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[upbeat music] What's going on, y'all? Welcome back to Blockspace Live, presented by CleanSpark.

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Bombshell news today, Charlie, as the Federal Electricity Reliability Council is issuing new guidance to expedite data center large loads in local grids.

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Somewhat maybe pushing the boundaries of what they're actually obligated to do, but they are trying to make sure there are guardrails in place to make sure that this does not affect retail electricity prices.

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More on that for our lead story after we get to our- first, our hash rate index update to start the show. Following that, we've got three interviews lined up today. We've got Rob Hamilton of AnchorWatch.

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We've got quantum wizard Hunter Beast.

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And we've got Luxur's Matt Williams on to talk about misconceptions with AI curtailment abilities, and also AI energy markets in general, and why these providers might need more hedging than Bitcoin miners themselves, despite the fact that their compute is much more lucrative.

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For our second news story today, [lip smack] we also have news that Hive has inked a new AI deal, Sovereign AI, as they're calling it, on the back of them acquiring a data center that they have been a tenant in since 2018 in Boden, Sweden.

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That's right. Blockspace goes live every single weekday at 1:00 PM Eastern, and featuring quick hits on AI, data centers, Bitcoin mining, emerging tech, and markets. Make sure to like and hit Subscribe.

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Let's kick it off with some hash rate index, Colin. Let's look at the state of mining. Yeah. This is the hash rate index update, brought to you by Luxur. Charlie, I wasn't looking at Bitcoin's price today.

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I don't really look at it that much anymore because we focus on data centers so much.

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And I'm-- I regret to inform you that it's down to 62,000 after pumping recently to just about 66 following the most recent sell-off to its yearly low, around 60 or 59,000.

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So as a result of that, hash price has taken somewhat of a hit, but we're coming off of a negative difficulty adjustment, I believe. The previous adjustment, Charlie, was negative 10%.

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Yeah, down 10% to really kick off the four CP season in Texas, 'cause that's when everybody's curtailing for the four coincidental peaks.

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Yeah, for all that heat so that we can rip that sweet, sweet AC that I assume the European tourists to the US for the World Cup are realizing is actually the best thing ever. Oh, man.

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So- They're eating at Waffle House and getting-- and doing it in, uh, in style. [laughs] They're doing the most mundane things. Other than, like, Texas barbecue, like they're going to the local places- Yeah...

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but you'll see these posts about people going to, like, Golden Corral or Waffle House and having, like, a transcendent experience. Which they're not wrong. I, I love Waffle House. I- You can- Yeah...

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you can see the aristocratic ghosts leaving their body, and they, they inhabit a, like, hillbilly form as a result. Anyway, all right. That, that aside,

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difficulty just fell, and now it's looking like we're only about a third of the way through the current epoch, but there's an estimated difficulty adjustment of around 5% given current block times.

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And hash price is at $32 a day, or $30 for peta hash per day. And man, if you look at hash rate, man, we're, we're still just absolutely in this downtrend.

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Um, I mean, it's popped because of the recent difficulty adjustment, and also I'd imagine maybe some curtailment subsiding in Texas and elsewhere. [lip smack] But overall, the...

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We're, we're basically where we were a year ago. Yeah.

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Which, again, tracks with what we've been saying about hash rate probably being stagnant this year, if not falling, um, at, at, by the end of the year from where it was when we entered in January. Yeah.

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Then just to go back to Texas, like, uh, this past week in Oklahoma, which is Texas's younger stepchild brother, uh, it was hot. So not surprised that people are curtailing. Um, we'll monitor hash rate index.

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Uh, we'll catch it next Friday too to close out the week to review what the Bitcoin network did. That'll be close to the next difficulty adjustment, so we can see what happens.

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All right, Colin, let's introduce the people to something called FERC. [laughs] If you aren't aware, FERC stands for the Federal Energy Regulatory Commission, and we have a really interesting development.

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I don't think anybody else is talking about this in, like, Bitcoin-adjacent land here, 'cause this is, like, kind of an ab- it's kind of ambiguous how, how the power gets to your home, but it starts with FERC.

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[lip smack] Yeah, I, um, I, I butchered, uh... I was getting it confused with ERCOT. I thought it was the Reliability Council. So thank you for correcting me there. Yeah. FERC, Federal Energy Regulatory Commission.

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They just-- This just hit this morning, and the TLDR here is that they are issuing new guidance on how grids should speed up data center interconnection. Now, the trigger event for this was on October 23rd last year.

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The Secretary of Energy invoked Section 403 of the Department of Energy Organization Act- Like a very rarely used piece of author- or, um, you know, a mandate of authority to direct FERC to consider new rules for large load interconnection.

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Um, specifically, the two most important parts of this new framework are, um... And again, this is just a framework and guidance. There's nothing set in stone from a regulatory front here.

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There's a reason for that that we'll get into in a second because FERC's kind of entering a gray area over their, their, um, actual authority and jurisdiction.

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But the framework, uh, of principles for new and co-located hy- hybrid data center facilities of twenty megawatts or greater, um, asserts that grids, um, or specifically those large loads,

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grids need to assign on those large loads 100% of the associated network upgrade costs. This is similar to what we've seen in ERCOT recently, where they're tell- now telling data centers, "You want all this power?

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You're gonna have to upgrade the grid accordingly. We're not gonna do that for you." It's a, it's a, uh, bu- it's a seller's market for energy right now.

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And then the other thing is that they want to expedite the study process by 60 days for loads that agree to be flexible and curtailable.

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Basically saying, if a load is, is saying that they can shut down at times of grid stress, you need to expedite the study process for that to make sure they can get through the queue quicker.

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And what they're basically trying to do with this is they're trying to expedite, you know, large loads for AI data centers to the grid in a way that is still hopefully still, uh, a little, a little responsible to make sure that energy prices for retail aren't skyrocketing.

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That's part of what the demanding them to pay 100% of the transmission cost is doing. Instead of socializing those costs among, a-along other rates, like for retail, consumer, and other...

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or, or commercial and other industrial consumers, they're trying to make sure that these data centers don't lead to a spike in cost. It's also a part of the curtailing, uh, aspect. One last thing here, Charlie, um,

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uh, their, FERC's guidance says they wanna see grids expediting, especially when data centers are bringing their own power.

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So if a data center's gonna have backup generation, let them rip that first and then f- solve the interconnect later, and again, when, uh, they agree to curtail during high-stress periods, so... Okay.

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So I think if you, if, if you aren't aware with this, with these abbreviations and lingo, let me, like, zoom out and try to put it in lay person's terms.

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So, uh, if we talk about the regulatory hierarchy of different entities and organizations, uh, it goes like this.

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You have the federal FERC, which is a regulatory body, which d- which says how the regional transmission organizations or ISOs, RTOs and ISOs, can behave.

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These are multi-state, uh, grid interconnect systems that connect, like, the high voltage lines and the distribution and transmission and underneath, and, uh, as underneath the RTOs and ISOs, you have the utilities.

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That's where the ones like you, that's w- who sends you your power bill. In Oklahoma, you're gonna get your power bill from PSO, Power Services Oklahoma, or OG&E, Oklahoma Gas and Electric.

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So you have FERC, the regulatory body, RTOs and ISOs underneath that, and then utilities, which then actually send you the power.

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So when we look at the giant data center backlash, which is happening everywhere on Boomer and Zo- and Zoom or social media, um, this FERC, uh, proposal would be, would ameliorate that considerably in that it says, uh, right now, if one of these big, uh, data center loads, [laughs]

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uh, seeks to be built, the, uh, the, all the power lines and distribution that need to make that happen are actually typically on the shoulders of the utility itself.

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So the utility builds the power lines, and then sometimes charges back a lot of that to the actual, uh, entity that wants you to build the power lines.

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But it's actually like a socialized cost to all customers of the utility. And so this would say, "Data centers, if you are gonna, like, th-that you're, we're gonna make the, you guys pay the bill, so you gotta...

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And it helps if you're bringing your own power generation, so we don't have to distribute it to you."

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This would be a very good sign for people who want, like, some kind of, like, healthy medium here, where the end user, the retail consumer, you know, Main Street is not paying for Wall Street's, uh, data center build-outs.

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That's the TLDR on, like, my explanation. Y- yeah, I, I like that because w-what they're trying to do basically is have their cake and eat it too here.

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They're saying, "We need to get these data centers through the door," and why is a federal agency doing this? Well, you know, you could say that the Trump administration's pro-growth.

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There's also a, um, national security angle here. They wanna make sure we have more of these than adversaries, so that we can stay at the forefront of developing these models.

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And they wanna do that in such a way that doesn't just absolutely kneecap all the other payers.

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But I wanna go back to this gray area because part of, per your ex-explanation of what FERC does, uh, FERC typically only has regulatory jurisdiction, um, specifically over, uh, how generator or generating, um,

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or [sighs] sorry, how power generators, how power plants connect to the grid, but they typically leave how end consumers of that power can interconnect with and, and consume that power.

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They leave that up to the states and the local authorities.

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And what FERC is doing here is they're kind of stepping into a legal gray area because a-a-as, as the, uh, chairman of FERC herself said, you know, w- uh, from this, uh, or during, you know, um, th-the discovery for this, she basically said, "We're trying to figure out- What our actual limits here are.

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And there is a case here, um, with PJM. PJM is the power market that services Pennsylvania and parts of Ohio, a, a large part of the- Like the largest one, basically. Yeah, yeah.

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Um, there's actually, um, a case here with PJM where earlier this year, FERC ordered PJM to let co-located data centers pay for, um, only the grid capacity they draw instead of being billed for full grid services regardless of how much they get from on-site generation.

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Basically, if you're in PJM right now, as I understand it, you can have on-site generation, but you still have to purchase whatever your load is from PJM from the grid, and then you can sell your generation back to PJM.

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And FERC here is saying, that is wildly inefficient. Just let them actually consume what they produce on site. This should be net positive because you don't have to worry about giving them additional load.

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And then if they need anything else, they can buy it from PJM. But there's no reason why they should have to buy and then send power back when they already have the generation on site.

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But this is a gray area, 'cause you could argue that the on-site generation that a data center is co-located falls under FERC's jurisdiction because it's generation that's connecting with the grid. But you're also...

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FERC is also trying to mandate how that load within the grid is managed, which is technically on PJM and the localities. And so there's actually jurisdiction for this... Sorry, I almost done tripped. Yeah.

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There's actually jurisdiction for this... Or sorry, there's, there's a legis- a, a, a, a legislative battle... God, I can't talk today. There is- [laughs] It's a lot of words.

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There's a lot of, uh, dollar words we got to wade through here.

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There's litigation outstanding for this that will decide whether or not FERC is overstepping its bounds currently, and this could potentially have ramifications for the guidance it's trying to give now.

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Because if FERC is really trying to wade into how large loads interconnect to the grid and pushing the boundaries maybe of their li- uh, jurisdiction, that case could decide whether or not what they're trying to do with this new guidance is actually permissible under the law, so.

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And so you bring up the legal challenge because this is ongoing, and this is, again, you say a gray area. And this is where the part two, the other shoe might be dropping here, 'cause I got to show this.

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This also announced yesterday. Surprised I didn't see any, like, the Bitcoin media pick it up, but friend of the show, [laughs] Cynthia Lummis.

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Friend of the show, Cynthia Lummis, also friend to Bitcoiners and broader crypto legislation, um, introduced a legislation to modernize rules for high-powered grid connections.

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Now, this might also sound like the same dang thing, and i- in a way it kind of is.

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This is the POWER UP Act, introduced the day before yesterday, I believe, the day before the FERC, uh, proposal, and it would codify into law what FERC is trying to do by regulation. So I'm gonna...

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Let me say that again. It would make it a law what FERC is trying to add as a legislation. Um, this is a parallel legislative path.

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Um, and it matters because right now, as Colin said, FERC rulemaking can be challenged in federal court. But if Congress passes the bill, then it can't.

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And then also the POWER UP Act would, um, kind of, uh, allow FERC to issue a final rule on these within 18 months.

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It would increase, like, the, um, large load definition from 20 megawatts, I believe, to 100 megawatts, which would probably be more in line with, like, how big this shit's [laughs] being built anyway.

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These are very, very big data centers. Um, so I've got my... We've got our eyes on this. Uh, I think, you know, Cynthia Lummis has been talking to Bitcoin miners for a long time.

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Of these senators, she's probably the one who is probably the most dialed into the transition in finance and money and the transition in large loads and data centers on the power grid.

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So, um, we may have yet another ally, uh, who is sophisticated and smart. And so, uh, shout out Cynthia Lummis. If... Say that she wants to come on the show, she has an open invitation.

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And, and to cap this off, we will be keeping track of this 'cause this is, you know, probably the largest, uh, single, uh, re- uh, regulatory response yet to the AI boom in the US. Yeah.

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It's, uh, coming at the highest level, and it, it could completely rewrite the rules for federal regulation over grids, so. Yeah.

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This is a really, really big deal that's really obs- that buried in obscurity unless you're in the industry. So eyes on this. This will make the Facebook boomers happy.

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This might kind of ruffle the feathers of some of the AI data centers, but it's, it's good for them. It's like ta- helping them take their medicine probably, is basically what it is.

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Okay, we got Rob Hamilton in the wings, and we are gonna talk about Bitcoin stuff with him. But before we bring Rob on, let's hear or have a word from our sponsor, CleanSpark. We are CleanSpark,

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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.

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We are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at cleanspark.com.

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[upbeat music] If Bitcoin's actually the best money, and it's the thing that people should accumulate, and it's the best risk-adjusted asset, I lose zero sleep about whether or not that's gonna happen.

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I, I just ask the question of when. It's literally matrix math that you're running on large pieces of data. The Bitcoin miners can absorb that energy.

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And, and in many ways, this feels like a second bite at the apple to build a new internet. [upbeat music]Energy Investors Forum in Dallas. Be there.

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Uh, there's a code in the video description. Okay, Colin, let's talk Stretch, another Bitcoin shenanigans with our boy, Rob Hamilton. Welcome back to the show, Rob. Hey, everyone. Thanks for having me. Yeah.

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Thanks for joining, Rob. So Rob, I know you, you're in the insurance game, and you're in, like, the, you know, the Bitcoin game, but we're...

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I'm gonna put you on the spot, and we're gonna riff on what everybody's talking about, not just in Bitcoin Twitter, but also in finance Twitter, which is Stretch. Which is plummeting, 85 now. I think it hit 82 overnight.

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Am I wrong about this? It was low. Um, what are you, what are you seeing out there? What's the reaction in the world of Bitcoin investor Twitter? Yeah. So I guess maybe just take a half step back.

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Um, Stretch, STRC is the stock ticker, is this preferred equity instrument, uh, MicroStrategy issued that is supposed to be at $100. And that is the target goal.

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Uh, the idea is that when the share price goes above $100, um, Strategy will issue additional shares of STRC to keep the price at $100 or lo- you know, or they can't keep it from going lower, as we're seeing today.

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But the idea is that if it ever goes higher, they're going to sell, uh, create, issue new shares, and they take the incremental dollars they get from selling those shares and buy Bitcoin with it.

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The idea being that, you know, Bitcoin with a roughly 30% CAGR, uh, being able to pay 10% to get, uh, access to credit today and paying out that dividend is actually a pretty reasonable position from their perspective when you have 850,000 Bitcoin on your balance sheet, right?

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Uh, and so what we're seeing currently with this dip down, uh, I actually have a little, uh, uh, man-on-the-street journalism to report here.

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When I was in New York City at OpNext, uh, there were multiple people at the Pubkey after party who I was talking to, um, that were hanging around the bar, and they were saying that they were going on Robinhood, and they were g- going...

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They were borrowing money from Robinhood and then going lever long STRC as, like, a carry trade, right?

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So if Robinhood was charging 6% interest and STRC was paying 11.5% interest, they could just carry that spread and be able to carry that forward.

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This gets further exacerbated, which I think is not as often talked about, but, uh, in the general DeFi ecosystem, there are tokens like the APIY- APYX token that basically take, uh, allow you to take dollars deposited and get these tokens that basically go out into the market and buy STRC, and then what you can do, what's called in DeFi looping.

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And David Sivory had a really great video about this maybe, like, a month and a half ago, where all... What you would do is you would get some APYX token. You would then lock that up.

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You would get dollars for, like, like, a loan against it, and then you'd go and buy more APYX, and you would just loop this continually, continually.

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And looking through it, like, I think a lot of the de-leveraging is kind of a breaking of this carry trade where people were thinking that it would never go below, uh, the $100 or stay really close to it, so their margin position would be protected, and all you needed was a couple incremental sellers to cause a, a cascading downward, like you would see in any other financial asset that has financial leverage on it.

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I mean, yeah. So the thing is, like, Stretch is still paying out 13.4% yield. It's now doing it twice a month, I believe. Yes. But, like, the yield is still intact, supposedly.

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The Treasury bill yield- Yeah, well, it's gone, it's gone up- They're paying in response to this, right? It was 11.5, I thought. And then- That's, that's right. Um, so the way...

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Like, just with any other instrument, like, you could view it like a bond, right?

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If you have $100, like the value of the bond's $100, and you're paying, you know, 11.5% interest, but now all of a sudden you can buy that same note for $83, they're still paying that rate based on if it were at $100, 11.5%, but that's why it actually goes down, and it's like 13% now.

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Which is interesting too, because the other major preferred issuer in the market is, uh, SEDA, which is part of, um, Stride's, uh, capital stack as a preferred instrument.

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They went right to daily dividends, which actually is, like, just as a financial premise, it's kinda cool that they've been able to break it out into a daily issuance of a, of a yield that gets paid out.

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Because you would have this dynamic where if, you know, right now we're in between the issuance of the notes of, of, of the, of the coupon payment for STRC, why would you wanna hold STRC for the other, you know, half of the...

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You know, if there's one day right before they issue the dividend where if you hold it, you get paid. You don't get paid anything if you hold it today on June 18th.

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You, like, you have until the end of the month where, uh, the next dividend payment gets paid. You might as well park your capital somewhere else. You're not being paid to hold STRC in the interim.

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And you can kind of see also, like, for the STRC live dashboard you have here, um, uh, SEDA has dropped off as well, but it's higher.

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And you would think intuitively, wait a second, that doesn't make as much sense because, um, Stride has a smaller Bitcoin balance sheet.

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Conceivably, like, the, uh, Strategy should be a better credit risk 'cause they have so much more assets on their balance sheet.

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But it's because on the interim, you at least are getting paid to hold that coupon note daily in, with SEDA, whereas for S- STRC, it's only twice a month, which just got moved over.

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Originally it was once a month, and now it's twice a month. It wouldn't surprise me if in the coming month or two, Sailor just moves it to daily because it's not like it has a significant overhead cost to them.

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They might as well try and disincentivize intermediary capital flight of leaving for, for, like, most of the market time, coming in the day of, buying it, getting the dividend, then leaving again.

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So th- this to me, given that SEDA is also dropping, it seems somewhat endemic right now. I mean, this is not just isolated to Stretch and Strategy. Mm-hmm. Rob, so is your read on it what you just said?

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Do you think we're starting to see some of these DeFi looping trades or some of this carry trading from all these different platforms unwind right now? A little bit, yeah.

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So, uh, APYX says that they have $400 million assets under management that are kind of buying these a- assets out in the market.

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And it's interesting, with the beautiful age of AI, I can just point, uh, Claude right to the contract address, and it'll just tell me the liquidations, which I did just before coming on the show.

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There was, like, a million and a half dollars of liquidations in the Morpho APY USD- USDC market. Yeah, which doesn't sound like a lot, right?

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Um, but I think the larger story though is that you have some people that are just moving, pulling out, going elsewhere, and then you have these levered positions that start unwinding. Um, it...

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They're gonna have to probably reevaluate their capital stack. And also, Morpho... Sorry, not Mor- Morpho's the lending protocol, but a- the s- STRC, the stock, only trades during market hours, whereas DeFi's 24/7.

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So, you start having this market dislocation too, where APYX started freezing the ability to move these funds because what are you going to do if someone wants to sell during off-market hours?

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APY- someone has to hold the balance sheet risk if I'm able to sell now, and then I have to wait till the market to open to close my position. You're not able to do a clean arbitrage.

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So, you almost have this, like, inversion where DeFi starts becoming, uh, uh, [laughs] tied to the traditional market hours if that's the main asset that the- W- which is hilarious too Yeah Sorry, Charlie, I just had to make this point.

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I believe one of Saylor's sal- selling points for this was that this was not DeFi, right? That it didn't, was not exposed to the risk of DeFi, you know? This is traditional finance, okay?

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This is not, this is not shitcoins, you know? A- and, and, and it's, and it's still beholden to the same risks that tank, you know, a, a lot of these lending protocols on, o- off on chain. So anyway.

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Oh, but, but Colin and Rob, I gotta ask, how did Saylor come up with Stretch? Well, he does talk about it here on this CoinDesk interview, uh, which I'm gonna roll tape and, uh, we can let him tell us himself.

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Did Stretch... You know, I designed all these with AI. You know, I couldn't have done it myself.

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I, I literally sat, and I used artificial intelligence, and I, and I went back and forth with the AI for a few hours and- So, you were just on ChatGPT, just like the rest of us, figuring out how to design these different offerings...

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and arguing with it and saying, "Can I do this? Can I do that?" So, this is VibeFi. Yeah, VibeFi. [laughs] That's what this is. It, it... I'm gonna have a controversial hot take.

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I would say that holding preferred equity is probably way better of a financial product than DeFi's ever previously had, rather than yield farming f- fruit tokens and stuff, right? I don't disagree.

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Like, there's actually something here. So, like, uh... And also, Saylor doesn't have control over what people do with his stock.

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So, for someone to go run off and create an entity to start buying these things and allowing the looping and the leverage, that would never be accessible anywhere else, like in a traditional financial system.

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You, you can't... Like, that, that is a, a f- a factor which is outside of his control. Uh, and I, I actually just dropped a link in the chat here.

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Uh, for this protocol, um, APYX was offering 90% APY to lend your APYX token into the protocol, which definitely signaled that there was some sort of capital distress event that was happening.

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It is now, in the past, uh... You know, he did that tweet, uh, last night. Now, this morning, it's back to 12.5%.

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So, there was definitely a dislocation overnight to be offering 90% yield, and now we're back to 12 and a half in the morning, which would probably partially also explain that this is, like, independent of Strategy's balance sheet.

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This is independent of their ability to pay the debt. Like, this is something that is just, uh, a financial, just kind of unwind and, and DeFi leverage that just kind of has these larger market impacts now.

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And I think this is, this is part of the trade-offs of i- integrating these assets into DeFi, is that, uh, you're going to have a lot of this volatility, and then it comes back into publicly traded stocks.

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Like, it just loops right back in. Yeah. And I think that that's fair. Um, my point in bringing that up was not to say, like, it's Strategy's fault that people were d- do- doing these carry trades.

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It's simply that this is a, maybe an unintended consequence of issuing something like this in an industry that is, [laughs] you know, associated with degens, right? [laughs] Right.

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And I actually do think, though, at some point he was saying that this was a net benefit of, like, basically synthetic Stretch. The idea that it could be traded and integrated into other things as well.

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Um, which again, all of this is out of their control. I merely highlight it as a, um, spectacular consequence of this industry that he's swimming in. Yeah. And so there's, like, this... There's, like, there's...

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When you think about Strategy, right? There's actually kind of three partners. Like, there's three constituent stakeholders at the moment that are k- at odds with each other. You have the MSTR common shareholder.

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You have the STRC preferred shareholder. And you just have people who like Bitcoin and are holding Bitcoin, right? And there has to be... It's kind of like, um, air in a balloon.

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Like, you have to find somewhere where the capital's going to go and where the capital's gonna be sourced from to be able to pay the dividends.

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I think the biggest controversial thing around, um, the management of, like, the treasury up to this point was they had a $2 billion, uh, cash. I, I believe it was $2 billion in cash.

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And they went and they bought, um, a convertible debt note that was, you know, far out of the money, but it wasn't until 2028, end of 2028.

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And so that was, like, almost a billion dollars they had to, like, put out of the table that, well, pulled out of the cash reserve, which I think probably spooked some investors, where now there wasn't as much of a cash reserve there.

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Um, and th- they have, like, he's at a point now where, like, does he sell Bitcoin to pay the dividend, which would, you know, upset Bitcoin holders. It'd be capital coming out of the, the Bitcoin ecosystem.

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Does he issue more MSTR to pay for the STRC balance, or does he let STRC kind of hang out, like, below par, right?

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And, like, all of these things are like, you have to find somewhere where the dollar is coming from to be able to ultimately keep the flywheel going. And the worst part is, is that Mythos is down, so he can't ask Mythos.

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He has to use, like-... Opus 8, who's not gonna give him the right answer. Mythos, Mythos will know what to do, Rob. Okay.

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Uh, bef- uh, before we let you go, I, we got, uh, another, uh, great Bitcoin guy, Dev, in the, in the wings. Hunter Beast. We're gonna talk about some Quantum here in a second.

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But before that, Rob, I wanna get your take on the Illinois crypto tax. Now, I know- Yes...

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I don't think Anchor Watch has anybody in Chicago that I'm aware of, but the, but the governor in Illinois wanna tax every single crypto transaction. This is, like, a big- And Newell- Does this- Including self sends...

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yeah. Wait, whoa, whoa, hang on. What? I thought it was just brokers and exchanges.

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I don't think it, I, I think it's just on- It, it- It is No, it's all transactions you make if you're within, of any crypto type, if you're within the borders of Illinois. I, like, I was going through this.

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I think he's right. I think it's, like, transfers. Maybe if you, like, consolidate UTXOs. Yeah. Like, self custody, self transferring UTXOs, 20 basis points.

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Uh, you know, it's, uh, I, I, Colin, please keep me honest here if I'm totally wrong here. Uh- I'm gonna, I'm gonna fact check this. Please do. I'm gonna Jamie's DPT this live on air. Fun.

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Because when we, when, well, when we had... The reason why, Charlie, is 'cause when we had Tim on yesterday, he was saying it was just, uh, um, Bitcoin that was custodied with a b- with a broker- No, I think-...

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or with an exchange... I think he, I think he was emphasizing that it included that. I mean, the thing is, like, this is really new.

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This, this was added in an omnibus budget bill, like, very recently, and we're all still kinda reeling. Um, I don't know. Maybe less of figuring out, m- less of resolving self custody, self send, uh, topic right now.

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I'm curious, Rob, on, like, the impacts of people running Bitcoin or crypto-related businesses in Illinois. Um, maybe like this. If Anchor Watch were in Illinois, what would you do?

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Uh, I mean, that'd be something that grounds to leave over, right?

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I mean, we saw, like, it's not the same exact thing, but you saw in Washington State, that billionaire tax they left, and now Gabe Newell, um, the, the god of gaming and Steam, is now just moving to Florida, right?

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Like, you're just going to, when you tax something, you disincentivize it from happening, and when you're dealing with, like, a digital asset, just pretty...

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It's not like it's a steel mill plant, where, like, it'd be really hard and capital intensive to move elsewhere. If you're dealing with software, people are just gonna m- move somewhere else.

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Uh, I, it, it, it's something, too, that I think there are probably some property rights questions there, where if it is including just self transfers, that, like, if it's my own property, like, why are you taxing me from using my own property when there is no capital gain from that?

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It doesn't. It's only at the service layer. Oh, it's only on the service. Thank you, Colin. And I think that's really, I think that's really important. 'Cause, like, it's still bad. I mean, this still is- Oh, for sure...

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you know. Like, this is creating a new t- you know, tax onus on service- Yeah... providers in, in, in the state. It's interesting.

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Chicago has a big, like tr- like the sh- the CME, like the Chicago Mercantile Exchange, right? The, the, the CBOE, like, like the futures markets and the commodities futures markets that exist there.

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It's, it's funny enough, I guess, a, a plus for using an ETF because you're not gonna get taxed on the ETF. Um, uh, and- The ETF will get taxed if... Well, they're not located in, in Chicago, I don't think. But yeah.

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The ETF will get taxed on, like, inflows. Oh, if the inflow's in? Absolutely. Yeah. Yeah, you're absolutely right. Yeah. And you know what's also interesting?

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There's a gray area, because withdrawing from the exchange could be a taxable event. That's something that's not clear. That is a tax, yeah, that is a taxable event. Right. Absolutely.

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But, like, once you actually c- self custody, they're not gonna tax you on every transaction. It's, it's, like, it's, like, Bitnomial's there. It's, um, Strike. It's, um, the, the crypto ATM people.

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Uh, like, there's a... It, it's Chicago. It's, like, financial, one of the- Yeah... in the world. So, wow. Yeah.

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Uh, and, and it's also, too, just quite ironic where I think it's four out of the past seven governors of Chicago have been, like, arrested in, like, for fraud and corruption, right?

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They're not really, like, the best stewards of responsibly managing their capital.

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Once Governor Pritzker removed all of the toilets out of one of his house to say that it was basically uninhabitable so he didn't have to pay property tax on it, right?

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These are the people that are trying to find ways to save tax. But trust me, they're gonna use that 20 basis points of every cr- transaction that's happening at these service layers for a really good cause.

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They're gonna actually solve all of the problems in the state of Illinois by making sure we can tax this. Rob, thank you so much- [laughs]... for coming on Block Space. Thanks, guys. Really appreciate your time.

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Let's rip again very soon. Will do. Thank you, guys. Excited to have you back. Cheers. Peace. Thanks, Rob. Okay. We got Hunter Beast, co-founder of Surmount Systems, here in the wings.

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We're gonna bring him on, talk about Quantum and Bitcoin. But before that, a word from our sponsor, Luxor.

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So if you'd like to learn more and get started, go to luxor.tech/commander. All right, let's talk Quantum. We've gone weeks without talking Quantum, Colin. We got Hunter in the wings. I'm gonna bring him up here.

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Fingers crossed the mic works. Hunter, can you hear me? Uh, yeah, I can hear you. Can you hear me? Rock on. Sweet, we got you. Well, good day. Um, we haven't covered Quantum in a little while, and so I'll, uh...

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B- but in the meantime, Bitcoin's gone down, so let me, you can put your little market wizard hat on here. In your view, do you think the drawdown in Bitcoin at all has anything to do with Quantum?

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Some people say yes, some people say no. What's your view on this right now? It'll always be an arbitra- albatross over the markets, uh, until it's solved.

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Uh, uh, I also kind of want to speak to some of the stuff you were just speaking to Rob about, if you don't mind. Oh, yeah, yeah. Go ahead. Uh, from First Principles.

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So, like, you were talking about, like, you know, geographic arbitrage and regulation.

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Uh, you know, like, generally speaking, uh, I'm just slowly becoming, slowly but surely becoming more and more aware of how we have this huge grifter class in the United States that h- their whole job is to just legitimize corruption.

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Uh, like, come up with new words to find legal ways to act in corrupt and exploitative and extractive ways, where the money just goes to them and it goes nowhere else.

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They're not capital allocators, and they're not creative or productive individuals.

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And, uh, if it weren't for them, the dollar would probably wor- be worth probably about 1,000 times more than it is now, if you, you know, price it in gold and if gold was the money, right?

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Like, if, if we never left the gold standard and we had, you know, any sense of fiscal restraint, then, you know, we, we wouldn't be supporting this grifter class of unproductive individuals with, you know, hard-earned money.

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Um, you know, so, like, it makes sense to, you know, at first to think of geographic arbitrage, and maybe that might make sense. I mean, look, I, I live in Colorado, and, uh, Colorado, we pass a bunch of nonsense laws.

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And, uh, you know, like, we have it... Our, our state even just got sued by xAI, by Elon Musk, because, uh, uh, we came up with this bullshit AI law that our governor signed. And I, I like Polis somewhat.

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I used to like him more. Um, you know, he used to be very freedom-minded, and he, he did technically sign the AI bill with, uh, res-reservations, but he did sign it.

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And, uh, so, you know, like, that, that put essentially our First Amendment rights, uh, up, up, uh, to question, and they're being challenged by the DOJ and by Elon Musk, and so, uh... Right, and rightly so.

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And so, you know,

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uh, going back to, you know, like, First Principles, I just, I just kind of gradually becoming aware that, you know, there's a bunch of people making up fake problems and fake solutions to the fake problems and selling them, and right?

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And so, like, like, w- w- until, you know, somebody makes a law and a jackbooted thug comes up to your doorstep with a gun, until that happens, all of that's just fake. You know? Like, all of that is not real.

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And so until they come and, you know, try to g- you know, essentially grab me and put me in, in, in, in, in some pr-prison, and they think, you know, they can rob me of my physical freedom, but they can't never rob me of my intellectual and spiritual freedom.

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And so really, like, that would be their worst mistake, right? Like, a complete admission of, of fault and wrongdoing, and I would be my most productive in prison, I would imagine.

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Like, I would, I would, I would be reading so much and writing so much and doing so much to undermine them from within. And so, like, that would be, like, the worst thing they could ever do.

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Uh, so- Well, you couldn't go on podcasts, Hunter, which as we know, is the backbone of the Bitcoin economy. Oh, right. Yeah, yeah. Proof of opinion. PO... Oh, of course. Exactly. I, I'm familiar with poo protocol. Okay.

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Yeah. Mm-hmm. So, um, I, you know, we have, I have some, like, Quantum update questions- Yeah, sure... for you. But you brought up AI, and I actually want to throw a curveball at you. Okay.

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Do you see that, um, some AI researchers cracked what's called the Erdős problem? It's a long-time- Yeah... mathematical problem. Well, there's- I don't really understand it...

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there's not just one Erdős problem, by the way [laughs] typically. Okay. Okay. There are thousands. So you guys- Well, over, um, over 1,000. Almost 2,000, I think.

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Context of Quantum here, and then I hear this argument a lot, um, and this is for me kind of a big black swan that I can't, like, evaluate.

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Um, like, a lot of people make the argument, uh, there are Quantum timelines, and those are based upon conventional, like, research and timelines and expertise, but then we have something like Mitos. So we have, like,

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this- Yeah. Yeah... unknown- So, so, so, you know, you know, it's, it...

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There was actually a, a famous professor here from CU who once said that one of humanity's biggest failings is our failure to understand the exponential function, uh, because it's just not something that usually really occurs in nature except for maybe in, like, wildfi- fires.

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But, uh, essentially, like, we, we always discount the ef- the consequences of compounding technological innovation. Uh, like, you know, I mean, history always bear this, bears this out, like it backtests.

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Uh, but oftentimes it's like 95% of that progress happens in the last 5% of the time. And so, like, how, how, how can we, like, mentally model such a, an event? Well, like, this is one way, right?

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To, to realize, you know, there is a certain threshold to intelligence, and, you know, if you listen to various scaling laws, you know, like for example, like a 10X in compute results in a doubling of output quality.

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Uh, if that continues to hold, then, you know, I mean, it's only an inevitability that we develop very capable, uh, machines that are capable of thought.

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However, we do have to, uh, remember that these things are not conscious nor aware, right? Awareness is a level of consciousness that is far beyond thinking.

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And, uh, so w- the way I kind of think of these things is like, I mean, humans, we, we th- we, we are capable of thinking without being conscious as well.

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Like, we have the subconscious thought, we have dreaming, and so, like, uh, that's, that's something they could do. They can think, but necess- not necessarily be conscious, much less aware.

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Uh, that said, that's a very powerful thing, right? To be able to amplify a thought. Uh, and so,

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um, you know, just, just something to consider is, uh, that they, they, they could be very, uh, powerful at essentially, uh, f- uh, amplifying enough thoughts to find every little crack in every little thing.

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And one of the things that, you know, a lot of people fall into is, uh, like, like you always have to think of things from first principles, right?

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And a really good first principle when, if you're working in software engineering, is Gödel's incompleteness, uh, because it has a number of implications on, you know, term completeness- What's, what's Gödel's in- incompleteness for those of us who- So the way I understand it is that, and by the, I've not, I don't have a strong foundation in mathematics, but I do understand that Godel's incompleteness essentially points out that any l- sort of any, any c- mathematical system that is capable of describing itself, uh, cannot consistently describe itself.

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Like, there will be gaps in its capability to prove its own proofs, essentially.

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And so, like, there's no system of mathematics we can devise, uh, except for maybe the most simplest, you know, uh, uh, the most, uh, uh, trivial systems that, like our- like Bitcoin script for example, very reduced problem set, uh, very declarative, very, uh, you have to unroll every loop.

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It's very, you know, uh... Some say it, it isn't Turing complete, but then y- we can quibble about, you know, uh, what is it, uh, uh, uh- BPN, yeah... No, no.

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There, there's like a, there's a specific, uh, um, it's, it's Wolfram, Stephen Wolfram, he, he d- defined all the cellular automata, and I think it's rule 119 or 110. Rule 110, yes.

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So, uh, uh, essentially, uh, Stephen Wolfram cellular automata's rule of 10, so long as it passes rule 110, then, you know, that, that could be one test of Turing completeness.

250
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And so a lot of people are, are, like, we have to d- even agree on the definition of terms, uh, when we discuss these things.

251
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So regardless of that, of Turing completeness, of, of, of this, like, you know, like, 'cause like, it, it has a huge bearing on protocol design.

252
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Like, the whole reason Ethereum is so complicated, they have gas and the gas is not deterministic, like the whole g- uh, gas model, like charging for unit of computation, it is, uh, it's literally what, what gas is.

253
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Uh, it's, it's, it's, it's very contrary to a lot of how Bitcoiners think of Bitcoin, and for good reason.

254
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It's not intuitive, and it's really con- largely a consequence of Godel's incompleteness, that we cannot prove that it, something will halt execution. It's a halting problem, right?

255
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So it halts execution before actually running it. Yeah. If it's of sufficient complexity. So I wanna, uh, I wanna let Colin get in a question if you want, Colin.

256
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Um, I'm, I kinda wanna zoom out, uh, and- But did I answer your question, Charlie? I forget. What was the question? I don't know, but you gave us a good, you gave us a good sound clip. That's what- Okay...

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that's what matters. [laughs] We're not here to, to, to answer the questions. We're here to get good input with- Oh, we're not here to seek truth. Of course, we're supposed to just entertain, I guess. E- exactly.

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I, sometimes I feel like a, a prison might be better, you know? [laughs] Like, I might be more, so much more productive than just, I don't know. I'm joking.

259
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Charlie, I actually have a, a little bit of a seasoning question before you get to the meat and potatoes.

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Going back to the exponential problem, Hunter, you know, this is kind of Ray Kurzweil's theory on AI that we'll get to the singularity much quicker than- I'm familiar with... Yeah.

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Right, and he said- He, he, he, he puts, like, 2045. I feel like Ray Kurzweil might have overshot the singularity. I think it could happen a little sooner than that. So th- this goes- There's a possibility...

262
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to my, to my question for you. Do you think when Bitcoiners are underestimating the potential threat of quantum computing, they're not taking that exponential function into account? Duh.

263
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[laughs] Which is funny, 'cause, like, I mean, Bitcoin is a bet on technological progress, and, like, gold would be a bet against technological progress.

264
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Like, like I can imagine about five different ways you can debase gold just from the fundamental physics of the universe. I mean, 98, 99.98% of the world, the, the, the solar system's gold is in the sun.

265
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So if we were serious about, you know, debasing gold, we should start, like a, some kind of plasma lance project to mine the sun.

266
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And also it would have the positive effect of reducing its metallicity and extending its lifespan. But regardless of that, oh, and also reducing the possibility of, uh, uh, what is it?

267
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Um, like another Carrington event, like from the 19th century where there were sparks in the telegraph wires where, you know, fry, it would fry all our electronics today.

268
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Um, so regardless of that, you know, like, we should learn to tend our star and extend its age, and that's just one of five different ways you can imagine, like, the gold supply being dramatically debased.

269
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Um, and, and it's not even the most powerful way either. Uh, so regardless of that, and th- this is based on instant physics. Um, so regardless of all that, you know, it's, um, I, I, I, I...

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Y- you just have to remember that, like, if you're betting on Bitcoin, you should also bet on AI. You shouldn't be betting against AI.

271
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Like, I know it sounds scary because there's a lot of socialists who wanna scare you about it. They wanna s- s- you know, create some kind of machine god for us to worship.

272
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And you know, uh, you know what I, I really would like people to read is the story from the Book of Daniel called Bel and the Dragon.

273
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It is a fantastic story, and it's not the dragon I'm really, like, the dragon's one thing, but the, but Bel, that...

274
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Well, also actually, dragon is a, the dragon is a cool story too because it's, like, like, this thing people fear.

275
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Like, people always fear this thing, but if you're clear-minded about it, like, there's really nothing to fear.

276
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Like, you can absolutely, uh, live your life in a way that is spiritually fearless, you know, knowing that, like, you are doing the right thing.

277
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Like, always remember, like, you know, the eight Beatitudes from, I think that's Matthew, and, like, the, the Ten Commandments, right?

278
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Like, the, these are, these are valuable protocols and rule sets for, like, living your life and building a f- uh, uh, a productive, flourishing civilization, right?

279
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So, like, it, it's always important to go back to, like, first principles and scripture and, like, especially during a time where there's, like, maximal a- uh, information asymmetry.

280
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Uh, you know, it, like, you really do have to go back to, like, your, your, your principles. Your principles are your armor as you explore the fr- uh, complexity frontier.

281
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Um, shout out, Hunter, for finally making a biblical reference that I didn't know off the top of my head, given that I grew up Protestant.

282
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That's in the Catholic and Orthodox- Well, so, so, so that's the thing is, like, I, I, I, I, not only am I, I'm kinda cheating because I have a Bible that also has the, it's a Catholic Bible, so it already, it has more books than you.

283
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Yeah. And also it has the Apocrypha too. Yeah. And it's an older book, so it predates- But-... a lot of the, like, information warfare that you mentioned. [laughs] Okay.

284
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I, I, as much as I would love to keep talking about the Apocrypha and different canonization- Sure. Yeah... I wanna go back to, uh, Bitcoin, and, uh, we got about five minutes. Um, and I would love to- Yeah.

285
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Back to Bitcoin, as if it's any different. [laughs] I, I know, I know, I know.

286
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I want- I'd love to, like, uh, you to give us kind of an update on, like, and feel free to be a little more technical, you know, in, in a short amount of time.

287
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Give me an update on, like, what's going on with, like, the Bit- Bitcoin quantum discussion among the technical people. We had some presentations at OpNext.

288
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They were great, but there's, like, not- You know, those don't tell you where the state of discussion is, it just talks about different proposals.

289
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How would you characterize the past three or four months in quantum discussion? Is it moving forwards or has it evolved? Describe this to me. We haven't even seen the beginning of the heap dialed up, being dialed up.

290
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Like, it, it is really, like, we, we need to be preparing for the fact that, uh, there are a number of things moving in place right now that I think 2027 is gonna be peak quantum FUD if we do nothing, and it's gonna tear us apart, and there will be, uh, it will be a worse...

291
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Like, if people think this is a bear market, it'll be worse. And, uh, that said, we also...

292
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There's a possibility that we can make an effort to address that at a fundamental level in a satisfying way that it, you know, treats Bitcoiners as, uh, intellectually honest free agents best we can.

293
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I know there's so many narratives around that, you know, Bitcoiners are retarded or whatever, but, uh, I mean, you wouldn't be a Bitcoiner if you, you know, didn't have free agency, free will, right?

294
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Um, you know, just, just pointing that out. And I, I don't know, I guess, uh, maybe this is naive of me to think, but maybe with like...

295
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When presented with evidence and transparency and honesty, uh, there's nowhere in the Bible that allows you to lie, by the way, at least the Catholic Bible or the Christian Bible. Um- Well, yeah, maybe not Luke's Bible.

296
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He... Well, you can mislead. Yeah, anyway. Uh, regardless of that, um, tease, um, uh- [laughs] Sorry. Sorry. Yeah. Charlie, liar. [laughs] Yeah, I guess.

297
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[laughs] Um, so regardless of that, uh, you know, I just, yeah, I, I'm, I, I, I, uh, I will tell you that, uh, I am, I am, I am founding a company as we speak.

298
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I will be raising capital and, uh, if anybody wants to join me on that journey, uh, to very seriously accelerate the timeline to Bitcoin quantum resistance against really, uh, not just even quantum resistance, but every conceivable threat, uh, and every conceivable concern that would get in the way of adoption of Bitcoin, uh, and, uh, uh, uh, on essentially, uh, when it's most needed.

299
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Because the one thing I want to avoid, at least if I can have any say in it, is Weimar USA, where we s- we go back to, uh, national socialism. You know, support for that was, was actually kind of high here.

300
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Um, there was a lot of, uh, I would say like ideology back then that I'm hearing kind of... You know, it's not... Was it Mark Twain who once said, "History doesn't repeat, but it does rhyme"?

301
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And, you know, like it's interesting, like the AFD, like, is a, is a g- the leader of the AFD in Germany, the alternative for Deutschland, uh, is, is a homosexual.

302
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And, uh, you know, it's, it's actually, uh, like what they call far right, you know, it's, it's not far right mi- in my opinion, 'cause like they have a lot of like kind of national socialist sounding policies around, you know, we should give ta- give, uh, subsidies to farmers and renters and things like that, and homeowners, and, and so, you know, we, we need a, a, a, a homeland for the, the white, uh, children.

303
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[laughs] No, it's, uh, but regardless of that, um, the AFD, like they, they, the...

304
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I'm just saying like it's interesting how, you know, homosexuals certainly are rejecting a lot of the more progressive causes because the progressive causes are aligning with Muslims who hate homosexuals, and so, uh, it's, uh, it's just interesting to see that dynamic play out, uh, you know, from incentives, 'cause incentives are very powerful here.

305
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And even worse, you know, like we're, um, we're just seeing like a return to, uh, kind of socialist tendencies and, you know, you can either like lean into that at an accelerationary standpoint, but I'm not an accelerationist.

306
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I, I don't like to accelerate or think about accelerate, uh, pain or misery.

307
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Instead I like to think, you know, of, of what can we do that doesn't require permission from the state to essentially, uh, uh, d- prepare for a time of great trial essentially. Hunter, thank you so much for your time.

308
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We hit on like 18 different topics, and that's awesome. Really appreciate this.

309
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Best of luck out there, uh, in the arena working on different ways to quantum proof Bitcoin so that the people may decide if we do it or not.

310
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So I appreciate you very much for your time and, uh, being out there despite Bitcoin not being an easy place. It's a very cruel, hostile environment, but we do it 'cause we love it. Thank you so much. Good.

311
00:53:51.038 --> 00:54:06.078
Uh, good talking- Thanks, Hunter... Charlie. Thank you. Cheers. Love Hunter, probably top 10 in my Mount Rushmore of like nice, uh, Bitcoiner, uh, devs. So, uh, we are gonna keep going.

312
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We've got, uh, Matt Williams from Luxor coming on here very shortly to talk about AI and energy, and we're also gonna talk about Hive's new $220 million deal. But before we go to Hive, let's hear from our sponsor, Ligos.

313
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314
00:54:32.888 --> 00:54:40.268
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315
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316
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317
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318
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Hive signed a big deal, three-year GPU cloud contract worth $220 million US. Colin, I'll toss it to you. Explain. Yeah.

319
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So there's actually two, uh, two news items to cover here that were released concurrently with each other.

320
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So the first one that we'll go over is that BuzzHPC, which is Hive's HPC subsidiary, signed a three-year GPU cloud contract worth 220 million

321
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with Bell Canada, which is a Canadian government adjacent, uh, te- uh, um, IT provider, and specifically this contract will have BuzzHPC hosting their own Nvidia Blackwells at a Bell Canada data center that will be used by Cohere, which is a Canadian AI model company, to run its foundation models on this infrastructure.

322
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Um, according to Hive, this brings their contracted ARR to just over 100 million.

323
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Now, for the second news item here that is related to Hive, they just acquired a 32 megawatt data center in Boden, or two they're going to acquire. I think the details of the deal are still being hammered out.

324
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But they are looking to buy a 32 megawatt data center in Boden, Sweden, that they have been using as a tenant since 2018. Um, importantly, there's no acquisition price yet.

325
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I think that's still being hammered out, considering that this is to acquire, not acquired. And the Boden Municipal Council has approved the acquisition, but the deal is not closed.

326
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It's still subject to all of the rigmarole that would go on as you are going through the M&A process here.

327
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And one thing to note here, Hive actually filed the SEC updates for both of these under an amendment for their ATM. They have a $300 million ATM outstanding.

328
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So far, they've raised 85.3 million from this ATM, with 214.7 million of capacity left on this.

329
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And I could be wrong about this being the first, but now Hive is doing this under domestic issuer laws with the SEC, not foreign.

330
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Um, as, as former mining pod, now Blockspace listeners will maybe remember from a Frank Holmes interview we did back in the day, they opened up a headquarters in Texas, and now it seems as though they are moving towards domestic issuer rules and not foreign, potentially as a r- a- as a, um, a- a consequence of that, but also, uh, largely because now they have more US shareholders as they've dual-listed on the NASDAQ and the Toronto Stock Exchange.

331
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So just kind of a fun little technicality there. Yeah. Uh, interesting that they're acquiring a site in Sweden. I mean, we are seeing this. Iron has the, what? 400 megawatt power pipeline in Spain.

332
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You have, uh, some interest in France, I believe. Was it Mara? Um- Mara, yeah. Xion, which is like the- Yeah, with like Xion.

333
00:58:15.868 --> 00:58:27.817
It seems to me that, uh, there, yeah, there's some deals happening in, in the, in Europe, which is interesting and exciting to see. Not at, not quite the same power profile, but, um, maybe we can- No...

334
00:58:27.868 --> 00:58:39.968
And the scale won't be as big. To me, it, it m- may indicate two things. One, getting deals done here is getting harder 'cause there's so much competition. And two, Europe doesn't wanna be totally left behind.

335
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I mean, it's kind of a foregone conclusion now that whatever their data center and AI industry will be will be kind of a vassal state to the US, but there's still deals to get done over there.

336
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And Hive specifically said they're going to convert that data center to a tier three data center for AI and HPC co- uh, compute load. So... Yep. Uh, shout out Hive.

337
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OG Canadian, uh, Ethereum and GPU miner, uh, was k- like, made their big break in that category. Now full circle back to GPUs. I think we go to our final guest.

338
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Colin, we have our boy friend of the show, Matt Williams. Legitimate friend of the show, Matt Williams. Legitimate [laughs] friend of the show. We're gonna bring him up here. We haven't done a mic check.

339
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We're gonna, we're gonna just go in bl- blind. Let's see. Matt, welcome to the show. Can you hear me? I can hear you, brother. How you doing? Rock on. Fantastic. You have a great month-appropriate shirt. You look sharp.

340
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I was about to say. Good, good for you, man. We have got you to come talk about AI and energy. You've typically been our derivatives and futures guy, but now I guess you're the energy guy, too.

341
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Colin, what do we wanna talk to Matt about? Uh, we're gonna talk about all that, but first, as a native Chicagoan- [laughs] Yeah... um, Chicagoan? That sounds worse.

342
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As a native of the beautiful city of Chicago, what is your take on the new, uh, I don't know what we even wanna call it, excise tax on Bitcoin transactions that Illinois just passed? Yeah. All right.

343
01:00:13.788 --> 01:00:24.468
Well, first of all, all my complaining about Charlie not being on here has finally paid off, so it's great to see you, Charlie. Yeah, I'm here. I'm finally. Yeah. I'm wearing a button-down shirt, too, so I've dressed up.

344
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Appreciate it. Um, second of all, just so everyone knows, all my friends, people listening, I don't work for the Illinois government. So it's, I didn't put this into play.

345
01:00:35.548 --> 01:00:50.048
Um, however, I think [laughs] the complaints about this are largely overblown, is my take on this. I think a 20 bip tax, um, that's gonna mostly apply to brokers and exchanges, not really move the needle.

346
01:00:50.148 --> 01:01:03.568
I mean, we're talking about maybe $60 million a year in revenue for the state. Um, now, I think the larger issue here is the precedent and whether or not other states follow suit if it bleeds into other areas.

347
01:01:03.988 --> 01:01:13.807
But for the typical HODLer, this isn't gonna impact you at all. Um, and small-time traders, same thing. Um, so I get it. I get it's problematic.

348
01:01:13.848 --> 01:01:23.804
I think precedent is probably the larger issue here in whether or not other states follow suit Um, so that's my two cents. Like, I think fundamentally not a big deal year over year.

349
01:01:24.204 --> 01:01:31.904
Um, it's the larger precedent and, but I think we'd all be fooling ourselves. Illinois wasn't the first state, another one was gonna be eventually.

350
01:01:32.284 --> 01:01:45.054
So irrespective of your take, the, to tax me harder, daddy, if it's only 60 million [laughs] If it's only 60 million, why do it at all? I mean, that's, that's like a, that's not even a spit- Well-...

351
01:01:45.084 --> 01:01:51.924
in the bucket of the overall tax revenue... I mean, there's some con- there's some context here you're probably not aware of. Like, Illinois has been in dire straits financially for a long time.

352
01:01:52.604 --> 01:02:03.304
Uh, Governor Pritzker has taken it upon himself to increase our credit rating, which he's done. Every year he's done better, so like in that regard, he had a- inherited a large deficit, he's gotta get out of it.

353
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Generally, when you have a deficit, you gotta get out of it. Through taxing people,

354
01:02:08.124 --> 01:02:21.224
you know, it's not ideal, no one wants to get taxed more, but, like, this particular tax, what, what other people aren't talking about is he's also introducing a tax on, you know, gambling, uh, event contracts, prediction markets, tobacco.

355
01:02:21.844 --> 01:02:31.564
Like, there's a lot, a vast majority of this bill, um, in terms of revenue's gonna... Not coming from crypto. It's a very small part of this. So it was a larger bill, this got tacked on.

356
01:02:31.684 --> 01:02:42.324
Uh, I think it's not good for the industry, is my stance, um, just because of the precedent. Um, but I think, you know, people glomming onto this as the larger part are missing the bigger picture.

357
01:02:43.584 --> 01:02:53.344
Yeah, that's all really good context, and kinda just to put a cap on this, do you think this will change anything about companies incorporated in Illinois for crypto services?

358
01:02:53.404 --> 01:03:02.164
Do you think that this means anything for service providers servicing Illinois residents? Totally. I, I- Yeah, I- But, but do you think they'll, do you think they'll quit the jurisdiction, though?

359
01:03:02.244 --> 01:03:10.344
Like, do you think there's a chance that exchanges will say, "We're just not gonna deal with this, so sorry, it's, Illinois residents, you can't buy crypto on our platforms anymore"? I don't think it'll go that far.

360
01:03:10.404 --> 01:03:18.924
I think it, the, the larger issue is, like, stifling innovation here and pro- you know, preventing people from coming here and doing, you know, new and cool things around crypto from an exchange perspective.

361
01:03:19.684 --> 01:03:31.053
Um, you know, they, they've tried for as long as I've been in this business, like the financial services business, they tried to do a finan- a financial transaction tax on, like, futures and options. That never passed.

362
01:03:31.144 --> 01:03:37.154
I think this is a small... I think the real reason that Illinois is trying to do that is just see if this works here, that they would maybe do it larger- Mm-hmm...

363
01:03:37.744 --> 01:03:48.924
on other commodities transactions, which would represent a much larger revenue stream for them. So, um, yeah, I, I think it's bad- That's scary to think about- Yeah...

364
01:03:48.964 --> 01:03:59.284
considering Chicago is the futures capital of US markets. Yeah. And I don't know what the downstream effects of that would be, but that seems like it would be much more consequential.

365
01:03:59.364 --> 01:04:07.464
Yeah, I mean, this is everyone's favorite politician, Elizabeth Warren's idea. [laughs] Okay, well, let's switch gears. Let's talk about something which is very much your domain.

366
01:04:07.704 --> 01:04:24.964
Um, Luxor, as I understand, is expanding the energy desk to AI data centers. Luxor's longtime Bitcoin hash rate energy desk. What does it look like now that you're looking to AI data centers? How is it different?

367
01:04:25.684 --> 01:04:35.604
Yeah, it, so at the baseline, like it, essentially what we are, what we launched last year in October is, uh, we're a retail ener- electricity provider in ERCOT, right?

368
01:04:35.644 --> 01:04:47.524
And then we've actually just got approval for SPP as well. Um- Ooh, my, my, my neck of the woods. Yeah, exactly. Um, so what we do is we serve load for, primarily for Bitcoin mining data centers.

369
01:04:48.204 --> 01:04:58.304
All we're really doing to start is the low-hanging fruit of extending that into non-flexible load data centers. So from a rep perspective, the construct is fairly the same.

370
01:04:59.124 --> 01:05:10.404
Um, the difference is that we have to incorporate hedging more a- as part of this. I think down the road, there's a world where, you know, we expand our Commander product to potentially manage GPUs.

371
01:05:10.824 --> 01:05:17.864
Um, and there's, you know, some other services we could provide. Um, you know, part of our suite can be extended to this.

372
01:05:18.044 --> 01:05:28.124
I think it's still too early in the AI space in terms of, you know, like it's not a one-to-one, um, in terms of management and optimization of mining to AI.

373
01:05:28.154 --> 01:05:40.324
It's not even close, but I think it will kind of trend that way, and so we wanna be positioned, start with a, like I said, low-hanging fruit, be able to serve load, be your rep, be your QSE for AI, and that's what we're doing.

374
01:05:40.363 --> 01:05:49.924
And we'll be probably, I would guess we're ready for that by end of July. You mentioned hedging there, Matt, and y- we, we were talking before coming on air.

375
01:05:50.384 --> 01:06:03.924
You mentioned that hedging is actually much more important for these data centers than for Bitcoin miners. That seems counterintuitive to me just at first blush, because, uh, the contracts are more lucrative.

376
01:06:04.564 --> 01:06:10.344
Um, I know the power can sometimes be more expensive, but Bitcoin volatility has just been insane for Bitcoin miners.

377
01:06:10.504 --> 01:06:16.924
Uh, so why, why is it more important, and what are the pieces that make it more crucial for these providers than with Bitcoin miners?

378
01:06:17.384 --> 01:06:23.234
Well, I guess, like, the context I meant, like, hedging's more important for AI is around power, right?

379
01:06:23.484 --> 01:06:32.004
So, you know, if you're a miner and it's not profitable, um, you don't, you can ride spot because you can just turn off if it becomes unprofitable, right?

380
01:06:32.104 --> 01:06:40.984
Like, that's the whole crux of flexible load is, you, you know, you mine when it's profitable, you turn off when it's not, or if there's incentive programs you wanna participate in, like you can ramp up, ramp down.

381
01:06:41.604 --> 01:06:51.624
Like, we, we all know that. But for AI, you know, depending on how you're deploying your GPUs, you might have to ride, uh, you know, crazy power spikes.

382
01:06:51.684 --> 01:07:01.484
I mean, we've seen, we've seen it this year, we've seen it, you know, with Uri. Your power price could go from $40 a megawatt hour to $9,000 a megawatt hour as a cap.

383
01:07:02.004 --> 01:07:12.524
Um, if you're not hedged, you're exposed to that because you, you know, in many cases you have 99 to 100% uptime requirements. Um, so, you know, think about it.

384
01:07:12.584 --> 01:07:27.072
Like, let's say you're a 100 megawatt facility, and you're currently at $40 a megawatt hour. And you're, you're just riding spot, right? That's, you know, $96,000, right? Um, $96,000 a day.

385
01:07:28.072 --> 01:07:35.392
Now, imagine that spikes to $1,200 a megawatt hour for a full day, and that's not unprecedented, like, not even this year.

386
01:07:36.132 --> 01:07:48.612
Like, now you're going from $100,000 a day to tens of millions of dollars a day, and that could last for days. So if you're not hedged, that's what you're up against. And so I think there are people...

387
01:07:48.732 --> 01:07:56.412
Well, and the other thing is, like, if you're, let's say you're starting up a new... You're launching a new data center, you're about to go live.

388
01:07:56.472 --> 01:08:07.052
If you're not your own credit support, you have to go to someone to provide that credit support, and they're probably gonna require you to be 90 to 100% hedged. So it's not even like should you do it.

389
01:08:07.112 --> 01:08:09.732
You might have to do it if you're not providing your own credit support.

390
01:08:09.752 --> 01:08:19.952
And like the other reps and QSCs that I'm talking to, that's pretty much the standard right now for them to deal with you is like, "If we're taking on your risk exposure, you're gonna have to be 90 to 100% hedged."

391
01:08:21.452 --> 01:08:30.812
So g- going back to this, uh, in addition to hedging, you know, you mentioned that some of these data centers need to have 100% uptime, some of them maybe not.

392
01:08:31.432 --> 01:08:45.092
What actual wiggle room is there for AI data centers to curtail and engage in demand response? And it's, it's kind of a ridiculous question in the sense that obviously not all of these data centers are the same.

393
01:08:45.112 --> 01:08:51.972
They're not like Bitcoin miners. They're not just producing one form of compute. They could be producing multiple different forms of compute. Yeah.

394
01:08:52.352 --> 01:09:01.752
But, but yeah, so you, you kind of mentioned that there's a misconception that they can't curtail. Can you unpack that for us? Yeah, I think it's... Uh, you, you kinda hit y- an answer to your own question.

395
01:09:01.852 --> 01:09:12.032
Um, and I think it's the, the misconception is that AI is completely inflexible, right? Uh, but I think certain AI loads are more flexible than people think, and you kinda touched on that.

396
01:09:12.532 --> 01:09:21.272
Like, not every megawatt needs to be available every second, depending on the use case. So, like, training loads can be shifted, um, batch jobs can be delayed.

397
01:09:21.872 --> 01:09:32.012
If you're doing certain inference workloads, um, those can be geographically distributed and, and then there's backup generation, too, and batteries, which are dispatchable resources.

398
01:09:32.042 --> 01:09:37.942
So my, my point is, i- you can't just bucket it into all of it's non-flexible, right?

399
01:09:37.992 --> 01:09:48.552
Like, I think depending on the use case and how the GPUs are deployed or the TPUs are deployed, there is flexibility and I think there's opportunity for curtailment strategies. That's more or less my thoughts.

400
01:09:49.072 --> 01:09:57.241
Now, it's still like, it's still very early, and I think people, you know, like, right now it's a land grab for megawatts. Um, I think that's phase one, right?

401
01:09:57.252 --> 01:09:59.912
It's everyone's like, "How do I get all the megawatts I can?"

402
01:09:59.952 --> 01:10:13.442
Phase two is optimization, and I think margin compression will push us towards phase two, and that's when people are gonna start looking at, like, all right, where, where are my, you know, AI loads flexible, and then how do I deploy strategies on that flexibility?

403
01:10:14.232 --> 01:10:17.352
Yeah. It seems right now it is absolutely a land grab. It's a power grab.

404
01:10:18.592 --> 01:10:28.711
And when we get to fa- and, and so, like, I think a lot of Bitcoiners imagine, they tell, we tell ourselves these stories that, you know, somehow AI gets crammed into this, like, land grab scenario.

405
01:10:28.792 --> 01:10:40.352
But when we think about the future optimization, there is this concept of a mullet miner- [laughs]... and, uh, this is fun to me, but I don't wanna delude myself into, you know, jo- drinking the Bitcoin Kool-Aid here.

406
01:10:41.212 --> 01:10:52.992
Um, to what extent do you think this AI in the front, uh, more dynamic flexible load in the back Bitcoin mining, uh, model makes sense as we think about optimization and hedging?

407
01:10:53.952 --> 01:11:02.432
I mean, first of all, I hope it comes to fruition just so the term mullet mining continues. That's cool. Like, w- I feel like next time I come on here I'm gonna have a T-shirt made for mullet mining.

408
01:11:02.772 --> 01:11:10.492
Um- [laughs] You should have a mullet. You should have a mullet. Yeah, all right. I, I'll tell you what. [laughs] I'll have a mullet with a T-shirt. Um, per- it's perfect.

409
01:11:10.812 --> 01:11:24.152
Um, I, I think this is conceptual at best right now. Um, we've floated this idea. I think we're starting to try and build a strategy around this. I think the crux of it centers on backup generation, right? I think

410
01:11:25.092 --> 01:11:36.692
backup generation for AI data centers is super costly, right? Like, you have to have tens of millions of dollars put in for redundancy's sake. Like, it's almost always sitting there idle.

411
01:11:36.792 --> 01:11:50.032
Um, and then but, like, the thing is when you pitch this idea of like, hey, you should leverage that backup generation either for curtailment or deploy mining, um, on that gen, it's, you know, y- you get two answers here.

412
01:11:50.072 --> 01:12:01.572
Like, one, you know, I'm worried that, like, the ramp up, ramp down isn't gonna be fast enough for that, and two, like, is, is this gonna create maintenance issues on that generation for me?

413
01:12:01.702 --> 01:12:07.672
'Cause, like, I need it to be reliable. Um, I think the first question, you know, it's a valid point, but,

414
01:12:08.772 --> 01:12:16.932
you know, miner management software, ours included, is advanced so far that, like, you know, ramping up, ramping down can be done in seconds. You know, like, we're talking under a minute.

415
01:12:17.412 --> 01:12:24.112
So I think that point is moot, or largely so. You know, I guess, again, it depends on the use case that we're talking here from AI.

416
01:12:24.772 --> 01:12:33.332
But I think there's a huge opportunity to deploy mining on that backup gen 'cause you, you can defray a lot of the cost for that. It's sitting there idle.

417
01:12:33.432 --> 01:12:44.222
I think another argument would be if you are running that backup gen on mining, like, now you, you know it works, right? It's not, like, you're not waiting till the moment when you got it fired up, um, to know it works.

418
01:12:44.332 --> 01:12:55.312
Now, m- maybe that's a flimsy argument. I think it's valid. Um, and it's a revenue stream, right? And, like, and then it also allows you to participate in, um, demand response and other ancillary service programs.

419
01:12:55.372 --> 01:13:04.752
So to me, I, I think people need to get comfortable with it. There's probably some work that needs to be done on the software side to make people fully comfortable, but I think it's a real opportunity.

420
01:13:05.372 --> 01:13:11.252
And, and right now, Matt, you know, you mentioned the revenue piece. To me, it seems like right now this would be negligible.

421
01:13:11.868 --> 01:13:19.818
But y- you mentioned a- also before we went on air that in the future this might make sense as margins compress on HPC compute. Like- Yeah, I mean-...

422
01:13:19.818 --> 01:13:28.487
at a certain point when you get to that optimization phase, this actually might be something that big players would consider, because it would actually be a meaningful source of revenue in reducing costs.

423
01:13:28.588 --> 01:13:37.088
Yeah, I mean, your point's incredibly valid. Like, like the whole movement right now is because there's so many more dollars per megawatt hour for mining... Or for, uh, AI than there is for mining, right?

424
01:13:37.228 --> 01:13:41.688
And so the numbers are obscene, the amount of money going in the space is obscene. So like, you're right.

425
01:13:41.778 --> 01:13:51.208
People, this might not move the needle, um, but I think it will, and I think margin c- compression is real and it's gonna happen. And so the, I think this is just a logical piece.

426
01:13:51.268 --> 01:14:00.648
And I mean, honestly, like you could work on, um, deploying this sort of thing and not actually leverage it until you want to. But, um, I- I- I don't know. I think it's a real opportunity.

427
01:14:00.728 --> 01:14:05.938
I don't think it's as negligible as you think, but it's, it definitely doesn't move the needle. Um,

428
01:14:06.948 --> 01:14:20.608
you know, it might help you in terms like when you're doing financing, showing another alternative revenue stream and get an ROI on your, your, um, you know, capital expenditures. You got the closer, Charlie. Yeah.

429
01:14:21.248 --> 01:14:37.388
The big one is everybody's launching compute indices. You can trade them on ICE, I think, very soon. No, not yet? Yet. Okay. Well, okay, here's the question then. Compute futures, are they feasible? What challenges?

430
01:14:37.948 --> 01:14:49.248
Is anybody actually able to build them? Talk to me about GPU. Yeah, so we're exploring this. We're actually... My trading desk is onboarding to basically all these ex- venues.

431
01:14:49.508 --> 01:14:59.478
What you're seeing right now is a lot of ideas, no liquidity, and zero volume. Um, not to say like it's not gonna happen in the future. You know, there... CME made an announcement.

432
01:14:59.568 --> 01:15:07.188
The one you're referencing is the ORM, uh, futures on ICE. That has a long way to go in terms of CFTC approval before it becomes legit.

433
01:15:07.728 --> 01:15:18.538
Um, I do like those guys, so I hope they're successful, but I don't think it's imminent. And then there's, you know, there's perps, there's some DeFi stuff. Like there's a lot of OTC transactions that are happening.

434
01:15:18.588 --> 01:15:26.228
N- I'm sorry. A lot of people are trying to build OTC markets, but not a lot of transactions are happening. My two cents on this is it's very early.

435
01:15:26.688 --> 01:15:30.668
I think a lot of these indices are solving, are looking at the wrong problem.

436
01:15:30.728 --> 01:15:41.318
They're looking at like machine prices, you know, like volatility in a H100 or H200, which is interesting, but it's like, kinda like AS- would you rather have ASIC futures or would you rather have hash price futures?

437
01:15:41.988 --> 01:15:47.348
To me, I'd be more interested in like hedging my revenue volatility than my machine price volatility.

438
01:15:47.918 --> 01:15:56.828
And, and you know, maybe there's room for both, but like the real problem to me is like how do you solve like the value of a teraflop, right? Or like a GPU hour?

439
01:15:56.868 --> 01:16:08.288
Like, and I think that's incredibly hard, r- like almost impossible. But like the person that solves an index around tracking and making it fungible across like GPU hours, then you have something.

440
01:16:08.348 --> 01:16:20.128
Like that has real traction, that has the real ability to like create liquidity, have a futures contract on CME or ICE. But w- we're not there yet and I don't think we'll be- So, so we need like the WTI crude of compute.

441
01:16:20.528 --> 01:16:31.768
We need the hash price of compute, yeah. Um, and, and for our listeners, a teraflop is not like, you know, an X Games mega ramp trick- [laughs]... in case you were- But it could be.... 20 years ago. You know?

442
01:16:32.168 --> 01:16:43.568
Imagine the X Games sponsored by Luxor. [laughs] Uh, yeah. All right. I think that, I think that does it. Hey, Matt, thanks so much for joining. Um, we'll have to get you back on soon.

443
01:16:43.608 --> 01:16:52.087
I think we've got Ethan coming up next week. Well, just give me enough time to grow a mullet. Yeah. You need the mullet. I miss the flow, man. You gotta get the flow back.

444
01:16:52.168 --> 01:16:59.368
I guess, you know, y- y- you gotta look a little buttoned up if you're gonna try to launch compute futures maybe. Yeah. Yeah. I, I always like you had long hair and a beard.

445
01:16:59.508 --> 01:17:12.208
I looked like a caveman, so I had to take- [laughs] Yeah. Look, Colin and I, we, we were just talking ahead, so w- yeah, if you catch us, if you catch me with a tie on, I'm dead. [laughs] So yeah. [laughs] Um- Anyway.

446
01:17:12.748 --> 01:17:22.337
Well- On, yeah, on that note, Matt, thank you so much for coming on the show. Really appreciate your time, and, uh, catch you in person at a conference sometime soon. Thanks, guys. Love you guys. Peace. Peace.

447
01:17:22.337 --> 01:17:36.988
See you, man. Take care. Love that guy. Uh, I don't- I'm starting to doubt if his name's actually McLuxer, but- Yeah, that's Matt Williams/McLuxer, formerly trading onions on X, now apparently gluten tog.

448
01:17:37.048 --> 01:17:38.968
Um- I, we, yeah, we'll, you'll have to find him.

449
01:17:39.028 --> 01:17:49.018
He, uh, reacting- And, and just to note, Chicago would be, and I, I don't think that he is this, but Chicago would be maybe one of the worst cities in the US to actually have a gluten intolerance. Oh.

450
01:17:49.048 --> 01:18:00.568
Like all of the good food would be denied you. Hey, well, uh, let us know, readers and watchers in Chicago. Write into the show. Let us know about your gluten intolerance. Okay.

451
01:18:00.948 --> 01:18:10.188
We've come to the end of all the stuff we have today. Thank you so much for watching Block Space Live, coming at you live 1:00 PM Eastern every single weekday.

452
01:18:10.348 --> 01:18:21.048
After we wrap up the live show, you can find us streaming, uh, as a podcast anywhere podcasts are found. Newsletter coming out daily at newsletter.blockspacemedia.com.

453
01:18:21.888 --> 01:18:33.688
This show is brought to you by CleanSpark, NASDAQ listed, ticker CLSK. Thank you so much for listening. I'm Charlie. I'm Colin. And one quick announcement.

454
01:18:33.788 --> 01:18:44.008
We will not be going live tomorrow or Monday as we are traveling for personal reasons, but we will be back Tuesday of next week and on for the rest of the week. Yeah.

455
01:18:44.048 --> 01:18:55.068
We gotta go on a company retreat to go figure out how AI works. We'll be back. Hopefully we don't go too deep. Catch you later. [upbeat music]