[laughs] Yo, [laughs] we are back for Bitcoin Season 2 Writers Room. Good morning, Colin. Good afternoon, Mr. Spears. I'm happy to be back. We missed last week 'cause I was traipsing around Yellowstone- Yep...
what early tourists used to call Fairyland, which I thought- Ooh... was super interesting. Um- Well, now we are on opposite sides of the globe. I'm in Amsterdam, uh, the Bitcoin Amsterdam Conference.
You're on the West Coast of the United States. But before we get in there, welcome to Bitcoin Season 2. Bitcoin Season 2 is brought to you by Botanix Labs.
Botanix Labs is pioneering a new direction for DeFi with the first EVM L2 running on Bitcoin that's built to be forward secure, decentralized, and share gas fees generated by the network with users.
See the future of DeFi from Botanix Labs. Go to botanixlabs.xyz. Anyway- Clean ad read. [laughs] Yeah, man, I- this- I'm in, I'm in media now, so. [laughs] No, like, so, uh, we got a couple things.
Um, it's, it's meme coin season again.
If you're the degen watching this, I think you may enjoy the first half of this chat, and on the back half we will revisit, I think, the other, like, spicy, uh, news event in Bitcoin, which is the Swan mining thing, and that'll be a Colin-led chat.
S- so degen's in the front of the bus, maxi's in the back of the bus. Yeah. If you don't give a shit about meme coins, um, then- Fast-forward half an hour... this conversation not for you.
Just wait until the end, or like Charlie said, if you're listening to this after the live stream's over, fast-forward to the end. We're gonna go over some of our coverage of the Swan mining lawsuit.
But meme coins are fun, and they are indicative of a decaying society. So if you're a maxi, this might make sense to you, so you should stick around. Yeah, yeah, so maxis, please don't leave.
And degens, you know, you know, degens, I'm not gonna give you real alpha, but I will give you the tools to produce alpha. [laughs] Thanks, Craig. Craig says- Thank you, Craig... if only Swan was mining memes.
[laughs] Um- If only Swan was mining meme coins, they might have made it.
Well, okay, so, um, let's roll the clock back to bottom of 2018 and, uh, there was a, a, a guy who I think kicked off, like, the Bitcoin maxi podcasting era, and he- Oh...
goes by- Oh, you're gonna give him that much? Yeah, I will. Oh. Actually, let me get my camera in focus. Um, yeah, I will, actually.
If you go back and you listen to Murad Mahmudov's, um, interview with Anthony Pompliano before Anthony launched the Pomp show, Murad had a, an episode called The Case for Bitcoin, and it did numbers at the bottom of that cycle in n- late, night, late 18.
And Murad kind of became, like, the ascendant Bitcoin maxi bull. He gave us, like, the tools and the language.
Go back and re-watch this video, and you'll be like, wow, all the talking points from, like, '19 and '20 and '21, they kind of originate from this.
So this is really interesting because today, in this past week or two, Murad has been the meme coin ascendant. Ansem has handed the torch of, like, meme coin lightning rod to, uh, Murad, 'cause Murad's back.
Why did Murad have to leave? This is an interesting story, but before that I'll just show, um, that this does relate to ordinals somehow, because here we have inscription 137,
which is actually an inscription related to Murad. This is from a chart- No, this is, this is 100, this is one of... the, the 137th inscription. Uh- No, th- Yeah, and disclosure- This-... disclosure, it's mine.
[laughs] This is- [laughs] Okay. Um, I didn't know that. This is in- incredible because this, to me, is a kind of, how do we put it, lower IQ stock to flow chart- Yeah... which is saying a lot, right?
But this is almost in the same vein of this kind of, you know, this kind of hopium chart that doesn't really have any methodology behind it outside of vibes.
That being said, when this was created, this made the rounds on social for, like- But... And this is Murad's chart... like, a year. This is Murad's chart. He- Yeah...
he defined this because he, like, he kinda codified, like, the language to talk about Bitcoin ascending into unit of account. Like, literally, all the maxi-like conversations, like, it begins as a digital collectible.
It gots, it's gotta be Lindy, then it's gotta be a store of value, then a medium exchange, and then it gets to be a unit of account. That comes...
I mean, it was, there were other people who talked about it, but, like, this chart is the thing that really, like, gave it jet fuel.
This is Murad's chart, and it was funny because when ordinals kicked off, I was like, "Well, ordinals, JPEGs, that'll never, like, be a big deal.
Let me make a meme about how ordinals are gonna follow the same path," and here we are. [laughs] Murad is now the meme coin king, and, uh, I have this... Anyway, so- So let's- Yeah...
um, back up a little bit with some history with Murad, because he had a fund in the bear m- in the, in the bear market, not the last bear market, the previous bear market, um, and he was allocating Bitcoin towards, you know, uh, derivatives trading, basically.
He was longing or shorting. We're all still waiting for the call on 1,800 Bitcoin. I- Yeah... big agree, Craig. Yeah. Um, but anyway, so Murad had a fund, and he was longing the shit out of Bitcoin
right before the COVID flash crash of March, what, 13th or 14th, 2020? Um, for those- Uh, March 12th and 13th. I don't remember- March 12th... very well, specifically. [laughs] Well, if...
So for those who weren't around at that time, there was a-Two-day period where Bitcoin started showing signs of weakness, and then within minutes the price tanked from, like, n- eight or 9K down to 4K, and then quickly rebounded up to 5K.
So it lost 50% of its value over the course of, like, 48 hours. And th- and this was incredible because this is when all of the markets were reacting to COVID. There was this shock across all financial markets.
Every asset across the board had this miniature sell-off, and then obviously we know the rest is history. Money printer go brr, everything rips after that.
But because of this, Murad's fund was completely liquidated, and he was blown out, and he just kinda left for- Yeah... two, three years. He...
It was a, it was a whole thing, and he wrote an apology letter, and it was kinda like, it was a very weird moment 'cause he was one of the first real, like, uh, celebrated Bitcoin maxis to just get absolutely liquidated.
And it, and, like, I think a lot of us felt for him, but also that was one of the first, like, public demonstrations in recent memory, really.
The first public demonstration of, like, you can be long Bitcoin, but you can still screw it up. Yeah. So, um- Right... he went silent for a couple years.
Yeah, he just, he disappeared, and now he's back, and he's betting big on meme coins. He wants to make it back on one massive trade. [laughs] It's not, it's not one.
It's actually a, he has an index of- It's like a suite... multiple coins, yeah.
Yeah, so it's crazy 'cause, like, he, he, he's a very, very compelling speaker, and he put this, uh, uh, it, he put this, like, uh, talk at Token 2049 together, which went, did the numbers and did the rounds, and it will probably be credited with, like, the, you know, the catalyst- [laughs]...
for kicking off the non-Bitcoin meme cycle. And he's got his, um, tokens, and it got really big, and people say, like, "Oh, he's the new Ansem." And it kind of is, like, appearing that way.
Um, but- So when you say the new Ansem, can you, um, explain what you mean by that?
Yeah, Ansem, or, uh, Z or Zion, is a well-known Twitter personality, um, has, was, like, the famously s- uh, bullish on Solana at the bottom in '22 or maybe '23, and he's k- he's kind of become a larger than life character, and he's, uh, synonymous with meme coins and Solana.
People love and hate him, and I think more people love him, so he's, he's, he's right at the absolute edge of meme culture. So now it's Murad, um,
and notable, and I'll try to keep this brief 'cause it is a little, um, little dicey. So on-chain sleuth ZachXBT, I want to share this tab instead.
ZachXBT, who tracks people down as a main brand, tracked down what are probably Murad's wallets. I won't get into them 'cause it's a little, I don't know how I feel about, uh, doing this right now.
This is a strange move from Zach. I, I- Yeah... I'm not really, uh, I think this is a little bit unethical. Like, you know, I guess maybe Zach's...
So ZachXBT is the premier on-chain sleuth gumshoe on crypto Twitter, prob- or well, just anything, right? Yeah.
So for anyone who doesn't know, he does these amazing investigations where he will typically try to use, he'll use chain analysis to tie addresses to certain bad actors, things like that.
He's won a bunch of different bounties for doing this. Um, for, but for, this is strange, 'cause usually he does it for, like, hacked funds or socially engineered- Yeah... you know, um, wallet drains, things like that.
So I don't know if Zach knows something about Murad that we don't.
I don't know, may- maybe he just doesn't like the, the posturing that Murad takes, if he thinks that it's unethical what he's doing in terms of trying to pump meme coin bags or, you know, what he, you know.
I, I don't know what it is. But this, this seems not, dubious to me. It's like the dude's not really doing anything. Why are you doxing his wallets? I, I find that to be a little bit questionable, uh, you know. But
not my life. I, I just wouldn't do it. It definitely is great for engagement. I mean, look, like, 9.7K likes. Yeah. Nearly 5K- But-... bookmarks. I mean, he, you know. Yeah.
So I wanna, I wanna get past this, but yeah, like, we know what are probably Murad's, the lion's share of Murad's holdings, and it's, it kinda lines up with what he, uh, the specific tokens he says have, like, you know, schizo vibes in the chat, cult-like behavior.
So anyway, this is interesting. Um, this brings us to, uh, let me, where's my train of thought? Um, this brings us to, like,
the, the thesis that I have that I would invite Murad to, one, come on the show 'cause we wanna talk to you, and, 'cause I think we could have a really interesting conversation, but two, you can do meme coins on Bitcoin now, and they are the subject of a lot of criticism and scrutiny, but, like, bro, you can do both here.
And meme coins on, on Bitcoin, runes and other fungible tokens, are up big this week.
I actually have a thesis, and I'll try to kinda put it together here, which is a lot of people c- uh, say, "Oh, these, these token, these meme coins on, these shitcoins on Bitcoin, like, they haven't done well to date because, um, Bitcoin structurally doesn't work very well to trade these assets back and forth."
To which I have multiple times said, "Yes, currently it's a little clunky to do this." We've written about it on, in our newsletter, like batch size and, and tranching them correctly, whatever.
Um, but if you adopt Murad's view that actually friction to sell these assets is a- Is a good thing... yeah, it's a good thing, this lines up very well, Murad.
I'm speaking to you here that, uh, Bitcoin's actually the, the confluence of all of your theses-And you can come back, you can recapture the Bitcoin narrative and the meme coin narrative at the same time.
Because these assets are clunkier to trade, they do, uh, they do naturally, uh, lend themselves to cult-like, uh, frictioned in and out behavior. So-
You're trying to bring- This is my- You're trying to bring chaos to the land of milk and honey, my man. Yeah, man. You're trying to bring hellfire and brimstone to Zion. Like- Exactly. So anyway, um, I get...
I see what you're saying, and this is an interesting point because when you think about... So I think for a lot of people, when they think about m- tokens or meme coins,
there's a very specific image in mind of the things that you trade sp- really now on Solana, maybe a little bit of Ethereum, but the token contract is central to that.
It's like it's, it's a whole other coin compared to the network that it exists on. With runes and, and their predecessor BRC20, y- um, how to put it, you don't have the same level of concretion for a token collection.
Do you know what I mean? Yeah. Yeah. It's like there's not the same backbone to it. That being said, functionally, it is indistinguishable. Yeah. And this is something that took me a while to kind of wrap my mind around.
I was like, okay, well, these are fungible tokens, but they're not really tokens.
Um, it doesn't really matter, especially in the case of runes, 'cause if the opportune data is there indexing these things, and you're minting them, it's the same function.
That being said, you know, going back to not only are, you know, can I hear the hordes of maximalists who might be tuning in, you know- You're- Getting their pitchforks and their AR-15s ready.
You have worn out the welcome, Rich. You're halfway excommunicated here. Yeah. [laughs] Just for even talking to me about this, yeah. Exactly. Um, but, you know, I think that going back to your...
So going back to one of your points about the, um, difficulty, the friction to sell helps with illiquidity, which helps with price action and volatility, I think that makes sense.
That being said, I don't think that the meme coin mania, at least in terms of volumes, will ever reach Bitcoin in the way that it has on Solana, for a number of reasons.
Like, I think number one, the first use case of Solana is meme coins at this point. Like, that's... I don't think anyone who's- Yeah... tuned in would dispute that. Yeah.
I, I don't even think maybe people working on Solana [laughs] would dispute that. You know? Yeah. They embrace it. Yeah. Yeah, right? I mean, that's, skate to where the puck's going.
If that's what people wanna use your chain for and that's where the money is, then yeah, go for it. The other thing too is I do think that there is a friction issue here, not just from the design standpoint or, or...
Sorry, not just from, um, Bitcoin's limitations, which we love Bitcoin for. You know, I don't want block times to be greater than 10 minutes. Um, I- you know, the design is, is...
It's designed the way it is for, to be robust, to be censorship resistant, to be low latency or to be, uh, low data, uh, for the blocks to be less data heavy.
All that being said, I don't even think that's necessarily the issue. I think it's also just the design issue of all of these things.
Like runes, even though they're an improvement over BRC20, are just like a super complicated way of issuing tokens on Bitcoin.
I think that there are a lot of reasons why the meme coin craze will never fully come to Bitcoin. That being said, to your point, runes are up, so degens will degens.
I do think that there's a limit though, because Bitcoin has clear use cases outside of this.
This is also why I think a lot of the fears about ordinals and inscriptions are overblown with people, because at the end of the day, the real monetary use cases of Bitcoin are more salient and are more impactful than- Yeah...
than, than collectibles. And so people are just going to- If Bitcoin succeeds... Yeah, if Bitcoin succeeds, it's gonna price out the more frivolous activity on chain. But in the meantime- Right...
I'm going to yeet my runes, I'm going to inscribe, uh, dumb arbitrary data.
But yeah, like if, if Bitcoin it- does become this centrality of the monetary system in some capacity, like that value dramatically supersedes that of, of 10,000 monkey JPEGs. Yep. Yep.
Now, of course, what is it, Gresham's law, bad money drives out good money? Yeah.
[laughs] Like that, but actually kind of flies in the face of this, and I do think that the HODL culture in Bitcoin, which I'm not knocking, that's, you know...
I, I use Bitcoin as a savings account, so I'm, I'm firmly in that camp that this is a use case.
But if people aren't moving their coins or making other transactions and the people who are speculating on and gambling on degen assets are, then there obviously will be periods where, you know, we have already seen this, right?
Yeah. I mean, using the chain in Q4 of last year was a fucking nightmare- [laughs] Oh my God, yeah...
because of all the people buying BRC20 tokens, which, you know, going back to people sh- people in the maximalist camp shit on Casey. Thank God for Casey Rodarmor.
Thank God for BRC or for, for runes, because it completely- Yeah, like, like, um- If you look at the runes transaction volume and you look at the fees, there's just a clear correlation that this, that this completely- The UTXO set is decreasing.
Yeah. The BRC20, uh, dust outputs are being consolidated right now. It's been one of the major, like, uh, block space events over the past couple weeks.
Like, this was very clearly and explicitly defined, you know, communicated by Casey, "I don't like the damage that BRC20 is doing. It was an un- unintended, unanticipated consequence of my, of my idea.
I want to, uh, hot swap this out with something less ridiculous." It has tacit and explicit, um, endorsement from other, like, pretty hardcore Bitcoin people and Bitcoin researchers.
Um, for example, Mononaut over at mempool.space confirmed this past week that, um, the consolidations from BRC20s are improving the UTXO set and that runes are not, uh, uh, seem to have no adverse effects outside of adding, um, fees to Bitcoin.
So-Like, this is great. I'll actually then, in response to Gresham's law, I'll say it's, uh, Charlie's law, which is [laughs] Um, long-term valuable use of block space will drive out frivolous use of block space. Yeah.
Uh- Turn that shit on its head. Good degen tokens drive out bad degen [laughs] tokens. Right. Yeah. Um- Yeah. So, uh, yeah, that's the, that's kinda my thesis.
And runes are up this week again by association of being in the broader meme coin category. If you look at Magician, like, the top 50 runes, like, 40, 45 of them are up tremendous, like, in some cases, multiples. So
this is fun. Um, are runes back? Well, they are this week.
I don't know what happens next, but- You know, y- the question that comes to mind for me is the inscriptions, in general, have been up over the last couple of weeks.
We've seen all of the blue chip collections nearly double in price. They've kind of retraced a little bit, but they were... kind of hit a local bottom, and then they rebounded.
Now, a lot of that money seems to be getting cycled into, you know, uh, fungible tokens, and also meme coins are going up.
I just wonder, is this a leading indicator for Bitcoin, or is this kind of traders looking for any sort of catalyst because Bitcoin has been in a range between 50 to 70K basically all year, which if we stop and think about it, is kind of impressive that we have been in this channel for so long, right?
People have lived and died a thousand deaths, and Bitcoin's sat in the same 15% ran- 20% range for the past six months. Like- Yeah. You gotta love it. Yeah. You know? Yeah. [laughs] You...
It, it, it inspires some level of confidence, but obviously Bitcoin can do whatever and, you know, it may be at the end of this... We're wind- It's kind of like a spring being wound, right?
And either the spring really s- spring- A beach ball underwater, one might say. Or [laughs] yeah, or the spring just completely degrades and falls apart.
But anyway, all that being said, I can't help but wonder if all the meme coin mania is something of a leading indicator because, you know, in, in traditional cycles, like bull cycles, you have this
inverse relation between Bitcoin pumps and dumps and meme coin and shitcoin pumps and dumps, right?
So Bitcoin will pump, and then it will retrace because all of those profits or some of those profits from the traders are being rolled into riskier bets and lower cap alt- I actually have an opinion on this, in that this is an interesting, um, uh, uh, uh, unrelated cyclicality to Bitcoin's block space.
So rather it does not affect Bitcoin's price as much, but rather it does affect Bitcoin transaction activity and therefore fees.
I think this is a story of Bitcoin's fee market discovering a relationship to other fee markets and other blockchains and less about Bitcoin the base asset.
Where I think we may have a situation where Bitcoin pumps, and then it flows into these other Bitcoin beta type assets.
But largely, I think these beta type assets are more related to the secular shitcoin liquidity, shitquidity, if you will- [laughs]...
which will go up and then be the marginal buyer of these JPEGs and marginal inscriber, if you will. And so I think this is a very interesting phenomenon. This is...
I've talked about, I've kinda tried to describe this view that I have on a few different places, but I think, I think this is, um, a cycle which will behave very differently than the Bitcoin to Ethereum to low cap alts to shitcoin, uh, meta that people have defined.
So- Hmm... pin that up there. So we've talked about meme coins. Murad, come on the pod. Thank, thank God we got that. [laughs] Only spent 23 minutes doing it.
Let's switch to if you are still a Bitcoiner [laughs] and still a... If you're a more hardcore maxi and you, and, and- [laughs]...
you made it through, you waded this pile of shit, let's talk about something which is perhaps more material. Colin has been
boots on the ground, dialed the hell in to the breaking mining story right now, which is the Swan mining saga. Colin, we didn't cover it last week on the pod. Catch me up to speed. Yeah.
So sharing my screen here for those who are on audio. So if you want to look at the article, uh, you can hop on, uh, YouTube. You can also find it at blockspace.media.
Article I'm looking at is new filings raise question about mining ownership and law- and Swan lawsuit. So to back up a little bit, Swan filed a lawsuit
against former employees and contractors on September 26, alleging that they stole highly proprietary and confidential Bitcoin mining business technology, trade secrets, property, and personnel.
Their lawsuit kind of hinges on the specific part of the mining business, which is Swan's BNOC, which was a dashboard that seems pretty rudimentary and seems pretty kind of run-of-the-mill in terms of what you would monitor from a mining side.
Looks at the hash rate. It looks at, you know, all of your different machines and their health and all this other stuff. I've actually not seen the BNOC.
I've only seen screenshots of it, but the case seems to hinge on them stealing that.
But basically what happened was Swan files this lawsuit because everyone related to their Bitcoin mining business that they launched in 2023 left, uh, between Oct- between August 8th and August 9th.
Then they went to Tether, which was the joint venture partner with Swan's mining business. Tether funded the entire thing actually.
And they went to Tether, established a new business called Proton Management, and then basically took over operations. Now, Swan files a lawsuit saying that this is basically akin to a corporate coup.
They totally stole all of their mining business, yada, yada, yada.
Well, an opposition filing that obviously negates-And denies a lot of these allegations from Swan, from Proton Management, and the ex-employees and contractors say that none of this is real, that they didn't steal anything and that in fact the stuff that they did take, because Swan alleges that they downloaded a bunch of stuff from their GitHub, was never really Swan's to begin with because Swan had a minority stake in the joint venture, which is known as Twenty Forty Energy.
So the joint venture between Swan and Tether is Twenty Forty Energy.
That's what managed the entire mining operation, and in the opposition filing they say that Swan never had any Bitcoin mining business to begin with, and the direct quote from the filing is, "Swan does not have a mining business of its own.
What Swan has called its mining business is really just a separate entity called Twenty Forty Energy."
Instead, they claim that it only owns a minority stake, and in fact, a- an investor presentation that Blockspace obtained from Swan for its Series C that it started raising for on July 11th of this year admits that Tether owns 80% of the venture and Swan owns 20%.
So that alone just raises a lot of different questions regarding what the actual ownership structure was and who is in the wrong or in the right here.
I don't wanna make any value judgments, but, uh, you know, from my perspective from doing this, it seems as though Swan really does not have a legal claim over this. Again, I'm not a lawyer.
There are a lot of new-- There's a lot of information that needs to come to light before we can totally make sense of this, and I'm sure we'll get more as the court proceedings continue.
But it, it, it seems like Tether bankrolled the entire thing and that they own 80% of it. Now, one more important point here too, and I'm actually gonna share my screen again.
So sorry, Charlie, I'm going on a- Go for it... on your [crosstalking] Do it. Ramp. I, yeah, this is good. Um, uh, okay. This is strange. Um, sorry, guys. Uh, here, hang on.
I need to- Feel free to- I, I need to get another, uh- Yeah. So anyway, you, you-- I'll let you poke around while I talk to people. Uh, call to action time.
If you're watching this, [chuckles] uh, go to our social media, blockspace.media, the website, subscribe to the newsletter, hit our other content verticals, the Goward Show, the Mining Pod.
Make sure you're liked and subscribed to Bitcoin Season Two everywhere you stream anything. Um, and we have a new podcast, Bitcoin Fi Pod, under our Blockspace Media umbrella, featuring Jan and Yogi.
Um, thank you Xverse and Meso for making this happen. This is a pretty interesting podcast. I think you'll get some of the more like, um, the people deploying capital into the Bitcoin ecosystem.
So that rounds out kind of the suite of Blockspace produced products pretty well, and we just had the latest one with a guy from the Draper Fund. Draper's been deploying capital like crazy.
I'm actually here in Amsterdam right now, and they had a whole like side event with a bunch of the movers and shakers and capital deployers. And so, uh, that's an interesting podcast. Make sure you check it out.
How we doing, Colin? Um, almost done. That was a really good filler [laughs]. Thank you. Oh, I can feel it. Yeah. Um, yeah. Um- Thank you for that. Hang on. I'm almost, almost there. Hey, okay.
I mean the, um-- For anyone like, uh, I'll just kinda riff a little bit here.
Like, you know, if, if you're a Dejian, you've stuck it around through Colin's kind of trudging, uh, uh, deep dive on some of like the obscure warts of the mining business, like this is pretty significant in the grand narrative of things.
Swan Financial is kind of one of the, I would say, hegemon of the, of like the Bitcoin discourse. They've been pretty-- They've been almost equally a media company as they have been a financial services company. Yeah.
They've been- So like... Yeah. They've been dominant with media. I mean, Swan Signal, most of our listeners have probably tuned into it- Yeah... have tuned into it before. They've created amazing content.
Um, some amazing analysts like Sam Callahan, shout out to him. He's got a really good newsletter on Nathalie Brunel's Coin Stories. Check it out. Highly recommend. Yeah. Great macro newsletter.
They have amazing- And they've got great engineers. Like I talked to the Swan engineers- Yeah... and they're absolutely kickass. Like I love- Yeah... those guys. Love- So, and yeah.
They- Love a lot of people involved in Swan. I don't want it t- this to turn into a Swan shit fest. Uh- Yeah. Yeah... I do think there are questions to raise about management here because...
I, I can't share my screen right now because I'm on a different Google account, and I can't log into our, uh, news- newsletter, um, facing stuff on the website. RIP. Anyway, I'm gonna... RIP.
Uh, we are s- on, as my sister would say, we're on the struggle bus this morning. Yeah. But anyway, um, I was gonna share my screen to show this chart, but I'm just gonna, uh, talk about it here.
A really important piece to this is the fact that Swan was not entitled to profit share from this operation.
According to their own documents that we obtained, this is according to a Swan shareholder letter that was sent in July and also the, the, the fundraising deck that we o- obtained, they were not entitled to revenue, or, or sorry, profit sharing, and I'm actually not even sure if they were entitled to revenue, that's not totally clear to me, from the operation until 100% of investor capital was paid back.
So until Tether returned r- received 100% of its invested capital back on the operation, Swan was actually not entitled to any profit share according to Swan documents.
Now, this is super important because in the first half of twenty twenty-four, that mining business brought in eighty-four million dollars worth of revenue.
It was 13.5 exahashes worth of equipment, which is pretty substantial.
And to give y'all a, uh, a kind of comparison here, Swan's financial services in twenty twenty-three brought in six million in revenue, and the, the projection for twenty twenty-four according to this investor presentation was thirteen million.And so a really important piece here, Swan, and you can go-- I encourage people to go read the article, not just because I wrote it, but because there's a lot of stuff here.
It's really dense. Swan was- You gotta read it. Swan was-- Thank you. Swan was-- seemed to have been banking on this mining revenue to be a factor in its financial reporting for the Series C that it was trying to raise.
Swan was trying to go public via an IPO. They were raising a Series C in anticipation of this. They were trying to raise seventy-five million at a valuation of one point two billion, which is insane to me.
But anyway- That seems like a crazy valuation to me. It seems wild.
And anyway, a lot of this stuff starts unraveling behind the scene, and eventually Swan backs that valuation down and backs their Series C aspiration down and goes from thirty million to three hundred million.
We have no idea what prompted that. We have no idea what went on behind the scenes. But I can't help but see that in conversation with all of this stuff going on with its mining.
During this time, Swan was trying to peel off its, its section of its mining business from the joint venture with Tether.
Apparently, they had a handshake agreement for that to take place on April first, but there was never anything signed.
So there's all of these weird kind of spaghetti-- There's this like s- type of spaghetti facts just all slithering around in this, in this, you know, lawsuit.
And, you know, we don't know where the meatball is, but it's somewhere hidden in there. [laughs] And, you know, um, all that being- So like- Yeah, go ahead, Charlie. Go ahead.
So like, so like what-- Yeah, so it's like it's, it's, it's veiled. It's, it's, it's ambiguous a lot of what's happened. Like, the more filings, filings come out, the more clarity emerges.
Um, it can be hard to, like, back channel some of the conversations to figure out what's actually happening and to do reporter stuff. Like, that is challenging. Um, where does this go?
Don't make a-- You don't have to make a prediction, but, like, where does this go? What happens next? Um, so tomorrow there is going to be, I think, the first hearing regarding the lawsuit.
I don't have the details as to whether it'll be public domain. I don't know. I, I mean, I-- They don't live stream these things, right?
So, um, I, I don't know if there will be-- There will probably be a transcript afterwards uploaded to Pacer. I'll be keeping my eyes out for that. So I, I think we're probably in for a few months of deliberation,
and this will probably settle maybe out of the court. Uh, that being said, if what is true about the equity ownership, the, the whole key to this is the shareholder agreement for Twenty Forty Energy.
Once we have that, everything will become clear, and my early hunch is that Swan doesn't really have a strong case for their whole mining business being stolen.
Because if they only owned twenty percent of Twenty Forty Energy, then, you know, Tether can do whatever they want. Like, Tether kicked Corey off of Twenty Forty Energy's executive seat.
He was the CEO, and they, they dismissed him in August thirteenth.
Now, importantly, nothing in the Swan lawsuit is, is going after Tether or Proton Management, which was the new company established by former Swan employees and contractors to manage the mining business.
Nothing in the lawsuit pushes back against Corey being removed. Nothing even really explicitly states that they're being sued for stealing the entire mining operation.
The crux of the entire suit is for stealing proprietary information from their GitHub, specifically the BNOC thing.
Which it, it looks kind of like a Grafana dashboard, which I frankly thought that was standard if you're gonna have an operation of scale, but- And yeah, and that's a big part of the opposition argument here is that, number one, none of that can even necessarily be said to be solely Swan's because that belongs to Twenty Forty Energy.
And number two, they also kind of say these aren't really trade secrets. Like, there's nothing super special here.
Anyone who has run a mine, anyone who has worked with miners know that basically any miner is gonna have some sort of software that they use to track these things. Yeah.
Obviously, they built it probably in-house, so there's an argument to be made that they were using something that they constructed from scratch. Certainly there's some data pipelines and some feeds, but is it- Sure.
But there's nothing here, like in the lawsuit, and this is where I will put a little heat on Swan.
They're talking about like that hash rate optimization stuff and like all of this kind of woo woo, you know, super advanced tech stuff. Well, they were switching between pools o- opportunistically.
Like, they talked about that on, on our mining pod, and we talked to Rafa, and like there was some like- Yeah. For sure... there was a little more a- agile like management, but how agile like can you really get?
And how special is that, right? Like if you talk to any miner, they have a lot of these things, you know. It's like whether or not these can be considered trade secrets is highly dubious.
And I really do think, again, the key to this is if this was built for Twenty Forty Energy for managing the deployment, then it's not necessarily Swan's, right? [laughs] Thank you, Craig. Yeah.
Craig says, "You're definitely trying to mine the epic set." I mean, yeah, if you're- Craig, if you-- Craig popping off in the chat. By the way, um, [claps]
uh, thoughts and prayers to Craig and all of those affected- Yeah... in North Carolina from Hurricane Helene. Um, we are- Yeah...
our thoughts are with you, and I hope that everything's going okay over there in Asheville. Yeah. We feel for you, Craig.
Um, I'll just-- Like one question to wrap it up, 'cause I, 'cause I can ask a good leading question.
Like if in a scenario where there's, say, a JV and one company brings some of the operators, um, and management, and one company brings well over the lion's share of the money, do you see a shareholder agreement where the JV is such that it gives the, uh, the just the operators so, uh, so much command over the entity itself?
I don't see that, uh-That's common in the industry Say that-- So sorry, say that one more time. If you have a JV- Like, you know, okay, so like, you know, Swan's got some operations guys
and, uh- Oh, I see They don't have one If someone foots the bill for the capital, and the JV is written in such a way where the operators end up getting the say over... Right. No, like, that's not very common at all.
Yeah. I mean, you could look at, for instance, like Hut 8's managed services might be a pretty good corollary here. Exactly. Yeah. You know, Hut 8 has no claim to those machines.
They only manage them, and they, they extract a fee from the parties that they manage for. And so that's really the whole thing about this Swan stuff.
And, and to me, you know, y- I had to be careful with the language in this. You know, we had to dance around it a little bit.
But it really, if-- what's laid bare right now, and, and we'll get more clarity later, seems to indicate that, like, what Swan advertised as its mining business was not its mining business to begin with.
It might have had a piece of it. It might have had a chunk. I don't know how much of the hash rate it owned, if at all.
But the really sketchy thing is here is, like, people were under the impression that this was Swan's operation. Yeah.
That it was one hundred percent wholly owned by Swan, and that's just fundamentally not true, by their own admission in their own documents. No, it was misleading. Yeah. Yeah.
So, you know, um, you know, hearts out to all the people who were let go from Swan in July. They laid off, like, half of their staff. Hearts out to anyone who's still there, who's having to deal with this.
You know, I, I know that this is probably coming as a shock, but to me, um, d- depending on how this pans out, it's gonna be a pretty damning, you know, condemnation of maybe some missteps by management.
And, and that's just, to me, that's kind of the story here is how-- were you misleading investors? There's something deeper here about, you know... And, and I think this is the other missing piece. I was told by a Swan,
a former Swan employee who, uh, who, you know, requested not to be named, that there was something bigger behind this story that has not come to light yet.
So, like, there is, like, a, a, a bomb or a smoking gun somewhere in here that once it goes off, we're gonna know basically everything about this, and we're gonna have more information on what was going on behind the scenes at Swan during, you know, what seems to be kind of an, a collapse of sorts, right?
Or, or at least a, you know, a, a huge, uh, growth spurt. Or not growth spurt, but a huge, uh, you know, misstep for the company.
I mean, you, you and I, you and I have a collective decade of watching mining in, in the Bitcoin ecosystem pretty closely, um, have seen, uh, a lot of ups and downs and a lot of bullshit.
And I think our joint BS meter or our joint smoke alarm is, uh, probably more accurate than it was, um, a few years ago, so. Yeah, 100%.
There is, there, yeah, this is def-- What we do know- Where there's smoke, there's fire. You know- Yeah... if it walks like a duck, if it smokes like a duck.
[laughs] Um, but yeah, just to highlight that last point, whatever that truth bomb is is gonna be decisive in figuring out what went wrong here. And, you know, it almost seems like going back to this, I'm alleging this.
I'm not saying this is true. This is Colin's gut feeling, his hunch. Yeah. This is an editorialized podcast. Colin the moron. This is opinion. This is, this is National Enquirer. So the National Enquirer take here- Yeah.
[laughs]... is did Swan mislead potential investors in their Series C saying that the mining revenue was theirs? Because if they used that- That's the question, yeah... in a pro forma, then that is,
that- that's, you know, big. That's bad. Yeah. So not saying that happened, but that's the big question mark that I have after doing this initial investigation. Uh, tune in to our newsletter at the Mining Pod.
You can go to miningpod dot new- the, uh, the miningpod.blockspace.media to subscribe to our newsletter, and we should have more updates on this as it comes.
This is gonna be a story that I'm following very closely over the coming months, and I will try to update it with as much detail as possible.
Also, if you know anything about this, and you're involved, or you used to work at Swan or whatever, hit your boy up. Always looking for a little intel. Yeah. The hotline is Colin's DMs.
As I lay HODLing, As I Lay H-O-L-D-L-I-N-G. There we go. Yeah. [laughs] I mean, so- Uh, Charlie, any, any, uh-- Sorry, go ahead. No, you were gonna ask me if there's anything else.
I don't have anything from- Any, yeah, any, any final takes on this from your side? Um, not, not any that I really wanna share publicly, except, like,
this is, uh, you know-- Sometimes there, you have to have multiple sacrifices before the bull run really kicks off, and you never know who's on the chopping block.
But, uh, I do feel like, man, the Bit- Bitcoin's, Bitcoin and Bitcoin builders have just been punched for the past fifteen years, and sometimes those are just self-punches.
And, um, yeah, I am bullish on, um, a lot of the people who've, like, developed really, really good skills and built really, um, good, uh, personal brands, uh, for themselves in the Bitcoin and broader Swan ecosystem.
So shout out. Hit us up. Um, yeah, that's all I'll say. Otherwise- I think that, uh, I think that's a wrap. I think we're gonna r- I think I'm gonna wrap it up. Uh, make sure to like and subscribe.
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