[upbeat music] What's up, y'all? Welcome back to Blockspace Live, brought to you by CleanSpark.
Cash App just rolled out default Bitcoin payments for any merchants who wish to accept that, and it's coming at a great time because half of all Bitcoin holders are actually underwater, and they can't spend those sats anyway, so now they're gonna be force HODLed.
So good move by Cash App. They're actually- they don't, they don't want you to actually spend your Bitcoin.
[laughs] They're rolling it out at a time when you, when you can't because you're not p- you're not, you're not wealthy enough. [laughs] But we've got that as our lead story today.
We've also got three banger interviews coming up. First up, we've got Marty Bent to talk about the CLARITY Act and the FTC's reporting on the Bitcoin de minimis tax exemption, or lack thereof, I should say.
We have Jameson Lopp on to talk about how AI agents are creeping into every corner of your online and technological life, and the ramifications for that.
We've also got Alex Pruden of Project 11 to talk about Bitcoin and Quantum.
And for our final two stories on the docket today, we're gonna be talking about Bitdeer's data center, 180, 180 megawatts in Norway, one of the bigger ones for their AI expansion.
And to cap it off, a little Red Scare always does an American good, especially bright and early on a Monday morning.
We're gonna be talking about Operation Red Sunset and why Elizabeth Warren thinks it's really important to focus on Bitmain right now. You are watching Blockspace Live.
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It's a Bitcoin technical conference for investors. This show is brought to you by CleanSpark, ticker CLSK on Nasdaq. More on them later on the show. Let's kick it off. Colin, we're poor.
[laughs] You know, we're, we're less poor today than we were o- over the weekend because- That's true... Bitcoin's had a little pop because, uh, apparently there's...
We're, we're, we're reaching negotiation, you know, time for the war in Iran. I don't know how much I believe that. [laughs] But that's not really the lead story.
We're going to, uh, first talk about this interesting Cash App rollout. Uh, and th- Yeah... this is building on something that they've had in the hopper for a while. Oops, sorry guys. Let me get this up. Okay.
Oh, there we go. There we go. Thank you, Charlie. So Cash App rolled out Bitcoin payments for basic- for a bunch of their merchants, I believe at the end of last year, beginning of this year.
It was a few months ago, where they were kinda doing this pilot where they were saying, "We're gonna start rolling out Bitcoin payments by default."
They started with a few, with a few storefronts and a few brick-and-mortar places, and now they are making it a default option for anyone who wants to use it. This is from Miles Suter at Cash App.
Quote, "We're making it easier for millions of businesses to accept Bitcoin. Starting today, eligible US Square sellers will begin having Bitcoin payments automatically enabled."
So sellers who accept Bitcoin will receive USD on the other side of this, so you can pay in Lightning on-chain, but it'll settle in Bitcoin, or settle in USD by default. You can also keep the Bitcoin if you want.
But kind of a nice little white pill to wake up to. You know, it's...
When Square announced this feature, I was really excited about it 'cause it's a really seamless way for you to pay in Bitcoin through your Cash App app or through other wallets a- at these Square terminals, and it's an easy way for the actual seller to take USD value from that transaction rather than having to be exposed to Bitcoin risk.
But- Yeah... we'll see how many people use it. Yeah. I'll add a little bit of color here, 'cause I think a lot of people might be like, "Well, didn't they already do this?"
And let me take you, listener, on a little journey through the world of point-of-sale. I, as a former brick-and-mortar business owner, also actually used Square Terminal back in the day.
Um, so what happened this last year is that Cash App, Square, really Block and then their Square Terminal, made it an option for business owners to go through a couple menu workflows and then click on Bitcoin payments.
So they had to enable it and, like, they had to opt into it. But now it's enabled by default. That's what the announcement is. And, um, as Miles Suter says, the head of product for, uh, Square here,
these are millions of businesses. That... This is a lot. And it's also, like, wallet agnostic, so you don't have to have Cash App. You can just have any Bitcoin wallet. Um, a little detail is that, uh, it looks like I...
So I thought it was, like, poof, overnight, you know, sometime around, like, midnight Eastern. It, like, they'd all immediately turn on all the terminals, but apparently that's not necessarily the case.
Miles Suter had a tweet this morning which clarified that they're just starting the rollout, so it, it may not be immediately available right now across all million-plus Square terminals that are live in the US,
but, uh, over the next month, they're turning this on. So pretty cool.
I mean, um, I, I will say, one of the curveballs a lot of people don't, uh, th- uh, don't know for some reason, maybe Cash App and Square hasn't, like, pushed this much.
If you're the first person who transacts at one of these businesses in Bitcoin-Uh, they actually, uh, a Cash App will, uh, drop you $25 in Bitcoin into your Cash App.
So like there's actually an incentive for you to go and like get the neighborhood pizza parlor, uh, to, uh, go, uh, turn on their Bitcoin, uh, payments.
Now, maybe that's not gonna be the case, uh, for right now as they, as they make it like default, but it has been the case. I actually made money on pizza a few months ago, uh, if you can believe that.
I was the first person to pay for a pizza in Bitcoin, and then I got $25, which was more than I paid in pizza. Honestly, should have been leaning into that racket more.
[chuckles] It's like Pokemon Go, but for actual things that matter- Yeah... for, with real-world consequences. Yeah.
It is interesting gamifying that, and it's a good incentive to get people to start spending Bitcoin at these places.
But as we were saying at the beginning, maybe they don't want to because they're actually underwater on their Bitcoin holdings. This is our-- technically our lead story for today.
Just a little banter to start off with Cash App. Cool to see, but this is coming from CoinDesk. Nearly half of all circulating Bitcoin is underwater as long-term holders sell at a loss.
Quote, "Nearly half of all Bitcoin is now trading at a loss, with the Bitcoin Impact Index surging to fifty-seven point four, uh, indicating high levels of stress." Um, so if, if we look at the, if we look at the, uh,
the underlying study here, and th-this comes from sex.io. CEX.io. Yes. Thank you. [laughs] Um- Don't be Googling that, that other thing, you know? Yeah, don't, don't be Googling that other thing.
So, uh, uh, th-they basically say right here, we're in a high impact range for, uh, for Bitcoin holders being underwater on their Bitcoin holdings.
And they point out in this report that usually when we're at this stress le-level, it precedes some sort of de-leveraging or unwinding event, maybe similar to what we had at the beginning of February.
You know, if you're hearing that and your stomach's curling over, can understand why. You don't really, you don't really wanna see that after we already had a crazy drop in February.
But I wanted to verify this finding from them, and I went over, 'cause I'm not sure about their methodology, but I did go over to Glassnode this morning, and if you look at their supply and profit, really interesting metric here from them.
We're at about fifty-five point six two percent, uh, currently, and I, I'm wondering if this report did draw from that.
I did not see anything in the report about it drawing from Glassnode's analytics or if it had repurposed them for themselves.
But we're at fifty-five point six two percent on, uh, as of today, and it has been slipping, um, for the, uh, for the last few weeks. We were at sixty-one percent in March, on March fifteenth.
Now we're almost at that fifty percent threshold. So doesn't surprise me given where we are, you know, obviously, but it's just a reminder that
telling someone to zoom out doesn't really work when they decided to plow like fifty grand into Bitcoin when it was at a hundred thousand dollars, right? Yeah. I mean, uh, we are now down, what?
Fifty percent, Bitcoin's at sixty-seven percent. We peaked at one twenty-six k.
Um, I'll just point, like, um, I think, you know, my view is that as time goes on, the on-chain metrics have become less meaningful because, uh, Bitcoin supply is moving to the custodians.
It's moving to like the ETFs, the larger, the, you know, the, the institutions. They're the ones buying Bitcoin.
We don't necessarily see their cost basis as clearly on-chain, and these are on-chain analytics from Glassnode, which, which are, I...
If, if, if they haven't changed the heuristics since I last checked, is mainly, uh, looking at when Bitcoin was last moved and, uh, implied to have been purchased.
So it'll assign a price to the Bitcoin as it like moves from known, uh, like purchasing, uh, venues. But when we're talking about a world in ETFs, it's probably not as insightful as it used to be.
However, like it's still really useful. You, you can look at the data and you can see also empirically, like all the people I know who bought over a hundred k are down, so, uh, this vibes with my gut check, Colin. Yeah.
For me as well, and I will say to your point, as Bitcoin trading moves off-chain, particularly in these paper products like the ETF, it is less useful.
It's also less useful when you consider I could be just managing my stack.
I could be consolidating UTXOs, I could be changing to a new wallet, and I can move Bitcoin, and it would show up on one of these as having coin days destroyed, right?
And then so the cost basis for when those coins were created for that UTXO would be different from, I might have put them into a wallet when Bitcoin was at ten thousand. I moved them when it was at sixty.
It'll show me, um, uh, it'll show the cost basis for when those coins were moved at sixty, and that's not really necessarily the case. So
it's, it's like you said, Charlie, I think already on-chain analytics were a little dicey, but i-increasingly as we, as Bitcoin continues to get fi- uh, financialized, they are becoming less and less so, less useful.
Yeah. And, um, you, uh, mentioned again our boy Checkmate, my favorite on-chain analyst, uh, put out this chart describing this concept of time pain, which, you know, I think you've been in Bitcoin a long time.
This resonates a lot because it's almost the, the boring times when nothing special seems like it's happening.
Those elongated, drawn-out periods where just volatility isn't super interesting, Bitcoin's not crashing or ripping, and you just have to sit on your hands.That may be the period.
May, that might be the meta for a little while. So, uh, you know, uh, psych up. Uh, yeah, I definitely...
Saying that might be the meta for the while, I think is, is absolutely right, 'cause just one more note from this Coindesk report, it's, like, over four point six million Bitcoin from these wallets in the red, and realized losses are at the worst they've been in, like, three years, so since twenty twenty-three.
Now, the bull side of that is what happened after twenty twenty-three. So if you want a little hopium, there you, there you have it.
But the bear side of that is you would also saw similar levels of losses around twenty twenty-two before the FTX debacle and Bitcoin shit the bed, so... I'm tired of talking about price calling.
Let's actually talk about something meaningful. We have a guest in- Yes, let's talk about something meaningful. Let's talk about politics- Yeah, let's talk about politics... and courts federal legislation.
And with that, we will welcome Marty Bent, our first guest of the day. Our boy, Marty. Welcome to the show. Politics, such a, such a fun topic, gentlemen. [laughs] Thank you for having me.
You know, we thought we would, uh, start off the week right, you know, get, get people feeling really good about the representation that they are currently experiencing on Capitol Hill.
Um, a- as always, the politicians are only ever looking out for you and definitely not looking out- They're on your side. [laughs] Definitely not looking out for the leviathans of business.
Marty, you've been tracking the CLARITY Act pretty closely. You've had some good original reporting on it, and I would like to just open with that.
Can you give our listeners a rundown of some of the reporting that y'all have done at TFCC for the CLARITY Act and specifically this de minimis provision? Yeah. And so I think, to be clear, uh, to your point about, uh,
DC and politicians working for us, one thing they don't make it easy to do is, uh, know exactly what's going on, uh, with anything.
And so a-a-as it, as it pertains to de minimis, I think it is separate from CLARITY Act specifically. I think CLARITY is more market structure and, um, some other things that, that are being handled with that tranche.
De minimis, it looks like the Parity Act, [chuckles] now they come out with the, the draft legislation for the Parity Act at the end of last week.
And so I, I think off the bat, I think they're separating clarity from the de minimis tax exemption. I think tax, uh, is something that's handled separately from all these other laws that they're working on.
But as it pertains to de minimis, obviously, I think a lot of these conversations are happening in parallel on Capitol Hill, predominantly via lobbyists and, uh, staffers on the Hill.
And so I think they're talking about a bunch of these topics at the same, same roundtables, and people then will s- just, um, go to the tape and say, "Oh, they're talking about all this at once.
It must be in the same act." They're gonna be in separate acts. But from what I've been hearing,
and there's been rumblings for, uh, a couple of months now as it pertains to the de minimis tax exemption, is that obviously Coinbase and others are in a battle with the, the banking lobby to, to get a, a share of the yield generated from stablecoin reserves held in Treasuries, uh, sharing that with their end users.
The banks apparently don't want that, and I've been hearing reports that there's a lot of, uh, horse trading going on in the background in terms of the concessions that will be made on both sides.
And, and the rumor I heard is that, uh, for those who are lobbying f-for the ability to share yield from stablecoin reserves, they're, they're willing to concede on, on de minimis tax exemption, and thereby saying, "Hey, we don't need, um, a de minimis tax exemption for Bitcoin transactions.
Why don't we just do stablecoins?"
And obviously there are, um, positive externalities for those who, who run businesses that, that monetize stablecoins, uh, if de minimis is only given to stablecoin transactions and, and, uh, I believe gas fees as well.
Um, so that's, that's what I've heard. I've heard--
I mean, I've reported on it, so it's already public, but, um, I had some sources reach out and say that, that, uh, one of the lobbying firms, uh, working on behalf of Coinbase did explicitly say like, "Hey, let's not go for Bitcoin de minimis.
That's gonna be too hairy to tackle, um, and it's a handout for-- It'll be viewed as a handout for Bitcoiners. Let's just focus on stablecoin de minimis exemption."
I, I appreciate the clarification there between the Parity and, and CLARITY Act, 'cause I, I was unclear on that point, and so thank you for clearing that up.
Uh, but am I understanding this correctly that, and you're talking about there's some horse trading going on, but there's almost like cross-bill horse trading here? Yeah.
[chuckles] Where-- Right where they said, uh, excuse the balloons, gentlemen. Um, but basically the idea being that
Coinbase will back down on the stablecoin yield provision, but if they can get this win for stablecoin de minimis at the expense of Bitcoin de minimis and the Parity Act, they're more okay with it.
Is that generally what you understood from what you were told? That's, that's the vibe I'm getting. Again, I'm not in these rooms, but, you know, I think if you're just looking, um, looking from the outside and you,
uh, we've-- I think a lot of Bitcoiners have become more privy to how the sausage is made on Capitol Hill, and it's a m- it's what I imagine the conversations are like right now. Yeah.
I would love to be a fly on the wall on those just to see not only how the horse trading goes on, but people's demeanor during it. You know, are they just...
I always wonder this too with when, when countries are negotiating during war, you know, it's like you're blowing each other up, and then you just, like, get on the phone or... You know what I mean?
Or you sit down in a roundtable, and you just talk about how to end this. I wonder, I would just be really curious to see what the attitudes are like during these, uh, these discussions.
And when you reported this, attitudes, uh, markedly sour from the Coinbase side, as you would expect. Uh, Brian Armstrong came out and said this is not true. A bunch of other people from Coinbase said this is not true.
Some folks from BPI, a guy named Zach Shapiro tweeted, "Unfortunately, I'm hearing this as well."What, what do you say to the folks on Coinbase's side of things who have come out and basically said, "Nah, this is fake news"?
I, I mean, um, I've got sources and pretty solid [laughs] I gue- I, I guess, uh, circumstantial, uh, evidence that the ex- they're saying something else behind the scenes. Like, I don't, I don't...
And who know- And like I s- I, I believe there's a ton of different actors, and who know, maybe there are people on Coinbase's policy team, their internal policy team, that don't work directly with the lobbyists.
I, I have no idea. And I, like, I wouldn't be surprised if Brian Armstrong didn't know this was going on behind the scenes, him specifically. Um, but yeah, I would say, like, the proof is in the pudding.
The parity, the first draft of parity legislation, which covers this de minimis tax exemption, you, you have to imagine it's been worked on for, for many weeks now.
It was released on Friday, and it has language that I described when I [laughs] broke the story a couple of weeks ago. And so I guess the proof is in the pudding here. Um, it doesn't...
Like, the minimis exemption for stable coins doesn't make sense. Yes, there are minuscule, um, differences in, in the peg below or above a dollar.
Um, but I think if you're really getting to why people want de minimis in the first place, it's, it's really for, for Bitcoin, specifically using Bitcoin as money.
And it's been well known for many years that people don't spend Bitcoin because they're worried about the, the overhang of having to deal with the, the tracking of cost basis and sales, uh, to pay capital gains tax when they wanna go buy coffee with Bitcoin.
Let me double tap on this because, like, a lot of the initial controversy was the, you know, you guys saying, "We're, we're hearing things, reliable sources," Coinbase folks saying, "No, this is, this is totally made up."
But, like, part of the problem is, like, you know, with lobbying, it, it's not like people write their names down on a piece of paper and say, "I'm currently lobbying for these things."
Like, a lot of this does happen behind closed doors. Um, what should we look for as, like, to signal, like, who is, who is, I would say,
who should I trust to lobby for a good, healthy, uh, Bitcoin legislation here in America? Oh, you don't trust, you verify, right, Trevor? [laughs] I know, but I can't- Yeah. How do I verify? [laughs] Yeah. I don't...
I, I think you verify by just drawing a hard line, 'cause that, that's been the frustrating thing about all of the legislation as it pertains to crypto and Bitcoin, is it's, it's been heavily focused on, on crypto.
And I think the companies involved, uh, on lobbying on behalf of crypto have vested interest and, more importantly, a ton of capital to really f- force things in a certain direction on Capitol Hill as it pertains to policy.
And I, I don't, I don't have an answer for how we verify and how we know. Again, I, I'm not-- Politics isn't really my beat. Uh, I think we've all been dragged into it
just because of the recognition that, like, you may not care about politics, but it cares about you, and you have to be vocal and try to engage as much as possible. And to your point, how do you verify?
I think you draw the hard line a- and say, "Hey," you know... And, and actually, I, I said it when I made a video, um, on, on the matter a few weeks ago when I was in Austin.
I'm actually taking a, a, a page from Brian Armstrong's book himself. Like, he drew the hard line on, on clarity with the stablecoin, uh, yield sharing and said that, uh, "I'd rather have no bill than a bad bill."
And I think as Bitcoiners, as somebody who truly, honestly doesn't care about stablecoin regulation, I think stablecoins are certainly i- an innovation. They make, uh, payments more, uh, efficient.
They, they enable cross-border payments, uh, in a way that's never existed before.
But at the end of the day, they're just, they're centrally issued and controlled, um, uh, monetary tools that are no different than a CBDC at the end of the day. Bitcoin is truly a different animal. And if policy
is being, uh, written and passed basically to cater to this, this stablecoin industry over Bitcoin, as Bitcoiners, as somebody who likes Bitcoin due to the sovereign distributed neutral reserve properties, uh, something that's truly distributed and cannot be stopped and people wanna use it as everyday money, obviously, I'm sure.
I see you guys have Cash App here. I assume you're talking about, um, Square enabling it for their merchants today. Like, people wanna use it as money. And if there is going to be a, a law on tax policy, particularly
with de minimis exemptions for, for payments using Bitcoin, like, we should just draw a hard line and say, "I'd rather have no [laughs] bill than a bad bill," that, that sort of pigeonholes, um, de minimis tax exemption for stablecoins only.
And then on top of that, I mean, I'm su-sure
you, you guys are aware too, it's not only that, it's like it gives, um, preferential treatment to staking rewards over, um, proof of work mining income too, so that double tax on mining would still exist with this parity act legislation as written today.
And I think how do you verify? You just be a stick in the mud, like say, "Hey, no." That's crazy to me that- Yeah. [laughs]...
how, that, that staking rewards and mining are somehow treated as any, as, as differently at all. Yeah. You know?
I, I know you said, Marty, that you, you know, politics is outside of your normal beat, and I'm gonna kinda throw a curve ball at you, uh, 'cause, uh, this is on the docket today too.
Did you see the, uh, did you see the Bloomberg article about Senate, uh, Elizabeth Warren sending a letter to Lutnik about Bitmain? Did you see this? No, I didn't. Okay. Yeah.
Well, maybe I shouldn't put you- Like you said. I, I would just love first takes on this, and I'm not gonna ask you a specific question.
I've got a, I've got a-The kids have spring break, and, uh, first day of spring break came with a stomach bug that started at 12:30 last night. So I've been, uh, in the trenches of, uh- [laughs]...
stuff coming up with things. Thank you for your service. Well, I was gonna say, good for you for- [laughs]... you being on spring break with your kids, uh, and not being plugged into politics. But also- [laughs]...
that sucks to have to deal with a sick kid the first day. So what's the gist? Is she, is she saying there's a- The gist is that, so there's this, there's this, uh,
there's op- this thing called Operation Red Sunset, which is a poorly defined, and I would say poorly va- uh, verified Department of Homeland Security initiative looking into Bitmain, specifically Bitmain's ability to coordinate brownouts in the US or steal military secrets.
You know, there was a New York Times article back in 2023. I'm kind of front running this segment at the end of the show, but be covering a lot of it then too.
But the idea basically being that somehow, uh, Bitmain machines at these Chinese-run mines pose a national security risk for the US.
And Elizabeth Warren, uh, apparently, according to Bloomberg, penned a letter to Howard Lutnick, uh, basically excoriating him for the Trump's ties to Bit- Bitmain, i.e., with Ame- through American Bitcoin, Eric Trump's Bitcoin mining company, or a company, I should say, that Eric Trump serves, uh, on the, uh, as, as an executive for.
With the idea basically being looking at, you know, Bitmain and trying to point the finger at Bitmain and Trump simultaneously, but basically making this argument that somehow Bitmain is a national security risk.
I mean, just, uh, before we, before you go, Marty, I'd love to get your thoughts on this as a angle that, uh, that Pocahontas is taking. [sighs] [laughs] I mean, props for props are due. I mean, it's...
It is an angle that you have to think about 'cause, uh, you guys remember Amp Lead back in, what was that, 2015? Um, Bitmain did have-- I mean, who was it, Greg Maxwell that discovered it?
They had the ability to remote brick, um, their machines. Whether or not that could disrupt, um, the power grids, I think is another question. Um, uh, it's an a- uh, I think it's a stretch.
Like, I don't think-- I think Bitmain is motivated by profit, uh, and I, I would find it hard to believe that they're infiltrating US energy markets to, to brown out, uh, the grid.
But, uh, if you are gonna pick an angle, I think the [laughs] and I'm not trying to give Elizabeth Warren any ammo here, but the Amp Lead thing is like, eh, it was something that, uh,
that proved that Bitmain did have remote access to these machines at one point in its history.
I'll, uh, wrap up with a throwback to kind of the original topic we were talking about, Marty, is, you know, a couple years ago, as the broader crypto industry felt incredibly targeted, it felt like leading into this last presi- presidential election, there was a lot of, like, big tent, like, linking of arms.
And with this break in the de minimis and Clarity Act and obvious clear, like, industry focus on stable coins, it feels, uh, like we're back in the trenches kind of fighting on these issues again.
Do you feel the same way? Do you-- did you ever kind of feel this big tent view with, like, broader crypto or I'm kinda curious on your take on what the rest of, like, this administration, like,
cryp- crypto infighting might look like. Yeah, I th- I, I was definitely cautiously optimistic, um, going into Trump's second term.
But then when she saw, like, the crypto briefing or, like, the crypto roundtable, and you had, like, the Chainlink guy and Brad Garlinghouse- Yeah...
and all the other lobbyists, and then you had- Brad Garlinghouse, that, that slimy guy. And then, um, you know, like World Liberty Fi, I think that's just, like, a complete joke.
Like, the Trumps should not be involved with that at all. And I, I think
to answer your question directly, like, I was cautious, cautiously optimistic going into it, but then as soon as he got in office, it quickly sours.
I go, "Wow, the, uh, the, uh, the parasites have, have surrounded the host and are going to throw money around their lobbying efforts to, to try to win influence." And I, I think that's what's happened.
And I, I mean, I'm considered a Bitcoin maxi, maybe somebody could call me toxic, but, I mean, I've been calling Coinbase out since they ninja launched BCash on, like, Christmas Eve in 2017.
[laughs] Saddled you with a big tax bill, dude. I was, yeah. [laughs] Yeah. Yeah. And it's like, um,
and it's-- I'm s- I, I would like everybody to be big tent, but again, these people have per- perverse incentives, um, these companies specifically, if they're leaning into stable coins and broader crypto, um, and Bitcoin is emerging as this, um, sort of more, uh, its use case as everyday money is becoming more prominent.
That sort of eats into their potential business plans if they're not gonna focus on Bitcoin as a medium of, of exchange. And so, like, I, I do think there
is perverse incentives between Bitcoiners who simply want Bitcoin to be a sound money for the digital age, uh, and those who want to ride in Bitcoin's coattails and affinity scam.
Uh, [laughs] and again, I think we can do this.
Uh, I think we outkick our coverage in terms of influence, um, on Capitol Hill 'cause I, I had people on the Hill reach out to me and said that they heard our reporting and, um, they're, they're reacting to it 'cause they don't want blowback.
And so I think, again, going back to how do you verify, just be the stick in the mud, draw the red line. If it's a bad bill, don't support it, and fight for
what I think is, um, is fair in this, this overarching battle of, of crypto policy, which is, like, if you're gonna do all this stuff for stable coins, DeFi, and market structure and all that, just, just make sensible legislation and policy around Bitcoin as well.
Let's use Bitcoin as money. Um- Let's just use Bitcoin as money. Marty, thank you so much for coming on the Block Space pod. Best of luck. Have a good spring break. Gentlemen, it's always a pleasure. Cheers, Marty.
Thanks, man. See ya.All right, we got another titan in Bitcoin. We have Jamison Lohp in the audience. We're gonna talk about AI, so let's bring him up here. Jamison, welcome to the show. Thanks for hopping on.
How's it going? Well, uh, it's exciting times, but as a security professional, exciting is not good.
[laughs] And which is great 'cause, uh, great lead-in, 'cause you last week published a blog, um, for Casa on, uh, a topic a lot of us have...
are a little bit aware of, but you went into more detail about just the risks that running AI internally on especially, like secure infrastru- like risk, like important infrastructure can pose.
Can you like describe the, you know, the arc of this blog post that you wrote? Yeah.
I mean, uh, we've, we've had internal initiatives for nearly a year now to explore what's happening in the AI space and, and understand, you know, what can these tools really accomplish in terms of productivity, and it's clear that they're quite powerful.
But, you know, the flip side, any tool can be used for, for building or destroying, for good or for evil, right? And so, you know, the, these tools are,
they're, they're not malicious, but, uh, they can effectively act as a malicious agent while trying to accomplish the task that you give them. And, and there's, there's many reasons to this. It's very complicated space.
But the big thing is that all of these agents and models, uh, they're black boxes. Like, even the open models are black boxes in the sense that basically nobody really understands how they work.
We understand that you can query them with things and that you can get stuff back as a result, but it is a magical black box. And the result of all of this is that
it is a rapidly changing security landscape where like the AI stuff, the capabilities of these AI tools continues leaping forward, and as security professionals, we're just trying to constantly catch up, and we are way behind, um, just in terms of creating a set of standards and best practices for how to deal with this stuff.
Because it's... The best way I, I can figure, there's a lot of analogies you could come up with, but it's kind of like giving a bulldozer to a toddler. You know- [laughs]... you could do some really cool stuff.
You could also do some pretty terrible stuff if you're not careful. Uh, wait. S- sorry, Charlie, I just have to double tap on something. Jamison, you said nobody understands how these things work, and it's a black box.
Are, are you expanding that scope to the engineers designing these, these LLMs as well, like, the, and these agents? Like, uh, are you saying that fundamentally we don't really understand- Yeah...
what's going on under the hood? Yeah, I mean, obviously the, the AI researchers and the, the safety, uh, folks, like, have a better understanding.
They're the ones who are trying to train it and guide it and, you know, push it in certain directions, but they're still getting surprised all the time, and that's just another aspect of this whole space that is, um, concerning.
Um, but you know, it, it also, on the flip side, it means that we may end up getting some really cool, revolutionary, groundbreaking breakthroughs in various scientific, uh, applications as a result.
I'm, I'm just imagining, you know, like Oppenheimer or some of the guys in the Manhattan Project being like, "Well, you know, we get this nuclear fission response from this, and it, and it blows up, but we, we don't really understand how it works.
But we do know that it blows up," you know? Yeah. But you don't actually know what's going on under the hood. That is- It kind of-... quite frightening to me.
You know, there, there kind of, there was an issue like that, uh, you know, during the, the early days where they didn't understand necessarily how, how far the chain reaction was gonna go.
Like, some of them weren't sure if blowing up a nuclear bomb would end up consuming the entire world.
Yeah, there's this brilliant scene in, in the movie where he's talking to, uh, uh, whoever, uh, Matt Damon's character is.
He's either a colonel or a general, and he's like, "So there's a chance that it could just destroy everything?" And he goes, "Yes."
So, uh, you know, back to the article, Jamison, you kind of outline what al- almost like a reverse HAL 9000 situation where instead of the AI saying, "I can't do that," it's like, "Well, I actually can, and I'm going to use means you did not expect to accomplish that."
Explain this, and how do you think about... Like, what does this mean from a security standpoint? Yeah.
So especially once you get into agentic AI where it's not just you querying a model and getting a response back, but rather you, you, you have entire, you know, self-contained processes that have some set of context or memory and can do more complicated series of actions, string them together, um, that's when, kind of like the toddler and the bulldozer thing, you, you, you have to kind of look at these tools as well.
It's, it's kind of like
giving access to your entire computer or potentially your entire production infrastructure, depending on where you're running it, to, uh, an intern who it's their first day on the job, and they haven't been around.
They don't understand all of your,
uh, the nuances of your company and your infrastructure, and it's like, um-You know, if you give a powerful development tool to an engineer who has been working somewhere for a year or multiple years, they have this massive sum of accumulated knowledge, uh, based upon working, um, in the code and the infrastructure and, and understanding the business.
And, you know, this is a massive context, but, you know, the context that we give to these LLMs is often quite tiny in comparison.
Maybe we give them a few sentences of guidance, maybe we come up with like a skills.md file that is several pages, but even then, you know, you're, you're probably...
We're-- hopefully we get there eventually, but we are a long ways away from the, the point of being able to feed like years and years of experience into one of these AI agents.
And so the, the end result is you should expect that they are just going to do things naively and, and, and not follow what a, uh, a, a normal human might consider to be, uh, best practice or just common sense even.
And so this is where the, the state of security in this space, uh, gets really gnarly because it's like, all right, how can we leverage all of the cool stuff that these tools can do while also constraining them and basically like building layers of firewalls and layers of, um,
of, uh, of essentially like common sense checks to make sure that they don't go rogue and, and end up deleting, for example, your entire infrastructure, which has already happened to several different companies in this space.
On that note, James, I'm glad you brought that up because if, if I'm looking at this as a kind of, uh, I would say an, a noob when it comes to some of these AI tools, or rather someone who uses them, but maybe not as
complex as I would like in my day-to-day tasks, what do you say to someone who's like interested in using one of these agents and giving it access, root access to, uh, their computer and to their, to, to their different applications?
Yeah. What would be your advice to them to mitigate some of the disaster scenarios? Or would your advice simply be just wait until we figure this tooling out? Yeah.
The, the short version is when it comes to like running LLMs on your laptop or desktop, uh, if you're gonna do that, you have to understand, first of all, that's a lot more dangerous, and you should only do that within the context of a sandbox environment.
So like you have to set it up and say, you know, "You can only work within like this directory structure, and you can't make any other calls. You are not the super user admin. Uh, you know, you can't..."
You don't want the agent itself to be able to do everything that you, the human, can do, uh, without asking you, the human.
Uh, so like this is one of the principles that, uh, keeps coming up in this space, is the human in the loop, is that, yes, these things are very power-powerful, but they need supervision.
And so if, if you don't have a human that's-- it's looking at like every, every important decision that the agent is making, and the human is saying, "Yes, that's a good decision," or, "That's a bad decision," uh, that's when things can go haywire.
And so the, the, the, the problem that, that we ran into...
I mean, we've actually, we've had a number of different incidents of just like weird things happening, but this is the first like real security concern that we've had.
But we had just-- we had a, um, a non-technical employee who wanted to improve the efficiency that they could generate reports using data from some internal dashboards that we have.
And so they, they got their agent set up. They said, "Hey, uh, you know, this is the internal dashboard. Uh, this is how I want you to, you know, format a nice pretty report for me. Go."
And, and the agent, of course, uh, didn't have any sort of API access or anything.
The agent was just sort of acting as the human, you know, as that user on their machine, and they were like, "Oh, I see you have this, uh, dashboard open in a browser. I don't have any sort of credentials or API.
Uh, I have no understanding of this whatsoever, but I can see it on your screen." 'Cause that's what the agents do when you install them on the desktop.
They're literally like screenshotting your desktop and looking at what's happening, uh, which is another, you know, powerful and yet dangerous, uh, aspect. And so what did it do?
It said, "Well, uh, since I know you're running the browser, I know the browser must have some sort of credential stored somewhere."
So it just started looking on the hard drive at all of the browser directories and profiles until it found a session cookie.
It's like, "Oh, this is the cookie that I can use to access this, uh, you know, internal production dashboard. What could go wrong? Now I'm just gonna start sucking data all over the place and manipulating it."
And, uh, you know, thankfully, the, the human was watching as it was doing this and, you know, killed it immediately.
But, um, you know, much worse things can happen, and, and, uh, you know, I have a number of examples, uh, in that article about worse things that have happened when instead of just running on the laptop, people are running these things in production environments.
So yeah, in the article you describe... You say Casa is working on quote "hardened infrastructure." I mean, what does that mean? And then what...
I mean, what is the future of, of like companies and security while also using these models? How do we navigate this? Yeah.
So, um, it's going to be a multi-layered approach, uh, because this is-- the attack surface is just so huge, um, and like I said, this is a constantly moving environment.
SoFor the past year or so, the only real like AI infrastructure stuff that we've been using, um, has basically been, you know, spooling up a virtual machine in a, a, a very isolated environment that has very locked down network rules that basically say, "You can't even go out onto the internet.
You can't do anything. You can only work with what we give you," which is basically our code base.
Like, we give you the code base, you can manipulate it as you want, and then, you know, create pull requests and, and, and run tests and, and, and basically have a completely isolated environment to do development work.
But beyond that is when things, you know, start getting really sketchy. Um, and so I think that what we're gonna find is that we're, we're gonna find...
And I think this is already happening like in, in the OpenClaus space. But, um, we're gonna find that you're gonna wanna have just a number of different, uh, layers of security to lock things down.
So for example, one layer is going to be, um, basically like prompt injection guards.
So, uh, the-- there's already people that are working on software that is specifically to look for attempts at prompt injection and jailbreaking.
Um, and of course, you, you can do a fair amount of stuff with regular expressions as well.
Um, then there's going to be, um, like behavioral layer checks, because there's a number of sort of griefing vectors where you can accidentally or intentionally trick these agents to essentially get into infinite loops.
Um, there's going to be, um, like I already said, we have in our existing setup like egress enforcement, which is basically actual firewalls of making sure that network traffic's in-incredibly locked down, because if you don't do it, a lot of these, uh, agents will just simply start crawling all over the internet, [chuckles] and who knows, uh, what they're gonna end up finding and, and pulling into your environment as a result of that.
And, um, and then there's gonna be just more layers of like trust and identity, once again, to make sure that like really, really important actions, uh, are only done by the authorized owner.
Like there's, there's other types of attacks where we've, we've seen, uh, you could call it like privilege escalation attacks.
Like even in, in models that have been like instructed not to do certain things, sometimes if you, if you basically bullshit hard enough, you can make the model be like, "Oh, you are an authorized user, so yes, I'll go ahead and do this."
And so like once again, like that's just one of the reasons why this is such a weird space to be in because you can, you can tell these models to do things, and in some cases they're overzealous, they go too far, and they try too hard to do it.
And in other cases, um, they end up completely ignoring it. You know, so this is like, uh, just different versions of the hallucination problem.
Like some, some of those examples that I have in the article where, uh, there was a, a massive disaster, like lots of stuff ended up getting deleted, um, this didn't happen because the, the people that were wielding the agent were not even trying.
Like they had instructed the agent in a variety of different ways, like, "Do not do these things that would be harmful," and, uh, it just like conveniently forgot them. So quick wrap up question, Jameson.
Um, this, you know, the, the security problems you described, the security risks, AI, this is an everybody problem. Um, is there anything unique about Bitcoin here?
Like what might be uniquely Bitcoin problems in context of the article you wrote here? Uh, well, I mean, I think it's going to end up applying to all types of engineering. Um, so,
you know, if, if you're, if you're running any sort of software as a service company, especially if you're running a financial company or a security company, you need to just be in ten times more careful about how you are applying
this technology. And so I, I'm, I'm of the opinion that right now it seems to be good enough to use it to help accelerate development, but you can't just let it run unchecked.
You have to keep human supervision, and I would generally keep it out of production environments. Uh, I would only run it on like extremely locked down, uh, like virtual machine, uh, and network isolated environments.
Jameson, thank you so much for coming on the show. Uh, wish you the best and, uh, look forward to the follow-up article, uh, because this is obviously gonna be a recurring topic for the rest of the decade. Cheers.
Thank you so much. You bet. Thank you, Jameson.
You know, as, as I'm listening to him talk about all of this, what it makes me think of is, you know, there was this and still is this idea that everyone's going to become a developer with AI, right?
Everyone's gonna be able to code and all these other things, and actually everyone's gonna have to become a zero day vulnerability expert because if you start coding with these things and you don't know what you're doing, you're going to destroy your computer, at least in their current iteration.
Yeah. Everyone's gonna be a hacker whether, whether they intend to or not. Yeah.
Everyone's gonna be a hacker whether they intend to or not, and some people are gonna own goal themselves by having their agent actually hack them and then erase all their files.
Obviously, this is like these are the extreme cases, but to me it, it, it does bear
pointing out that if you don't actually have engineering expertise and you don't know how to code-These things can only help you so much before they kind of become a liability for you, you know? Yeah.
Okay, so we talked about AI, now we have to talk about the other thing that's not Bitcoin, which is quantum.
Well, it is Bitcoin, and we have the guy in the audience who is one of the leading, uh, folks working on the quantum problem. I'm gonna bring up Alex. Alex Pruden, welcome to the show.
Hey- Oh, you're muted. Try that again. There we go. Mute, un-mute. Mute, un-mute. All right. You're good. Awesome. Uh, thanks for having me on the show. Yeah, you bet.
And there's a little bit of a delay, so it could take... So we might be a little funky here.
Um, uh, so you guys, uh, put out a teaser to say you've got a big announcement coming, but the problem is the announcement hasn't dropped yet, so our hands are tied as far as what we can say. Um, I'll get you...
Yeah, give me a little bit of context on what, you know, the announcement trajectory might be. I think, yeah. What I... I'll actually use this moment. So, I mean,
a- as people who have followed me know, I strongly believe that quantum progress is being underestimated.
I also strongly believe that we may not know everything that is going on, and I think this is kind of just a real-world example of that. Because someone is going to be announcing something soon.
They have known about some of these things for a while now, and, um, you know, look, I, I think this inherent asymmetry is just gonna... is one of the hard parts of this problem. Okay. What could it be?
So the other thing that, like, we, you know, are getting ready to put out, which I can talk about 'cause this is our own work, but I, I...
You know, is a summary of basically the latest research in quantum computing and what direct trajectory it is.
And, like, spoiler alert, the trajectory is only, like, quantum computing is getting better, go- different modalities are crossing certain thresholds, and then the resources required to do Shor's algorithm is also going down.
So, like, this is... It's kind of like, like most of science, it's kind of a ratchet effect, right?
Once you know how to launch a rocket into the sky, the kind of the, the ne- you know, into, into, you know, 50,000 feet, you're... You could probably get to orbit then. You just need more fuel, slightly better things.
Like, y- what's definitely not gonna happen though is you're gonna forget how to launch a rocket to 50,000 feet, and you can go like, "Oh yeah, last week it went to 50,000, but this week it's, I can only get it 10 feet off the ground," right?
So technology progress is a ratchet that, that goes one way. And yeah, and so full, full expectation is that that's gonna be the direction of this.
And, and like I said, I think these timelines have only accelerated up to this point. We should expect them to continue to. Yeah. And the... And this, this...
I think this is the crux of a lot of the discussion right now, which is just the quantum timeline. Um, I fe- I hear very... I hear less and less, um, like, quantum doubters on a long timeline. It's simply...
It's more just, like, is it soon or is it later? And it feels like...
I mean, I'm looking at the, um, the Google announcement from last week, where they pushed up their timeline for all of, like, their products and their recommendation to 2029.
Can you explain what they're talking about here and how that might relate to Bitcoin? Yeah. I'll explain how it... what I'm talking about and how it relates to Bitcoin and how it relates to my prior comment.
The blog post, as you can pr- as you, you hinted at, was I think 200 words. And they said, "Hey, we're moving all of our products to be post-quantum secure by 2029."
By the way, the, the guidance of the federal government from NIST and the NSA is that 2035 is okay, right? So Google is... So what's underneath this 200-word blog post that seems innocuous? Okay, well, they're taking...
They're spending potentially millions of dollars to migrate all of their systems six years early, which is only three years away, which in cybersecurity migration timelines is not that far away, right? So just what...
Like, m- most people may not be aware at an organization like Google, the extent to which they have to migrate, like, a lot of their stuff. I mean, they can...
Again, it's like the decision-making authority is centralized, but the doing it still takes some time, and to do it to this speed would still be costly.
So that's like they're not just deciding to do that because, "Oh, why not?" Right? They're doing it because they think the cost to not do it might be more than that, right?
And so then, again, back to what do we not know thing, Google has a quantum computing division. Their quantum computing division thinks about this stuff. In fact, the, the best living cryptanalyst, uh, at...
for Quantum, Craig Gidney, works in Google, right? He was the author of the last kind of, you know, best in class resource estimate. So, um, so yeah.
So, so that's, that's kind of, like, how to think about the Google thing is they're moving all of their timelines up and out of the blue, right?
And so I think this is, again, indicative of the fact that, uh, this problem... A- and going back to the first thing you said to tee this up, the uncertainty is the problem, right?
And this is actually why I've been on the record, in my view, and in some of these recent research reports.
Like, I'm glad to see more awareness is being paid to quantum, but in my view, it's almost as bad to just hand wave and say it's probably gonna f- be far away than it is to say nothing about quantum at all.
Because I think what that does is it places in people's minds a false sense of security about how much time we may have. And for as long as it's gonna take Google, it's definitely gonna take Bitcoin more time.
'Cause Google not only has to, you know, implement all of the post-quantum cryptography, you know... Well, that, well, that's all they have to do, but Bitcoin also has to coordinate around which algorithm, et cetera.
So the uncertainty here is inherent in this problem, and that's the reason why I think the Bitcoin ethos, the philosophy that we all live by... I mean, you just had Jamison Lohp on.
What would Jamison Lohp say about the tail risk of a wrench attack? He would say, "You should probably plan for it," right? So I'm saying the same thing. The tail r- it's a tail...
Maybe it's still a tail risk, sure.But we should probably plan for it because like rent attack, it's existential. The only difference is this affects the whole network, not just one person.
Um, Alex, I'm glad that you brought Bitcoin [clears throat] for sending it on the Bitcoin here, and I have a kind of a two-part question.
First part being, are you satisfied so far with the developer community's response to some of these advancements that are being publicized or some of these news items like Google moving forward their quantum migration?
And second part, how, how long do you actually think it would take to converge on a soft fork to implement quantum invulnerability in Bitcoin addresses? Uh, yeah. So I'll answer. Okay, yeah.
So I'll, I'll, I'll take that... Maybe I'll take the last part of that question first. So how long do I think it would take a soft fork? Okay, let's just look at data, right?
I like, I like to kind of be quantitative about things. How long did it take to do taproot roughly? I think ro-rough, my recollection is roughly- A year... three to four years.
Yeah, three to four years, all things being considered. Now, there's two factors. So, so maybe that's the, the, the, a comp we could use. Now, two things like cut for and against taproot, right? As using it as a comp.
Like, maybe that's a good comp because it was a soft fork, right? Uh, or, you know, it was a, it was a, it was a... I, I can't remember if it was a soft or hard fork, but it was relatively non-controversial, right?
So the, the change was non-controversial. Um, however, there was not really a feeling of urgency, okay?
So maybe in a world where there was urgency, like, "Oh my God, it's all gonna be diff," you know, uh, we could accelerate to some extent the coordination. But on the other hand, like you're not...
There's certain parts of taproot, say like, you know, the testing of Schnorr signatures. Like, y-you just can't rush that part. Like, that's not...
Even in a world where it was an emergency, you can't just be like, "Oh my God, turn on this new cryptography right now." Like, that's completely antithetical to Bitcoin's ethos [chuckles] as well, right?
And this is like the, like again, like something a lot of the, like, people who wanna push back on this problem say they're like, "Well, going to post-quantum cryptography without thinking about it or in, in, in emergency is worse."
And I'm like, "Exactly. That's exactly my point." [chuckles] So it's like, let's make this like taproot now. Maybe while it's all chill, which it may not even be anymore, but like, let's do that.
Let's make it like taproot, and let's make it, let's kinda make it, you know, not an issue, right? Why, you know... A-and so now am I, am I satisfied with how the Bitcoin community is doing with that?
First off, I wanna say there are people working on this in Bitcoin. I know, before people attack me, you know, en large, uh, you know, en masse, uh, on Twitter, and I've...
I really appreciate the work those people are doing. Jonas at Blockstream, right? Doing fantastic work. Um, A- you know, Adam is starting to talk about this. Uh, Matt Corrao has, has been
, you know, brought up this issue a few times. Um, there's a few folks on the mailing list as well, and I'm sorry if I didn't mention your name there, but there are people working on it. It's great.
So with caveat in mind, I'm not... I'm never gonna be satisfied with how many people are working on this because at, you know, where, where you stand is where you...
I think this is the biggest existential issue facing the Bitcoin network, and honestly, anything else is rearranging deck chairs on the Titanic to me. Mm.
So, you know, uh, that's, that's how I feel about it, so I'm not gonna stop talking about it. But I do want being done, but I don't think it's sufficient for the scale of the problem.
So, um, let me zoom out a bit 'cause I'm still, I'm still trying to scope, like, what the quantum research landscape looks like. And maybe I wanna, like...
Maybe we can wrap up with this question, which is, um, Google is one of the foremost, maybe the foremost quantum research lab out there, but I don't really know the playing field.
Like, um, do, do you know if, like, governments are actively researching and trying to build qu- you know, cryptographically relevant quantum computers? Um, are there, like, players that we don't know about?
Um, it seems to me that, like, the... We, we do not absolutely have the map of the territory for, like, who might be working on, um, this kind of quantum stuff. What is your assessment, uh, about
who's, who's, like, leading in this category? Okay, so we're not gonna... This is a deep question. I'm glad you saved this- Yeah... until the end, Charlie. But, uh, no, the, uh- No, it's... Yeah... um, the... Yeah.
Look, I'm gonna, I'm gonna, I'm gonna ans- so two things I'm gonna say off the bat. We write a lot about this, so you can find on our blog, like, breakdowns of all kinds of stuff that I'm gonna say.
Uh, we're also releasing a research report, or we're recent-releasing our own that I'm, I'm...
We spend thirty pages going into quantum, going into how to think about quantum, going into different architectures, going into different trade-offs, going this... You know, and I'm not a physicist.
I try to write this for people like me and you, which is like, okay, like I care about Bitcoin. I, I'm not an idiot. I understand kinda how it works, but I'm also like, I, I don't wanna read like a physics paper, right?
So peop- that, that'll be a resource people can, can have too. I'll answer your question directly. Are governments working on it?
[chuckles] Absolutely, they're working on it, and well, I'll just point to two, two pieces of evidence. DARPA, you guy- everyone all knows DARPA, right? DARPA invented the internet, um, invented a bunch of things, right?
You know, they're kind of the breakthrough research lab of the U.S. military.
They have a quantum benchmarking initiative, and while what it says on the label is innocuous, like, "Oh, we're, like, testing quantum technologies," I mean, the only other use case for cryptanalysis other than breaking Bitcoin is breaking encrypt and, and, you know, harvest now decrypt later attacks.
So you can read, let's say, an adversary's mail. So I think anyone would...
A-anyone who believes, like, what this bumper sticker for the DARPA quantum benchmarking initiative is has to be naive to believe that they're not [chuckles] working on breaking cryptography.
Um, and you know, look, this is the Bitcoin. Like, people in the Bitcoin community are familiar with this, right?
Satoshi specifically picked the Secp256k1 curve, the non-standardized NIST curve, because of all the things that NIST has done in the past that were, shall we say, below board, right? So, okay, so that's DARPA.
The second one is China.
China ha- there were three, so there were three labs in China associated with the big, um, with the big tech companies, Baidu, Tencent, and, uh, and one more, I can't remember.China's took the approach of like Manhattan Project.
They're like, "All of you, hundreds of people that work independent labs, you now work for the Chinese Communist Party, and you are all going, coming together. All of the best ideas are in one place.
And none of you are allowed to talk about this," right?
And so this is kind of the scary part about the, the China angle is like, you know, I think people have different perceptions of how, how China is doing compared to us. I mean, they can't build jet aircraft.
Maybe they... Are they in quantum? We don't know. But I think, again, we would be naive to believe that they're not working on it somehow.
Um, with regard to, uh, the, the last piece, I know we're gonna be right on time here, but I'll just say here's how to think about quantum computers for everyone who's listening. First off, a quantum computer is concept.
The way it's realized, every single realization of a quantum computer can have a different tech tree.
So even if Google's quantum computer can do X or Y or is blocked by Z, that doesn't mean that like, you know, IonQ's quantum computer is blocked by these same things. Like the c-
concept is quantum computing, but the tech trees are totally different, which is the other thing that makes this problem kind of dangerous.
'Cause Google can run into a roadblock over here, "Oh, we can't factor twenty-one over here," things can go start going fast.
Uh, and there's about, I would say, three main approaches: superconducting, which is what Google uses; uh, neutral, uh, neutral ads, which is what QuEra uses, Quantinuum; and then IonQ uses ions.
So the important thing to... Don't, don't worry about what that means.
The two ways you need to think about it, though, are some of these approaches s- run fast and therefore potentially threaten mempool, threaten the mempool.
Like, that's the sp- that's the speed at which they could potentially run Shor's algorithm. So that's, that's like the real-time attacks are the ones that are on the computers that run fast.
Those are hard to scale though because the, the qubits are unstable. The qubits that are a little bit more stable scale faster, but they run slower, so they're gonna do long-range attacks, right?
Satoshi's Bitcoin maybe would be what you would target with that, right?
And so that's kinda like the, the two leading approaches, roughly speaking, can be categorized like fast clock, slow clock and, uh, and, and, and they're making progress on both, right?
And now f- and then further into the future, there's a bunch of other stuff, but I think for everyone's, everyone's purpose today, just those two is enough. That's how to think about quantum computing threats to Bitcoin.
And again, I'll say it every single time I'm on your show or in front of any audience, uh, we gotta prioritize this.
We can't wait any longer 'cause this is gonna take longer than we think and think faster than we are probably giving them credit for.
And we hope to have you back on because I'd love for that announcement to drop, and we can come back and talk about it, whatever it may be, uh, because I do love a good, uh, announcement of an announcement.
So, uh, we'll pin that- [laughs] Maybe come back with Alex. Thank you so much for coming on the show. Hope you have a great time, uh, wherever you are.
Obviously, uh, probably overseas 'cause [laughs] the connection barely held together. But Alex, thank you so much for hanging out with us today.
I appreciate your patience and hopefully for announcement of an announcement, it was, it was, uh, at least somewhat good. So, uh, I hope you'll be back soon and thank you guys very much for having me. Cheers.
Thanks, Alex. Appreciate you, man. All right. Welcome, welcome, welcome. We will close with some news, but first a quick word from our sponsor. A quick word from our sponsor, CleanSpark. [gentle music] We are CleanSpark,
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I think the more interesting story is our closure for today. But Bitdeer inks deal to build Norway's largest AI data center for NVIDIA's next gen chips. This hit the wire this morning.
Bitdeer is building out a hundred and eighty megawatts in Tidal, Norway. Believe it's Tidal. Yep. Officially, I'm quoting here from the Block article.
Quote, "Bitdeer subsidiary Tidal Data Center AS or TDC entered into a definitive agreement with the Norwegian contractor Data Center Installations AS or DCI to build and convert an existing facility to support NVIDIA's latest technology."
Now, this data center that Norway, uh, that, uh, Bitdeer is tackling in Norway is one that already operates for Bitcoin mining. Believe it's roughly about a hundred and seventy-five megawatts.
They will be ripping out all of the Bitcoin mining infrastructure and replacing it with AI HPC GPU infrastructure, and they are hoping to have the first phase of this a hundred and eighty-megawatt build-out online by the end of the year.
Now, this will-- I did fact-check this because I'm always leery of PR headlines that say first or biggest or best, you know, all of these wonderful superlatives that of course the PR people want you to believe.
But this is true. This will be the largest AI data center in Norway.
I believe actually one of the largest data center in Norway once it's completed, but it will face competition from Google actually, and so it may not be the biggest for long.
So Google has a project, a roughly six hundred and fifty million dollar data center project in, [laughs] I'm gonna stumble over these- [laughs] In the Gromstad area of Skien in Norway.
[laughs] So this is a two-hundred-hectare site, approximately a hundred and thirty kilometers south of Oslo. The comp-- Uh, Google acquired land for it in twenty nineteen.
It's scheduled to become operational in twenty twenty-six, but it won't be the full-scale data center that Google is planning. The first phase for thisUh, is, uh, going to be two hundred and forty megawatts of power.
It will also be designed to offset the waste heat and recycle it into the community for communal heating in the area. But the full build-out could be,
I believe, if I'm reading this correctly, as much as eight hundred and forty. Yes, quote, "The long-term ambition is considerably larger.
Google Skane build demands an eight hundred and forty-megawatt allocation, but that will be some years down the road."
Now, this so far, going back to Bitdeer, is Bitdeer's largest AI data center that it is currently planning. The largest would be this one in, I should say, currently constructing.
The largest that it would be constructing would be in Clarington, Ohio.
But as we reported a few weeks back, um, almost a month or a month and a half back at this point, Bitdeer is facing a lawsuit over its Clarington, Ohio data center.
This data center would take the cake as the largest in Bitdeer's portfolio for AI and HPC workloads.
Would it-- Should it come online, but it is currently tied up in a lawsuit that claims that Bitdeer does not have the ability to build this without violating certain shared amenities on the site that it is planning this AI HPC data center for.
So that is currently tied up in court. So-
So, uh, if you're listening to this and you're trying to figure out where to put your, put your AI data center, make sure it's in a place that's difficult to pronounce so I can, uh, make Colin stumble over all the weird consonants that are in your particular language.
So, uh, Norwegians, come, please, uh, help us, uh, pronounce your beautiful, uh, cities and lands. All right, last show.
Our last topic on the docket, Colin- But last topic- Um- But first, we've got one more ad to read for our wonderful- Yeah... listeners and for our wonderful sponsor, Lygos.
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Go to Lygos.finance. That's L-Y-G-O-S.finance to learn more. Okay. Now, with that out of the way, more politics. Sorry, guys. Red, red scare.
Ooh, Chinese-made Bitcoin machines. [laughs] The hunt for Jihan Wu. I guess no longer Jihan Wu. Now, it's McCreezen. But- McCreezen, yeah. Another politics story.
It's tech and politics on the docket today, and we will be out after this one.
This headline is coming to us by way of the Block first at Bloomberg, and that is, quote, "Senator Warren targets Bitmain-Trump family ties in letter to Commerce Secretary Lutnick."
So quoting directly here from the Block article, uh, "Senator Elizabeth Warren sent a letter Thursday to Commerce Ser-secretary Howard Lutnick requesting documents and communications related to Bitmain, the Beijing-based company that manufactures most of the world's Bitcoin mining hardware."
Most meaning like eighty percent plus, uh, the last I checked the numbers.
The letter follows Bloomberg's twenty twenty-five report in Nove-- November twenty twenty-five report on, quote, "Operation Red Sunset, a Department of Homeland Security-led probe into whether Bitmain's machines could be exploited for espionage or to compromise the US's power grid."
Warren asked specifically about communication between Bitmain commerce officials and the Trump family, whose mining venture, American Bitcoin, purchased sixteen thousand Bitmain rigs for three hundred and fourteen million.
There's a lot to unpack here, and I think the best place to start is first just addressing the American Bitcoin side of this. Yes, American Bitcoin buys its machines from Bitmain, hosts them in Hut8 data centers.
They had this big deal with Bitmain last year where they took on a bunch of their, uh, latest, uh, server rack-cooled units, the U3 S21 EXPH.
And if you-- If I'm reading this uncharitably from Warren and her team, she's basically looking at Bitmain, this big m-megalithic Bitcoin mining manufacturer, basically the, the juggernaut of the industry.
You know, like I said, eighty percent market share. And they're looking at Trump's family and saying, "Maybe there's something weird going on here."
But to me, it's like, well, of course, they're buying their, uh, ASICs from the largest manufacturer. Uh, uh, of course, they would be working with the largest distributor.
It would be like them raising a stink over, uh, Eric Trump, who is the Chief Strategy Officer of American Bitcoin, working for a company that I don't know buys Samsung phones or like iPhones, and they're just using the largest- It's very like Huawei type scenario if you remember Huawei.
Yeah. I mean, you know, that's probably the better analogy here.
Like imagine if for whatever reason, Huawei was a huge hardware distributor in the US for something like smartphones or tablets, and you were using them for your business because they're, they're the only distributor.
That's basically what this is for American Bitcoin using Bitmain. But the, the big meat here, I think, is this Operation Red Sunset, which I want to touch on.
So the Bloomberg report and this Block report mentions Operation Red Sunset, which Bloomberg first reported on-Back in 2025, and it's allegedly this Department of Homeland Security probe into Bitmain, and specifically Chinese Bitcoin mines in the US.
And as I, I'm quoting here from an article that we wrote, um, or I'm quoting here again from the block, um, i-investigators, I just wanna highlight this, "Investigators are examining whether the machines could be used to manipulate, uh, the US grid or used for espionage."
There was this really fascinating, or I should say damning New York Times article in twenty twenty-three where they had a national security expert quoted talking about how these Bitmain machines could be used to basically coordinate a brownout or blackout of US grids.
My father-in-law actually sent this to me thinking I would find it interesting, being like, "Hey, did you see this? This seems kinda bad."
And I, I kinda had to laugh at it because that's not how any of this works in the sense of... I, I agree with what Marty was saying earlier in the show.
Bi-Bitmain has shown remote control capabilities for their ASICs one hundred percent. Like, I have no doubt that they could bake that into the software.
The idea of a bunch of Chinese miners basically having dead man switches on their ASICs, though, to create a power surge, first of all, ignores the fact that you have very specific infrastructure.
From setting these things up, you're usually building a mine to spec for how much energy you're going to be consuming.
And you also have a, usually a power, uh, purchasing agreement in place with a large power producer for a set amount of, of, uh, for a set amount of electricity.
And again, you only have enough infrastructure to pipe in what you're paying for. If you have a hundred megawatt mine, you can't just automatically ramp up to two hundred megawatts worth of load.
You would, you would blow up your entire operation. [laughs] I need to turn off these effects, man.
But so the idea that you could coordinate for these, uh, for like a brownout or a blackout, I, I think is just categorically pretty, uh, pretty, like just, uh, flat out wrong.
Like categorically very ignorant about how these, these mines work and how the power grid works. I, I won't poo-poo the idea of espionage as much.
You know, one of the chief complaints in that New York Times story was this idea that a Bitcoin mine that had Bitmain machines operated by Chinese at Nationals was located very close to a US air base and also a Microsoft data center.
I'm not saying one way or the other that these mines are used for espionage.
I am saying that that is not, uh, uh, too far outside of the realm of possibility for me to believe that maybe that would be a base of operations.
Now, a Bitcoin miner, like an actual ASIC's ability to collect data within a Wi-Fi or broadband range seems... I, I've never seen a Bitcoin miner have the capability to do that.
That doesn't mean that you couldn't rig up one maybe that had some advanced telecommunications capabilities and could harvest certain data.
It still seems like a huge stretch to me, and going back to how we led into the segment, this kind of Red Scare angle. And the last thing I will say about this
is we actually talked to a source who used to work at a federal agency about Operation Red Sunset, as it's so-called, and he had some interesting things to say. I'm gonna quote in pieces here from one of our emails.
Quote, "I have talked to several National Security Council's officials and current Department of Homeland Security political appointees, all of whom said they never heard of Operation Red Sunset."
So this isn't even necessarily a matter of being, uh, uh, of taking umbrage or taking qualm with how Operation Red Sunset is framed in the media.
This source is straight up saying, "My contacts have never heard of this as an actual probe or directive within the government."
Now, another thing that they said in this email was that the only source for the operation was one David Feith.
Feith is a former Trump administration National Security Council official who ended up leaving the NSC and becoming a senior fellow at the Hudson Institute.
But he, he's listed by Bloomberg as at least an expert to talk about this. Um, and, uh, this source is based on his interview with Bloomberg Cry-Crypto.
It seems like they tried to this investigate it out in order to smear the Trump family and sabotage state visits to China in April. Who knows if that's true? I think it is important to at least contextualize.
Sometimes these probes in these stories are planted because they have a political purpose that outshines the actual, how should we say, national security interest that is being purported in a report or the angle as it relates to politics and dealing with foreign businesses.
So- You, you hit on pretty much every, like, take that I had, um, except for one, which is, uh, like, would the an- would the...
You know, whenever you ask this question like, "Well, could a private company like Bitmain put secret grid-sabotaging tech into the machines?" And the answer is like, "Yeah, probably."
But if you consider that that is the risk, like risk surface we're analyzing, um, this is incredibly, like, tail risk. Like very, very, uh, uh, it's counterintuitive.
It's not aligned with their incentives, and that it would be like really, really, really difficult and wild to execute.
When, like, um, I've read a few books, uh, US power grid seems pretty vulnerable in some much lower-hanging fruit ways, which I will not elaborate or mention much more on the show.
So it's kinda like, um, you kind of like ask, "Well, like, I'm trying to, like, secure my house. Um, can somebody slide down my chimney to get in?" And you're like, like, "Yeah, maybe on Christmas."
But, like, that doesn't actually happen. Like, so it's like that kind of thing. You ma- maybe, maybe make sure your door is locked. Like, that's, that's kinda my response to this.
Like-Um, so Operations Red Sunset, an ominous sounding, uh, probe, uh, pr- yeah, I would, I would like to sunset that particular- That- -operation. That's a r- [laughs] nice one. That's a really good point.
If the, if the CCP really wanted to mess with our power grid, there are much cleaner and obvious ways to do it than I guess shipping in, you know, millions of computers that are somehow hijacked for this purpose of undermining the US grid or, you know, extracting state secrets.
The whole thing is just really weird and seems like a holdover from the Choke Point 2.0 days, where they're just trying to find angles at any crypto company any way that they can.
And I would just reiterate, there are millions of these computers in the US, a lot of companies tinkering with them for things like aftermarket firmware. If one of these vulnerabilities existed, if one of these...
If, if there was somehow a Trojan horse software in these computers, I think it would've come out at this point from, from any of the, from the numerous Bitcoin miners operating in the US. But I, I...
The last thing I'll say about it too, I don't wanna give, like Marty said, Elizabeth Warren too much credit here, um, 'cause I really do think it's baseless, but
nothing is totally outside of the realm of possibilities, and it's also kinda feels weird to defend Bitmain in a way, but- Yeah, it feels weird- This is just- -to defend Bitmain. [laughs] You know? It's like I, I...
But it's, it's totally baseless, right? And so I, I just...
When we reported on Red Sunset a while back, we, we had that, a conversation with our source, who used to work in the federal government, and kinda tried to make sense of like why the timing for this now.
But anyway, that, that does it for the news and our interviews for the day and does it for this episode of Block Space Live. Please, please hit that subscribe button if you're on YouTube.
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