[upbeat music] What's up, y'all? Welcome back to Block Space Live, brought to you by CleanSpark for the final show of the week, and we've got some exciting stories today.
Mara axed fifteen percent of its workforce this week as Bitcoin miners continue to pivot to AI and say, "We might not need all of these Bitcoin mining people."
Also in the news for a public miner, we've got CleanSpark getting the first investment-grade Bitcoin-backed bond onto the market. Really cool story I was not expecting to hit the wire this morning.
And it j- it seems like it is a, a hat trick for public miner stories this morning 'cause we also have Riot selling thousands of Bitcoin in Q1, adding to the list of public Bitcoin miners who are divesting of their Bitcoin holdings because why you need all that cash if it's not actually doing anything for you?
And for interviews today, we've got Jamie Gill of Luxer to talk about their new Bitcoin miner management fleet software launch commander.
And we've got Alex Pruden on again to talk about the most recent, uh, paper from Google about quantum computing risk.
Whether it's AI or quantum, all of the new bleeding-edge tech is going to make you poor, and we will be talking about it on today's show. [chuckles] Yeah, we don't know what the FUD is, but the FUD, it makes you poor.
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Colin, lots of news this week, the hat trick of mining news this week, but I think in order to appropriately set the stage for the show, we gotta go to hash rate index.
It's always Groundhog Day when we do this now [chuckles] 'cause it's always really difficult to, uh, look at what's happening within the Bitcoin mining market because it's just bleak week in and week out, man.
Hash price is still just puttering around at thirty dollars for peta hash per day, and fees are nowhere to be seen. Got about [lip smacks]
point six percent of, of the block subsidy is coming or the block reward is coming from fees currently. And we had just had a r-recent difficulty, um, a move in difficulty. The last adjustment was plus four percent.
One of the few upward or positive difficulty adjustments we have seen in recent memory, and that comes on the back of hash rate peaking its head just above a thousand doll- or, um, a thousand exahashes recently.
It's just under that right now. But Bitcoin's hash rate's kind of been all over the place because profitability is in the dumps.
Bitcoin price is not quite in the dumps, but it's not exactly where you want it to be, and the network's just been getting slung all over the place.
If you look at the last year, you know, we hit an all-time high of almost twelve hundred exahashes in October when Bitcoin was ripping to its own all-time high, and then during Winter Storm Fern, we crater into February, and then we also, uh, kind of recover a little bit from that.
But [lip smacks] it's just been up and down and up and down, and it looks like it's kind of getting compressed into this band here, but so far not really too much reprieve in sight.
And we'll just go over to difficulty really quickly before we close on this. If you look at the last,
uh, you know, ten or so difficulty adjustments, we have two, four, six, eight, or two, yeah, two, four, six, seven out of the last eleven have been negative.
That's pretty staggering and something that you don't see very often. And in fact, the la- the only corollary to this is really the China mining ban in terms of what it's done to Bitcoin's hash rate and reshaping it.
The current Bitcoin bear market and the AI pivots that we've seen from Bitcoin miners are really kind of driving and reshaping Bitcoin's hash rate similar to that event five years ago. So... Um, yeah.
So, you know, you say it's Groundhog Day in, uh, as far as, like, ha- new things happening on, in hash rate, and that is true.
So, uh, because we have a little bit more time allocated for this segment, I would like to maybe float a couple new features, which I don't think people typically click around and look on on Hashrate Index.
Um, uh, I'm going to, uh, show you this particularly cool, uh, thing, which is the, uh, the history of ASIC releases. Now, like, this is great.
You know, if you're just jumping into Bitcoin mining and you don't, like, know the history and trajectory of, like, the efficiency of these rigs and, like, when they've been released, this is a really cool chart buried in here on Hashrate Index, um, on the ASIC release history.
K- and it kinda shows, like, different eras, and you can actually kind of see a little bit of a trajectory here. You may, you may actually be able to divine Moore's law from this, uh, chart.
So that's a pretty interesting, uh, section. And then I also think this is-Um, also kind of underrated.
A lot of people are like, this almost seems like a twenty twenty-one talking point, but like the Bitcoin mining energy consumption index. Um, again, this is not an objective measure.
This is, uh, this is like Luxor and Hashrate index, you know, estimating what, what they think are the boundaries for upper and lower, like, energy use, uh, for, uh, Bitcoin mining.
And there's a really good snapshot of kind of like, look, here's a profile of the machines.
Here's like an energy blend, and, uh, we can basically see that the, uh, theoretical upper bound for mining consumption is like, say sixteen point three...
Uh, I mean twenty-one point two gigawatts versus the theoretical lower bound is like--
I'm sorry, the theoretical upper bound is thirty-three point three gigawatts versus the lower bound being fifteen point three gigawatts. Pretty cool.
I think this is a, you know, if you're going to write an article about [chuckles] Bitcoin mining energy consumption, please visit this first and look at the methodology instead of just kind of wildly projecting, as many folks have in the past.
Yeah, it's, it's a really good data set, and they basically take different assumptions for Bitcoin's average ASIC or for the Bitcoin network's average ASIC efficiency, and then extrapolate what the energy consumption would be, assuming the majority of the network or the average network efficiency is of that model.
So what I find interesting about that chart, and then we'll drop this, we basically, according to this, for the estimated consumption, we just got back over where we were at following the halving,
which is pretty, pretty in-insane. The estimated consumption on May 2nd was, May 2nd, twenty twenty-four was nineteen point five megawatts. Uh, or excuse me, nineteen thousand five hundred megawatts.
Now it is about twenty-one thousand five hundred megawatts.
So interesting to see that we're just kind of now getting back up to that point, and obviously that's because a lot of, you know, a lot of the newer machines that have been employed have greater efficiency than some of the older ones.
But we'll, uh, we'll put that aside for now, and we will go ahead and move on to our first story of the morning. Little original reporting from you boys here at Blockspace. Yeah, we got the scoop.
Some people tried to rug us. Shout out Unchained, uh, for, uh, publishing the story without accreditation. We worked hard on this. Take it away. And, yeah. And
the news item here, Bitcoin miner Mara lays off fifteen percent of its workforce. Now, this is a story that we had heard about a- about a month ago, that these layoffs were coming actually.
And we didn't report on it at the time because we couldn't substantiate it. Talked to some sources, and they said nothing's happened yet.
Then it seemed this week that the kind of house fell down, and Mara ended up eliminating a number of employees across various business lines. Seems like the layoffs started around Wednesday.
They really culminated on Thursday. But that fifteen percent has affected, like I said, basically every single depart- department you could think of across operations, strategy, technical, et cetera.
We were told specifically that their ASIC repair... I, I would assume these people were contractors. They might be full-time. But we were told that the ASIC repair department specifically really got shellacked in this.
I wouldn't be surprised if the, that department's basically gone at this point. And, um, another, uh, important thing to note here, let me get... Well, I can't see. [chuckles] I have the article.
I have the unpaywalled article. Yeah. I don't-- It's weird, I logged in, but it's telling me that I'm not logged in. Okay. Um, w-we, we, we quoted a, an employee in this piece.
I, I just wanted to highlight this really quickly. I'm gonna pull up the article so I don't misquote it. But I thought this kinda sums it up. Quote, "These cuts are going deep." End quote. There's a possibility...
Uh, quote, "There's a possibility entire teams are being cut." End quote. And we had a statement from Mara, uh, a-after we published this article. We reached out to them beforehand. They got to us after we published it.
That said, uh, quote, "Mara remains focused on executing our strategic evolution from a pure play Bitcoin miner into an energy and digital infrastructure company as our company evolves, so too must our operations and where we focus resources."
And then we also got a memo from CEO Fred Thiel that was sent to the employees who remained on after the layoffs saying, quote, "This is not purely a financial decision. It's a strategic one.
As we've been sharing through our recent announcements with Starwood and Exion, we're focusing the company in a new direction. That means the shape of our teams need to change with it." End quote.
So it's impossible to read this story without taking the recent AI buys by Mara in context. For those who have not been paying attention, Mara finalized a majority stake, uh, sixty plus percent of Exion.
That is the data center subsidiary of France's national grid company, EDF.
And they also contracted construction firm Starwood to start looking at revamping or rather refabbing their AI or their Bitcoin mines for AI workloads.
So we have not had any deals announced yet from Mara, and we don't know exactly what their AI business line will look like, but it looks like they're going in the direction of other Bitcoin miners saying that they are probably going to build a PowerShell and try to court some sort of tenant to bring GPUs, a hyperscaler perhaps, on-site into their facilities.
So Mara, like all these other miners, pivoting towards AI.
So it kind of makes sense they would be laying off a substantial number of workforce that was on the Bitcoin mining side if they're not going to be doing that as much anymore.And just a little color on the layoffs. Um,
uh, it looks like it was a decent severance package.
I mean, so we're, uh-- affected employees will receive one month paid leave, benefits through April thirtieth, thirteen weeks severance, and full payout for unused ti- paid time off.
That's a pretty good exit package, I gotta say. Yeah, for sure. And there was another piece in there too that I didn't actually include in the article.
I probably should, but anyone who vested shares through the end of last year will be able to keep their vesting schedule, I believe, until, like, June.
I actually didn't quite understand the language behind it, so that's why I didn't put it in.
But basically, there's going to be a buffer for people who were laid off where they'll get to vest more shares as if they were still with the company.
So o-overall, Mara not just, you know, throwing people to the wayside and not taking care of them. I think that they did a pretty decent job with those severance packages.
And one last note on this before we toss it over to a friend of the show, Jamie Gills, who's waiting in the wings here.
I was poking around to try to figure out how many employees Mara actually has, and I never ended up getting a good number on this.
But if you go to LinkedIn, it lists fifty-one to two hundred employees, but it also says three hundred and sixty-eight associated members.
And I think that's where layoffs for a big company like this can get tricky, 'cause Bitcoin miners often employ contractors, not just for things like construction, right?
They do it for a number of internal business functions, technical to strategy, et cetera. So it's hard to say how much of this could be full-time employees or contractors. I saw a pretty high number floated.
I don't wanna quote it 'cause we couldn't substantiate it. But we were told early on when we were first tipped about this that it looks like it's going to be across both full-time employees and contractors. So, um,
I, I hate to say it like this, but I think probably a sign of things to come.
You know, we already saw Block lay off four thousand of their employees, uh, forty percent of the workforce, and Jack Dorsey said the same thing. We're not financially hurting right now.
We're just getting ahead of the game because we realize now that we don't need two people to do the job of one or three people to do a job of one now that we have LLMs. Mara didn't come out and say that outright.
Mostly this is because of their pivot to AI, but you also have to imagine that's probably also driving this decision as well.
It's like, well, some of these employees are redundant at this point if we can basically just give middle management, you know, Claude and then let them run away with it. So. Yeah.
As far as, you know, just a, a subjective assessment of the, like, employees, it's, like, really hard to discern, like, employees from LinkedIn, contractors from LinkedIn.
Of, like, my two handfuls of people that I know at Mara, the majority of whom are laid off, I would say only half of them had, like, publicly put Mara or some, like, Mara subsidiary in their LinkedIn.
Sh- that is just a subjective assessment and not descriptive of the whole thing, but gives you a little snapshot. Little snapshot. All righty.
With that, we will bring up our first guest of the day, Jamie Gill of Luxor, back to join us again. It's been a few weeks. Always happy to have you on. Jamie, how you doing? Colin, Charlie, great to be here, man.
I feel so lucky. Twice in one month. This is great. Telling you, man, we, uh-- on-only the best over here at Blockspace. That's why we like having you folks at Luxor on.
Okay, so y'all had a big product announcement this week. I'm gonna toss our coverage of it on the screen here in a second.
But before I do that, Jamie, can you launch into an explanation of what exactly this Bitcoin mining fleet management software Commander is? Yeah, absolutely. I'm super excited about this announcement.
You know, it feels like the accumulation of all the hard work and everything we've been building at Luxor. This is kind of i-- the final piece that ties it all together.
Um, you know, some people might just see an announcement like, "Okay, Lux-Luxor's launching a mine management software."
And although the idea of, of a, another mine management software entering the space isn't necessarily exciting, what we've built really is. And we came in with a value add, a, a new piece that wasn't out there before.
Uh, as we, we've tried to do in the past, you know, when we first started building over eight years ago, the goal was, um, all right, you know, we started in the pool space, which is a little bit difficult to provide value outside of just reducing the pool fee for miners.
Mm-hmm.
So with a, a goal to professionalize Bitcoin mining, continue to add some value to those Bitcoin miners, we decided to venture into the firmware space, which has taken a lot of years and a lot of effort to now build what is an industry-leading, over forty exahash, four hundred thousand machines running on our firmware.
Um, and it really provides value, like, you know, increases efficiency, increases uptime, machine longevity. Um, so from there, we got a, a taste of what it felt like to really provide some value in this space.
Moved to create from scratch the hash rate derivatives market, which is now-- last year, we did over four hundred million transacted in notional value. So that's reached a point of maturity.
Then we ventured into, uh, the retail electricity provider and qualified scheduling entity space in ERCOT. So now, you know, we're, we're providing value for flexible load Bitcoin miners, uh, in the energy space.
And so adding all these pieces to the puzzle, and it's, it's come together now where we needed a control layer. So one central piece to be able to tie it all together, and that's what Commander really is.
Um, so yes, you can control your fleet with it. You can create automations. Uh, we've made it really fast and really easy to run. Like, the requirements for the agent are, uh, minimal.
But that aside, the big value add is the addition of Intelligent Miner, which we put out a piece, uh, during the North American Blockchain Summit in October of last yearCalled the Intelligent Miner.
It's available on Hashrate Index if you guys do wanna go check it out, it's a good read.
But, um, the crux of it and what this, this addition to a mine management software really does is it takes in real-time power price.
It takes in your machine's specific profitability at different frequencies and, and wattages, uh, as well as real-time hash price data.
And with all of those pieces together, it can move and optimize your whole fleet in real time to find the most profitable spot for that whole fleet to be running.
And this has the potential to completely disrupt and change the way that Bitcoin miners operate because there's no longer a single strike price for energy where-- which is too high for your fleet to be running.
There's no longer a single hash price that is, uh, attractive to overclock or underclock.
There is a dynamic world at play, and in the past, there hasn't been a provider who has, uh, y-you know, understands the complexities of all these different pieces together, and now we've brought it together under one roof.
Being able to all see it in super app, it's just-- it's really exciting, man. So this is live as of Wednesday. Log into your Luxor account, go check out Commander.
Uh, it's free for sixty days as well, so, um, no reason not to try it, really. Um, I'll, I'll hop in. You know, the story of Commander is a bit of like the story of Bitcoin mining itself.
You mentioned like there is no longer one like universal industry-wide strike price for mining.
Uh, there kind of has been-- the industry has kind of had similar cost of production, but now each miner has such a d-different dynamic strategy. I'm looking at things you've got here.
You've got, uh, you're really into the, the IoT, like PDU-level control integration with the actual rigs themselves. You get into actual like price feeds and conditional, uh, statements with that.
Talk a little bit more about that, and can I plug, can I plug my, my agent into this too? Is that what I'm seeing here? Yeah. So the, the actual setup of it is really easy.
Um, all you have to do, you go click on Commander, um, you copy and paste a line of code into terminal running on a VM that's there at the site, um, and then it'll automatically start populating all the miners there.
Um, and the, the process is quick and easy, it's painless, and in a matter of a couple of minutes, you can be running Commander.
Um, and then your decision on h- what you wanna do with the fleet, you can, uh, deploy LuxOS for some advanced functionality or just use your fleet as is.
Um, and you can set automation saying like, "Okay, every day at this time, I want you to, uh, s-- uh, you know, overclock, underclock, shut down, completely curtail."
Um, and because we're a qualified scheduling entity, um, included in the price of Commander,
um, you know, uh, the traditional incumbents, there's, uh, uh, additional costs generally associated with, uh, tying in your, your signal.
But with, um, Luxor Signal Engine, uh, being native and within our own, uh, ecosystem, we include that.
So you're able to connect, uh, uh, to that signal automatically, connect it to power markets, and have Intelligent Miner just automatically start optimizing the fleet right away.
So Jamie, I'm curious, you mentioned at the start of this that there are a bunch of miner management softwares already, and so some people would ask, "Why y'all wanna do this?" So a way to ask that
is I, I guess I would highlight a few things and then toss you the question.
One of the things that interests me about Commander most is when I think about other miner management softwares, a lot of it boils down to you're, you're working with third-party pools, firmware, et cetera, right?
Whereas you have the company that does the miner management software, but the stack of software that they're actually touching is not something that they're building in-house.
And it's also typically on the operational side i-in the sense that you're looking at the ASICs themselves, the firmware they're operating on, you know, you're interacting with whatever grid you're connected to.
But this actually also has the financial element baked into it too, with the derivatives, um, uh, with the derivatives and the pool added on top of the way that you can use the pool to interact with the derivatives contracts and also with the energy markets piece as well.
So I guess all of that is a long-winded way of asking like what are some of the actual tangible benefits to Commander over some of the other miner management softwares that are already on the market?
Yeah, it's a good question.
And again, it, it, it's kind of a reason that p- most people probably won't get too fired up when they just think, "Oh, it's another mine management software," 'cause there has been a lot of people who have taken a run at it.
And the first thing I'll say is, you know, I'm really proud of the team. Like it's really snappy, really quick. That's something people notice right away.
Uh, it's just everything is right there, right when you need it, regardless of how many machines, uh, that you end up selecting to, to move.
Um, and your point is a, is a great one because the telemetry, the data all being within one org really speeds up and improves the, the quality of the information that you're able to get.
Running LuxOS, using Luxor Pool, and using Commander makes it so there is so much accurate and quick information available that it, uh, it really sets, sets this mine management software a-apart from others.
Um, and yeah, to your point,
being able to visualize your derivatives position, so let's say you're hedging out a, a, a-- against hash price volatility, and you can visualize that position in the same place you can see your energy bill, your ancillary service revenue, uh, the same place that you can curtail your miners and, um, that you can, you know, optimize your fleet and make sure that things are, are running well is, is really exciting, I think, for a lot of people.
Not switching between apps, um, and one, one throat to choke.
When you want, uh, features added, the, the best part about our team, you know, we're now a hundred and ten people at Luxor, and a huge portion of that is engineers, and they are just-Building and dedicated to optimizing for operators.
And that feels really good, 'cause when there's feedback from customers, we feed it right back to the product team, and they go and, and build it.
So, um, being able to say, "Hey, there's something I noticed on the pool dashboard," uh, to the same person you're talking about your, uh, your mine management software, uh, it just makes things really easy.
And, um, yeah, I think this is, this is gonna be a great shift, uh, for the whole industry. And it comes at a good time, where, you know, we need some good news.
Uh, everybody's still down in the dumps with the, the, uh, uh, feeling, feeling of this never-ending bear market. But to be honest with you, this is just consolidation. This is a good time to be in the industry.
If you have conviction in Bitcoin mining, if you have conviction in Bitcoin, then we've all been through these times before. And it's-- We're, we're due for a bounce soon.
So just, you know, stay optimistic, keep, uh, keep those smiles on, and we'll be out of this bear market in no time. I mean- Cool. Hopium. If you wanna double...
Yeah, if you wanna double tap on that, we'd floated maybe trying to turn this into a hopium conversation. Um, every publicly traded Bitcoin miner has been selling their Bitcoin, pivoting to AI.
You, you know, you love and you hate to see it at the same time. Uh, I don't know. I invite you, comment on this, uh, or do, you know, do these historically mark a bottom? What are your thoughts?
You've been around the block a few times. That, that is a strong indicator of a bottom.
And, um, you know, something I've heard, I, I, I haven't fully, uh, validated this, but, um, Bitcoin has bottomed twenty-three months after every all-time high in every previous cycle, and we are in the twenty-third month.
So it does [chuckles]-- starting to feel very optimistic right now. Um, and yes, the large public miners selling off their Bitcoin generally marks the bottom in, in a lot of these cycles, which is occurring right now.
Um, and, uh, yeah. I mean, that's as well. That's-- Uh, this is our first bear market where we're, we, we have that.
But, uh, you know, they're kind of built to, uh, buy at the top, sell at the bottom, and that's what's happening right now.
So yeah, I would say, um, i-in life, I'm generally always optimistic, but I'm incredibly optimistic about the future of our industry as a whole. Man, I hope that- Just hard to believe in and running for the hills. Yeah.
Yeah, I hope that twenty-three months- Bitcoin's the least to buy... is, is, is real because I, I do have to say, man.
I go to bitcointreasuries.net, and I look at that thing, I'm like, "Man, there's a lot of Bitcoin on the sidelines [chuckles] that could be thrown into the market at any moment."
It kinda creates an interesting dynamic because on the one hand, to your point, Jamie, about conviction in mining, if you are long-term bullish on Bitcoin, now is actually not a terrible time if you have the right setup because a lot of these big Bitcoin miners are getting out of Bitcoin.
And so in terms of hash growth over the next year or two, you have to imagine it's going to be very muted compared to what we've seen since the industry re, uh, shored onto the US after the China mining ban.
So that's bullish. On the other hand, when you have all these- It just short. It never will. It never cares. [laughs] You have all this potential sell pressure. It's been reshored. [chuckles] You, you know what I mean?
Like, you have all this potential sell pressure from the Bitcoin miners and the DATs, so that would put pressure on hash price at the same time when hash rate coming offline would actually alleviate, uh, some of that pain.
So just an interesting and exciting time. Well, it, it's a really great point. We have an estimated difficulty adjustment coming of, of minus nine percent, which is really exciting to see.
After pr-previously some-- We just had a positive one, but before that, some really, um, y- you know, negative difficulty adjustments, which was great to see.
And yeah, having those large public miners leave the space isn't necessarily a bad thing. Short-term, it hurts. Um, it, you know, and it's, it, uh...
For overall morale, it doesn't feel great, uh, because it's loud, it's the headlines, it's what everybody's talking about and what people sort of follow as their guiding light in this industry in some ways.
But in reality, it takes-- They have such, so much cap-capital to, like, come and play in this space that it makes it very difficult to stay on the hamster wheel for midsize operators.
And those that do have strong conviction outside of balance sheets, out-outside of short-term gains, um, it makes it hard to play.
So with a mass exodus of the upper tier of the large Bitcoin miners, it does level the playing field long-term.
Um, and with a strong bounce in Bitcoin price, uh, and a continued decrease in hash rate from the large pubcos, uh, that should come together as a very positive shift for, for the Bitcoin mining industry.
Charlie, any final thoughts? No. It's never been cheaper to buy an ASIC. Uh, well, I think it's never been cheaper to buy an ASIC. I'll have to check on that. Probably never been cheaper to buy newer generation hardware.
Yeah. Which, which actually, Jamie, I do have one final question for you. We were side barring on this before we hopped on.
You were mentioning that there is a trend of hydro ASICs in the market currently, and that trend being miners buying them, prioritizing them.
This is something that I've been kinda tracking on the side for a while because I've heard from a number of Bitcoin miners and from some of the, you know, some of the distributors in the secondary market like Luxor saying that these hydro miners are really starting to be pushed by the ASIC manufacturers, primarily Bitmain.
Curious, how much of the demand for hydro is organic? How much of it is that this is where Bitmain is putting a lot of its chips, and it's kind of the only thing that you can buy right now for new machines?
W-Way, is d- Is, is it organic demand, or is it Bitmain trying to push these units onto Bitcoin miners? It's a great question. It's a combination of both.
So times of compress-pressed hash price like this, everybody's looking in every corner they can to get more efficiency. So hydro is a natural spot to land to go, "All right.
I get more efficiency per footprint in my facility."That coupled with the manufacturers realizing that this is the way the industry needs to shift, plus they can get more, uh, dollars per machine put out the door, really, because, you know, when these hydro machines are significantly more hash rate for a single miner versus an air-cooled, in some cases double.
Um, and so Bitmain has a lot of control being the, the largest, uh, you know, the, the largest manufacturer over, uh, you know, we estimate over sixty percent of the market share.
Um, they have a lot of control to say, "Okay, S23, uh, we're gonna pause air-cooled production, but we have S23 hydro for you."
And if you want that new gen and you're there, you don't really have any option other than to start pricing out hydro build-outs. So it, it starts with the manufacturer, I wanna say. Um, but in reality, it, it,
it's both. The operator needs to feel the pain and needs to want to move towards hydro and understand what that actually entails for the build-out, the cost and everything, um, and the complexity of the operation.
But the manufacturer, um, pushing it also helps, uh, add some wind behind the sails. It's hard to say chicken or the egg, but it's a good question. Always interesting to talk to you all about ASIC market dynamics.
All righty. Jamie Gill, we will get you out of here, brother. Thank you for joining and, uh, appreciate the rundown on Commander. If y'all wanna find out more about it, go to luxor.tech.
And we hope you have a good weekend, man. Thanks so much, guys. Always great talking to you. Talk soon. Without further ado, a word from our sponsor, CleanSpark. [upbeat music] We are CleanSpark,
America's Bitcoin miner, a publicly traded company with the largest operating hash rate, powered entirely by self-operated infrastructure across four states. This is our proof of work.
We are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at cleanspark.com. Honestly, a perfect intro from sponsor into the next story- Yeah.
-because this is kind of a cool story which we added last minute, Colin.
Yeah, we actually didn't really plan this for how it shook out, but this is one of the cooler stories I've seen in a while, just because-- And it reminds me of the Ledn story that we covered a while back, and I'll touch on that in a second.
But CleanSpark is issuing a hundred million dollars worth of Bitcoin-backed bonds through a New Hampshire subsidiary.
This is one of those headlines where if you just read the headline, depending on who posted it, you could get a wildly inaccurate take on what this means.
I think a lot of people saw this and maybe thought New Hampshire is issuing this bond with CleanSpark, or New Hampshire is somehow underwriting this bond, right?
But what's happening here is that CleanSpark established this, uh, subs-- this, this vehicle in New Hampshire, and through its--
and, and through, uh, New Hampshire's regulatory, you know, uh, regime, they're issuing this Bitcoin-backed bond.
Re-quoting here directly from the Blockspace website, "While many Bitcoin miners are dumping their Bitcoin stash, CleanSpark is looking at the bond market for financing.
Announced Tuesday, Moody's has assigned a, um, [chuckles] a PBA two," so basically a B rating, "for up to a hundred million in taxable revenue bonds from Bitcoin miner CleanSpark's newest bond project.
The Business Finance Authority of the State of New Hampshire issued the debt through the Waveros Finance project, with CleanSpark receiving the bond proceeds via a Bitcoin-backed loan."
So what's essentially happening here is this is the first fully Bitcoin collateralized investment-grade loan on the market.
Uh, Ledn had something similar for its consumer-facing loans, so they got the first triple B-rated Bitcoin bond a few weeks ago. But that is collateralized by actual loans on Ledn's balance sheet with its clients.
So that's like quasi-backed by Bitcoin in the sense that customer deposits who have taken on loans with their Bitcoin at Ledn are part of that bond. The, the, um, you know, their assets are included in that.
Specifically, their business with Ledn i-is packaged into that bond. But this is the first purely hundred percent just Bitcoin as the collateral for a bond that we've seen out of any company. And
it was really cool to wake up to this because, you know, you hear all this t-talk about Bitbond stuff, and I, I was-- The first question I asked myself is like, how novel is this?
And, you know, you got the answer in the sense that this is the first Bitcoin-backed bond.
But the idea of a company going into New Hampshire to issue one of these bonds, to issue a, a, you know, a corporate bond is actually quite common.
So they, again, CleanSpark registered in New Hampshire to, to take advantage of their legal and regulatory framework for issuing one of these bonds.
Uh, the bond itself has a one point six loan-to-value, so for every hundred, uh, dollars that it is-- that CleanSpark is receiving, they're collateralizing it with a hundred and sixty dollars worth of Bitcoin.
Uh, there's a liquidation or a wind-down clause if that collateral doesn't get topped off and it hits one point four, uh, X loan-to-value. There's a seventy-two percent advance rate on this.
That basically means, uh, the lenders see a scenario where potentially only seventy-two cents on the dollar are paid back. That's my understanding of it. I could be wrong. I'm not, not a bond expert.
But that's similar to other junk bonds that we've seen for auto, you know, um, uh, for auto bonds and also for consumer real estate. And the bond is split up into two different issuances.
It's a hundred million in total, so I believe fifty million each. And again, there's no government backing to this. Like, New Hampshire Public Funds can't cover any shortfalls.
They're not going to get involved in, in the case that CleanSpark defaults. I think some people maybe were curious about that. Like, what is-New Hampshire's actual involvement here.
The, and the, the answer is that they really have no involvement other than just CleanSpark issuing it through a subsidiary that they established in their state.
It's kind of similar to how a lot of companies will incorporate in Delaware. A lot of companies will go to New Hampshire to issue bonds.
In fact, um, New Hampshire's finance authority in twenty twenty-four was the largest national conduit issuer. It priced thirty deals that year, um, including like a thri-- a two point eight two billion dollar one.
The next biggest one was the Wisconsin, uh, Public Financing Authority. It was seventy-two deals. The biggest was three billion. But y- New Hampshire is a little bit...
Is kinda unique in the sense that the-- a company doesn't have to be based in New Hampshire to be able to issue a bond through a company in the state, like, or through a subsidiary.
So you can have out-of-state companies, companies that are totally incorporated elsewhere, they can come into New Hampshire, establish these subsidiaries to issue these bonds and-- Which makes sense, you know, this is the live free or die state.
You know, it's very libertarian. It's always kinda had free market principles behind it. That's why CleanSpark is going here with this bond.
And I'd be really curious to see how many Bitcoin-- if we see any Bitcoin miners following their lead with this.
Because as we'll cover on our last story today, a lot of Bitcoin miners have been selling their Bitcoin because they're looking at the Bitcoin they have on their balance sheet, and they're saying, "We're not actually getting any sort of benefit from this."
Investors and traders are not trading our stocks like Bitcoin proxies anymore. They used to do that when there was no E-ETF and when there w- was no microstrategy.
Investors and traders would look at Bitcoin miners and say they have these huge Bitcoin stashes.
We can trade them as proxies that have a high beta to Bitcoin, so they move very vol-- They, they are super volatile, and they move, uh, higher to the upside and lower to the downside when Bitcoin moves.
And it was a way for basically institutional types and Wall Street to get exposure to Bitcoin before there were wrappers that they could use for that exposure. That beta is gone now. The correlation doesn't really...
Uh, the correlation obviously still exists for some of these miners because they do their Bitcoin, uh, facing businesses, they have risk with Bitcoin price, et cetera. But it's not nearly as exaggerated as it used to be.
You know, Bitcoin miners used to rip when Bitcoin was ripping and also get destroyed when Bitcoin was dumping. That's not so much the case anymore.
So you have some of these miners with hundreds of millions to billion dollar worth of Bitcoin on their balance sheet, and they're basically asking themselves, "Why aren't we just deploying this into infrastructure for these AI and HPC pivots that are going to cost a lot of money?"
But CleanSpark is kinda taking the opposite approach and saying, "No, we're actually going to lend against that Bitcoin, and we're going to access capital markets using Bitcoin with a novel credit instrument."
Be really curious to see if other Bitcoin miners follow their lead here. I can see the pro for why you'd wanna do this. I would love to have someone come on and talk about the con for why maybe this doesn't make sense.
Also, there was-- The, the, i-- the press release for this didn't have any interest rate. You know, CleanSpark probably doesn't want to advertise that.
Believe the, uh, actual press release came from Moody's, the ratings agency who gave the bonds a rating. But we don't know interest rate. We do know duration. I believe they mature in twenty twenty-nine,
and so we'll see where this goes. But overall, interesting to see CleanSpark kind of pushing against the trend that we've seen for most of their peers as they move to sell their Bitcoin.
[clears throat] Yeah, I have a number of, uh, points.
Um, so just for context, this story's actually been out for a few days, but I think it was kind-- It was, uh, at-- I will-- I gotta shout out Nifty Nay for being the first person I saw who identified that it was CleanSpark, uh, as the, uh, as the person putting up the Bitcoin in this capacity.
So then we dug deeper, found out that reference in Moody's, um, and then I'll just say, like, Colin, you, you know, you said it, but, like, all the other miners are selling their Bitcoin to basically fund AI expansions, and
we've generally said that is probably a pretty good idea. But also, what's the number one rule of Bitcoin? You don't sell your Bitcoin. So, uh, you know, how do you reconcile that?
Well, now that we're in twenty twenty-six, we have better instruments to, uh, financialize that collateral. And we've covered, like, the story of this on the various Blockspace, like Extended Universe podcast.
Go back, and I recommend pe-people listen to Gwart on the Gwart Show's interview with Rory Murray from, like, six months ago, talking about how CleanSpark is using their Bitcoin stack to finance an ASIC deal.
Pretty interesting conversation there. Um, and then we had [chuckles] Rory on this not too long ago, like two weeks ago maybe, um, also talking about, uh, their, their Bitcoin strategy.
Um, it's, it's a breath of fresh air, I think, to see a miner not hit the big red sell button, but rather, um, do something a little bit different.
So, uh, I think if you've got a Bitcoin treasury, there's way more things to do with it these days than just sell it.
I'll also point out, uh, as-- since we went live, we got a nice, uh, David Bailey, uh, retweet on this.
Uh, so, um, amplifying it, he says, quote, uh, about the CleanSpark Bitcoin backbone, "Legitimately cool, very creative.
Success of this product will significantly expand the TAM for Bitcoin pow-powered financial instruments." Um, yeah, now pretty cool.
Potentially now Bitcoin treasury companies can borrow against their Bitcoin to buy more Bitcoin.You know, we're always looking for fun ways to financially engineer in this space. I can- Yeah.
Are we gonna, are we gonna see a Nakamoto strategy? 'Cause, you know, they, they do have some Bitcoin. Um, yeah.
It, it's funny because I think, you know, I interviewed Pierre Rochard last year, and he's kind of jumped on the Bitbond, uh, train, and that's been his main thing. And if I'm not mistaken, this is one of the, like, the
first, like, real Bitcoin-backed bonds of its type that I've seen at this scale. So, uh, you know- Yeah, it's the, it's the first ever of, of- Okay...
a company collateralizing Bitcoin and getting a rated investment-grade bond. Again, like, I think the ratings here is really important. Moody's is one of the big rating agencies in the US.
You know, we can, we can have quibbles about whether or not they deserve to be considered prestigious.
You know, as with S&P, they, they were the, some of the agencies behind horrible ratings for the credit default swaps that ended up tanking the market in 2007.
But this does seem to be the first one, at least I didn't see anything else. And I, I'm just... The one th- one thing that I'm really curious about is, is why did CleanSpark not announce this?
And I think that is a question that I would love to toss to them if we can get them on next week to talk about this. Because ultimately, this seems like a pretty
ground, groundbreaking thing, or at least it's a watershed moment for corporate finance vis-a-vis Bitcoin. And maybe they're waiting to see how it shakes out.
Maybe they think that their, uh, their shareholders won't really appreciate this as much, or the market doesn't think that it's a good idea when all these other Bitcoin miners are selling Bitcoin.
And going back to the interest rate point, uh, just one last thing to make before we move on to our next segment here, Charlie.
You know, going back to Nakamoto, Nakamoto has a lot of m- the majority of its Bitcoin locked up in a loan with Kraken, and that's not uncommon.
A lot of these Bitcoin miners would also lock up their Bitcoin for Bitcoin-backed loans from some of these crypto native lenders, right?
These are the Ledns of the world, you know, used to be the Celsiuses, uh, used to be the Blockfis, used to be the Blockfills. Ah, it's tough to say. [laughs] Oof. All right. It's like three out of the four are gone.
But I'd be curious to see, the interest rates on those are often quite high, right? And it's because it's Bitcoin- Like low teens often. Yeah, low teens. You know, b- if you're lucky, eight, nine, ten percent.
You know, if you have a big amount, it's probably lower than the low teens. If you're a retail, it's probably low teens. But regardless, interest rate's pretty high because it's hard to price the risk.
These companies are not, the companies issuing these loans are not the Morgan Stanleys of the world, right? So their credit rating isn't the best, and also Bitcoin's super volatile.
So I'd be curious to see how much of a discount you'd get on the interest rate for something that is rated like this. Still a junk bond. Junk bonds, you know, B-rated. I think that's kind of a...
It's a harsh term for a bond in a way, but, you know, 'cause you think of B, it's like that's not that bad. But it is rated. It is rated. It is rated, exactly.
So, you know, this is a more obviously buttoned-up way and more institutionally acceptable way to earn, to lend against your Bitcoin, I would imagine. So I, I would just love to see more from CleanSpark on this.
We're hopefully going to get someone from the CleanSpark team on to talk about this next week. But
we'll leave the Bitcoin-backed lending and Bitcoin bonds aside, and we'll talk about the thing that everyone can't shut up about right now, which is quantum.
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And with that, Charlie, take us to the promised land of- Yeah, we're gonna talk quantum... fantasy compute. Yeah. Let's bring them all up here. Okay, we have Project 11 CEO, Alex Pruden. Welcome back to the show, Alex.
Welcome back, Alex. Hey, let the record show that the news was quasi-broken on your show first. [laughs] When, when, when I almost... I couldn't-- So we're, uh, so I just, uh...
Yeah, we don't need an intro 'cause I was here Monday. But- Yeah... you know, I was, I was hinting at this thing. I knew, you know, we're cited, Project 11's cited, I'm cited. So I had a heads-up on this paper.
And when I was on this show, I was sort of, like, looking at archive. I'm like, "Is it gonna be out? Is it gonna be out? Is it gonna be out?"
So I'm happy to be back here and hopefully talk about it in some more detail about the reva- revelations that came out this week. And just for... Sorry, before you jump in, Charlie, quick context for listeners.
Google released a paper discussing quantum vulnerabilities with blockchain, spending a lot of, spilling a lot of ink on Bitcoin specifically, and Alex Pruden and Project 11 were cited in the paper as part of the research.
So that's- Yeah... kind of the jumping-off point for this segment. A ton of people cited. Um, let's just, just for context, uh, there's two papers that dropped.
Each, each of them, uh, you know, they're focused on kinda the same thing, but they're, they're a little bit different.
Um, Alex, can you just give me, like, a TLDR, thirty, forty-five seconds on, like-The general gist of the papers. 45-second TLDR. Both papers, very accomplished teams.
One is Google, uh, including also cryptographer, um, Dan Boneh, a cryptographer from Stanford, Justin Drake, head of the EF. The other is Caltech.
John Preskill, one of the co-authors, invented, effectively, quantum error correction. Okay, so extremely prominent teams.
Upside me- or the upshot message of both is, like, the resources for Shor's algorithm for EC crypto specifically have dropped dramatically, and the recommendation is to start migration immediately.
The papers differ in the sense that, uh, Google, like, the kind of the big aha for the Google paper was that in light of the architecture that they use for their quantum computers, which is called the superconducting architecture, they forecast that what are called fast clock or on-spend attacks might be possible sooner than ex- people expected.
That means that it's not just Satoshi's Bitcoin that, you know, might be vulnerable. It's, like, in the mempool, you could potentially be front-run by a quantum adversary.
That was kind of the big whoa of the Google paper. Uh, the, the Oratomic paper, the other paper from Cal- the Caltech folks, the upshot there was just the headline number of physical qubits.
So in the Google paper they still recall-- they still required that, you know, the, the quantum computer be five hundred thousand physical qubits.
The Oratomic paper said, "Hey, you could actually run this attack with as few as ten thousand physical qubits." Why is that important? 'Cause the same team at Caltech demonstrated a sixty-one hundred qubit array already.
Now, I don't, I don't wanna conflate these two things.
The sixty-one hundred qubit ar-array is not a quantum computer, but it's like ac- what you can just see just in the numbers, like we're getting very close into the same orders of magnitude here.
Now, of note, the Oratomic paper's what's-- is still, like, a slow clock, so this wouldn't affect the mempool necessarily.
But it was much more explicit about how you would actually build this thing, which is a criticism some people had of the Google paper. They're like, "Yeah, okay, sure, five hundred K qubits, whatever.
We still can't factor twenty-one or whatever, so, like, how are you gonna get there?" The Oratomic paper basically said, "Hey, look, here's exactly how you build this thing."
And, uh, you know, one, y-you, you, you hinted at this last Monday, it, like, that there's different strategies, different techniques, and the quantum computers that would build upon these techniques look, look a little bit different.
Um, are the Google and Caltech Oratomic papers discussing different techniques? You know, elucidate this a bit for me because I have a hard time- Yeah... figuring out what's what. Yeah. Two different tech trees, okay?
And the Google paper actually lays this out. They, they have this concept of, this notion of a fast clock and a slow clock architecture, right?
And typically, the way that quantum computing has kinda developed, the fast clock architectures, which is the superconducting architecture that Google uses, have proved to be hard to scale because the fri-- they are much more fragile.
Whereas the slow clock architectures, like Oratomic's neutral atom-based approach, have proven to be easier to scale because they're generally more stable, but they obviously, you know, it takes days to run instead of, instead of hours.
Although one important thing to note, like I said, the, the-- and this is something that's, that's, uh, that's called out in the Oratomic paper. Actually, both papers, maybe this is worth talking about both papers.
Both papers explicitly mention that elliptic curve cryptography is very understudied when it comes to quantum computing. Typically, the Shor's algorithm is benchmarked ag-against RSA.
But both papers explicitly mention that elliptic curve is a relatively new field, and there are actually might even be more optimizations in the future. We can't rule that out.
So- So you're saying that we can build, like, these different techniques, take different tech trees. Like, one of the reasons why...
That, that basically we build a computer to break ECC, and that is still among the types of quantum computer research, the least, like, not as mature as some other types. Is that what I'm hearing? Uh, yeah.
So the most mature is superconducting, but it... People stopped doing it because it was hard to scale, and so everyone went into the-- piled into these new things like the neutral atom.
But I think the, the, the upshot is right. Like, quantum computing isn't just, like, a monolithic field where, like, the whole field has to overcome this barrier.
Like, quantum computing is kind of this idealized concept that is realized in these completely distinct tech trees with their completely distinct approaches.
And so even if Google over here with this, like, you know, chandelier thing gets bottlenecked, you can still make progress over here. And by the way, those are just two of the approaches.
There's actually almost a dozen different approaches. I would say the neutral atoms and the superconducting are at this point the most mature, but the ion, like, ions are worth noting.
PsiQuantum is a company that raised a billion dollars last year. They're doing photonic-based computers. So there... All different tech trees, none of them-- and all of them have a shot at getting there.
So you, Alex, you just said that, you know, uh, elliptic curve, uh, is not-- is, is a pretty underexplored area of computer science in terms of vulnerabilities for quantum computers.
So I, I was thinking of this already before you said that, but it's a great lead-in to my question, which is, why do you think we got two papers dropping on the same week about crypto vulnerabilities with quantum computers?
It seems oddly coincidental. You know, th-this is still very small. I mean, I think more people today know what Bitcoin is versus last bull market and the bull market before that.
But if we're really talking about the grand scheme of things in terms of overall financial activity and also things that people are thinking and worrying about every day, we're still a pretty small piece of the pie.
So why do you think this is commanding so much attention to get two papers in the same week? Look, I, I think, I think it is, uh... Well, two things.
One is I think there's a bit of a catch-up effect happening here, where I think there's sort of this realization of the tangibility of this problem.
Like, doing a theoretical paper about Shor's, you can s- uh, for RSA, you can be like, "Oh," like, "yeah, the internet, you know, is gonna be broken," or whatever. You kinda high level what's the use case.
But here you can point to dollars, right?
And in the case of the Google paper, they actually like, the b- kind of in my view, the best part of the Google paper is they, like, inventory all of crypto and like, "Oh, you like zero-knowledge cryptography or ZK-"...
proofs. Here's how they're broken. Oh, you like L2s? Here's how they're broken. All these things, right? So there's this...
I think the tangibility of the problem has attracted researchers to look at it specifically, 'cause there's a lot of dollars on the line.
And also I think there is this dynamic where crypto is kind of not moving as quickly as some other industries are to adopting post-quantum cryptography. And one last thing is just a, a fact about Shor's algorithm.
It's kind of obvious in retrospect that there might be some more low-hanging fruit here, but Shor's algorithm runs i- in time, uh, relative to the key length. So RSA 2048, the 2048 defi- is the number of bits in the key.
ECC is a 256-bit key, so this is actually kind of where there's a lot of, like, the speed up coming from. So there's, like, the k- and by the way, why were these shorter key lengths even adopted?
Well, it's because in blockchains we're very size and time sensitive, right? Because this is a distributed system, right? And that's why elliptic curve cryptography was ultimately adopted and, you know...
But, but the physics community kind of, like, didn't think about that, and they've only recently started looking at it.
I got a couple questions about, like, things in the papers, and then I'll put you in the hot seat for a couple questions. Amazing.
Um, so one of the interesting things is, I believe it was in the Google paper, that Google published a ZK proof of a circuit they had built.
Explain what this is, and then explain, like, the game theory here, because they're showing that you can do it, but we're not gonna show you how to do it. Explain these. I mean, it's sort of self-evident, right?
They're... They don't wanna show the world how they did it. And by the way, so first off, what is the circuit? The circuit is an algorithmic description, not the physical architecture, right?
The ORATOMIC paper is actually kind of more explicit on the physical architecture, but they similarly, like, don't show the circuit. In fact, they actually reference Google's circuit that they proved, not showed.
Um, but yeah, so the, the, the important piece though here, I think for people who are... may not have as much context on computer science or physics is, they proved it cryptographically, they didn't show it.
What this implies, in fact, actually they explicitly say, they are concerned that the, you know, trajectory of quantum computing is moving fast enough that there's a risk that if people keep publishing, this ultimately might not give crypto enough time to adopt, right?
There's a strong parallel here that's implicitly... implicit parallel is the, you know, race for nuclear weapons in the '30s, right? Where scientists were like, "Hey, you can, like, do atomic physics.
No, you can, like, shoot a neutron at an atom and it goes boom," and, "Oh, let's stop talking about this." [laughs] So that's, that's what's going on there. [clears throat] So, um, one...
I wrote a newsletter this morning, and again, the purpose of the newsletter is to be oversimplistic and kinda hand wave, just try to communicate to a less technical audience what the papers are about.
And I framed it as, like, to be really reductionist. Like, we made a lot of theoretical advancements, and, um, the papers themselves do not mean, do not, like, themselves necessarily imply
material advances in actually building a quantum computer. So we've basically, like, made a lot of theoretical advances in a computer that hasn't been built yet.
But Nick Carter pointed out in my replies that, um, there have, there have been practical advances in building a quantum computer, and he te- and he mentioned that Craig Gidney had talked about this.
Um, I'm frankly kind of out of my league here, and I don't know.
What are your thoughts on this, and, um, how would you characterize the listener, like, what the feasibility of, or progress of building an actual quantum computer is currently looking like?
Yeah, Nick's a very reliable reply guy for sure. Um- [laughs] The, uh, yeah. So look, these papers themselves do not... They're not experimental reports of a quantum machine running, okay?
So it is correct to say that this is not, like, a demonstration that we're there at all in any way, shape, or form. The, uh...
An analogy I like to use is, like, you know, I give you a goal of going from point A to point B, and you can make progress towards that goal by walking towards point B from point A, or I could just move point B that much closer.
And then, like, is that progress? I don't know. You know, you're still... You're closer, right? So maybe it'll take you less time. So that's how to think about this, right?
The, the quantum computing field is walking towards the requirements for Shor's algorithm, which are being pushed this way. That's what those, that's what those papers are for. But it is... What, like, Nick...
So these papers weren't about the quantum computing field walking forward, like, hardware-wise, but there has been a tremendous amount of advancement over the last year, uh, or last couple years.
And I, I would say that's particularly applicable to neutral atoms.
And again, what's notable about the ORATOMIC paper is y- these Caltech folks that they've assembled are kind of the greatest hits folks from across a bunch of different individual papers who have shown, "Hey, this component works like this, and this component works like this, and this component works like this."
And kind of... And the ORATOMIC resource estimate really is driven by the fact that, like, the individual components, many of them, not all of them, but many of them have been demonstrated to work individually.
And so I, I think it's unquestionable that quantum computing progress, uh, it's certain... There's certainly been progress over the last couple years. Uh, if you want, we...
I can address the, the, the straw man of, like, they haven't factored twenty-one yet. But, um, I, I just... Maybe I'll just- I would say yeah, address it. Uh, yeah, 'cause- Okay...
we, I, I haven't, we haven't had it on this show, so yeah. Give me a- So a common, a common criticism of quantum computers is like, "Oh, they haven't factored twenty-one."
And, um, look, by the way, I think the, the best takedown of this argument, uh, there's one from, from, uh, the, one of the Google co-authors, but also, uh, a head of security at Cloudflare, this guy named Boss, uh, you can find him on X.
Did a whole blog post about it. I highly recommend it. But big TLDR is quantum computers and Shor's algorithm are very, very specialized, and you can factor a number like twenty-one in your head.
So, like-I, I, you know, me, me building a quantum computer to factor twenty-one is sort of like building a nuclear weapon to s- to hit, to fly swat something, right? It's like massive, massive overkill.
Again, going back to these tech trees, like this... It's very expensive to build a machine like this.
So what physicists have chosen to do instead of focus on building, you know, sh- sh- th- progressing down like up the numbers, you know, up the number line, they've said, "Hey, look, Shor's algorithm is so efficient at solving this factoring problem, all we need to do is basically get the error rate down low enough, and then once we figure out how to plug all the pieces together, we can factor twenty-one, we can factor two to the twenty-one, and we can factor two to the two hundred and twenty-one.
It doesn't really matter." And so that's like if you talk to physicists they're like, "Yeah, who cares about twenty-one? We can factor twenty-one in our heads." Like they don't even...
It doesn't even compute to them, right?
Um, for what it's worth, uh, we have our own effort at, at Project Eleven called the Q-Day Prize, and, uh, there we're up to a six-bit number with a couple candidate numbers in the ten-bit range.
So that's actually in the, like, uh, what? Eight bits I think is, uh, a hundred twenty-eight or two hundred and fifty-six. I can't remember.
So anyway, there, there are like actually you could factor it, you know, you could factor bigger numbers than twenty-one with a quantum computer. Again, though, what's the point? It doesn't matter.
Um, so I think that's the, that's the r- that's a red herring, wrong metric to look at.
I will come back with a hot seat question about this in a sec, but I want to give you, I think, um, kind of a low-hanging fruit hot seat question, which is on Twitter, on the timeline all this week, um, a lot of the, the Bitcoin folks have been pointing to like Nick, the private companies.
I look at like the Oratomic authors all forming a private company after, and the accusation is, "Okay, you guys are spinning up this narrative. Um, you got bags.
You're gonna sell like various mitigation solutions or what have you. Um, like, why should we trust you?" And... Or like, "Why," you know, "you guys are spinning up FUD." Um, I'll throw this at you. What's your response?
Yeah, my response is quite simply, like, I think just the fact that people have for-profit companies does not necessarily mean that the work that they're doing should be dismissed out of hand.
I mean, look at the Bitcoin community. Jameson Lopp, for example, runs Casa. Like Blockstream sells services for its Liquid, for Liquid. Marathon Digital Holdings funds Enduro, which is working on BIP-360.
I mean, none of these people are ever questioned. Uh, by the way, I haven't realized a dollar of revenue for my bags in Bitcoin, so if anyone would like to give me some money [laughs] for, for this FUD, please reach out.
But like, y- you know, uh, so yeah, I, I guess that's, that's my, that's my first and primary take. And, and my second take is that, um, look, this is a... It, it's, uh, the scale of this problem is enormous, right?
And I think, um, the reason that I personally feel compelled to raise awareness about this is because I fear the consequences of apathy and waiting too long, and ultimately the financial cost that will, the community will pay, um, if it's not addressed.
So that's, that's my answer. And I'll circle back on, um... I wanna press harder on you saying like you put this, uh, the, was it the Q-Day Prize?
Where, where, um, you have as a metric to like factor like lower bit numbers, and I, and I actually...
And, uh, I want you to de- defend this a bit more because, um, like I've heard people say, "Well, can't we just, just factor like a six-bit number or, you know, factor six and like demonstrate you can do it?"
Because so much of the critics have like, have, um, you know, the burden of proof on their side. Like we still don't have a quantum computer. Put... Or, you know, we can't do these things.
You know, I, I invite you to respond to that a little bit more in depth. Yeah. So quantum computers certainly can factor very small numbers.
I mean, I say very small because these are numbers you could factor in your head. So that's true. Um, no one's writing papers about those because again you can, you can, you know, factor them in your head.
And again, like, uh, the, the trajectory... Okay, so maybe we'll actually... Let me, let me get to the question behind your question. Yeah. How do we know this is real? How do we know this is happening, right?
And, you know, th- predicting the future is hard. Predicting the future is uncertain and, you know, we're, we're looking for metrics that we can rely on.
The best metric that I think we have is looking at the people building the quantum computers themselves.
Like it is an indisputable fact that today, uh, any quantum computer that exists, uh, probably even within the next twelve months will exist, is not going to break Bitcoin, right? So we know that's true.
So how do we know we're gonna get there, right? And so I have to ask, well, what is the benchmark that the quantum computing hardware developers are looking at?
And this is what they're looking at is like how can we build more physical qubits and... Whoa, and less- [laughs]... errors. I just zoomed in on myself for dra- Yeah... for dramatic effect.
And with, with lower error rates to be able to then factor any number we want. Like to them, the number... Uh, like remember, like physicists aren't building these things just to break Bitcoin.
Like there's a bunch of applications for this. To them it's, if anything, this is like kind of a benchmark, but it's, it's only relevant if you get to the scale of cryptography. And why is that?
It's because this is an example of a problem that a classical computer could not do. It's what... It's, it's termed as like d- a cl- like quantum dominance.
So again, like researchers want to basically show that quantum computing can do things classical computers couldn't do.
Classical computers can factor numbers into like the hundreds of bits, like 100 bits I think is the limit last time I checked, right? And so they just don't care about that.
And so again, the people that are the smartest people in the world that are currently building these things, like either the field is totally bunk, it's possible, but or the field might ultimately produce something that has consequences for the cryptographic community.
I choose to be conservative in the sense that-These scientists might be right, and if they can ultimately build this computer, then it may not be very long before they can break Bitcoin.
Now let me actually give you a quote directly from the Google paper, or a piece or a part directly from the G- Google paper, paper. Uh, actually, you know what?
I'm gonna, I'm gonna read the actual quote because it's worth it, um, 'cause they addressed this, uh, explicitly. Let me see if I can find it. Yeah, there, there are some good quotes. Yeah.
I, I would recommend everybody r- actually read the paper if you're able to. Yeah. Yeah. Uh, in... I, I'll read it.
So quote from the Google paper, "Indeed, if a leading quantum architecture encounters and overcomes all scaling chan- challenges before producing a, a device able to solve, for example, thirty-two bit ECDLP, then there may be little time between the breaking of thirty-two bit ECDLP and the breaking of two hundred and fifty-six bit ECDLP.
Furthermore, the community should not expect to see public demonstrations of the most advanced quantum error correction architectures and algorithms deployed to cryptoanal- analytic problems."
And Google is a living example of this. They published a proof. [chuckles] And, you know, you gotta imagine, I mean, who else wants a quantum computer? Any intelligence agency in the world.
D- how many of those, you know, organizations want to telegraph that they have this capability? Zero.
So you have to imagine that the evidence that we're gonna see for this thing approaching cryptographic relevance is going to diminish over time.
And so this is the counterargument I make to those folks that, "Hey, nothing's happening."
I think by the time the skeptics, the s- the deepest skeptics are convinced, it will just simply be too late because an aspect of this conversation, the place that I wish we could move this conversation is if this happens, the foundation upon which Bitcoin and every other blockchain is built must get rebuilt while preserving and securing the trillions of dollars of value on top.
That is a highly non-trivial challenge that is unlike anything else that is affected by a quantum computer.
And I think if you start putting the pieces together, even in pretty aggressive timelines, you're looking at years.
And I think e- even if you start to be pretty con- you know, conservative about your quantum timelines, these things start to overlap, and that's the risk.
Alex, I have one more question for you before Charlie closes us out. You mentioned intelligence agencies not wanting to advertise if they have one of these.
You also made the analogy of it being similar to a nuke, you know, in terms of quantum computing capabilities. I think people often use the nuclear, uh, simile as well for AI.
Uh, but to me, uh, it d- continuing with, you know, some military metaphors here, AI is maybe more like a gunpowder and rifle moment, where it, it, it, you know, every nation's going to be able to, to figure this out to some extent.
It's just some are gonna be better than others, and it's going to be used to project force and for defensive capabilities.
Quantum computer being more like a nuclear capability to me really seems to make sense because when I think about this technology and its applications in the world of cybersecurity and cyber threats,
uh, it seems to be a complete paradigm shift, one in which I would be very shocked if there were widespread, at least to start, commercial uses for it, and that, you know, let's say Google was the first to get there,
US government's gonna step in and probably do something to seize that intellectual property and the capabilities.
Could be wrong, but to me it seems like it is such a monumental shift in how we interact with the cyber world and also a huge threat and a huge weapon that they would want to have an interest in it.
All of that is a long-winded way of asking what d- what do you think is the most likely outcome for how quantum computers are rolled out and then adopted? Will it be very gated like we've seen with nuclear technology?
And then second part of that question, does that change the calculus at all for the risk profile that cr- to, uh, cryptosystems, blockchains have for quantum computers?
Like, if the United States government is the only one with a quantum computer, do Bitcoin holders need to be as worried? Uh, I think the high level, uh, maybe there's so many...
I'm gonna answer both in kinda one word and then break it down. Uncertainty. This uncertainty is what creates risk. We don't know a couple things. We don't know if the US government's gonna get it first.
China has an effort to. If the US government get- government gets it first, we don't know how far behind people are. Go back to the, you know, the nuclear weapons.
US had nuclear weapons, and then the Soviets suddenly did, and then a bunch of people did, right? So we just don't know exactly how quickly the tech is gonna proliferate. I...
In my opinion, there's very little question that, um,
that we are not going to get state-of-the-art, you know, just like the [chuckles] Google paper said, and just like the zero knowledge proof shows, like people are already self-censoring.
The government, the US government, DARPA, the Defense Advanced Research Projects Agency, runs a quantum benchmarking initiative. So you see like all the big public quantum companies and all, they like...
Everyone's like talking about the commercial use cases for quantum, but guess what they're all also doing? They're all in the DARPA TBI. And what do we think that's for?
And guess how much money is going to the companies from the government from that program.
Like, so I, I, I think it's to me inarguable that in the short term, the vast majority of funding for these systems has and will continue to come from people that are interested in breaking cryptography, either to profit from lost coins and buried treasure or to read the mail of their adversaries.
Um, so yeah, I, I think specific...
And so I, I don't think we can safely assume that, you know, we're gonna like have a slow, easy slope up to this technological revolution, or that we're gonna see it coming, or that it's gonna be the US, or that there's gonna be some kind of rule of law that we can resort back to in the case that someone steals something.
I, I just don't... Well, maybe, right? It's the answer is maybe, but I, you know, if we're betting the network on it, I'm not-- I, I don't think that's a good idea.
[clears throat] Okay, Colin literally stole my nuke question, but I'll, I'll throw in a markets question to wrap up.
So a month or so ago, I wrote an opinion piece basically saying, and I do still hold this opinion, that, um, there's a narrative that Bitcoin has a quantum discount in some level becau- and that's why the price is going down.
I do not buy this. I, I, I know that there have been a few investors who have, like, changed their investment, like, recommendation or portfolio, but I'm really skeptical that anybody's actually selling Bitcoin in size.
But my point was that this could quickly become the case. What are your thoughts on this? Um, do you think anybody is actually selling Bitcoin at, like, in, at, at scale this time? And, um, I don't know.
Do you think Bitcoin would actually have a quantum discount, say, in the next year? Uh, so full disclosure, not a trader.
Uh, I, I-- the times I've tried to make money thinking I knew what everyone was gonna do, I've typically lost money, so just take that. So with that caveat- That's usually how we feel when we start, yeah.
[chuckles] Yeah, yeah, maybe I can't trade. Uh, the co- so okay, so those caveats out of the way. Um, yeah, it's un- I have no idea why people are selling Bitcoin.
I think, though, it seems to me that if we believe from first principles, we argue that Bitcoin's value proposition is rooted in this concept that it is digital gold, and gold is one of these reliable things that people have stored value in for tens of thousands of years.
Um, and there's this kind of potential Achilles heel of Bitcoin that is this quantum computer or q- quantum risk that might invalidate or might cause you to lose all the value that you put inside of this digital gold.
Then I think there are probably people m- who would be marginal buyers of Bitcoin that are not buying.
Um, I think I know that's, like, a very qualified statement [chuckles] but I, I guess, like, to me that's, from a markets perspective, that's how I look at it.
Like, if we really believe this digital gold narrative, then there's no reason not to address the thing.
This isn't even like, you know, Donald Rumsfeld, old defense secretary, had this kind of, this, this frame of, like, unknown unknowns and known unknowns. Like, we know this is an unknown. It's not even a known unknown.
It's like a known vulnerability. And so whether it's soon or far, I think you can just solve...
You can do a, a, I think, a huge benefit to the narrative of Bitcoin of being future-proof to store value by addressing this.
And, and I think to me that outweighs probably most other things that you could do to technically improve Bitcoin in the i- i- you know, in the near term. So it's interesting.
I have made a similar point as well, that I think, you know, these boardrooms, these people at capital allocations are always looking for a reason not to buy it.
Quantum's a very easy w- reason to, to, not to buy Bitcoin. So I totally get that. Alex, I'm gonna do a call to action here. You are giving a keynote at our conference, Up Next, in New York City on April sixteenth.
It's a technical conference for investors and developers. We've got you. We've got, like, everybody. I don't-- like, we have freaking everybody. We got Jonas Nick. We got Ethan Holman. We got Matt Corallo.
We got, um, Hunter Beast will be in the room. We've got BlackRock. I mean, we've got everybody who's a part of the conversation. I'm looking forward to your talk. Thank you so much for coming onto the podcast.
I look forward to saying, shaking your hand in person in New York in a couple weeks. Yeah, me too.
It's gonna be a great event with a lot of great people with, uh, different opinions than me, but I think it'll be, for the community, hopefully very valuable to kinda get the benefit of all these perspectives and, uh, and I am also looking forward to meeting you in person.
Thanks a lot for having me on today. Cheers. Catch you later, Alex. Cheers.
W- what do we think is more likely there, Charlie, going back to the gold analogy for Bitcoin, that we get to that massive asteroid in the Milky Way that has, you know, like, ten times the amount of gold we have on Earth, or that we get a quantum computer first?
'Cause that's the first thing I think about when I think about people- Yeah... worried about quantum computing, and therefore they're not gonna invest in Bitcoin.
'Cause I actually think that's a legitimate reason not to if you're a boomer, and you have no idea how any of this [chuckles] stuff works anyway, and you can't model the risk. That makes total sense.
Yeah, I, like, both camps now have a good, like, easy, uh, like, gotcha to the other one. Yeah. And the Bitcoiners are like, "Well, we're just gonna go mine an asteroid sometime in the next century." [chuckles] Yeah.
The a- the asteroid thing to me has always been a little clowny. Like, maybe we'll get there eventually, but also if we do that, we'll be eating on gold plates, dude. Gold will be so cheap.
Yeah, that'd be pretty cool actually. That would actually be sick. With quantum computing, everyone's just, you, everyone's poor. You don't know who to trust on the internet anymore. [laughs] Yeah.
Um, which I guess you kinda already don't. Yeah. I already don't trust anyone, except for us. Yeah, exactly. We're the only trusted source of information, Blockspace Media. Let's go to our next story. Last story.
All right. Last story. We'll be quick on this. There's not too much to say. It's just hitting on what we talked about earlier in the show. Bitcoin miners are divesting of Bitcoin.
Riot Platforms sells three thousand seven hundred and seventy-eight Bitcoin for two hundred and eighty-nine point five million in Q1 2026, mines fourteen hundred and seventy-three Bitcoin.
So Riot is joining the bandwagon, selling Bitcoin as it pivots into AI and HPC, as many of its peers are also doing.
And this follows a sale that it also madeEarlier in, or excuse me, at the end of twenty twenty-five, Riot sold two thousand two hundred and one Bitcoin for two hundred million in November and December of twenty twenty-five.
Just a quick scorecard for the miners who have sold so far. Uh, Mara has sold about nineteen thousand two hundred and nine Bitcoin. Not totally sure, I don't have it in my notes here if that's just for twenty twenty-six.
I think some of that might be at the end of twenty twenty-five as well. It sold, as we reported recently, fifteen thousand, just over fifteen thousand in March alone for one point one billion.
Core Scientific sold roughly nineteen hundred Bitcoin for a hundred and seventy-five million in January.
Kango sold five thousand and one Bitcoin for over three hundred and five million throughout January and February of this year. Bitdeer sold its entire stack, roughly two thousand Bitcoin, in February.
And Qihel, formerly Bitfarms, sold some twenty-eight point two million in twenty twenty-five.
The-- It's an undisclosed amount of the actual Bitcoin, but they also have announced that they will sell their entire eighteen hundred and twenty-seven Bitcoin treasury throughout the rest of the year.
Or as I should say, at some point, I actually had an interview with Ben Gagnon that we'll be publishing next week, where he said, "You know, we're kinda gonna wait and see what Bitcoin's price does.
We're not just gonna smash sell. We're gonna be a little strategic about that wind down."
[lip smacks] And all that said, uh, last one, Cipher holds about fifteen hundred Bitcoin now, down from an all-time high of two thousand two hundred and eighty-four.
They have been selling over the, the last few quarters as well. So all these Bitcoin miners are winding down their Bitcoin treasuries.
This is, you know, a drop in the bucket depending on the day, I would say, for Bitcoin's overall liquidity.
But it is a decent amount of Bitcoin on the sidelines that is entering the market or will enter the market throughout the next year.
And as we were talking about with Jamie, it is, I think, one of the headwinds along with the Bitcoin treasury companies, some of whom have started to sell just to stay above board.
We were-- we covered that with Naka recently, and they sold, I believe, [lip smacks] like two hundred and eighty-four Bitcoin, um, to cover some loans.
But that's a decent amount of sell pressure potentially coming for Bitcoin now. It may not be enough to keep the price suppressed, but it's one of the things I'm looking at in terms of qualitative,
you know, qualitative points about where we are in the bear market. I would love to believe that hopium that we are at the bottom. What was it? Twenty-three months after the all-time high, you get, you get to the bottom.
I, I don't know. I think we go lower from here, but at the end of the day- Bro, give me any kind of hopium. I, I'm desperate. Pick, just pick a ri-- spin the wheel, give me some hopium. I'll, I'll do whatever.
You know what's funny, Colin, is like we did this thing last cycle. The miners bought Bitcoin at the top of twenty-one. They sold at the bottom of twenty-two and twenty-three. Are we just running it back again?
[chuckles] We're just- We're always running it back. No one ever learns anything in this industry. I mean- Yeah...you can look at all of the investment theses from,
uh, at least from my perspective, because I, I didn't start writing about Bitcoin until twenty seventeen.
But from twenty seventeen on, it's like DeFi was just ICOs but rebranded and with more of a use case, which was just gambling. And then meme coins were also a rebranding of DeFi, which is also just gambling.
All of it is just, all of it is gambling and ponzinomics, at least in crypto. And for the Bitcoin miners specifically,
there is this FOMO that we see during bull markets where they just want to accumulate as much Bitcoin as possible, and they did buy in the last run-up and then sold.
Not to the same extent, 'cause for instance, Mara and that fifteen k Bitcoin sale, I'm not picking on them in particular, but it's just a s-- it's a spectacular example.
They ended up paying off a convertible note or part of a convertible note that they took on in December and November of twenty twenty-four when Bitcoin was up above a hundred k.
They took, they took on that convertible debt, took the fundraising from that convertible note and bought Bitcoin with it, only to sell that Bitcoin at a lower price and pay down some of the debt.
That's just incredible capital destruction, no, no, no matter how you slice it. I mean, you say everything's gambling.
You know, you know, if you wanna be s-- if you wanna go all the way down the, the, the logic train here, technically, Bitcoin mining is gambling. It's a bunch of machines guessing numbers. Yes.
[chuckles] It's just gambling.
[chuckles] You know, I have a, it's not quite a bet on this, but, you know, there's this kind of perennial gripe that Bitcoin miners and technical autists have against mainstream media, 'cause they'll describe Bitcoin miners solving complex math problems.
They're not. No. Like Charlie said, they're just guessing- We're buying lottery tickets. [chuckles]... trillions of numbers per second. Like, that's all- Yeah... they're doing.
And I think that the media has converged on this idea that they're solving complex math problems because it's impossible for them to reconcile that people are guzzling, you know, the same amount of electricity as Austria to guess a number.
They think, "No, that has to be more complicated than that. There has to be something more profound than just basically- Yeah... a digital lottery ticket." But that's all it is. No, no, no, we wanna be taken seriously.
You gotta get it right. We're not solving complex math problems. We're gambling. We're gambling. [chuckles] We wanna be taken seriously. We're playing the Powerball. Yeah. [chuckles] Powerball.
We're, we're act- we're, we're making the Powerball look, you know, small. We're, we're doing trillions of Powerballs every second. Okay. Thank you all for sticking with us. Listen to the Block Space live stream.
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