Bitcoin, Mine it or Buy it?

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Narrator: Hey everyone, welcome to the podcast. I'm your host JP Barrick and this is Digital Gold. Known to many as the Bitcoin Kid, I started my own cryptocurrency out of my parents' basement back in 2013. The goal of this show is to simplify the crypto world and explore how it changes the way the world thinks about money through conversations with thought leaders in this space.

Narrator: JP Barrick is the founder and CEO of Orm Capital Ventures. All opinions expressed by JP and podcast guests are solely their own and do not reflect the opinions of Orm Capital Ventures. This podcast is intended for informational purposes only and should not be relied upon for investment decisions.

JP Barrick: Today, my guests are Guzman and Colin from Luxor. Guzman is the CEO, the Chief Product Officer at Luxor Mining Pool and Colin is the Head of Content at Luxor Mining Pool. Today, we're excited to talk about hashrate, how the capital markets have grown in the Bitcoin mining space and the discounts on future ASIC mining machines.

JP Barrick: Welcome to the show guys. How is your Christmas?

Guzman Pintos: Very well. Thanks for having us on, JP.

JP Barrick: Awesome. I'm glad to close it out with you guys. It's the last podcast for 2021 and jump into where we all started which is hashrate. Can you guys give me an indication of what you have seen over the past six months after the China ban, what happened to the market, maybe what you were expecting to happen and how that's affected future deliveries of ASICs and current deliveries of ASICs? Sure. I guess the last year or six months in mining has been pretty wild actually. From the China ban, we saw 50% or maybe a little more than 50% hashrate drop immediately overnight in total network hashrate. Since then, we saw the network come pretty much to all the high hashrate and difficulty levels since then. It has been pretty much every miner has been struggling to get machines like them. Right away, everyone is fighting for the correct space. That's kind of very scarce right now. And then that's also kind of like reflected in the ASIC prices. From the China ban, ASIC prices also take quite a bit, maybe not as much as hashrate did, but definitely we saw like a 30%, 40% decrease in ASIC prices. But since then also with a little bit of help from Bitcoin price going into like all them highs towards Q3 of this year, ASICs prices have rebounded since then we are seeing like at least $100 per tera hash from like new J9.6. Yeah, that's kind of like a small summary of what's going on in mining and ASIC targets over the last few months. And for those people that aren't familiar with a tera hash value, Colin, can you give us the what a tera hash means and exactly what that means to a Bitcoin miner? Yeah. So tera hash is just a rating of hashrate. The lowest end of the totem pole is a single hash goes all the way up to exahashes and tera hash is the third largest unit behind petahash and exahash. And when we look at ASIC prices to kind of make pricing transparency or to make prices more transparent and to break it down on a more granular level, we look at prices of machines per tera hash, right? So for instance, right now, looking at hashrate index, I believe that the price per tera hash or average price per tera hash for a machine like an S 19 is 102 bucks a tera hash. So if you had an S 19 with 100 tera hashes of hashrate, you could expect to pay just a little bit above 10 grand for that machine. So it's basically just a way to break down ASIC prices. Well, I appreciate that for our audience. It's important that we use this new term tera hash. I was actually talking about hashrate of my mom yesterday. And she was like, I have no one to do with a tera hash. I was like, well, it's like the building block of this whole space. Most people are familiar with Bitcoin and Bitcoin mining, but this whole concept of a tera hash, we don't know much about. So can you guys talk about hashrate index and how you develop that and that tera hash value? So because for myself, I use tera hash values for modeling for my conversations. I think it's better than talking about how the cost of mining a Bitcoin or how much Bitcoin you're going to get at the end of the day. Guzman, do you mind jumping in and explaining how you guys built that index and what it meant to do for consumers and for industry participants? We started hash with index, I would say like almost two and a half, three years ago. And that time hash with index was kind of like a nights and weekend project outside from kind of like lakhs or main business, which is like mining pools. And at that time, what we were saying is we started to essentially craft this idea of hash price and the expected value of hashrate because we see hash rate as a commodity, which then it can be traded that you can start like building all sorts of financial instruments on top. But at that time, two and a half, three years ago, that was not very well understood in the market. So we went on kind of this mission, like small site project to start like essentially providing the community with some data and insights into what like hash price means, what's the miners revenue, what are the cost of these basic machines that not many people knew about and what they're on. And that's essentially pretty much how the hash index was born. We essentially went into the mine, the coding mine and put together some really good insights or at that time, what we thought were good insights for the community. And since then, we were even taking feedback, adding new stuff, adding content now, just relaunching it to our website with a bunch of new metrics and whatnot, all communities driven. Anyone out there that wants to see like a new metric or wants us to iterate on it, happy to take any feedback. And that's pretty much how we build hash with index since the beginning. Can you talk about the data sources that you guys have pulled to get this index created and how Luxor came about caring about the terra hash value and the fluctuation based on what the mining pools are paying for a terra hash. The hash price index, which is the expected value of hash rate, it's actually fairly easy to compute and we like probably going to have a lot of information, it's like blockchain data, which is essentially the expected value of hash rate the same way as full paper share mining pools pay to its customers. So that's like also very easy way to audit mining pools. So essentially what we do there is we compute that fpps rate and we come essentially convert that into like a dollar per terra hash per day, like metric. So in terms of data source there, it's big conno, it's great blockchain data and then have like a reference price for Bitcoin itself. Other data sets are a little more complex. For example, we have the re-index pricing. And in that index, we try to essentially estimate what's the value of different ASIC machines or different efficiency tiers. That's a little more complex to essentially generate because most ASICs and others happen OTC, essentially behind closed doors, between miners and brokers and sometimes even manufacturers. In order to compute that index, we've been on an animation for the last couple of years to scrape as much as possible from the web. And I think right now we have over 30 or 40 sources that we collect data from in order to compute that like re-price index. Can you talk about how these back of the market deals happen, these back room office deals, I think Marathon just launched or released today that they bought another 78 or 80,000 plus S19s, which is insane. I mean, that's over 300 megawatts of capacity, right? Where is that going to go? So can you talk about how you guys get insight into this market? Like, you just have microphones in all the boardrooms or how does that work? Kind of those like one-up deals that Marathon is able to do because of their size and how many ASICs, I mean, you just said, is 300 megawatts worth of ASIC is kind of like an insane number, not only of energy, but also rig can. Probably trade companies with like usually like advertised in their public filings or like even announcements from whom and at which like average cost they bought those miners from. So that's kind of like a very easy way to get a reference for what like Marathon is able to acquire ASICs. But that's not the reality for the rest of the market. The rest of the market usually operates, I would say like a much lesser and apparent transparent way. So there's a bunch of brokers all over the world, mostly in the US, which will try to sell ASICs to small to even like private companies and even some like public-driven companies, ASICs. And they literally have like Telangrups and they're like advertising, essentially their price for different machines. So we go into every single Telangrup, we chat, websites. We also have other brokers that submit data to us, in order to compute this index. And something that we've been seeing over the last few months since essentially Luxor started its own like brokerage business. There's a lot of essentially lack of accountability in the brokerage industry. One of the main reasons that we've been able to succeed in the brokerage business is because we are able to bring the Luxor brand really high quality legal contracts between all of the party symbols in all of these like off-take brokerage agreements and also try to reduce kind of the counterparty risk that happened on these markets. And that's also a data point that we take into consideration for the index, even like our own like brokerage business line. So yeah, if you take all of those data points into account, we are adding like hundreds of different data points that go into each week price update. Can you talk about where you are seeing the margin? Like you're saying $102 a tera ash. So I know it's possible to get a machine for $100 a tera, but that's not usually shipped, even at least for us. So can you talk about where is this spread? Is it 102 to 120? Is it 130? Is it 110? And how has the broker business taken off with Luxor? And what does that look like? So in terms of margin, what we're trying to do with the index is kind of like kind of the gross dollar per tera hash for the machine. So as Colin was mentioning, if you see like 102, 103 dollar spread to a hash, that bait and you are buying like hundreds of hash machine, that essentially means that that machine is worth slightly more than 10k a piece. Of course, different buyers and given economies of scale, we'll get different margins, right? So if you are going to, let's say a retail miner is going to buy an ASIC, they're probably going to be paying at least a 20, 30 percent premium, if not more. Like we are seeing for example, some ASICs on Compass marketplace going like wild for 150 or like 180 dollars a tera hash, which is insane. I have no idea how these people are going to write these machines in the short term. On the opposite side, you have like marathon, which is buying thousands of ASICs at even a much lower cost, like this, like a hundred dollars per per hash. So it really depends your volume, your size, but the egg like on average, if you are like a mid-sized miner, you should be looking to pay, as you just mentioned, something very close to this index. Yeah, I was going to jump in there with talking about Compass. If you look at their turn keys, because they have that new marketplace, so anyone who mines with Compass can now liquidate through Compass, and these turn key machines are expected. Usually the turnaround after you buy them, it's like a week and that's going to be online for you, right? Those carry a huge premium because instead of waiting a few months or in a lot of cases with some of Compass's machines, if you're buying them, you're waiting six months until it gets online. And those six months machines usually have a discount, right? Like you can actually find some S9s, S19s that are like 90 to 95 bucks a tera hash, and that's because the lead time wanted is so long. And inversely with some of the big players, if you look at pre-orders for the S19 XP, that thing is 140 tera hash, but it was selling for like 10,500 for some for the first batch of pre-orders. So that's like 75 bucks a tera hash. Obviously, the caveat here being no one actually knows how well this machine will perform. The miners are taking a risk. I mean, bitmane makes some good machines, but we all know that the S17 was garbage, right? So you always kind of run the risk of newer models, not beings up to snuff. And obviously those machines are not going to start hitting racks until Q3 of next year, probably even a little later, depending on how supply chain issues and just general logistical problems interrupt the supply chain schedule. So it sounds like this marketplace has a lot of work still to be built into it. Even though we have people building on top of it, trying to build futures and pre-orders and ability to shrink transparency to the market, it seems like it's still very destroyed. And that's what we're seeing on our side. Is that a statement that you guys agree with? It sounds like that's the case. How do we, what do you guys see this market being in two years? Does it compress? Do we get a easier to use platform? How do you guys see this market changing? Does it become tokenized where you don't actually own the physical machines? What things are people throwing around in the back of the office? This is the easy answer, but I'll build on it. I think that transparency, ease of use, and just general access to services only goes up from here, even in just this year, right? Like you've had product offerings from companies like Compass, then make it easier for retail to get into mining. You also have companies like Luxor that have started doing brokerage, right? So before the China ban, so much, obviously, of Bitcoin's mining industry was concentrated in China. And that also meant that machines were somewhat harder to come by if you weren't well connected, right? And even then you wanted to make sure that the supplier and the broker was a trusted or trusted parties because people got screwed all the time. And not even in just, you know, orders not being fulfilled, but you'd order a batch of 100 machines and 90 of them would be lemons, right? So I think that with the China ban, there was this opportunity, right? And a lot of North American companies like Luxor jumped on it. There is this huge demand for not only more transparency, but just services for the North American mining industry. And so companies like Luxor, establishing broker charms, we kind of absorb some of that business. The other thing that I think is going to really, on the brokerage side, you know, you're going to see more and more players for mining companies across multiple different business lines just makes sense to do it. You're buying these machines anyway, you have buddies and friends and colleagues that need machines. And so it's just a natural extension of the business. Another thing that I think will help kind of grease the wheels of this going forward is just having more manufacturers too, right? So we had block stream purchase spondules this year. A lot of people are pretty optimistic about that, bringing some much needed competition and hopefully opening up access to smaller miners, right? Because again, one of the big problems right now with the current model, you have Bitmain and MicroBT, which are the giants. And who's Bitmain going to service? They're going to service Marathon, who comes to the negotiating table, and says we have $800 million to spend on pre-orders. And so, of course, Marathon's going to get that business. A lot of the flows from those kinds of deals, obviously go to the bigger guys. And then it kind of trickles down to the rest of us. Some people think that block stream will probably not be able to compete with Bitmain in terms of efficiency. But if they can kind of carve out an ish with smaller miners and retail miners, even if the machines aren't as efficient, then perhaps they can really kind of make some ground on that front. When does Samsung NVIDIA AMD Intel get into this space and really start putting pressure on the market? Bitcoin mining, we have 20 years left where 99% of the coins will be mined. So that's where I tell people after that, I don't really know what's going to happen. But I know we have another 20 years left to really play this game. Have you guys heard of anything like any of these guys, the bigger chip players getting into this space and really showing Bitmain that they can do it better? And it's not that hard to do.

Guzman Pintos: They've been in this space for some time, right? Mostly on the GPU mining market. NVIDIA and also Intel, they released GPUs that are specifically designed just for Ethereum mining, right? I think at 8, they are taking the delivery right now of a huge batch of GPUs that were designed by Intel. And these GPUs, they got them before the rest of the market or the GPUs were essentially available to the market. So they got these miners well in advance. I think they are still getting their feet into the water and testing for these giants, right? There's a lot to be said about the kind of, if you are not into the space, what's essentially what's like long term Bitcoin mining going to look like. And if there's actually worth the time and investment for them to get into the space, at least I think that's what's going on into all of these executives' mines, right? Kind of like an ASIC pointer is completely different to the kind of chips they're used to manufacture. ASICs are, I'll say, robust, in a different sense of the chips that go into cell phones and all of the MacBooks and computers that we use. Yeah, I think they're kind of like thinking what's the long term outlook for them to essentially decide if it makes sense for not to get into the space.

Colin Harper: And I think too, it depends on the overton window of how much people actually accept Bitcoin mining. I think that there's still a lot of people in the United States who are looking at Bitcoin mining and seeing its wasteful, saying we don't need that, talking about how much e-waste it creates and how much the resources could be allocated to other industries like cell phone manufacturing, car manufacturing. You know, chips go into everything, right? And everything from your refrigerators to your TVs. So I think that for some of these bigger players, they're going to need both more public support. And it's going to have to be normalized. I think that once you start having large energy producers in the United States and grid operators mining Bitcoin, I think that kind of opens up the avenue for them. And it also, to go to the Guzman's point, like it has to be in their interests, right? The kind of business that they might get starting out from just the mining industry who's got all these ties with all these legacy companies like Bitmini and What's Minor or MicroBT might be a little harder to get their foot in the door. But if some American companies and some American entities start mining Bitcoin at scale, like those energy providers, and they kind of set up these deals with Samsung or Intel or something like that, then maybe that kind of opens the door a little further and kind of spurs them on.

JP Barrick: So it definitely seems like it's going to come from these larger, well-financed companies that are going to come into the space and build out this new layer, this new side of the business for chip manufacturing and for new or machines. How do you guys see the capital markets and the recent string of public companies in the mining space affecting capitalization, affecting how much percentage of mining is done by the public companies versus the retail market, is retail dead? Can you guys talk farther on that and what you're seeing from the interest side, from the content you guys are creating and your pulse on the market in general?

Guzman Pintos: I think over the last 2021, in my opinion, was kind of the year for publicly traded mining companies. Specifically in the public markets, what we are seeing is like a market arbitrage, where a miner is able to go and raise funds in order to procure ASEX and get a really good multiple. So like more detail, like beyond this, in hashred index, we have kind of like a stock dashboard in which we track a bunch of metrics on publicly traded mining companies. So for example, if we take marathon as an example, and also their latest filing in hashred, they are operating just over three exahashes of Bitcoin mining hashred. And under market capitalization, it's just over 30 billion. So if you look on a market cap to hashred ratio, that means they were $1,000 per term hash, and they're able to plug in right now. We've been talking since the very beginning of the podcast, what's the cost of the SAC miners? And we are talking like on a spot basis, you can go and procure new gen hardware for 100 bucks at their heart. So essentially, that means that they are getting a 10x multiple on essentially any amount of money they can raise and get their essentially their hands on miners. And that's kind of the arbitrage that all of these companies are trying to pursue. You get 100 bucks and you can immediately turn it into a thousand just to public market valuation dynamics. And that's kind of what like every single public company is trying to aim for. Just raise money in a couple of markets, get orders and future orders from Bitmain, Micro-BT brokers, Luxor itself, and try to go and get this crazy valuation multiples. Probably one thing that could be said is these miners might be taking a little bit to risk. They are not necessarily trying to build long-term cash flow positive businesses, but at least seeking short-term valuation while we still are in a bold market.

JP Barrick: And so you hinted at Luxor's plan. How does Luxor fit into going public? What does the roadmap look like? You guys have discussed internally or you're able to share externally without Ethan, the CEO breathing down our throats.

Guzman Pintos: I'm in like public markets procuring ASICs from Luxor. We are not necessarily looking to go public anytime soon, especially not in 2022.

Colin Harper: So I feel like a public mining pool, I mean like marathons public, right? And they have a pool. I feel like they're just opens up a very interesting dynamic. I mean, once a mining pool, especially one that's retail focus, Luxor is pretty retail focused. I mean, we've got a lot of guys slinging big hash rate, right? But the business, the core of the business was built on the back of pleb miners, right? And so once you go public, I feel like those, I mean, it really kind of puts those guys in a tough spot. Suddenly the pool is kind of making decisions based on the board and based on what they feel like their shareholders want and no longer really making choices based on what the core of the business the retail users need.

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JP Barrick: So let's talk about this future of hash rate. And I want to talk about financialization of hash rate more specifically. So can you guys discuss where you see TerraHash or when you see Terraash as being purchased in bulk quantities, and we're not buying the underlying asset, is there interest from investment banks? Is there interest from family offices? What type of structures are you guys seeing in the marketplace? And is there anything out there today that's actually working?

Guzman Pintos: Oh, that's a couple years we've been seeing different approaches to this idea of financialization of hash rate, right? Kind of that first take was cloud mining contracts, where essentially you could go with your credit card and buy hash rate future, like X amount of compute power. In most cases, it was like focused for retail and all of these people were gripped off. But that was the idea, right? Like sell hash rate future. Then we had like approaches, like pooling, some finance hash rate tokens. So it's a way like tokenized hash rate as well. And both tokens got quite a bit of market capitalization in them, not only retail, but like a bunch of people like trading them. So in terms of volume, there's definitely kind of like an offering there. We also have like FTX difficulty adjustment, like instrument. And then we have kind of like best poke to the OTC hash rate contracts, right? So there's been like multiple iterations over the last couple of years, while like a hash rate, the realtive could look like specifically hash rate futures, right? I think none of them have fully succeeded from like a product market basis for different reasons. But we're like, lock circuits in. And I think where we have like our differentiation, there is we believe that hash rate, like a financial product that involves hash rate needs to be built by the mining pool, because nobody knows how to manage and deliver hash rate. And like also, like understand hash rate better than the mining pool. Essentially, all of we do is take hash rate every single second, in order to build consensus and blockchain, right? And we buy the hash rate and pay miners for the service. So essentially, what we're trying to do is like take off the knowledge that we've been building into receiving and delivering hash rate, right? To be like a financial product on top. One of the key aspects that you can like start thinking there is like physical delivery of hash rate, you can do like a physically delivered hash with contract. And the only way to do it is if you're the mining pool that you are able to like proxy hash rate, just basically contract and run on. I think there's where like our different take on the hash rate product is going to look like with sound like a broken record here. We've been trying to bring this to market for a while now. I think 2022 is going to be the year where we start seeing some of those like first iterations.

JP Barrick: And I definitely think it's needed. But you guys have been on the podcast earlier talking about this, at least Ethan has. So it's not a broken record, but it's innovation. And something like this where we had to even explain what a terra hash is to people shows you how far we have to go before we're financializing the value of a terra hash. So Colin, can you talk to me about the marketing and the content game at Luxor? I've seen a lot of blog posts, but I haven't seen many TikToks. I'm just so confused. What are we doing? No, I'm joking. But what are we doing at Luxor? And how are you guys getting the name and brand out there?

Colin Harper: It's funny that you say that because Will Foxley was talking to Ethan. Will Foxley from CalPose was talking to Ethan the other day and he tried to convince him to get me to start a TikTok. Maybe if I was a little bit younger, personally have no interest. I'll do what these guys tell me to do though. I don't know how many zoomers are going to be hopping onto the mining pool. Maybe they'll mine some pirate or some Zcash or something like that. I think when I started at Luxor, the way that I was viewing content or trying to position Luxor in terms of getting research and stuff out there, I really wanted to put our proprietary data sets at the fore of what we do. So a lot of the time that I spend in the content mines is just looking at differences in ASIC prices, looking at trends from that, looking at a hash price too and trying to pair those together to give a picture of exactly what is happening both on the ASIC market front in terms of what machines are being prioritized. Why are they being prioritized that way? For instance, one question, it relates to one of the things that Guzman was talking about earlier. ASIC prices have not hit a yearly high again, even though Bitcoin roared to an all-time high in October and November. I think usually you expect ASIC prices to perform a little bit better than Bitcoin and up swings. But they haven't since the China ban. Why is that? It's what Guzman was talking about earlier, Rackspace, infrastructure, all of that is still being built out. There's not enough demand to absorb all of the supply that the China ban left in people's labs. I really just want to bring more transparency on some of these topics, especially rig prices. When I first heard about hashrate index in Luxor a few years ago when I was a journalist, Ethan dropped this data into my lap and I was just like, holy shit, how do more people not know about this? I can actually quantify how much money a miner can expect to make at a full-paper-share pool with hash price. That to me was completely revolutionary. Same with rig prices. This is something that I feel like the mining industry out of everything in Bitcoin, except for maybe core development, which is just a Leviathan that very few people I feel like are really equipped to fully understand. Mining is such an obstrucent and esoteric topic that there's a lot more that can be done to shine a light on the darker parts of the side of the industry. I think that our data sets are great for that. I really just try to use those as much as possible, draw in supplementary research for certain metrics and data when it's needed.

JP Barrick: I definitely agree with you guys. You guys have one of the best data sets out there. I utilize it for not only research purposes, but also our team use it for internalized internal purposes for models. One of the things that I think would be very helpful in the data set world would be the compounding percentage decrease or increase of hash rate over time. If you could set a date and see how far it's dropped or how far it's gone up, that's something that I've noticed when I modeled that data out. I was really shaken back, taken back by like, wow, when this drops, hash rate drops low. Let's talk about the bear market of 2023, 2024. What can people do today? Because you mentioned $180 a terra hash. What do we need to do today, especially for the plebs out there, people who are buying one or two or three machines and are running them at other people's facility? That's why I have really stopped doing hosting contracts personally, is because I understand when there's blood on the table and you sign a contract that's six, seven, eight cents a kilowatt hour. The odds of you owning that machine is zero to none, especially if you have more than 10 of them. What advice can we give people today so that they don't set themselves up for failure in 2023 or 2024? Of course not financial advice, but just advice as market participants and being in the space for as long as we have.

Guzman Pintos: Also, kind of the scenario that you describe, it's not as mad as some of the contracts that we are seeing in the market right now. I've been saying, given large miners, not only plebs, but getting into 10 to 12 cents hosting contracts, which is insane. I mean, right now you could potentially be profitable with S9, of course, an S19, but that's not not going to continue to happen. I mean, hash price will go back to like under 10 cents eventually. I mean, hash rate is only going to go up until it's like marginal cost here. So I think like a buy, there's seems like a few golden ages of mining. The China ban was one of them where you could procure a six in June. And if you were able to plug them in right away, you have potentially already arrived those miners. If not, you are very close to doing so. But right now, that's not the scenario anymore. Right? So kind of like thinking long term, try to secure hosting rates as low as possible. But most important on the hosting rate is what's the cup packs that you are deploying, because if you're buying 150, 180, 200 dollars per dollar hash, that machine essentially takes twice as much to ROI as what like everyone else or all of the other institutional miners are paying for. If I were to invest, I would much rather get into high like, op-ex hosting rate, much lower cup packs. So I'm sure that I can like get a ride before we go into a better market, which eventually is going to come, right? But yeah, if you're a player, try to look for the best deal possible and not get into the first opportunity that arises. Because yeah, I mean, we've seen lots of miners going bankrupt. Even the probably companies that right now are trading like a few billion a piece. If you look at August 2020, most of them were like really close to going bankrupt. Like these machines were like hash break was like seven cents a their hash. Always keep that in mind when you are like modeling kind of what we are going on right now, it's like a super cycle of hash break, where margins are really, really effective. But that's not going to be the case moving forward. So keep that in mind and prepare for it. It's the recipe for success.

Colin Harper: Yeah, don't drown in the in the froth. I think that like during bull markets, everyone gets so jazzed. There's so much excess. And every cycle, some Bitcoin or some pleb wants to start mining, which is awesome, right? I would never discourage people from trying. But I think people just get in a little too deep. So like people need to manage their expectations instead of trying to find a hosting contract and trying to buy a bunch of S19s and negotiate all that just like get an S9 running at home, see what it's like, figure out how difficult it is. Like why did it just go off? Like you were hashing 10 minutes ago, and now you're showing me the red light. There's so many factors to consider. But to me, it's almost like, I know it's easier because you can buy the machine and plug it in, but it's almost like handing someone a shovel and saying like, all right, now let's go find a backhoe and start gold mining. People think that it's so simple. You just plug the machine in and it prints money. And that's true. But like Guzman was saying, I was modeling out 2021 ROIs for different setups under different kilowatt hours and different capex costs for this report. And when you buy your machine and when you get it plugged in, it changes everything. If you bought a machine at the beginning of this year, like you bought an S19, you were ROIing that S19 in 258 days and S9, you were ROIing it in 65 days. This is under four cents. So it's not really fair for everyone. But if you look at six cents, it's not much different. But you turn around and you buy that machine in July after the China ban, your ROI actually goes down because you're getting basically the same price, if not lower, than at the beginning of the year. And you're turning it on right before this golden window of opportunity for hash price, specifically BTC denominated hash price.

JP Barrick: So you mentioned BTC denominated hash price. So for the listeners who don't know, that one's when you take a terra hash value is nominated in Bitcoin. So you guys get the question, Bitcoin buy it or mine it? What do you say? What's the answer in short two or three minute kind of spiel? Because it's a hard question to answer. And I think there's multiple variables, but I'd love to hear your guys' thought and approach on that question.

Colin Harper: Yeah, I think it going back to our previous question, it really just depends on your situation. I'm actually appalled to hear that some people were paying 10 to 12 cents in these hosting contracts, Guizmann. That's what I get in Colorado. I get 12 cents at home. So for me, it's almost like, dude, I mean, not everyone has that right Colorado has pretty decent electricity rates. That's well below the national average in the US. I think it really does depend on everyone's personal needs and their setup. I was living in Colorado or my home state of Tennessee. My residential rates are pretty low. Home mining for most of 2021 would have been a very good idea, especially if I started earlier in January. Now, if I was living on the west or east coast, it's not possible. Unless I was just willing to eat the electricity costs for a newer machine and just basically dollar cost average KYC for Bitcoin. And that's another thing entirely. But if you are someplace with higher electricity, you obviously need to get those hosting rates. And that's a whole new hurdle, right? These hosts are not sharks, but they're economic actors. They want to squeeze the lemon as much as possible. And if you don't know what you're doing at the negotiating table, you're going to get squeezed. So I would generally say, I think it's worth it to try. I just wouldn't be betting half of my stack on mining equipment, right? And I personally probably wouldn't have as much equipment as I have today if it weren't for the connections I've made through Luxor and the mining industry, like getting more favorable hosting terms, having the BD team help broker deals for employee mining program we have. It takes expertise. And if you don't have that expertise, I would generally advise against exuberance. But I would always encourage someone to get one S9 if they are more heavily capitalized, maybe an S19 to run it at home, if they're really passionate about it. I just think it's about managing expectations, right?

JP Barrick: Yeah, and I would add to that, it's about managing expectations, but it's also timing. A lot of this comes into when do you get into the market? We've talked about getting in in the frothy time and how that's not good. We've also talked about opportunities like the June China band and when that was a great time to get in. So, I mean, my advice to people is if you're interested in Bitcoin mining, watch, learn, pay attention and wait for the time to really deploy a lot of capital. Start off the least getting your foot in so you have reason to stay and pay attention and that would be one or two machines. But if you're only have a million dollar net worth, put in 50,000, don't put in 500,000 or 250,000 because it can provide great returns, but without leveraging debt, without a low energy price and without a low cost per terra ash for acquisition, it doesn't make sense. I want to ask you guys one last question and that is what advice would you give your 18 year old self now that you come into this mining space into the wild, wild west of an industry for those people out there that are 18 years old or younger listening to the podcast today? What do you what advice do you have for yourself and work if you will connect with you guys on social media and contact you guys for more about Luxor?

Guzman Pintos: I would say definitely buy more Bitcoin when we have like 2019 crash going Bitcoin back to like four or five K. I definitely got as much as I could but I could probably have gone like even deeper. So, continue to stack to DCA every single day, every single week. I'm then mining for me mining is my perfect DCA strategy because through Luxor mining pool and getting Sats onto my wallet every five minutes at the much favorable electricity price. I'm not only stacking in Bitcoin every five minutes without my ASX, I'm also doing it that this comes to spot because my machines are profitable. So, yeah, definitely, I would say getting to the industry as early as possible and then just learn. Going to like for example, this podcast, try to listen all of the people in the industry, go and read, get into into a rabbit hole off and research and Bitcoin mining research. I think there's amazing, I'm really intelligent people writing about topics related to Bitcoin itself and layer two technologies and mining. So, I would say those would be kind of my two recommendations.

Colin Harper: Yeah, I would say obligatory tell my 18 year old self to buy more Bitcoin, to buy Bitcoin at all. I didn't hold any Bitcoin at that point. And then to just anyone else, they're interested in the industry. They're interested in Bitcoin or trying to find maybe a way to make it into a career. I would say is that like we need everyone, we need all stripes. I mean, I studied English in college, right? Like I was reading Faulkner and Shakespeare. And now I use Excel and I never used Excel before and I model out these charts and do all of this research. But to Guzman's point, like there are a lot of really smart people learn from them, understand the lingo, figure out what are the talking points and learn how people engage in discourse. Because the Bitcoin community is truly amazing because it is so global and so connected. I've met so many interesting people from all around the world through this thing, all really united under this passion to learn more about and to build this alternative monetary system. And so I would just say, take what talents you do have, figure out what interests you have outside of Bitcoin and try to find a way to make them fit. Because some people might want to try to get into mining as a way to make money and look at it as a career. I remember I was in a spaces with Steve Barber a while back and some guy was asking, how can a guy like me get started? And Steve was just like, honestly, dude, maybe mine as a hobby if you want to, but don't try to make a career out of this right out the gate. Find another way in with a way that plays to your strengths and compliments your God given talents. And I think that's really important. Because back in 2017, there's this conception that this Bitcoin crypto industry, you got to be a finance bro or a coder or something to make it work. And as the industry matures, it's just not true, right? Like we need people from all walks of life to build these companies. So figure out what your talents are, take them and then try to market yourself to one of these companies.

JP Barrick: Well, gentlemen, where can people connect with you? That was a great rundown and I really appreciate the time today talking about hash rate. It's hard to get people with your level of expertise to talk about this in an open form. So I appreciate it.

Guzman Pintos: So definitely you can find us on hash rate index.com. That's like lock source data platform, all community driven. Then I'll say a corporate website that mining pools likes attack mining that lacks attack. And then we are also over Twitter writing and publishing new threats insights data points. So you can find us also at hash rate index and for and also at Luxor tech team.

Colin Harper: Guzman's Twitter handle for anyone wondering is goes at Guzman Pintoas. And I'm at as I lay, hodling. You can also just look us up by our names. Guzman has S nine S nine fans for his eyes on his Twitter profile picture.

JP Barrick: Well, I like it gentlemen. Thanks again for the time. Everyone remember to continue to mine on and thanks for listening.

Narrator: I hope you enjoyed today's episode of digital gold. Be sure to subscribe so you're notified when the new episode drops. Don't forget to leave us a five star review to support our journey to become the number one crypto podcast. Thanks so much for listening. And until next time, mine on.