have all the ETFs in the world but if people don't want to put money into them to buy Bitcoin because they want Bitcoin you won't see a big price rise so long long winded answer but you know I think it's important for people to understand that yeah absolutely appreciate that context and the details to to your point

19:54

if someone is worried about inflation and paying their bills and so forth they're not gonna be thinking about investing well I'm going to put some money into a Bitcoin ETF you know when they have this fear right and that the FED is going to keep raising rates uh uh and and the price of bread or energy a gas whatever is going up it's the last thing they're thinking of but uh maybe like you said hopefully early 2024 or so the FED pauses um at some point they're going to start QE again and like you said the liquidity

20:27

is going to come absolutely yeah so we'll be back in in that bull cycle if you want to call it that um so you know it'll be it's you know risk on risk off it's kind of you know how you have to look at it and uh to your point um you know Regional Banks commercial real estate you know there's a liquidity crisis getting ready to happen there the FDIC and the bank Regulators are going to have to do something they're likely they'll have to stop QT because they've been sucking all of the money

20:56

through the uh the repo Market um into the bond market and so they're gonna have to shut that down so that will cause liquidity to come back in so you know fingers crossed uh you know we see some positive momentum next year for sure now what they have in coming up and in with the context of these Bitcoin spot ETF applications in play um obviously BlackRock being the biggest some are anticipating a potential approval and Q4 obviously we don't know if that's going to happen but how are you as a minor preparing for uh these

21:34

catalysts right the having and and with the ETF approvals because I'm assuming that you're going to see increased demands are are you is this a two-fold question how are you playing for that and are you you know having getting calls for possibly buying Bitcoin that you guys are selling from some of these big players um so not going to comment on whether we're getting calls or not because you know we get calls all the time so um but I'm not going to comment on any change in that um you know we don't sell direct to

22:10

customers we sell typically via OTC desks so we're not necessarily aware of who our counterparties are when we do sell Bitcoin um at the end of the day these large buyers typically are trying to buy at a discount actually not at a premium right um so if they can find coins you know other places they will um I don't think any of these ETFs for example have an ESG requirement that the coins are fully effect compliant or other things like that you know those are things that uh I think we may still see the SCC plug-in

22:47

as requirements and that will change the nature of how they have to Source coins most probably um but we'll have to see that so I think there's a lot undecided yet um I think the nearest um deadline is about 45 days or so out I think it's an arc application that they need to respond to but I think generally the consensus amongst most people I speak to say that um if the SEC is going to approve they're going to approve a number of them all at the same time um you know they have to you know if they're going to approve any they have

23:23

to approve the grayscale conversion uh now what they may say is you know they may do another round of questions and comments and cycle through this I think the kind of uh end point of all this is sometime at the end of q1 next year most probably I don't think we're going to see something this year necessarily I think Congress for one thing is going to be very busy with budget and the stalemate around that and the spending and then uh you've got a bunch of other hooplog going on in Congress right now

23:55

but yeah we're going into an election we're in a presidential election cycle so there's a lot of stuff like that going on so I don't think we're going to see any real progress on crypto legislation until next year possibly um if then um but you know we'll see uh you know uh McHenry is up for re-election is rather turned out as chair of his committee and so I know he wants to get his legislation kind of through Congress uh before he turns out uh on that so I think we'll have to see but um and you

24:32

know we'll we'll have to see what happens on the uh the coinbase lawsuit that's got huge implications because if the SEC decides that you know hey let's get a win here we'll approve some ETFs and we'll settle with coinbase no harm no foul slap on the wrist you know you don't admit you did anything wrong and and you know we all moved Merrily on and maybe you remove some tokens that you know have been listed then um I think at that point you know chair Gensler can say you know put his hand on

25:07

his chest and say well you know see look at all the good stuff I did yeah um and maybe walk away with a win otherwise if he refuses these ETFs he almost you know there's a high degree of certainty he's going to have to roll back the spot rather the future ETFs which would be a huge black mark so listen all of these people are Political Animals I have a feeling he has aspirations for higher office and um he needs some wins in the column because right now the Judiciary certainly hasn't been giving him the

25:40

wins he wants oh yeah absolutely um now tell us about uh marathon's mining that is taking place this year um maybe how much how many Bitcoin you've mined and also uh there was reports of you know with the Texas heat wave of uh ramping down a bit there are you ramping back up now in September if you can give us some insight on that sure I mean you know you can look at our production numbers they kind of speak for themselves uh you know we were down nine percent in August over July um which is not a whole lot considering

26:16

the fact that um you know there was a lot of curtailment that happened um so uh what you'll see is kind of so you know August and July you had over a thousand Bitcoin each month um we did about 2300 Bitcoin in Q2 so you should be able to infer that we'll likely do something close to 3 000 Bitcoin uh or more if Garden City turns on here um in Q3 which will be a nice uptick and uh you know if you think about it over the past 12 months we've through the end of Q2 uh year over year we increased our hash rate from 0.8 extra

26:59

hash because July of last year we were almost mining nothing uh if you think about it to having over 19x a hash um operationally so significant uptick in the amount of hash rate you know our percentage of the global hash rate uh you know went from point eight percent to uh somewhere around 3.2 percent and it'll continue to grow uh this quarter which is in light of kind of a doubling of the difficulty rate you know an eight-fold increase in our market share um which is great um so yo quadrupling of our market share but you

27:39

know with a double difficulty added to it so um yeah we're very happy with the progress we've made it took longer than we wanted to obviously but uh you know ourselves in the market can be impatient at times um but we have now a prudent kind of uh Tempo if you would uh of how we look at uh what we're doing you know we're primarily focused on owned and operated sites now um moving away from kind of the um asset light model we're looking for balance in our portfolio so we want to have a balance of third-party hosted and

28:14

the balance of owned and operated we think that um over time you'll see us favor owned and operated and uh you know as I've said on a number of calls more recently you know you'll see us go about 50 of our capacity domestic 50 internationally you know we're looking in Latin America we're looking in Africa we're looking in Asia looking in Europe uh and continuing to look in the Middle East and we'll expand in all those regions you know as appropriate um to get good diversity uh you know

28:45

there's some great Energy prices that we can get out there and then at the same time we're also doing a lot of really interesting stuff around leveraging the heat that we generate um especially in our immersion systems for things uh like experimenting with greenhouses and experimenting with shrimp farming um which will generate profitable uh streams to the business so the goal here kind of longer term if you would is to really look at you know how can we make the cost of energy disappear because if it doesn't cost you anything

29:22

to mine then you're going to be the last minor standing no matter what the global hash rate is and no matter what the price of Bitcoin is yeah yeah can you tell us about more about the shrimp farming so uh would it be like integrating uh these additional business operations into the existing mining setup or moving to mind think of it as as partnering with these types of operations and then having Revenue shares in their product you know we don't want to operate that's not a report competency uh and I

29:58

don't want our shareholders thinking we're going to invest capex in those things but we can sell our heat to them essentially right it's just like with our technology stack our vertical technology stack you know we are out there talking to the third party miners about them using our firmware on their bitmap machines we're out there talking to sovereigns about them using our pool for them to operate their own pools we're out there talking to people across the Computing industry about using some

30:26

of our immersion technology and you know that creates diversification and if you think about marathons objectives more recently it's been about energizing capacity it's been about optimizing the capacity we do have make it more productive lower our cost of Mining and then now we're also looking at things like diversification where we can leverage what we do in mining to make money in other ways yeah that absolutely makes sense so I'm curious uh you know with the having coming up um is there a race to get as many

30:59

Bitcoin as possible um from in a profitable way of course uh ahead of the rewards being cut is that a strategy or a plan that you guys have that you you know as it gets maybe in January 2024 let's ramp up our mining yeah so it's you know the goal is always put online in as much capacity as you can before anybody else because we operate in a zero-sum game right it's 900 Bitcoin a day until April of next year and then it's 450 Bitcoin a day um so you're always focused on optimizing and maximizing your

31:35

production capacity you know I think um for people who are now spending a lot of money on bitcoin miners that they'll plug in in q1 of next year if the price of Bitcoin isn't where it's profitable for them to mine post having I think they're going to be in a lot of trouble and I think if you look across the fleet of miners out there globally the average Energy Efficiency is somewhere around 33 joules of Terra hash based on the nonce analysis that has been recently done you know our Fleet operates at a an

32:11

average efficiency of about 25 joules of Terra hash so we're way down there meaning we're much more efficient um you know there is risk at the having if the price of Bitcoin doesn't appreciate significantly that anybody who is operating anything above 30 joules of Terra hash we'll have to stop mining and so if you start looking you know what machines does that mean it'll mean to anything but s19 J Pros was probably uh anything older than that you won't be able to mine with unless you have free

32:49

energy or very very low cost energy so I I think it's you know you're gonna see at the having again depending on where the price of Bitcoin is caveat what most analysts out there are predicting is assuming a 25 to 30 percent decrease in global hash rate so that means people shutting off machines not turning on machines so that's certainly an opportunity uh right for those who can still continue Mining and absolutely because it I mean I know it gets more difficult as you're having um so I'm curious what marathons

33:27

long-term strategy um and you mentioned you know branching out into other uh business layers uh not defeating too much on Bitcoin mining but like you said utilizing as much of the process to monetize it and recoup you know costs and things like that um what's your long-term strategy for the next having and so forth so again we kind of look at ourselves a little bit the way oil companies look at themselves right you're pumping oil out of the ground so you have to constantly be exploring new places to find oil so

34:02

exploring new places to host miners we're constantly exploring new technologies to make our mining more efficient lower our costs to mine increase our Energy Efficiency we're constantly looking at ways to reduce our energy costs um and then like oil companies you can either sell oil or you can refine it into products like plastic pellets and fertilizer and things like that so we're looking at kind of the downstream opportunities to earn margin on the um the exhaust of our business if you would uh no pun intended for the heat is

34:35

kind of an exhaust um but also Bitcoin and Building Things at Layer Two and layer three so we think um that it's very important that we continue as an industry to remove the friction of using Bitcoin and the Bitcoin blockchain two different topics here um as much as possible because if we can make it easy for people to hold Bitcoin the currency meaning the store value um and use it for for whether it's transacting settlement or just holding value um the more friction we can reduce and ETFs those are long goes a long way to

35:20

reducing that of friction is great and then what can we do to reduce the friction so people can build applications on top of the Bitcoin blockchain because at the end of the day we need adoption to happen yeah because when adoption happens transactions happen when transactions happen transaction fees will go up we've already seen this with ordinals of what happened there um and when transaction fees goes up the security budget for Bitcoin is insured and the security budget is essentially how Bitcoin miners are paid and while

35:51

this having you know which is near upon us um doesn't pose huge issues for that you know two havings from now so not 2028 but go down uh you know one further you know 2032 and if you look at the price that Bitcoin has to be at in 2032 for the subsidy to keep miners operating uh if there isn't a substantial increase in the transaction fees or if minors can't generate revenues via other means then I think you're going to see a considerable restructuring of the mining industry and you know it will get

36:34

Consolidated and it will likely become very closely tied to the energy industry and uh you mentioned scalability and improving real world use and adoption um or what do you think about the Bitcoin lightning Network and are you doing anything on that front so I think the lightning network is a great um initial foray in a way of being able to create a a transaction layer that settles on the Bitcoin um layer on the L1 I think there's still way too much friction to using lightning and I think there is a huge amount of

37:12

innovation that's going on but even more that should be going on to reduce that friction to zero it really should be as easy as you know I've got my phone here uh I have Fiat in my bank account I have Bitcoin in my bank account and I go and I tap to pay and I choose am I going to pay using Bitcoin or am I going to pay using um you know fiat currency you might even pay using some stable coin and then I can manage my assets on my app shifting Bitcoin to stablecoin or Bitcoin to Fiat and then when I pay that transaction

37:46

layer I really don't care how it operates it just has to be frictionless it's kind of you know think about it the user today thinks the Visa Mastercard network is frictionless if you talk to the merchants you know it's not frictionless which is why visa and MasterCard are looking at things like Solana now and other Technologies to settle because you know Merchants pay high fees to get and they get their money three to four days later yeah so you know they looked at the Alternatives if they were to adopt lightning and

38:17

again you could make the three out to Fiat payment go over lightning and make it totally frictionless but you know people have to get money transmitter licenses there's a whole lot of regulatory rigmarole you have to go through to get that done but technologically you could make it magic and you know Steve Jobs was famous for saying that you know the closer technology is to Magic the more easily it'll be adopted so I'm paraphrasing so I know I'll get a bunch of people on Twitter or X it'll Hammer me for that

38:47

now um final question here for you um you know what are you most excited for in this upcoming um next bull market I should say uh you know with Bitcoin and we let me rephrase that with the macro being in a better position you know uh the crypto market and Bitcoin following that liquidity cycle um you know what are you most excited about so um I'm super excited about the Innovation that's going to happen um you know I lived through um the you know internet 1.0 2.

39:25

0 and you know now we'll see about web 3.0 though I I think it's it's not about virtual reality in games it's about a much bigger thing than that it's about people owning their data monetizing their data and um you know having data at the edge and not siled and centralized application but um you know I remember the days of um uh yeah I took the first company I was CEO of public uh the first public company I I did an IPO on was in 2000 and you know it was in the middle of the internet 1.0 wave and uh you know people

40:00

were building the equivalent of the delivery services and grocery shopping and pets stuff and it all crashed because it was too early there wasn't consumer adoption then came 2.0 and there was consumer adoption right and we had built these great companies like salesforce.com all of these you know Facebook Google Etc so you know we have gone through you know blockchain and crypto 1.

40:29

0 that happened now we're moving forward into 2.0 and what's in 2.0 well I need 2.0 where you really start seeing real use cases that cause people to want to adopt it right and whether that is leveraging blockchain to validate data for AI systems so that they can't they won't be biased or whether that is as Oracles of Truth for automated transaction systems where you know your car is driving down the highway and paying tolls automatically and things like that um without you even thinking about it there are all sorts of uh reasons to

41:06

leverage blockchain technology and things we do every day not all of those applications need to be decentralized on and so it's you know how do you pick the right applications to build deploy them on the Bitcoin blockchain um you know today with um Tap Root and the other dips that have been adopted and hopefully you know 300 301 will be accepted as well because Bitcoin needs to continue to evolve um you know we'll see great Innovation and that's what I'm most excited about because Innovation drives adoption

41:37

adoption drives growth and growth is a tide that floats all boats so yeah absolutely definitely agree with you there um Fred pleasure chatting with you I'm excited to see the future updates around marathon and uh we'll we'll try to meet again rather than two years later uh maybe sometime next year but uh thank you for joining me absolutely anytime good catching up with you [Music] thank you [Music]

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