Title: S13 E7: Nick Hansen on Luxor, Bitcoin Mining & Ordinals
Podcast: Bitcoin Takeover Podcast (host: Vlad Costea)
Guest(s): Nick Hansen (CEO of Luxor Mining / Luxor Technology; Hashrate Index, Ordinal Hub)
Published: 2023-03-08
Duration: 1:58:03
Episode URL: https://bitcoin-takeover.com/audio/?name=2023-03-08_s13_e7_nick_hansen_on_luxor__mining__ordinals.mp3
Audio: https://bitcoin-takeover.com/audio/media/2023-03-08_s13_e7_nick_hansen_on_luxor__mining__ordinals.mp3
Transcript: CORRECTED. Base: local Whisper medium.en transcript with automatic diarization, reconciled against a full local small.en re-transcription with word timestamps, with 40 doubtful, dropped or looping stretches re-transcribed locally from short audio clips (small.en, because the transcription pipeline running on the same machine left too little memory for medium.en; 15 of them re-run with tighter clip boundaries). Speaker labels fixed using local speaker-embedding similarity scores and by hand (Vlad Costea, Nick Hansen; the pre-recorded sponsor reads are labeled Ad voiceover). Names and jargon checked against the title, the show notes and the web (Luxor Mining/Luxor Technology, Hashrate Index, Ordinal Hub, ASIC RFQ, Alessandro Cecere, Beck Hansen, Compass Mining, Blockware, Foundry, AntPool, F2Pool, Slush Pool, Braiins, TeraPool, MARA, Core Scientific, GRIID, Bitmain Antminer S9/S19j/S19 XP, ERCOT, OFAC, full RBF, Bitrefill/Sergej Kotliar, Peter Todd, Luke Dashjr, Jimmy Song, John Carvalho, Udi Wertheimer, Eric Wall, Casey Rodarmor/Ordinals/inscriptions, Taproot Wizards, PSBT, Counterparty dispensers, Rollkit, Yuga Labs, Bitcoin Punks, Omni Layer/Tether, Binance, Eric Voskuil/Libbitcoin, Baltic Honey Badger, tail emission/demurrage, txindex, UTXO set, witness discount, Nebulous Labs/David Vorick/Luke Champine, Jihan Wu, Charlie Lee, Gary Gensler/SEC, Kraken, Wells notice, Paul Sztorc, Marty Bent, Colin Harper, Nostr/zaps, BTC Prague, Pizza Day, Wasabi Wallet/WabiSabi, Cryptosteel, Bumbee, ShopinBit, BTCTKVR). Light clean verbatim: ums, false starts and stutters removed; factual slips by speakers are kept as spoken. Intro music omitted. Remaining doubtful words are marked [unclear: best guess].
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[00:00:54] Vlad Costea: Welcome to the Bitcoin Takeover Podcast. I am Vlad and my guest today is the CEO of a mining pool that's called Luxor and his name is Nick Hansen. But unlike Beck Hansen, who is the singer who sings Loser, he's not much of a loser, even though there are people in the Bitcoin space who want him to lose. And that's kind of a very good starting point from which we can talk. So hi, Nick.

[00:01:22] Nick Hansen: Hi, how are you doing?

[00:01:24] Vlad Costea: Well, you know, soy un perdedor, I'm a loser, baby, so why don't you kill me? Sorry, I'm doing this. I guess you're not related to Beck Hansen. There are lots of Hansens out there.

[00:01:35] Nick Hansen: There are lots of Hansens. Yeah, there are many Hansens in the world. I just happen to be one of them.

[00:01:41] Vlad Costea: But you're not a loser, I guess. You're the CEO of a mining pool.

[00:01:44] Nick Hansen: I am the CEO of a mining pool and we've been doing pretty well. Things are going really well over here on the Luxor side. Yeah, we're known for... Like, if you go and Google Luxor Technology or Luxor, most likely you'll find something related to our Bitcoin mining pool, but we do all sorts of other stuff. We build firmware for the mining machines themselves, which is the software that runs on the mining device. The mining devices are about the size of a really big shoebox and we build software for them. We build financial products based on the value of hashrate.

[00:02:17] We build a website called hashrateindex.com. We recently acquired Ordinal Hub. We also build ASIC RFQ, which is basically a place where you can go and buy and sell mining machines. It's like eBay, but mining machine purchases are very esoteric. They require a lot of handholding, a lot of logistical support. So we built a purpose-built platform for it called Luxor RFQ. So we build all sorts of different products and things for Bitcoin and Bitcoin mining specifically, but we are most known for our mining pool.

[00:02:56] Vlad Costea: There's quite a lot to unpack there. The reason why we started doing this interview was that we got connected by Alessandro Cecere, and he's the one who told me I should interview you about the new mining hardware, but let me take you out of PR mode for now and take off that CEO suit and whatever, because I have something of utmost importance that I want to show you. And I want the two of us to watch this. I guess we might break into laughter. I cannot guarantee any other results, but we gotta take a look at this.

[00:03:30] This was created by Eric Wall. It concerns Luxor Mining. Let me know if you hear the audio.

[00:03:39] Nick Hansen: Oh, yes. All right, let's play it.

[00:03:46] Vlad Costea: No, we can't hear the audio.

[00:03:47] Nick Hansen: Oh no, but I know this video and the audio is phenomenal. So we do need to get the audio.

[00:03:55] Vlad Costea: I hope it's on my end. I really hope so. So basically it's this series of tweets for people listening on Spotify and not seeing the video. It's a series of tweets by Jimmy Song and the background audio is this cowboy who's screaming like he is in a lot of pain. And the first tweet is the Bitcoin "moderates" are cheering the fact that the Bitcoin blockchain is getting bloated with nonsense JPEGs, making it harder to run your own full archival node. Still think these are benevolent people? This is the first one from February 4th and it escalates.

[00:04:37] Nick Hansen: It does.

[00:04:42] Vlad Costea: Okay. January 30th, sorry. So this was five days, no, six days before the previous tweet. Some dumb people are going to subsidize miners with lots of BTC fees and realize soon after that they could do it for a tiny fraction on their own website. In the meantime, they'll buy BTC, which they won't get back. This is good for Bitcoin. Okay. So let's see where this goes. It escalates pretty quickly.

[00:05:17] Unpopular opinion. If inscriptions start bloating the chain, a decreased block size has to be on the table. Okay. This is getting very serious right now. We're getting a hard fork. Getting closer.

[00:05:32] And up next on February 2nd, Luxor will be punished by the market. Just watch. So this is the natural question that comes. I have been watching. I have not seen any punishment so far. Did you get punished by the market?

[00:05:54] Nick Hansen: We have not been punished yet by the market. So far things have been going pretty well for Luxor. We've grown market share. We've grown in size. We've bought a company called Ordinal Hub. Some people tweeted that, you know, it will take time for the market to punish us. But I guess that's just the way things go. We're going to try to just continue to do what we do, which is try to build high-quality software-based products. And yeah, I think if the market decides that's not what is necessary, then I guess we will be punished.

[00:06:31] But as of now, no major repercussions yet.

[00:06:35] Vlad Costea: No, I wish Jimmy Song was here, honestly, even though we're laughing right now and making fun of his takes. I guess in person, he's a lot more eloquent.

[00:06:48] Actually, I'm not even sure what punish means, as in not do business anymore. I think that's what he means.

[00:06:55] Nick Hansen: I think he thinks that people would either not use our services or decide against being a part of our ecosystem because of our involvement there. But it doesn't make sense because miners are incentivized by profit and ordinals directly relate to higher profit for miners. So it just doesn't make sense in my mind that that would be the case. So we'll see. We'll see where this lands. But as of right now, I just can't see this being a bad thing for our business.

[00:07:39] Vlad Costea: Now, we got to talk about the elephant in the room, which is block 774628, which was mined by Luxor. And let me show it on the mempool explorer screen. This one. OK, so this was and probably still is the largest Bitcoin block ever recorded on the 1st of February of 2023. A lot of people freaked out at the time because it paid no fee. And they were like, OK, we got a four megabyte block. They didn't even pay for a fee. We're super triggered. What happened here was that there was this huge transaction and this transaction contained a wizard, a picture of a wizard which promoted some sort of discord server.

[00:08:31] What's the story behind this?

[00:08:34] Nick Hansen: Yes, so it's called the Taproot Wizards. It's going to be like a Bitcoin based art project that's all built on inscriptions and ordinals. And so it's headed up by Eric Wall and Udi Wertheimer and a few others who have all somewhat been the ire of Bitcoiners in the past. But they reached out and said, hey, we want to build the we want to do the largest transaction. And the reason that you need to reach out to a pool for that is because those transactions are considered nonstandard.

[00:09:11] They won't fit into a standard mempool. But there's filters in the mempool that will reject those transactions. So they could create it, but nobody would broadcast it or propagate it. So it wouldn't ever get picked up by pools because most pools run Bitcoin Core, which has this filter in it. It's 400 kilobytes, by the way, is the size of the... That's like the maximum size by default. So if that goes in... So anyway, they came to us and we injected that directly into the Luxor mempool. And it ended up getting mined.

[00:09:50] And yeah, we put the fee... They wanted to put the fee at zero, which was kind of trolly, because if the fee is at zero, it kind of messes with the incentive model. And we ended up getting an out-of-band payment for the missed mining reward from that block later, as kind of what you call an out-of-band payment. And that was like another somewhat controversial point. But that's how it ended up coming together. And that's what we ended up doing. And it turned out to be somewhat provocative.

[00:10:20] And it's definitely an interesting point. But yeah, it's great.

[00:10:25] Vlad Costea: Yeah, it's certainly interesting. And it begs the question, is this the future of Bitcoin mining? Because I can think of a lot of services, for example, CoinJoin wallets can sign contracts with miners and have a more predictable block inclusion rate. Because right now, they subject themselves to the market. But they can estimate a lot more accurately if they sign contracts. And by the way, this show is sponsored by Wasabi Wallet, so I can get in contact with them. I guess they would be interested to have their transactions added to the block a lot faster.

[00:11:05] I mean, we are living crazy days, I guess. And yeah, you're running a different revenue model, which I'm not sure if is unprecedented, maybe that there were instances where this happened.

[00:11:18] Nick Hansen: Yeah, that's actually a good point. It's really not that unprecedented. This is maybe the case where it's the largest and most publicized case, but transaction accelerators have existed for years, long before RBF ever existed, the way you would get your transaction mined if you, say, set the fee to one or something, and there was a lot of transaction volume, was that you'd have to send an out-of-band payment to a mining pool. A mining pool would then include your transaction. Usually it was... Some pools do it for free, some do it for more.

[00:11:57] Maybe if you wanted to do a lot, it's like a $1,000 transaction. But yeah, this sort of quote-unquote out-of-band payment has been around for quite a long time. It's just this is the first case where it was really noticeable and quite significantly large, I should say.

[00:12:16] Vlad Costea: But do you see a future where basically there are these deals behind the curtains and miners include certain transactions that belong to certain actors? Or is that less profitable than accepting whatever the market fee is?

[00:12:31] Nick Hansen: I would say most likely that most of this, so we've been doing this with other transactions now, we call them big blocks or bespoke blocks. And those blocks, we started doing the payment in band, meaning we put the payment as transaction fee into the block directly. So that way you end up with a very profitable mining pool. So we've done this with TeraPool, which is a Luxor pool as well. So we started putting that fee into the block itself, which turned out to be quite interesting because now there's been some big blocks that have $15,000 to $20,000 worth of fee in them, which is pretty interesting.

[00:13:25] It's exciting. Also, the people that are interested in this type of thing are very interested in green energy and TeraPool is like a green pool. So that's another interesting facet here as well.

[00:13:38] Vlad Costea: Yeah. And right now, as I look at it in this cycle, Luxor is the sixth most successful pool in finding blocks. Let me show it on the screen and also have questions regarding some concerns about mining centralization, right? Because we have Foundry, which is huge right now. It's the largest pool. In the past, we have had these Chinese miners, usually F2Pool and AntPool were larger, but it seems like Foundry is more successful. And there's also Luxor, which is 3.12% of the blocks discovered.

[00:14:20] It's the sixth largest. And the question that I have for you right now, is there a collaboration between Luxor and Foundry or do you see a scenario where the two of you would collude or comply to some regulation from the United States to censor some transactions?

[00:14:37] Nick Hansen: So Luxor and Foundry are competitors. So we definitely are not in any sort of collusion. We're trying to outcompete each other for products and services and things like that when it comes to mining. So in that regard, I would say there's really nothing like that, but we've had conversations about what would that look like? Is there a world where we're asked to censor transactions? And we've had discussions with regulators about this, and we basically told them, if we have to censor transactions, we become uncompetitive in the global market and you're effectively killing.

[00:15:15] You'll be through the swipe of a pen, effectively killing a whole vertical of business line in the US. I mean, for example, if you required all the US miners as well, so not just the mining pools, but the miners to use pools that were compliant with US sanctions or whatever, or like OFAC compliance, then that would most likely put all of those miners at risk as well. So it's certainly something to think about and something I don't think regulators are taking lightly, but that's kind of where we're at on the regulatory front. So yeah.

[00:16:03] Vlad Costea: I'm pretty sure it's tough. And when I had Charlie Lee on the show last year, I think, I told him a joke that it's very hard to tell which country is the free one and which one is the authoritarian one because China was announcing bans on mining every other week, but at the same time, they never actually kicked them out until 2021. And they never actually censored transactions. But in the US, you had, I think that same year in 2021, you had MARA Pool, Marathon. I think that's what it's called.

[00:16:36] And it was the first one to brag about being OFAC compliant and censoring some blocks. I'm not sure what happened afterwards because they did come back as if they changed their mind about the decision. But as far as I heard, they kept on censoring some transactions. And it's interesting because in the US, even though it's the free speech country, it's also the overregulation country. Not as bad as Europe, but still you have these politicians who discovered this new burgeoning industry and they're like, oh, we got to regulate that.

[00:17:13] Nick Hansen: Yeah. So the Marathon example is actually really interesting. That is one where they thought that the market was going to reward them for that pool. And that was something that was at the time just like a misstep. And I think Fred has even mentioned that before. The CEO of Marathon has mentioned that that may have been potentially a misstep. They misread what the market was looking for. That was certainly an interesting time. And then, of course, they reversed their position on that after they got some public... What do they call it? The cyber hornets.

[00:18:00] Marty Bent and the cyber hornets went after Marathon and they ended up having some bad PR and that sort of thing. So it ended up being an interesting kind of an interesting event. And they certainly were, I don't want to say punished, but yeah, they ended up getting some kick, some flak from the market for that.

[00:18:24] Vlad Costea: You don't have to agree with me on this one, but I think it was the Bitcoin equivalent of go woke, go broke.

[00:18:32] Nick Hansen: Let me think about that. Maybe. I don't know if this was wokeness, really. I think this was more specifically trying to be like the compliant miner, you know, like that was really one of those...

[00:18:47] Vlad Costea: Virtue signaling, [unclear: if I may].

[00:18:50] Nick Hansen: Yeah, that's a good... Yeah, I would say that's a good way to put it. I would say, yeah, it would be virtue signaling in that regard, because it certainly was: "We're trying to signal to the market, we want the BlackRocks and Citigroup and MassMutual to buy our stock."

[00:19:11] Marathon wants them to buy their stock. So that's what they were trying to, you know, that's what they were trying to to achieve. And that's ultimately what they ended up renouncing.

[00:19:26] Vlad Costea: Okay, so let's say that I buy a new ASIC miner and I want to mine with a pool. Why should I go for Luxor?

[00:19:34] Nick Hansen: So there's a lot of reasons. It depends on what your class of miner would be. We have probably the most feature-rich mining pool that exists today. So we make it super easy for you, from something as menial as doing your taxes to payment splits to, you know, managing a farm. Like say you're a mining farm operator and you have a thousand machines inside your mining farm, but those are all owned by 50 different customers.

[00:20:03] We have like a whole suite of products and services for that. We also are one of the only American companies building custom firmware, which is the software that goes on the mining machines themselves. And that firmware works really well with Luxor Mining. You also get a fee discount if you use Luxor firmware with the mining pool. So it starts to become a pretty compelling product offering that the market seems to be pretty interested in.

[00:20:34] Vlad Costea: How would you say that the firmware is different from the one from Slush Pool, or as they were rebranded right now, Braiins?

[00:20:45] Nick Hansen: Yeah, so ours is somewhat different in that we are a, of course, we're a US-based entity, so that is very attractive. We're also what's called SOC 2 Type 2, which basically is like a standardized audit for data security and resiliency. And then also they check like all of your corporate processes, very tedious and boring work, but also is very important for big businesses, especially publicly listed businesses here in the US. So our firmware is going to be the only SOC 2 Type 2 compliant firmware that exists in the market, US-based.

[00:21:22] And then, of course, we're trying to build features into our firmware that are required and demanded, requested by our customers. Most of our customers are big hosts that have thousands of machines, and they're participating in what we call controllable load resourcing demand response programs. So doing basically like ramping machines up and down based on power pricing. They get signals from the market, whether they should be ramping machines up or down. And then they also get compensated for that. Like that's Riot's core business model is during the summer, they know when to turn down their machines and reap market benefits from doing so.

[00:22:05] And we're trying to build our firmware very specifically to cater to those types of customers.

[00:22:11] Vlad Costea: Yeah, makes sense. And the reason why I like you guys is that you hired Colin Harper to do the content.

[00:22:19] Nick Hansen: Okay. Colin. Yeah, we love Colin. He's a legend.

[00:22:22] Vlad Costea: Colin and I go way back. We used to work for Bitcoin Magazine. We were writers. At one point, he was doing this trip in Europe, trying to live on Bitcoin for a month or something.

[00:22:30] Nick Hansen: I remember that, yeah.

[00:22:32] Vlad Costea: And we even shared a bed in Berlin. No homo, but we shared a bed in Berlin.

[00:22:39] Nick Hansen: Okay, awesome.

[00:22:40] Vlad Costea: We both have girlfriends or had at the time, so...

[00:22:44] Nick Hansen: Amazing. Well, that's cool. Yeah, that was, I mean, you guys are... That's legendary, legendary.

[00:22:51] Vlad Costea: It was fun. We were both broke and we shared that hotel room for a couple of nights. And we went to the legendary conference, The Lightning Conference in Berlin. That was a once in a lifetime event. It was so great.

[00:23:08] Nick Hansen: That's awesome. That's awesome. Yeah, getting Colin in to work on Hashrate Index and do Luxor content has been amazing. He's been an incredible addition. One of the earlier employees at Luxor as well. So I'm glad to have him on. Glad he's part of the team.

[00:23:26] Vlad Costea: If you're listening to this and you don't know who Colin is, you should listen to Season 3, Episode 10, I think, of the podcast. It's from 2019. That's when we recorded.

[00:23:37] Nick Hansen: Oh, wow. Yeah, that's OG. That was pre-Luxor days. I shouldn't say pre-Luxor. We were, so Luxor was founded in 2017, but we didn't have like grand ambitions of becoming what we are today. We're a team of just under 50 now. At the time, it was Eddie and I working nights and weekends on what we thought was just a hobby. We didn't really consider Luxor. We weren't thinking Luxor was going to be this grand big company that it is today with all these employees and success and things like that.

[00:24:09] But it was mostly just a hobby project. So in 2019 is kind of when we started to realize we have product market fit and we're stretched to the gills at our day jobs. I was a software engineer at Salesforce. Eddie was actually, he was in college at the time and then went on to be an engineer at Nebulous Labs, which is a coin called Siacoin. They built that coin. Anyway, he... Sia.

[00:24:37] Vlad Costea: Sia, as in S-I-A?

[00:24:39] Nick Hansen: S-I-A, yeah. Siacoin.

[00:24:41] Vlad Costea: I remember that coin. It was maintained by Romano, I think.

[00:24:45] Nick Hansen: Nope. That's Via, V-I-A. That was Romano. That was Viacoin. But yeah, no, Siacoin was made by David Vorick, Luke Champine, and the Nebulous Labs team. They built Skynet. They built some really cool technology. But yeah, unfortunately, just their coin. Not great. But ultimately, so yeah, Eddie worked on that. Eddie worked on that. And yeah, it was a really... So anyway, but then I went full time in July of 2019. So that's really when we considered Luxor as starting, because that was when I was working on it full time.

[00:25:26] That fall, I went to a mining conference in China. And then a bunch of people joined full time after that in the first part of 2020. And off we went. So that was really more... That's really Luxor's Genesis story and how we got to where we are today.

[00:25:42] Vlad Costea: So how do you go from this hobby, this startup, to a company that has 50 employees and is the sixth largest mining pool today?

[00:25:55] Nick Hansen: We work really hard. Eddie and me and Guzman and Ethan have worked incredibly hard to get to where we are today. Getting through 2020, like that summer of 2020. I don't know if you remember how the ecosystem was, but it was dire. March, April, May of 2020, it felt like... I don't know if... I'm worried for crypto, but I'm also worried for the world. I don't know if the world is going to come crashing down to an end here. It was a really weird time. And it was a terrible time to be a first time founder and be out there trying to generate enough money to keep my salary flowing and all of that stuff.

[00:26:38] So it was a very interesting and scary time. But yeah, it was good. And I'm glad that we... I'm actually really glad that we went through that together that summer. Me, Eddie, Ethan, Guzman. That was an interesting summer. It was a really, really challenging time. But yeah, we made it through and got through. And how did it... But your question more so was around, how did we go from being just a hobby to being what we are today? As we started to reach product market fit, it became more apparent that what we were bringing to the market was interesting and compelling.

[00:27:20] And we had a lot of people asking about what we were doing and what we were building. And so that was really invigorating. And it really helped us validate some of the things that we were doing and started to realize this market is pretty big. And we can go out and capture a large portion of it as long as we continue to work hard and execute on the vision that we've laid out. And that's really where we are right now. And that's what we're continuing to do.

[00:27:47] We're just continuing to build all of the products that we think we would need as a miner. And it seems to resonate. For example, our financial products are really in demand. We have a lot of folks that are interested in that. We have our firmware is... Every day we get people asking to use the firmware. It's awesome.

[00:28:09] Vlad Costea: When you describe a mining pool, it sounds like a hardware company, one that deals with buying and running ASICs. But it sounds more as if you are a software company, one that develops custom firmware for the miners and tries to build on top of that.

[00:28:27] Nick Hansen: So right now, I would like for Luxor to be considered a software services company. We build software-based technology services. We take hard infrastructure problems like... Buying and selling mining machines is a very logistically heavy problem that we're able to use technology to streamline. Our RFQ platform is a great example of that, where we're able to build more or less like an order book with liquidity depth. And that has become really, really compelling and really popular. And so that's just an example of a place where we take in really tangible, hard physical problems from the world and use technology to streamline them and make them more scalable and easier to use.

[00:29:24] And that's something we're going to continue to do. And that's what we are as a software services company. So we are in the mining space, but we are not miners per se, because we don't really own... I mean, we own some machines, but not any meaningful amount.

[00:29:39] Vlad Costea: Yeah. I mean, it sounds reasonable. You guys do software and it's a nice focus. I guess. What kind of devices are compatible with your custom firmware? Is it only Antminers or Whatsminers or is it also... What's the name of the one that's for the living room? I forget.

[00:30:00] Nick Hansen: Oh, the heaters?

[00:30:02] Vlad Costea: No, no, no. Not the heaters. Those were made by Crypto Cloaks. I'm going to remember as we talk. I need to search my emails because I tried to order one at one point.

[00:30:17] Nick Hansen: Okay.

[00:30:20] Vlad Costea: Yes, so the question was, is the firmware only for one brand or does it work all across the board?

[00:30:26] Nick Hansen: So, of course, we started with the top and worked our way down. And right now the most prolific miner is the 19 series. So within the S19 series, which is a Bitmain Antminer, we started looking through like, what do we think is the most ubiquitous? And we found, we're pretty sure that the S19j Pro is probably the most ubiquitous. And so we started building towards the S19j Pro. There's a few constraints around what we can get on. And it comes down to the control boards. There's three or four different types of control boards, BeagleBone, Xilinx, and Amlogic.

[00:31:13] We picked Xilinx. It's the easiest. So we took Xilinx. It's probably the best. It's also probably the best control board. If you have a choice, most people don't even really know what their control board is. But if you have a choice, probably try to get the Xilinx if you can. It's easiest for us to get software on. And so it makes it a lot more dynamic. Those machines are far more easy to use because you can get custom firmware off and on. And then we also think that the...

[00:31:42] But then that also constrains us. So we're stuck to Xilinx with j Pros. But we started expanding our model support. So we do support the S19 XP. We also support the S19. We call it the S19 Vanilla, which is just an S19. And then there's an S19 Pro, which we also support. So we're getting more and more support for the S19 Antminer series. The next question, obviously, everybody asks: when Whatsminer? Everybody wants to know when Whatsminer. They ask the same thing for Braiins. So we're trying to think like, what are we going to do for Whatsminer?

[00:32:15] Are we going to go after Whatsminer? Or should we just start adding tooling for the next Antminer series? It really depends on where the market heads. It's unclear exactly where it will all land. But that's where we're at with regard to some machine support.

[00:32:41] Vlad Costea: Okay. The next question concerns the fact that we have very few brands that produce ASIC miners. And even though there was some interest on behalf of Samsung at one point in 2018, and then there was Intel, I think that announced that they were developing something. Still, as far as I know, I'm not aware of any device that competes with the Antminers and Whatsminers. So do you have any information about anything that might be coming on the market in the near future?

[00:33:14] Nick Hansen: Sure. So it looks like Intel has definitely produced chips, but the way they did was different. They produced the chips, and then they gave samples to mining companies here in the US. They gave them to, I think, GRIID and Argo and I think Core Scientific and some of the other... All the big US miners got access to some of the chips. And they're supposed to build the form factors. And I don't know if anybody's actually gotten those over the finish line yet. It sounds like they're... Obviously, we're in more of a...

[00:33:50] I don't want to say we're in a crypto winter, but we're in a bit of a crypto winter, especially compared to when Intel released their chip, like the details of their chips previously, which was like the height of the bull market. So they wanted to... They definitely were monetizing the hype. But it seems now that that has died off, and maybe there's less interest within Intel to continue to expand into this market. So I don't know where that has landed entirely.

[00:34:24] Vlad Costea: Okay. And something else that I would like to know, because I don't get to talk with the CEO of a mining company every day. And I'm curious, what's your take on the fact that mining is getting industrialized? And if you see a future where there will be more people mining from home and make that reliable and also affordable.

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[00:39:09] Nick Hansen: All right, so the question you asked before was how do we view home mining kind of going forward here? Is that the gist? You're looking for like home mining alpha?

[00:39:20] Vlad Costea: Yeah, of course. Always.

[00:39:22] Nick Hansen: Cool. All right. So right now, I feel like there's a... So there are certainly home miners that do home mining for reasons that are not purely economic, right? Obviously, this is like an economic thing, but there are definitely places in the country where you can still mine at home reasonably profitably. And you also get the added benefit of hosting your own hardware, making you more sovereign as an individual, as a Bitcoiner, and just as a human in a world that can definitely be uncertain.

[00:40:00] If you do host your hardware somewhere, you can only trust your host so much. Most likely, you trust yourself much more than you trust really anybody else. So in that regard, I would say that home miners, there is certainly a case for home mining. But as you start to scale your home mine, things start to break down, especially when you start getting more than even 5 machines. More than 5 machines starts to become difficult because your home's infrastructure doesn't have enough capacity for that, most likely.

[00:40:32] 5 machines takes 20 kilowatts and your house probably doesn't have that much in it. You'd have to have custom hardware put in. Which is fine. You could do that. But you will start pushing the limits of what is possible at home relatively quick. So what does it look like for the hobbyist miner to start to scale outside of just their home? Most likely, you'll end up with hosting... Most likely, you'll end up going to one of the hosts. You know, like you'll either use somebody like Compass or [unclear: Supplybit] or, you know, we have Blockware, we have a whole host of [unclear: ...]. We have a whole bunch of different hosts that have the ability to take your mining machines and run them for you in a place that is purpose-built for it. Another thing you'll run into at home is heat. Miners produce a lot of heat. Like if you have 20 kilowatts of miners running in your garage, you're going to have to have significant fan infrastructure to keep them cool and keep your garage from becoming 150 degrees.

[00:41:33] I have a machine running in my garage right now, which is completely uninsulated. And it's 40 to 45 degrees here in the Pacific Northwest. And it's only using about 3000 watts, maybe 3500 watts. And it's like 100 degrees in there if I don't turn on the fans. So you've got to have like special air circulation infrastructure if you're going to run at home as well. So like back to hosting, they also will be able to host at more like industrial rates. Like they'll probably be able to get you like 6 or 7 cents per kilowatt, which is certainly going to be better than what you're paying at home.

[00:42:09] But then there's also the fees on top of that. So that's really what the home miner is looking at right now. They can probably run a few machines at home. But most likely once you get past having 5 to 10 machines, most likely you're going to need to start hosting them somewhere. And then in that case, you want to look for, in my personal opinion, I would look for hosts that are relatively close to you physically. Just in case anything goes wrong, you can take a day trip over there and maybe pick them up.

[00:42:41] I know that that's something people have done in the past is drive over to their host. If their host is like not running their machines or they're having heat issues or whatever, you drive over there and pick them up and then drive back. It's kind of a little bit of a pain in the ass, but it'd be better than losing out on, say, your $20,000 or $30,000 investment into mining machines. So that is my opinion on mining for home and how you would scale from being a home hobbyist miner to making a real investment into mining machines.

[00:43:16] Vlad Costea: Right. You mentioned the C word, meaning Compass. What's your take on that business model? Because I know that they had lots of problems. Lots of customers were unhappy. Their miners went offline and they would not go online for a long time.

[00:43:30] Nick Hansen: Yeah. So Compass had a lot of operational issues, and most of the issues that they had were a result of: they didn't really own the infrastructure. They've made structural changes to the way their business is operated now to where they actually own more of the sites that they operate in. And they were effectively getting hosted before. They also were operating during the year of 2022, which is like the worst year ever for mining economics.

[00:44:03] And so, of course, when everybody is compressed, when all margins are contracting and the space is seeing bankruptcy after bankruptcy, things are going to start going south. And they certainly did. I would definitely have put them in the sell category maybe a year, a year and a half ago, but I'm actually coming back around to the idea of Compass. And, you know, I told Whit this back when he was the CEO.

[00:44:32] And I know Thomas, I actually saw Thomas maybe two weeks ago. Good friends with [unclear: James and Nani]. I want that business model to succeed. I love the idea of democratizing mining, making mining accessible for the small miner, somebody who wants to host five machines that didn't exist before or it was really hard to find or it was really expensive. And it was probably a scam, like an outright scam. Compass, a lot of people feel like they got scammed, but Compass is a legit business.

[00:45:02] They just happen to have poor execution at the time. And I think that they're getting better. And I think that we'll see over the next couple of months where they end up, because I know that they have a lot of stuff going on in the works. Happy to be close partners with them and want to continue to see them succeed. I just hope that, you know, the majority of the operational issues that they've had are behind them.

[00:45:32] Vlad Costea: OK, so how can you actually fix that? You mentioned that they did not own the grid or something.

[00:45:39] Nick Hansen: Yeah, they didn't own the physical places where they were putting their customers' machines. They had contracts with the hosts that just, you know, then you just add another counterparty into the system and it causes you to have more risk. Like, for example, they were hosting with that company called Dynamics and then Dynamics had liquidity issues and started turning off machines or redirecting machines. I don't really know exactly what happened, but ultimately, Compass customers started suffering as a result of Dynamics not being able to fulfill their side of the bargain.

[00:46:13] And so when you start adding in other hosts like that just becomes another counterparty that you're exposed to. And it makes it really difficult for a business to succeed that way. So I think that over time they'll continue to take more ownership of their infrastructure end to end. And I think that'll really be the right way to build that business over the next several years. And, you know, there are businesses that have done that.

[00:46:46] Like, I think Blockware is a good example as well, where they own the majority of their infrastructure, which gives them a lot more agency to improve the operation of their business.

[00:47:02] Vlad Costea: That sounded like a very PR kind of answer. But since you guys are partners, I'm not going to make you say something. I mean, if you want to...

[00:47:11] Nick Hansen: If you want to dig into it, you can dig into me if you'd like. I'm just trying to tell you what I think. And, you know, I have been told that I have a customer service voice, so maybe that's coming through a little bit. But I'm trying to get it to you as straight as I can. Compass certainly fell short of the customer's expectations in the past. You know, I think every business at some time has fell short of their customer's expectations and it just really depends on how you react.

[00:47:36] And I think they're making the structural changes to the business necessary to overcome that. And it's just going to take time. And unfortunately, they've had some bumps along the way. But I think they're in a good position. Like I said, I would be long Compass here if I could be.

[00:47:54] Vlad Costea: I was just trying to get you out of PR mode, but I guess I failed. But you said something very interesting about 2022 being the worst year for mining. And I want to ask you, why is 2023 any better? Because the bear market got kind of worse.

[00:48:11] Nick Hansen: Yeah, so it's a great question. It's a great question. And the reason I think 2022 was so bad is mostly because of how fast everything happened. Businesses, big businesses that take out corporate loans and do corporate finance, they're looking on a three to five to 10 year horizon for different. Like, for example, if you're a big construction company and you need a loan to build a new building, the loan is going to be 10 to 15 years in tenure, probably maybe even more, and big business moves somewhat slowly.

[00:48:51] But this is crypto. Bitcoin moves very quickly. So what that means is in 2021, we were at the height of the bull market. Not only were we at the height of the bull market, we had the Chinese mining ban in May, which caused Bitcoin mining to become massively more profitable than it's ever been. And so mining companies were seeing massive returns and investors started to get overzealous. And so they started giving miners just tons and tons of money. Miners then use that money to lever up, go out and buy machines.

[00:49:20] And then over 2022, all of that debt had been incurred, and all the margins started to compress over the course of 2022. And they just didn't have time to readjust their business strategies, readjust their agreements, that sort of thing, before it all started crumbling down. The reason I think that 2023, even though the mining economics are almost identical, will be a better year for mining, is just that folks have had time to adjust business strategies, go through negotiations and determine how can we come to an agreement on how to pay back this debt.

[00:49:53] I'm not going to be able to pay it back on the original terms. They come to some agreement and business carries on. And I think the big thing is it's just a little less volatile and a little bit more time. But that doesn't mean it's going to... I mean, at least here we are almost one quarter into 2023. I think it has been less volatile up to now. And that helps miners. Also, I guess it's been volatile upward as well, which definitely helps miners as well. Even though hashprice generally, it's only gone up a little bit, relative, because difficulty has increased.

[00:50:31] But yeah, that's kind of why I think that 2023 will be less of a bloody year for miners than 2022. But it certainly won't be, you know, it's not going to be like a golden year like 2021 was.

[00:50:45] Vlad Costea: That's a good answer. I was actually hoping that you would say something about your new venture, but we'll segue into that at some other point, because I'm not sure we exhausted the topic of mining. Because most people are critical, the ones that know nothing about Bitcoin, and they read from mainstream media information about Bitcoin mining, they think it's wasteful. And nowadays, I think Ethereum, at least some of their advocates, I'm not sure if their team is actively involved in this, but they started fighting Bitcoin mining. I think Ripple funded Greenpeace to talk about changing the code to eliminate mining.

[00:51:30] Obviously, they don't really understand how decentralization works and why it's important to have this mining component to have a fair distribution of the Bitcoin supply and to secure the network in a way that's secured by the laws of physics, not just by social consensus. How do you refute this argument about Bitcoin mining being wasteful or polluting the environment?

[00:51:57] Nick Hansen: Yeah, so I think there's a couple of things on that. So one, Bitcoin mining, for a lot of reasons, I think that Bitcoin mining is going to save the world because it is going to reimagine the way that we generate energy. And generating energy is one of the fundamental ways that we can improve the human condition, not just for us. And first, you know, us on Zoom calls, we're in the 1% of the world. You know, I'm talking about people that have never had electricity or never had running water.

[00:52:30] If we're able to improve the amount of energy that we're able to produce in the world, those people will potentially have access to what we consider basic human necessities and basic human, yeah, basic needs. And I think that, so if we're able to produce more energy, I think these good things will happen to the world. Bitcoin mining directly consumes energy and monetizes it. That's the most important thing is that it monetizes energy. It's the most direct monetization strategy for energy. If I have an extra megawatt, I plug in Bitcoin miners.

[00:53:02] It's like the most direct way to take energy to money. Generally, a lot of other ways that we use to take energy and generate money require a lot more convoluted things like you have to put like a textile mill in between, or, you know, you put a car in between and drive over, but all of these things are much more convoluted ways of turning energy into money. So with that in mind, with Bitcoin being a streamlined way of turning energy into money, we can now take Bitcoin mining to places where there's a lot of energy, regardless of how connected they are, so-called stranded energy.

[00:53:39] So you could take Bitcoin miners to places that have hydro dams or lots of sun and have, you know, lots of solar farms or wind farms. I mean, that's what we're doing in ERCOT in Texas. Like that's what Riot does, is turn off their machines or turn on their machines when there's extra capacity or, you know, like when the wind is blowing and there's a lot of energy in the grid or the sun is shining very bright and there's a lot of extra energy on the grid, Bitcoin miners go and gobble that up and monetize it, which incentivizes more energy production.

[00:54:15] And then of course, when there isn't wind blowing and there isn't sun shining and the miners, you know, what they call peaker plants, the natural gas peaker plants turn on natural gas when natural gas is expensive, Riot will just turn off their machines and not consume that energy. So then the grid becomes more efficient. This is a way of producing a more efficient energy grid. Turning on and off capacity is very expensive and not the right way to run a grid.

[00:54:46] If you can keep the demand very, very flat by modulating these Bitcoin miners, it becomes vastly more efficient. And then of course, the cheapest energy is green energy. So, and Bitcoin miners really only want cheap energy. They don't want the most expensive energy. Coal, expensive energy. Nat gas, expensive energy. Green energy is generally the cheapest. So by monetizing the cheapest energy, it's going to incentivize production of more energy. And Bitcoin mining certainly is the perfect use for this. So lots and lots of reasons that I think Bitcoin mining is going to save the planet and ultimately end up producing more green energy, more sustainable energy.

[00:55:32] And I think it's just going to continue to get greener.

[00:55:36] Vlad Costea: There's a lot of talk in the U.S. right now about electric cars. You even have the president who's telling you to buy one if you're not happy about the gas prices. But if you think a little bit about it, it doesn't scale. You don't have enough power to have every American citizen who currently owns an automobile of any kind to be able to fuel their, not fuel, to charge their cars.

[00:56:05] Nick Hansen: Right. Exactly.

[00:56:06] Vlad Costea: To be able to run it. So would you say that Bitcoin mining is making the grid more efficient to enable electric cars to scale?

[00:56:15] Nick Hansen: I mean, it's one of those things, certainly. And we need to get better at using electricity. We get electricity from the sun. It's the easiest energy that we can get from the sun. I would definitely say that we need to get better at using electricity. If we can use electricity for more things, I think overall, the human condition will improve. It's also very transportable. Its ubiquity would improve other countries. So I think improving the amount of electricity that we are able to produce and consume is a good thing. And so ultimately, just like you said, if we wanted every car in the U.S. to be electric, we would need like three to five times as much energy as we produce now to do that. I'm not saying that every car needs to be electric. I do think there are cases where, you know, more of a consumable fuel makes sense.

[00:57:17] But there's a lot of cases where electric cars do make a lot of sense, especially with battery technology improving. This is like a whole other conversation for another topic, but like with battery technology improving, our charging getting more and more efficient, high voltage becoming more and more common. Like I just put in a 480 volt plug in my house so that I can run more Bitcoin miners, but I could also charge. I could also supercharge my Tesla if I had a Tesla. I don't have a Tesla.

[00:57:47] Vlad Costea: That's fine. You'll get a Lambo eventually.

[00:57:50] Nick Hansen: I would love to get a Lambo. Not a lot of miners driving Lambos, by the way. Let's definitely get that out there. Not a lot of miners driving Lambos.

[00:58:00] Vlad Costea: What do miners drive?

[00:58:02] Nick Hansen: Ford F-150s. The XLT, not the Raptor, not the Lariat model, the basic model. F-150 XLTs.

[00:58:16] Vlad Costea: I mean, it makes sense. You can carry lots of ASICs in the back.

[00:58:19] Nick Hansen: You carry ASICs and all sorts of stuff, but yeah.

[00:58:26] Vlad Costea: Well, at least it's not a Toyota, right?

[00:58:30] Nick Hansen: No, I think it's always F-150s. Yep.

[00:58:35] Vlad Costea: Right. So the other question that I have for you concerns the waste that's generated by damaged ASICs, the ones that no longer work. What happens to those? Is there any way to repair them, to recycle them, to repurpose them for something else?

[00:58:53] Nick Hansen: Yep. I think that that is a good... Now, that I think is a real criticism of Bitcoin mining. The mining machines have started lasting a lot longer, like an S9 really was on and off usable through this year, or maybe 2022. Parts of 2022 is probably when it started to really die. And those were released in 2016. So the lifetime, the lifespan of these miners is certainly getting longer. But I do think that that's a valid criticism, though there's not that many mining machines in the world. It's not like phones, by any means.

[00:59:36] There's hundreds of millions of phones. There's probably only a few million machines. So while that is certainly... You know, they do eventually become obsolete and need to go to a recycling facility. I think they end up getting recycled just like any other e-waste. They end up getting burned down to their bare metals, their rare earth metals. Those things end up getting recycled. And yeah.

[01:00:03] Vlad Costea: And the other question concerns the comparison between the pollution generated by, for example, the Twitter or the Facebook servers, because they do have these facilities that run super powerful computers with lots of storage. And there's some greenhouse emissions from that one. And there's also some emissions from the ASIC miners. So would you say that these are comparable or does Bitcoin mining emit more CO2?

[01:00:33] Nick Hansen: I don't think that it's... A, I don't think it's truly comparable because really the cost of running a data center is... The power cost of running a data center is drastically... It's a much smaller part of the expenditure for... Let's just say, let's just use Twitter. Twitter's always a very popular, controversial place, so we'll use Twitter. Their biggest input is probably not expenses for power because the machines that they're running are not dense power consumers like Bitcoin miners. They also have different constraints. They need to be close to population centers for latency reasons.

[01:01:16] They also have a lot of different security because Bitcoin mining farms, maybe several million dollars, but like a Twitter farm, that's all of Twitter, which is billions of dollars. So they have way more security probably. And so really the constraints of a tier one data center, like a Twitter data center, is certainly different than what you consider like a tier two or three data center for Bitcoin mining. So it isn't an apples to apples comparison in that regard. Bitcoin mining doesn't really use globally that much power.

[01:01:47] You can back into how much power it uses by just looking at the hashrate of the ecosystem... Sorry, the hashrate of the network. So if you look... Actually, here's a shameless plug for hashrateindex.com. We actually track the energy, what we call the energy index. So we have the estimated consumption at about 9.5 gigawatts, which sounds like a lot. But when you consider that Texas is almost 100 gigawatts, it's really not that much power in comparison to a lot of places. So all that's to say that I do think that...

[01:02:27] Oh, and then another thing is that most Bitcoin miners are on renewable energy. It's very popular to use hydro dams and nuclear power for Bitcoin mining. Generally, you're not using coal for Bitcoin mining just because it's not that cheap compared to other sources. So by our estimates, most likely Bitcoin mining is done probably like 60-ish percent with renewable energy sources. So lots of reasons, lots of data to say that Bitcoin mining probably isn't really that big of a contributor overall as a percentage. And then also, what it does contribute is probably a small fraction compared to comparable power loads due to its unique...

[01:03:27] How do I say this? Due to its unique power profile in that the input is really the only cost. And so you're going to go try to find cheap energy sources, which are generally renewable, where, like I said, Twitter doesn't really care about where its energy is coming from. It just needs to... It has a lot of other considerations when building a tier one data center like that. So that is... Yeah, that's how I would say it.

[01:03:53] Vlad Costea: Yeah, to make a pop culture reference, back in 1985, you only needed 1.21 gigawatts to power up the DeLorean time machine. That'll take you back in time.

[01:04:05] Nick Hansen: 1.21 gigawatts, yeah. Now, that's actually... For a car, that's a lot. Now, for contrast, your house is probably... Your house probably at no point in the day uses more than 20 kilowatts at any given time. Probably not unless you have Bitcoin miners running in your garage like I do. You're most likely using somewhere probably around 5 kilowatts, maybe even less. My house probably right now, without a Bitcoin miner, is probably less than 1000 watts. For example, your microwave is like 1000 watts. Your vacuum uses maybe 1200 watts, 1300 watts, depending on the vacuum.

[01:04:51] But those are very small consumers of power. And then 1.2 gigawatts, that's huge, absolutely huge.

[01:05:01] Vlad Costea: It is. They needed the clock tower and some thunder strike or whatever.

[01:05:10] Nick Hansen: So if it goes 1000 watts for a kilowatt, it's a million watts for a megawatt. It's a billion watts for a gigawatt, so...

[01:05:22] Vlad Costea: Yep, that's a lot of energy. And I'm not sure if I have any more questions about mining right now. There is one from Peter Todd who wants to know when you're going full RBF with Luxor.

[01:05:38] Nick Hansen: We are. We were the first pool to mine full RBF, and we've been mining full RBF.

[01:05:45] Vlad Costea: Oh, so I guess that's why he asked it, just so you can brag.

[01:05:50] Nick Hansen: When was that?

[01:05:52] Vlad Costea: Yesterday, on Nostr.

[01:05:55] Nick Hansen: Oh, boy. Nostr. I don't have a Nostr. Should I get a Nostr?

[01:06:00] Vlad Costea: Yeah.

[01:06:01] Nick Hansen: Okay.

[01:06:02] Vlad Costea: So actually, I misunderstood his question. What he actually said was full RBF. And I thought this was a question, but it's not. He's just bragging.

[01:06:16] Nick Hansen: Oh, okay. Yes. No. Well, we do full RBF and had been doing for a long time. Actually, we just configured a new node. I wonder if we set that flag. I'll double check. We may not be.

[01:06:29] Vlad Costea: Don't make Peter angry.

[01:06:32] Nick Hansen: Don't. Yes. Do not make Peter angry. He's a great guy. He's always been super nice to me, and his messages are super helpful as well. But I have heard he can have a temper. But great guy. He's always been super nice. Super smart too. Wow.

[01:06:45] Vlad Costea: Yeah, I like him. And I want to get him on the podcast specifically to talk about the full RBF situation. I even arranged back in January. I think I arranged the debate that he could have had with the CEO of Bitrefill, who was very much against the idea of using full RBF, because his business model requires, or at least required in the past, [unclear: zero-conf]... No, no. John Carvalho. He was not the CEO. He was working...

[01:07:22] I think he was doing some sort of marketing for them. The CEO is Sergej Kotliar, who's Swedish. You should come to Europe for conferences.

[01:07:33] Nick Hansen: I will. I need to. I'm going to come to BTC Prague for sure.

[01:07:38] Vlad Costea: Oh, I'll see you there.

[01:07:40] Nick Hansen: Okay. [unclear: Bummed they got rid of it.] They were going to do the mining, BTC mining conference. Braiins was going to do it, but I think they decided not to do it before. Sergej... So you're going to send me Sergej's Twitter?

[01:07:52] Vlad Costea: I will. He has the name of a Digimon. Do you know what a Digimon is?

[01:07:59] Nick Hansen: Yeah, yeah. Oh, I know Digimon. You said it's @ziggamon?

[01:08:06] Vlad Costea: Yeah. So not Pokemon, Digimon.

[01:08:08] Nick Hansen: Yeah. I remember Digimon. I think there's a chance I'm blocked. Nope. I know John Carvalho blocked me.

[01:08:18] Vlad Costea: I mean, I like to think that we're good friends and I did have him on the podcast four times and I did go meet him in person on his last day here in Romania. And we had some fun together, but at the same time, he unfollowed me on Twitter and he seems to be acting strange. I don't know. Maybe it's stressful to be the CEO of Synonym. I don't want to cause anything here, but I hope we're still friends. We haven't spoken in a while, but yeah, the CEO is Sergej Kotliar.

[01:08:57] And what else did I want to say? Oh, have you ever played Final Fantasy 7?

[01:09:02] Nick Hansen: Nope.

[01:09:03] Vlad Costea: Okay. Then I was going to make this reference to my name because basically in the game Final Fantasy 7, there's this big corporation that's called Shinra and they discover a way to exploit the Earth's resources to create very affordable energy. And your role in the game is basically to become an eco terrorist, to put bombs to destroy their generators, because apparently they're destroying the planet. But along the way, it gets very grayish in the sense that you begin as this guy who thinks that he's saving the environment, but then you discover that a lot of people have received jobs and have had their lives improved.

[01:09:48] You get to a mining town, no pun intended, but there are coal miners there who lost their jobs and they're like, yeah, back in the day, coal mining. But then they discovered this better form of energy, which can produce for the entire planet. And we're out of work, but realize, okay, how is that bad? You know, you got rid of coal miners. It's really interesting. So if you ever get it...

[01:10:17] Nick Hansen: It's certainly a real world problem. Like that's a real world use case. Like that's something that could happen, you know? Yeah. Like we've seen, you know, coal, whether we like it or not, coal made what is like the world today. The world today would not be the same if we didn't have coal. Coal is a phenomenal energy source. It's dense, it's readily available, it's abundant. It's a great energy source and it's made what is available. It's what is available to us today.

[01:10:48] So I would say, you know, but it's being vilified because it is generally not that great for the environment.

[01:10:56] Vlad Costea: Yeah, of course. Here in Europe, you have cows that are being vilified and they want farmers to kill them. But that's another conversation.

[01:11:09] Nick Hansen: All right. What other questions can I ask you for?

[01:11:12] Vlad Costea: Yes. So let's talk about ordinals because you acquired a company which deals with them and you seem to be enthusiastic about them. And I'm curious to know if they improved the mining revenue because that was the expectation, right?

[01:11:27] Nick Hansen: Yeah, so it's been pretty dynamic. So we've seen pretty big jumps in mining revenue and mining reward around ordinal inscription ID numbers, like around 10,000. People were trying to pay up to get their ordinals in before 10,000. We saw a lot of that at 100,000, even at 200,000, not as much at around 300,000. I imagine we'll see a huge push at a million, especially as more and more infrastructure gets built out. So it's so early days, like we've only seen a few thousand, you know, a few hundred thousand of these things, where there's mill... Like, if you look at ETH or other DeFi ecosystems, there's millions, tens of millions of NFTs out there. And we're just barely scratching the surface. So who knows where all of this goes? As of right now, it hasn't been as... I'll be honest, I will say that it hasn't been as meaningful as I thought it was. I think there will be more mint mechanics that will drive up fees. For example, there was the Bitcoin Punks, which was somewhat a race. You wanted to mint first and be the first to get your inscription in because the first to mint was the quote-unquote winner.

[01:12:44] And I think that in that case, it drove a lot of transaction fee volume. And I think if there are similar mints that run, that will drive a lot more transaction fee volume. Because transaction fee volume really only occurs when there's immediate demand for block space. Right now, there's this new... With ordinals and inscriptions, there's now effectively infinite demand for block space. Blocks are always full. The problem is a lot of inscriptions or a lot of inscription services or inscribers are like, ah, I'm willing to wait a couple days.

[01:13:21] So I'll wait for like 1 or 2 sats per vbyte. So I'm not going to pay up to, say, 10 or 15 sats per vbyte. So in that regard, I would say that we haven't seen as much transaction fee volume because there isn't an immediacy. There isn't an urgency to get your inscription in right now. And that's what we saw. That's what you saw for ETH NFTs. There's an immediate urgency because you want to be one of the first 10,000 to mint.

[01:13:51] So they pay up. They pay a lot of gas to be the first mint. They did that with Otherdeed. Like when Yuga Labs dropped their NFT... It's called the Otherside project. There was like $150 million worth of transaction fee paid during that day. And ETH miners had like an insane day where they made a ton of money. So it was a really interesting time, but we just haven't quite seen that with Bitcoin yet.

[01:14:23] Vlad Costea: Yeah. So there's this famous quote by someone who has been in mining for a long time. Jihan Wu said back in 2016 that SegWit is unfairly cheap. And he was referring to something that we are witnessing today. Witnessing, you know, pun intended. But you get this discount with SegWit. You only pay 25% of the block space that's being occupied. Do you think that it's unfair?

[01:14:55] Nick Hansen: It's hard to say. So there is a reason that discount exists. There's concern about the UTXO set continuing to expand because that makes nodes less efficient. If you have to keep track of all the UTXOs, I think right now we're at around 100 million. That adds strain and reduces the performance of your node. And so when they're adding new features to Bitcoin, they think about how can we reduce the size of the UTXO set.

[01:15:33] By adding the discount for the witness data or by making a discount on the witness data, they basically made it so that it's cheaper to do a consolidation transaction than to create a new input. So that way, there's an incentive for wallets to consolidate transactions down into fewer UTXOs over time. And that's the reason that that witness discount was added, because that data is in the witness data. Those consolidations can be done in the witness data. I don't know exactly the opcodes that it uses, so don't quiz me on that.

[01:16:17] But that is the reason that that was added. Now, we are having a little bit of an unintended consequence of that, like nobody intended for Ordinals to be... not Ordinals, inscriptions specifically, to be a thing. And so we're kind of going into the wild west now, where we have this unintended consequence that's being, I would say, exploited is a good way to describe it. It's effectively an exploit, because it's not being used for what it was specifically made for, this witness discount. But that said, a lot of people seem to be enjoying it and having a really good time.

[01:16:56] So I guess what's to stop that?

[01:17:02] Vlad Costea: Why do you see this as a business? Because you acquired Ordinal Hub and obviously you have expectations that this is going to pick up in the future.

[01:17:13] Nick Hansen: Yeah, I think it's going to continue to grow. So for example, for context, these marketplaces were some of the biggest businesses in the last bull run, like tens of billions of dollars in shareholder value created. And so certainly, that's attractive from a revenue perspective.

[01:17:39] And then of course, there's like other aspects to this as well. So we definitely want to be like the explorer. So I use Etherscan sometimes as an example, because Etherscan is very, very popular. It's like by far the most dominant explorer. Or become like the mempool.space of Ordinals and inscriptions. Basically wanting to be the single place to go and view collections, inscriptions, et cetera. All right. So Ordinal Hub, I think, is going to have three verticals. We've got Discovery, Explore and Market. I'll go into each of those.

[01:18:14] So I think that Discovery right now is probably one of the more important verticals. It's basically learning about new inscriptions, new inscription collections, everything related to learning and getting exposure to the ecosystem. That's what Ordinal Hub's Discovery feature is supposed to be. Then we have Explore, which is digging into a particular collection. So let's just say TwelveFold, just concluded. You want to dig into more information about the artist or other collections that the artist has or interesting information about the collection specifically. That would be within the Explore.

[01:18:50] And then also, of course, individual pieces, you would go and look at like this piece has this inscription ID, this number. Here's all the data about it, all the metadata about it. And then the Market. So we're not 100% certain what the market is going to look like yet because marketplaces are still forming. But we want to be a place where you can go to learn about the marketability of inscriptions, meaning here's the value over time. Here's all the analytics about different sales, different drops. An example would be Yuga's drop today on TwelveFold.

[01:19:23] That would be a good example. So I would say that's where we view Discovery, Explore and Market being different verticals for Ordinal Hub. And those are all different, like each of those have different revenue models, like obviously Discovery would be like a paid promotion spot. Explore would be, again, you could probably pay to highlight projects, that sort of thing. And then Market, of course, would be like a fee on transaction volume. So that would be the example.

[01:19:57] Vlad Costea: Okay. So that's why you decided to buy Ordinal Hub because you see potential in establishing this and you want to become like a hub, pun intended. You want to become a hub for identifying and providing maybe a marketplace for Ordinals.

[01:20:13] Nick Hansen: We also want to... I want to foster this ecosystem because I view this as being a very interesting and compelling reason why Bitcoin miners could start to make significant fee volume. This is a reason, this is a use case that demands block space. When block space is in demand, miners are rewarded for it directly. We see this ecosystem is already flourishing on other chains like Ether. They have had gas wars for different on-chain activity for years now. It's like they have a problem or they consider it to be a problem.

[01:20:54] But for us, we need to figure out ways to increase the demand for block space so that transaction fee volume increases because as the time goes on, the miner subsidy goes down and effectively the security budget needs to be replaced by transaction fee volume as the coinbase reward reduces over time. So I think that this is a very compelling and interesting use case for block space. And I want to foster that so that, you know, at the end of the day, Luxor is a mining company. And if we're able to foster an ecosystem that drives mining reward, you know, then our customers end up benefiting even more.

[01:21:40] Vlad Costea: Yeah. So you just made me remember what Jimmy Song said about this situation.

[01:21:52] Nick Hansen: So yeah, he thinks that we're going to be punished by the market for this.

[01:21:55] Vlad Costea: Not only that, but he said that a smaller block size should be on the table. And there are people who share that opinion.

[01:22:04] Nick Hansen: There are. I don't think that that would make anything go away. Excuse me. So if the block size needs to go down... So let's kind of like look at it objectively. Let's say every block is completely full of inscriptions. They never will be. But let's say it's completely full of inscriptions. Every block is a four megabyte block. We'd be looking at adding a little over 200 gigabytes to the Bitcoin blockchain every year. Bitcoin blockchain is about 550 gigabytes right now if you have a full txindex.

[01:22:43] So it would be expanding at a higher rate than it has been historically. But, you know, a terabyte drive is now less than one hundred dollars and it's continuing to come down. I think that if we keep at four megabytes, the cost of a terabyte, the cost of those 200 gigabytes is continuing to go down every year. And the economic value that the Bitcoin chain would benefit, you know, would see as a benefit. I just think it outweighs the cost.

[01:23:25] So I do understand and I hear when people say that we should reduce block size, you know, maybe down to two megabytes or reduce or remove the the witness data discount. But if you remove the witness data discount, that then causes a weird incentive where wallets would not be consolidating transactions anymore. And the UTXO set size will balloon over time, which is another big performance problem for nodes keeping track of that many UTXOs. So I think that it's hard to say. It's kind of a double-edged sword.

[01:24:03] I would be open to hearing a proposal to reducing block size.

[01:24:09] Vlad Costea: Yeah, I mean, that can be done socially if you follow Luke Dashjr, he's going to say that you can do it by running his new software. He has been advocating for 300 kilobyte blocks for a while.

[01:24:25] Nick Hansen: So his software is effectively useless in doing that because you need the mining pools to run that software and you need all of them to run it. So it won't do anything. It is a good signal. It's good virtue signaling if that's what you want to signal, but it won't affect any meaningful change the same way that running... Let's just say there was a node out there that censored OFAC transactions. It doesn't really matter. You need the miners to run that software.

[01:25:02] And if the miners are running it, those transactions will still get included in blocks.

[01:25:07] Vlad Costea: Yeah, this goes back to the debate about who controls Bitcoin, right? Because there are people who say, no, the nodes are in control and we tell the miners what to do. But at the same time, nodes cannot tell the miners which transactions they should pick up. Right?

[01:25:24] Nick Hansen: Exactly. Yep. There needs to be a fork in place to change what is considered a valid transaction, not just a mempool filter.

[01:25:34] Vlad Costea: Yeah, it's just, you know, people who are concerned that their nodes are storing stuff that they don't like as if they haven't already for years. I mean, people have been adding files to Bitcoin since the early days. There are WikiLeaks documents. There's child porn. I'm pretty sure there is. There were discussions about this back in 2014. So nothing is really new about all of this which is happening. It's just that a new generation of Bitcoin adopters has started to have some of the same concerns as the people before them.

[01:26:11] But as we get more mass adoption also, I don't want to offend anyone here, but the average intelligence of the new Bitcoiner gets lower with every wave. And not just intelligence, but also in understanding of what this is and willingness to ideologically accept that people you don't like are using Bitcoin for purposes that you don't like. And it goes back to the philosophical discussion of is this a permissionless network or do we follow leaders who tell us how to use it? And I'm not saying that I like the fact that my node is storing stuff to which I resent, basically.

[01:26:53] I don't like some stuff that's happening with ordinals. I think some of them are stupid or wasteful. But at the same time, if I don't respect other people's right to transact and their freedom, then it's likely that others are not going to respect mine. So I need to be very careful with what I do because they're respecting the consensus rules. There's nothing I can do about that. I also inscribed some stuff. So I don't want to be hypocritical, but I think that the stuff that I inscribed is slightly more valuable than the numbers or whatever they're putting out there.

[01:27:33] Nick Hansen: Yeah. Well, I mean, the numbers are only like three bytes, but yeah, understood. Understood the theory there, what you're mentioning.

[01:27:48] Vlad Costea: You also said something about Ethereum. And there is a very important distinction to be made here because in Bitcoin, you have a very clear block size limit of four megabytes and you cannot go over that. But you have the gas limit and that gas limit can be exceeded if you pay extra. So there are some market incentives for you to not exceed that gas limit. But if you do exceed that, you're going to pay a lot of money to exceed it. And basically, some users with a lot of money have managed to increase that gas limit to unreasonable amounts.

[01:28:25] And that's why it's having so many scaling issues.

[01:28:31] Nick Hansen: Right.

[01:28:34] Vlad Costea: That's why it's so hard to run a node in Ethereum, because it...

[01:28:38] Nick Hansen: It is. I don't know if you've tried running an ETH node. It is really hard. It takes, you know... I tried running it on a Raspberry Pi. It took like a month to sync or something.

[01:28:51] Vlad Costea: Well, at least it succeeded because I know people like Eric Wall right now is into ordinals, but he tried back in 2019, I think, to run a full Ethereum node on a brand new MacBook Pro, and he failed. It got stuck. So if you do that today, I think it's even more impressive if you're able to do it on a Raspberry Pi. But yeah, it's very difficult. And also in Ethereum defining what a full node is. That's a very tricky question.

[01:29:24] Nick Hansen: That is too. Yeah. I mean, a Bitcoin full node with txindex. I think that's pretty much everything you need to do a full verification. I don't think you even need txindex to do a full verification. But yeah, I agree.

[01:29:41] Vlad Costea: But I did see that the Ordinals situation has spawned a new wave of people who are looking into what Bitcoin can do. And they figure out that it's more economical and it makes more sense from a security point of view to do it on Bitcoin. And we have Rollkit, which was announced like two days ago: [unclear: ZK] rollups on Bitcoin. And if you read their blog post about it, they say that they were inspired by the ordinals. And the fact that Casey, who was on the show, I guess, four episodes ago, so last month, he was here on the show.

[01:30:18] We discussed this, but I presume that he had no expectation that other people would pick up and get inspired by his work with Taproot and SegWit to create what was designed for Ethereum in a more elegant way on Bitcoin. And it just goes back to what we have been saying for years, that everything else is a testnet and it's all coming back to Bitcoin. Even if some people like it or they don't like it, whatever.

[01:30:50] Nick Hansen: It is. Everything's a testnet. It's jokes. I love that.

[01:30:56] Vlad Costea: Yeah. And from I guess from your perspective as a miner, this only guarantees that there's going to be more demand for block space over the long term, because there is no guarantee there. I remember... So it's so stupid to me that we blame users like regular people who inscribe ordinals for being wasteful. But we don't blame exchanges. I remember Binance a few months ago went through this audit and they bloated the chain. They filled the mempool with like 50 blocks. The average fee was upwards of 12.

[01:31:34] I like to call them baby bitcoins, not sats. Baby bitcoins per byte. That was the median fee for a week or two. But nobody blamed it. Everyone was like, oh, this is so healthy. It's so great that this is happening. Before them we had Tether that was being traded on Bitcoin on the Omni Layer. And that was not considered to be wasteful. It was Bitfinex doing it. I guess Bitfinex is investing in core developers or whatever, because nobody was angry at them for doing that.

[01:32:11] But if the average user does it's scandalous. They should be stopped. They should be put in line. They should be shamed on Twitter or whatever. And that's what makes me angry sometimes, because I guess if Ordinals people started funding Bitcoin Core developers, they would be more accepted, which is ironic and hypocritical.

[01:32:32] Nick Hansen: Yeah, I guess that Binance audit. Yeah, that was around what, November, mid-November last year. And they were definitely paying up a lot of fees, but it didn't last.

[01:32:45] Vlad Costea: Yeah, that's the other dimension to this conversation, because it's very hard to predictably have revenue for miners. Like you can ask people to open Lightning channels. You can ask people to CoinJoin. You can ask people to consolidate once in a while or move their coins from one wallet to the other every year. Or whatever reason. Like, we've established these festivities, these social events where people make more transactions to subsidize the miners. But they don't necessarily work. Like even proof of keys, which is one of the most noble ideas in Bitcoin, to withdraw from exchanges on the 3rd of January. It's not as big as we would desire.

[01:33:33] Nick Hansen: It's not. It's really not. It's a good meme, it's a good meme, but yeah.

[01:33:42] Vlad Costea: And I'm not advocating for ordinals. I'm just saying that I'm not discouraging anything that generates revenue for miners, because I know that the Bitcoin culture encourages you to HODL and keep everything in cold storage. That doesn't help the miners at all.

[01:34:01] Nick Hansen: No, it does not. HODL, don't spend. Miners gotta... you know, miners need to keep the lights on.

[01:34:10] Vlad Costea: And the same people don't really understand that miners have electricity costs and this is what keeps Bitcoin running. It's a difficult situation because you cannot tell people what they should do with their own money. We don't want. So I've had Peter Todd for not the last time, but the last time he was on the show. He said something about demurrage or adding tail emission. And these are the most unpopular opinions, like taxing holding or else creating inflation. That's super unpopular. It's anti-Bitcoin from many points of view.

[01:34:53] I know why he does it, because he's trying to basically issue a warning that unless we do something about it, we're going to end up in that situation.

[01:35:02] Nick Hansen: Yeah, exactly.

[01:35:04] Vlad Costea: And I'm not happy with people saying, yeah, we're going to figure this out in two decades. I mean, it's not really helpful.

[01:35:14] Nick Hansen: I mean, he's got a really good point and I know he is trying to be provocative, you know, and get people thinking about this problem.

[01:35:24] Vlad Costea: I was surprised in Riga. You should also come to the Baltic Honey Badger if you can. That's usually in September or October. But in Riga, there was Eric Voskuil, who is the maintainer of [unclear: Libbitcoin] right now. And he presented something which validated the theory about tail emission. And even Peter Todd was surprised. He was not aware that such an event would happen.

[01:35:55] It's strange, you know, we are in the middle of a culture war and we are having this existential crisis that's specific to bear markets. We're trying to figure out what Bitcoin is and we're trying to build a new narrative for the bull market. And I don't recall this being the exact same way during the last bear market. It was more about distinguishing between BCH, BSV and all the other forks and explaining why this is the real Bitcoin. I guess the market was very efficient in the years that passed to delineate between these forks.

[01:36:35] But now that there's only Bitcoin and we established a culture where in the beginning it was we don't want this on Bitcoin, go do it on some other chain. But three or four years later, it turned into you should not be using shitcoins. And naturally, people are going to be like, OK, these are shitcoins. I'm not going to use them. Let's do this on Bitcoin. And then the reaction is, no, don't do this on Bitcoin, go back to shitcoins. You know, it's a never ending cycle.

[01:37:07] Nick Hansen: It's true. It's a good point. You got to figure out something to do on Bitcoin. And I think we've unlocked something here. And we'll see if it lasts. It's unclear whether it's going to stay relevant here long term, but it does seem like it will be for now.

[01:37:25] Vlad Costea: Yeah, so I do have some questions from the audience that I'm going to ask you, but before that, let me show my ordinal inscription. I guess I told you about this before we started recording, but now I want to show it just for the sake of it. So it's number 62,533 and it comes with these free magazines. And what I want to tell you about them is that these are open source. So you can download them for free and print them yourself. But if you do get this ordinal, Nick, I'm going to make you this special offer.

[01:38:01] Let me turn off this background so you can see the magazines, choose virtual background and none. OK, this doesn't look too bad. So you get this magazine in English and you also get this magazine in French, which is basically the translation of the one in English and this one in Spanish, which has a cover that's designed by Bitcoin artist [unclear: Bitco]. All three of them delivered to your door if you pick up this inscription for whatever reason. And you don't have to make your decision now. You don't have to tell me yes.

[01:38:41] All right. I did my pitch. Now let's get to the questions.

[01:38:46] Nick Hansen: All right. Let's get to the questions.

[01:38:52] Vlad Costea: Share screen. OK, so DJ wants to know, what's your favorite Bob Dylan album?

[01:39:01] Nick Hansen: So I looked this up because I don't know Bob Dylan. Probably don't even think I could name one Bob Dylan song. I mean, Bob Dylan was from 1962, which is way before my time. So, oh, Rolling Stone. That's a Bob Dylan song. OK.

[01:39:19] Vlad Costea: Like a Rolling Stone. Yeah.

[01:39:21] Nick Hansen: I don't know if it's an album or...

[01:39:23] Vlad Costea: The album is called Highway 61 Revisited.

[01:39:26] Nick Hansen: OK, all right. Rolling Stone. It's whatever album that one's on.

[01:39:32] Vlad Costea: Yeah, Highway 61, from 1965, because I'm a nerd and I know this.

[01:39:38] Nick Hansen: How do you know that?

[01:39:39] Vlad Costea: So Vacuum Cleaner Bitcoiner wants to know, ask him, would everyone use Bitcoin in a permissionless way if we reach Bitcoin massive adoption? I guess... This is about scalability, I think.

[01:39:55] Nick Hansen: I think... I mean, it has to be, right? You don't have a choice. Bitcoin is a permissionless network. You don't have to ask anybody permission to use it or to publish data that meets the consensus requirements. So I would say yes. The answer is, would everybody use Bitcoin in a permissionless way if it reached ubiquity? Then yes, I think that's the answer.

[01:40:19] Vlad Costea: OK, CryptoGuruDeals wants to know: hashrate target post-halving in 2024 at current profitability levels? Latest gen machines like S19 Pro would be breakeven at point... I guess this is four cents roughly.

[01:40:41] Nick Hansen: Yeah. Yeah, 4.3 cents. So let me... We're starting to use... So CryptoGuru, we're starting to use dollars per petahash instead of dollars per terahash just because we're running out of decimals. So we would say $43 a petahash for that breakeven right now. I would say most likely, I mean, right now with the current S19 XPs, we have a floor around $34. Like that's a really hard that'll be like a really hard floor for profit for hash price. That number is based on assuming every machine on the network is an S19 XP and assuming that everybody on the network is paying five cents a kilowatt hour, which is quite low, probably much lower than the average.

[01:41:35] That would be like marginal breakeven. So that would be around... I think that's around $34. So that would be a really hard floor. Now you could back into a lot of different, you know, a lot of different hashrate numbers based on price action, and it'll really just depend on what price action is, you know, if we're at a hundred K, we'll probably be getting close to, you know, 600, 700 petahash, sorry, exahash.

[01:42:00] He asked by the halving, post-halving. So that's like basically a year. I imagine we'll be getting close, you know, mid 300s, probably 350 or so. It's hard to predict exactly because we don't know if there's going to be, you know, like another big banning event or if price drops, if price drops 30% from here, hashrate will probably plateau and maybe even go down a bit. It really is hard to say. It just depends on price action.

[01:42:27] Vlad Costea: Okay, that's a longer answer than I expected, but a very good one. So Mandalorian Hodl wants to know, when he's so crazy about NFTs, why doesn't he stick to ETH? Did Luxor mine ETH? Is Luxor staking now? What does he think about Gensler coming after all unregistered security token issuers?

[01:42:51] Nick Hansen: Yeah, so never really done ETH. Luxor did have an ETH pool, mostly because we have like customers here in the US that wanted it. And, you know, it's a proof of work coin. We are a proof of work company. So we stick to those, you know, not that idealistic. If our customers are asking for a product that we can make money doing it. Happy to mine ETH. We don't do any staking. Probably will not. I mean, we've had requests to build staking pools.

[01:43:23] Foundry has built a whole staking business and other companies here in the US have built staking businesses, but we've never really got into staking. Don't view ourselves as having any sort of competitive advantage there. Really staking is more of just an AUM game. It's like going out and getting people to give you their stakeable coins. And I don't see any reason why we would have a competitive advantage against Foundry or anybody else when it comes to that. So no staking. Can we go back to the other question? It was around Gary Gensler coming after everybody?

[01:43:59] Yeah, that's crazy. I can't believe they went after Kraken. Kraken is like one of the most standup companies in the space. So I'm really surprised that they went after Kraken. It's really unfortunate. I don't know what's going to continue to happen. It seems like they're really cracking down on a lot of things right now. So I would hope that cooler heads prevail and that we don't stifle innovation here in the US. I have a lot of personal friends that have left the US because they couldn't build the company that they want to build here because of the regulation that we have.

[01:44:32] There's a lot of gray areas. There's a lot of places where there isn't enough clarity to fully know what the laws are. And so I would like to continue to see the same meaningful guidance and regulation. But just slapping everybody with a Wells notice seems like maybe not the best strategy. But anyway, that's what I got to say to that guy... person.

[01:45:00] Vlad Costea: Yeah, Mandalorian Hodl. Anyway, as a side note, I did watch Gensler's MIT lectures, and he's a lot more aware of what's going on than he reveals. And I guess also from the position of a university professor, he was free to say much more stuff than he can right now as the SEC chairman. It's certainly interesting because he asks the students directly point blank, did you buy Bitcoin? They're like, no, not really. And he seems so disappointed when he looks at them like, why are you even here?

[01:45:42] Anyway, funny. You can find them on YouTube at MIT. Let me ask the next question. And it's not much of a question: [unclear: Hucci Mane] says, "I'll be there, I want to know." Well, you're not here, at least not yet, but you're gonna know one day. Luis David [unclear: Esparragoza] says, "long-term revenue model for miners in general, energy markets and current best options around the world, future and sustainability of proof of work." These are not really questions. They're statements, but I guess you can go through them.

[01:46:23] Nick Hansen: Yeah. So I guess the long-term revenue model for miners in general is going to be mine Bitcoin for less than it costs you to produce. I... you know, sell Bitcoin for less than it costs you to produce. The miner HODL strategy of 2021 was always really weird to me. Miners were generating massive margins and creating incredible revenue and then not realizing any of that revenue by selling Bitcoin. They had to wait until Bitcoin went down by, you know, 30 or $40,000 to start selling it.

[01:46:57] So that was somewhat weird, but would definitely say that, you know, selling, you know, mining Bitcoin and selling it for more than it costs them to produce is the business model energy markets. I think that the US has, I think that we're starting to see that the US having very strong property rights is one of the reasons why people are coming to the US. Paraguay is another place that has a lot of cheap power, but I don't know if they have the best, you know, sovereign sovereignty is potentially an issue there.

[01:47:27] Scandinavian countries continue to have a lot of cheap power and then lots of places in the, you know, in the Middle East are coming online. And then the last part of the question...

[01:47:36] Vlad Costea: Was future and sustainability of proof of work.

[01:47:42] Nick Hansen: Yeah, there is a, I mean, there is a growing concern that proof of work will have too much pushback from government agencies, et cetera, for it to become a meaningful and viable ecosystem. You know, a lot of pretty much venture capital was turned off to mining entirely because of that reason. In general, venture capital is not going into mining companies. It's going to a more like technology type, you know, services. So in that regard, I would say there is some growing concern. I'm still a proof of work maxi, but yeah, I would say that there is reason to believe or reason to have, you know, a bit of a doubt in the back of your mind that maybe this is, you know, maybe this is going to be, you know, this will be a problem for us long term.

[01:48:35] Vlad Costea: Yeah. Going back to something that I recall that I read from Paul Sztorc, he said that Bitcoin will work with proof of work mining for as long as there is at least one free country around the world. I mean, that's unfortunate for you guys in the United States because you invested a lot of capital into your operation, but at the same time, if it's not sustainable in the US, I guess you can migrate somewhere else. And there's this geopolitical game.

[01:49:06] Nick Hansen: That would be certainly, you know, certainly a huge blow to mining as an industry though. If, you know, for let's just say tomorrow was banned in the US, that would be a huge blow to the mining industry.

[01:49:19] Vlad Costea: By the way, I should have asked this a lot sooner because I'm not sure how many people are going to watch up to this point. But if you do like write something in the comments, say, what should they say if they have been listening up to this point? What should they say? In the comments, yeah. Like something very random that only people who listen to this can figure out.

[01:49:43] Nick Hansen: We do a little magic.

[01:49:46] Vlad Costea: We do a little magic. Write that in the comments if you're listening. I'm not sure where I was going with this. What was I saying before it?

[01:49:57] Nick Hansen: You were asking about... We were going through the Twitter questions. And then you were asking about where sovereign miners are going to go.

[01:50:12] Vlad Costea: Yeah. So I don't recall what I was going to say. My backlight just died. But let me show you the last question that I have here. It's from a user whose name is [unclear: Bavopi]. I'm not sure how you pronounce this, but he or she wants to know: when smart contracts?

[01:50:38] Nick Hansen: I don't know. I don't think that's coming to Bitcoin, man. I think Bitcoin after this Taproot Wizard, or this Taproot thing, has caused Bitcoin to become ossified for a generation.

[01:50:52] Vlad Costea: But then again, how do you define a smart contract, right? Because multisigs are smart contracts. Counterparty dispensers are smart contracts.

[01:51:03] Nick Hansen: Yeah.

[01:51:05] Vlad Costea: Ordinals with PSBT are also smart contracts.

[01:51:11] Nick Hansen: I would maybe say PSBT, maybe. I don't know if they'd say smart.

[01:51:18] Vlad Costea: They're contracts anyway, and you got to be smart to use them. So I guess...

[01:51:25] Nick Hansen: That is true. If you've ever crafted a PSBT, you do have to be smart.

[01:51:32] Vlad Costea: So I'm not sure if I have any more questions for you at this time, Nick, which is unfortunate because you're a wealth of knowledge. But this was super nice. And how can people follow you and keep up with what you're doing with Luxor?

[01:51:47] Nick Hansen: Yeah, you can follow me on Twitter at @hash_bender. Definitely keep in touch with our socials. We've got @LuxorTechTeam or @HashrateIndex. If you're interested in Ordinals, we've got @OrdinalHub. Definitely follow all three of those. But yeah, my personal is @hash_bender. You can go yell at me for bloating the chain or whatever you want. But yeah, I'll be there and we can talk about it.

[01:52:11] Vlad Costea: Yeah, and you should join Nostr. It's so cool. It feels like the early days of something that's going to blow up. You want to be there and people zap each other. So it's not just likes. They send each other Bitcoin transactions as rewards for saying something that they like. I got zapped by Peter Todd for that RBF comment.

[01:52:37] Nick Hansen: Oh, yeah. Nice. That's awesome. I should jump over there.

[01:52:44] Vlad Costea: OK. Well, awesome. I appreciate it. This was super nice. And I look forward to having you once again some other time to talk about what's new with mining. And if you're interested in that ordinal inscription, let me know after the show.

[01:52:57] Nick Hansen: Oh, yeah. Yeah. I mean, we got to work on that. Are you going to what's your next conference? Maybe we do the exchange.

[01:53:03] Vlad Costea: I'm coming to I'm going to Warsaw this month to a film festival. And then I'm going to Pizza Day, which is two weeks before BTC Prague, and then also BTC Prague. Both of them are in Prague, so I might as well be there.

[01:53:22] Nick Hansen: You should. Yeah, I'll be at BTC Prague. Maybe we can catch up there.

[01:53:27] Vlad Costea: Yeah.

[01:53:27] Nick Hansen: We'll see what inscription number we're at. Maybe you got yourself a grail over there.

[01:53:32] Vlad Costea: I sure hope so.

[01:53:34] Nick Hansen: Awesome. All right. Thanks for having me on.

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