Sazmining Podcast Episode 4: Jimmy Vaiopoulos on Bitcoin's relationship with fiat currency

‍

Synopsis:

In Episode 4 of The Sazmining Podcast, Will speaks with Jimmy Vaiopoulos, Interim CEO of Hut 8 Mining Corp. They discuss how COVID affected Bitcoin mining, the relationship between Bitcoin and fiat currency, hedging vs. trading, and more.

‍

Will Szamosszegi (00:00:04):

Welcome to the SA mining podcast at SaaS mining, we are bringing you into conversations with today's industry leaders and blockchain and cryptocurrency. Our goal with this podcast is to improve the understanding and adoption of blockchain and cryptocurrency. By giving you an insider's look at what's being built and inform predictions on what the future holds.

Will Szamosszegi (00:00:25):

William

Will Szamosszegi (00:00:27):

Simi is the CEO and founder of SA mining, Inc. All opinions expressed by William or his GU on this podcast are solely their opinions and do not reflect the opinions of SA mining. You should not treat any opinion expressed by William as a specific recommendation to make a particular investment or follow a particular strategy, but only as an expression of his opinion, this podcast is for informational purposes. Only

Will Szamosszegi (00:00:53):

Today's episode is sponsored by block by and cogent log room. Our listeners can visit block by.com/sa mining for an exclusive offer for cryptocurrency management and check out cogent law group for all your legal needs.

Will Szamosszegi (00:01:15):

His guest is a graduate of both Western university and the

Will Szamosszegi (00:01:18):

Ivy school of business.

Will Szamosszegi (00:01:19):

He was a senior associate and consultant at KPMG, Canada, and later went on to become the CFO of UGE international, a global renewable energy company. He held the position of CFO of HUD eight mining for nearly two years and recently stepped in as the interim CEO for the company. So with all that said, I'd like to welcome you Jimmy to the podcast.

Jimmy Vaiopoulos (00:01:41):

Thank you will appreciate it.

Will Szamosszegi (00:01:44):

So how is it that you ended up getting involved with cryptocurrency mining at hu eight?

Jimmy Vaiopoulos (00:01:49):

I first got interested in, in cryptocurrency. I remember around 2013 when I, I was living in Vancouver and the first ever Bitcoin ATM was, was there. And so created a lot of commotion and, uh, you know, people had a chance to get their first, you know, their, their, their, their hands on Bitcoin. And it was quite complicated to get, get in around that time. Uh, and so that led me to read the, you know, sushi, white paper and really understand blockchain. Um, but, uh, you know, in my career, I, I hadn't stepped in at that point. It was very, very early there weren't companies, the size of how ate or, or even fractions of that at that time. Uh, but generally in my career, I worked in infrastructure, uh, focusing a lot energy and traditional mining. And so with Bitcoin mining, most Costco towards electricity. So working energy was very helpful there, and there's a lot of similarities being a public Bitcoin minor, uh, and a lot of the public gold mining companies I used to work with. And I've been traveled to a few few of those gold mines in some, uh, interesting locations. And so it was a really good overlap that I would've never, never guessed would've led me to Bitcoin mining, but, uh, ended up being a, a really good path to get there. So I also enjoy working with early stage companies and early stage industries.

Will Szamosszegi (00:03:08):

Well in, in terms of mining companies that everyone sees in the news and in this space and industry hu aid is one of those names that almost every single person who's a minor knows. And I guess just diving into how hu got to where it is today. Can you talk a little bit about the backstory of how hu eight started and really reached that type of scale that all mins are going for?

Jimmy Vaiopoulos (00:03:32):

Definitely. So hu started, uh, in 2017, what you can imagine if you look at the chart of Bitcoin, you know, it, it went parabolic a lot of excitement and, uh, around Bitcoin and people wanted to figure out how they can get in. Uh, and so in the Canadian markets, even north American in general, there are a lot of institutions and people that wanted access, but either didn't have the mandate actually by Bitcoin themselves. Of course, it's complicated sending up a Bitcoin mining system, uh, and people, and there's a lot of people that just didn't wanna go through the efforts and the constraints of, of, uh, buying Bitcoin through, through mediums that they, they didn't know were trust at that time. And so how they had figured out how to set up that mining structure, how to, um, system in Alberta, uh, with cheap electricity and we hold our Bitcoin in, in a very safe way. And so what it does is it creates a platform and a structure for people to invest in the public markets and get exposure to Bitcoin through both mining and through holding, uh, Bitcoin. And so we've really leveraged that and people, uh, you know, wanna have some holdings of, of, of Bitcoin exposure to that in, in their portfolio and how it's the, the easy way to do that.

Will Szamosszegi (00:04:44):

Got it. And that, so it seems like you really capitalized also on the timing too, because it's, oh, for happened during that, that 2017 bull run, uh, is that something that you think that a mining company could do today, or it was a nature of how the industry was at that time with that big bull run?

Jimmy Vaiopoulos (00:05:04):

Yeah, a combination, I think in 2017, you know, the size that Bitcoin got to caught a lot, caught a lot of people off guard. And so there were a lot of people playing catch up and learning and, and understanding what Bitcoin is. And, uh, especially the institution, I think there, there, they were caught, uh, you know, realizing, wow, this is a great play and we wanna, we wanna get involved. It's, you know, complete new asset class here. Um, you know, moving forward, you know, I, I don't know if we're gonna see as, as much of, uh, you know, it can still go parabolic and all these things could still happen. But I think that the knowledge of Bitcoin is definitely at a, at a much higher level, through a lot bigger companies now. And so there's still very big opportunities to, to capitalize again, the way that we did. Uh, but I think it was something very special that happened around that time that, uh, you know, we were we're at the right time and right place.

Will Szamosszegi (00:05:57):

So it seemed like there were these institutions, they wanted exposure to Bitcoin. And rather than just going and buying exposure, you explained that they could get exposure by investing in actual mining equipment and the cash flow that's generated from the Bitcoin being mined. You guys became a public company, right?

Jimmy Vaiopoulos (00:06:18):

The intention always right from the, the formation of hu eight was to, to take us public. And so what we, uh, uh, what we did and, and the way that we sold it was, was that it would be public. You could get in and out very quickly. Um, it's, uh, you know, we, we really focused on that structure, uh, which is what people really wanted, right. They just wanted a way to get exposure, to adjust their position as they needed. And, and, um, and that's what really was the compelling part to a lot of these institutions and, uh, and, and individuals as well. I mean, it was across the, the spectrum, but, but really what took us off to, uh, a really big start were the institutions that wanted to get involved.

Will Szamosszegi (00:07:01):

Got it. And when you were going and trying to raise the capital for hu eight, what was that process? Cause that's even earlier than where we are today, understanding yeah. Uh, what Bitcoin is, how the technology is and, and how, how mining actually is a reliable way to generate revenue. So when you were going into those conversations, what were you pitching to these investors?

Jimmy Vaiopoulos (00:07:25):

Yeah, so the, the, I mean the big pitch was, you know, you don't have to go through the mess of buying Bitcoin. Uh, you know, there's a lot of constraints on these exchanges for how much you can buy. I mean, we raised over a hundred million, uh, when we started this company, right. So there was just, it was very hard to amass that kind of exposure to Bitcoin at that time. Uh, and, and, and anyone who's in the industry probably remembers what the margins were like around that time with Bitcoin taking off and just, you know, not that many manufacturers making, uh, this equipment, the margins were through the roof. Right. So it was, it was just massive demand. The demand far out stripped how much, uh, hu was trying to raise. And so we had to, you know, we we're talking big scale stuff, right. We were running a hundred megawatts and we had to, to, uh, to, to, to, to limit how much we took in to how much power we had, and that's how much demand there really was. It was, uh, quite an interesting time that's for sure.

Will Szamosszegi (00:08:27):

Yeah. That's incredible. And those investors were people that you just had worked with in the past or people that you went online, you looked through different invest investment mandates of these different investor funds, and then tried to pitch those firms in particular. How did you go about finding those, those investors who were participating in hu eight?

Jimmy Vaiopoulos (00:08:49):

Yeah, so, so hu eight knew a lot of these, uh, the people behind hu eight, we knew a lot of the, the folks that ended up getting involved. Uh, but these are the, the, a good chunk of the, the funds that brought in were from some very large institutions, right? Like that's, that's where the good chunk of the, the, the funds came in and it's, uh, and, and there of course word gets out that you're cause these are all public raises. So once word gets out that you start raising money, uh, you know, people don't wanna miss out on, on, uh, you know, the, the one company at that time that was gonna be the Bitcoin minor, right. There wasn't that many people doing this there's hive who did it before us, but they weren't focused fully on Bitcoin. And so being an early entrant as one of the Bitcoin mins, um, you know, almost sold itself at that time. And so that, that's how the demand grew so big.

Will Szamosszegi (00:09:49):

Got it. And after you've raised that capital, you have to find a way to actually deploy all of it into mining. So what was the process like when you had gotten the capital and, and you're now delivering on a hundred megawatts of mining that you're trying to build for these institutions?

Jimmy Vaiopoulos (00:10:08):

Yeah. So, so it all starts with, you know, a couple of things. So one very critical item is the electricity that we consume. And so we ended up with what I think is one of the most unique, uh, and better structures that I've seen out there. And so, uh, our, our main site in medicine hat, they're one of the unique places that actually the city runs their own grid. So most places you have a really big utility that you're, you know, it's very, you can't even negotiate really. And, and anyone who's kind of been in the, the room there's very fixed rate structures and all that. And so working with a city that runs its own grid for a generation plant that wa they had just built there was new, but they didn't have someone to take on that energy. Uh, so we went in and we said, you know, we'll take all that energy and we'll run at 24 7.

Jimmy Vaiopoulos (00:11:02):

And they, they almost didn't believe us, right? Like this is cuz that's that's. I mean, that's a dream to a lot of these, uh, um, uh, electricity providers. And so we said, yeah, we'll come in, we'll take, we'll take it all. And we set up a very unique structure specifically with utility, which was the city with whom we rented the land off of and pay paid property taxes to, and we have a whole kind of structure and we built a really good relationship with them. So we had that in place. You know, the second key piece is the infrastructure and the chips. So, you know, at the beginning where we're very young and new company, so we teamed up with bit fury and bit fury. Uh, they, they have a really good system for, for building these, uh, sites with just, you know, uh, fixing up sea, you know, 40 foot containers to, uh, to, to, to, you know, put the chips in there.

Jimmy Vaiopoulos (00:11:56):

They run they're easily moveable, uh, mobile. And, uh, and, and, and they run off. Um, uh, so, so, so they all get cooled off, uh, by a system of air flow. And so the way that we, so they have built many of these, we use that insight that they have built. We got used their, uh, you know, there were partners, they owned a big percentage of our company. So we had them aligned in terms of equity. Uh, and we were able to build, uh, ahead of schedule under cost, um, this site. And, and so, so we got it all off the ground quite quickly. Uh, you know, I'd say by, you know, by early summer we had, uh, um, you know, we started turning on boxes. So, so those, the kind of the key pieces we had the money. And before that we had the site and the chips lined up, uh, we had precedent for how these would be built and, and really tried to build a world class, um, uh, a, a world class site there, which we think we have.

Will Szamosszegi (00:12:56):

Yeah, that's great. And that, that's a very smart approach to go and leverage the expertise of a company that's been operating and doing a lot of mining in the space as operational partners as well.

Jimmy Vaiopoulos (00:13:07):

Definitely. Yeah, it was, it was, it was essentially, you know, it was, we provided a way to invest in a early stage company, both without some of that early stage risk. Cause we partnered with bit fur and, and building it up and they had some of the most experience in the industry.

Will Szamosszegi (00:13:22):

Yeah, definitely. And then once you went through that initial deployment and had deployed that capital, did you guys go and try and raise additional capital or go through a cycle of upgrading that hardware? How did you approach that next phase after you were up and hashing?

Jimmy Vaiopoulos (00:13:40):

Yeah, so, so we're all, we're, we're pretty much there now where after the, having, we're looking at modernizing a lot more of our equipment and, uh, and, and looking past into the next phase, uh, you know, what, you know, past the next having now. And so we did, uh, we did a bit, we did, uh, a raise recently in June for about 8.3 million over an oversubscribed deal. And, uh, uh, and so that fully 100% went towards upgrading our, our site with, uh, with different suppliers. So, so also to mention, you know, we, uh, you know, bit were great partners in getting off the ground. Uh, but eventually we saw a lot of value in, in being autonomous and buying from any supplier. Right. And, and if that happens to be bit that's great, but it kind of, it provides full flexibility to, uh, to, to operate in the best way for hunting. And so we teamed up with, uh, micro BT on this most recent one. And we found the system that we built originally fit fury was flexible. So we had, we were able to use any minors and we had been testing them for, for quite a bit of time, uh, like micro BT purchased their equipment. And, uh, we're gonna be installing those here, uh, uh, quite soon. So, so we're excited to, you know, build some diversity within our site and, and, and keep growing and modernizing.

Will Szamosszegi (00:15:02):

Yeah. And now from, uh, right now you're the, the interim CEO of the firm, and you're really making those decisions on how the firm's going to move forward and any CEO in any industry right now on top of all the things that they traditionally had to balance. Now, there's the question of what's happening with COVID and how this is impacting your industry and your business. So with that said, how do you think COVID is going to impact the next year of cryptocurrency mining?

Jimmy Vaiopoulos (00:15:34):

So, so there's, there's, there's a lot of effects through, through, through COVID. And, you know, you know, at the beginning it was, it was very tough because we saw collapse in capital markets and Bitcoin price, and we were all, you know, really trying to figure out what, what what's what's ahead and what's gonna happen. And so we've seen things steady out since then. Uh, we, we, you know, Boone was thrown to us and then we saw cheaper electricity prices during that time with obviously people staying at home, uh, in, in Alberta, there, there, you know, a bit of a tougher time, cuz they're quite reliant on the oil industry. And so we saw demand go down, we saw supply go up and, um, and, and so prices fall for us, which, which was quite an opportune time, especially around the having and uh, but long term in terms of what this is gonna do for the industry, what COVID and people staying at home.

Jimmy Vaiopoulos (00:16:29):

And what we've already seen is, is this is progressing eCommerce and digital currencies and everything at a rate that we thought, you know, it was gonna happen much slower ahead of all this. And so I think in the long run, we're gonna look back at this as, you know, a time that people start getting more used to, um, working with digital currencies and, uh, we're working through computers and, you know, I mean, we're doing this over zoom right now. And, and so the, the, the amount that, that of comfort that people are getting with this, I think has been sped up, uh, greatly and, and is only positive for, for Bitcoin. Everybody seen a little bit of a run up in the price. And, and so who knows what happened from here?

Will Szamosszegi (00:17:15):

Yeah. Yeah. You touched on a couple really interesting points there. One being the change in demand for electricity and how it could actually benefit a minor, who's trying to secure a lower electricity cost, which is very important for a mining operation. And then you also touched on the fact that we're recording this over zoom and remote work is really becoming much more of a norm. And it's something that I think many companies were afraid of initially, just because how are you all of a sudden going to get as much done when no one's going into the office. And it's just a completely different way about thinking how you can operate a company, but it it's goes to show that really a lot of the work that's being done nowadays, you can really do remote

Jimmy Vaiopoulos (00:18:02):

That's right. That's right. So adoption is just going through the roof for a lot of this stuff. Uh, and, and people who may have been reluctant that, you know, before this really have no choice now. Yeah. So it's, um, it's, it's just a new world we face and, uh, I'm very happy to be focused on, you know, digital focused part of our society, uh, being in Bitcoin.

Will Szamosszegi (00:18:25):

Yeah. And aside from the electricity prices and just the norm of working remote, how do you think all the money printing that's happening globally is going to end up affecting Bitcoin as it is seen by many to be a store of value asset. There are people who have different opinions on how, the way that the central banks are acting is going to play out within the price of Bitcoin.

Jimmy Vaiopoulos (00:18:52):

Right? So, so I think these, uh, these are very connected, uh, things. So we've seen a lot happen since, uh, since, uh, the COVID really hit us and we had shelter in place provisions and all these, all these items and the money printing, uh, is, is, uh, pretty unprecedented at this time. And we've actually seen the fed come out. I think it was today actually say, they're gonna commit to a plan of, of, of higher inflation than they have in the past. And, and we're gonna see that across the world, um, including here in Canada, where I am and, and Bitcoin mimics a lot of the values, uh, and properties that gold has just in a digital form. And so it in, so doing, it has a lot of anti inflationary properties and, and so we've already seen gold, uh, you know, hit record highs in, in recent days.

Jimmy Vaiopoulos (00:19:49):

Uh, and, and Bitcoin, again, mimics these properties. And as we see more value, um, come into the younger generation's hands, we've already seen that they would rather have a digital store value than a physical store value, uh, like gold. And so, so we're gonna see a generational shift there. We're gonna see, uh, a shift in, in just people accepting Bitcoin generally, but, uh, it's a very responsible thing right now to be holding Bitcoin gold as a part of your portfolio, given all the things going on in the world and the, the, the, the fed just printing out money as much as fast as they can. And it's, um, it's a crazy time, but it's, it's a time that I think, uh, shows how important it is to hold something like Bitcoin.

Will Szamosszegi (00:20:39):

Yeah. Yeah. It seems like a lot of the trends happening today are actually beneficial for the people who are participating in this industry. Uh, but again, on the other side, there are also many challenges and things that, uh, that might have changed the way that a minor or any other person building in this space might approach their business. So with that said, what are some of the biggest challenges that you're seeing today among cryptocurrency minors?

Jimmy Vaiopoulos (00:21:07):

Yeah, I mean, the biggest, the biggest, uh, thing that we have, uh, always facing us is just the volatility. It's the new, uh, asset class. Uh, we, we see people stepping in, in a big way and stepping out in a big way at different times based on different items and, and just the nature of big Bitcoin mining. You have these fluctuations in Bitcoin price, but you have difficulty network difficulty adjusting every two weeks. And so you have these mismatches mismatches is that, that, uh, mismatches that can, that can occur. And what happens is, you know, Bitcoin drops very rapidly like it did in, in mid-March this year. Uh, it's very hard to run a profitable operation and you have to think to yourself, you know, is there a good rebound, we, you know, how do we adjust our mining so that we can, um, we can react to this.

Jimmy Vaiopoulos (00:21:58):

And, and beyond that, uh, if just on the other side, if Bitcoin takes a complete run, which it has many times over its history, it's very profitable for a minor because it takes time for that adjust and, uh, the, the network difficulty to adjust. And so, you know, we have to prepare ourselves for the worst in, in, in these scenarios, which means, you know, keep a little bit more buffer, set up our contracts, that we can stay flexible and manage any sort of downturn, but we also have to make sure that we're locked and loaded, ready for any bull run and to, uh, to capitalize on those short periods of time that we can make, uh, a significant amount of money. And so preparing for, you know, the best and worst and staying on your toes between that, uh, is always a difficult thing for, for a Bitcoin minor.

Jimmy Vaiopoulos (00:22:46):

Uh, that's number one. The other thing right now is the, uh, the manufacturers of this equipment, you know, as, as you can, if, if everyone remembers, you know, end of 2017, we saw this big shoot up in Bitcoin price, and it was great margins for, for good amount of time for Bitcoin mins. So then all the manufacturers try to make as many of these minors as they possibly could, and just completely flooded the market. And the way that these, these minors work is you have to buy space in like Taiwan, semiconductors, or Samsung to actually make these chips. And so they overloaded in terms of their anticipation of everything, and they got burned, cuz they ended up with a bunch of equipment that they couldn't sell at that time. So it's a lot more of a steady hand moving forward with these, um, equipment manufacturers. And so what we're seeing is the, the equipment that they make goes into the few hands that have those relationships, uh, but there are delays and it's just that, you know, it's very hard to get your hand on the latest equipment cause it is so, um, they they've limited their production. So to ensure that they can manage their cashflow as, as well. So a lot of nuances in this industry to, to, to kind of always stay on top of.

Will Szamosszegi (00:23:55):

Yeah, definitely. And that first topic that you talked about creating a buffer, how much yeah. Are, how are you going to buffer for when times are tough and how are you going to, uh, allocate that additional, those additional resources when times are good to make sure that you're ready when times go goes south again? Yeah. Yeah. Do you guys have any sort of protocol for how you're planning that or is it something that is just kind of how you're feeling and the trends that you're seeing in that moment?

Jimmy Vaiopoulos (00:24:27):

Yeah, so yeah, I can't get into all the specifics on it, but you know, it's a conversation that is continuously ongoing. It's, it's something that's very important to us to make sure that we're thinking through that buffer at different times in our, uh, in our, in our history. And so the result is quite simple, right? We just have to make sure we are holding enough cash, uh, on our, uh, in our bank account to make sure that we have an, uh, X amount of days that we can handle our expenses. And so as long as X amount of days are far longer, uh, that we can handle expenses than what we think a downturn could be. And, you know, you know, we're talking a month, two, three months, depending on the timeframe, uh, you know, that's, that's the core of what, the way we think about it from a buffer.

Jimmy Vaiopoulos (00:25:14):

And we're obviously always holding Bitcoin and setting up our contracts that allow some level of flexibility so that we can push out things by a month if need be and, and, uh, staying. Uh, and we also have a very lean team as well, right? So we make sure that, you know, we wanna be as low cost of a Bitcoin minor, as you can kind of similar to the, the gold industry. You wanna be a low cost producer. And so what that allows you to do is during tough times, um, you, you, you find ways to toggle up and toggle down as needed and your core expenses remain very low.

Will Szamosszegi (00:25:49):

Got it. Yeah. That's, that's a smart approach and it's interesting to see how you guys build in that buffer and have that timeline. So you're able to weather any sort of storm that might come.

Jimmy Vaiopoulos (00:26:00):

Exactly. And we've had many, there's been many of them. So, uh, so, and, and, and we're still around operating strong. So, uh, it's, uh, it's, it's been working well, but you know, of course you, you always, you always dropping a few sweats whenever you see some, some big movements <laugh>, uh, down or, or, or up, and, you know, even when it's going up, you're making sure that you're capitalizing on that as, as much as possible.

Will Szamosszegi (00:26:21):

Yeah. It's one of those things where you have to, you just are always checking the price. You always are seeing where the market's at and then seeing how the difficulty is, and, and then making sure that you're, you're aware of it. So if any major changes happen, you're ready to ready to act.

Jimmy Vaiopoulos (00:26:35):

Oh yeah. I'm, I'm, it's always flashing in my screen. It is. <laugh> very early time that I'm not checking the Bitcoin price.

Will Szamosszegi (00:26:41):

Yeah. Great. Yeah. It's part, part of like the routine now where I wake up in the morning, I'll check the email and then next thing that gets clicked open is the price

Jimmy Vaiopoulos (00:26:48):

<laugh> <laugh> I could relate, I can relate it's uh, people think you're crazy, but then, uh, when you realize how much is on the line here, it's, uh, it's, it's critical, right?

Will Szamosszegi (00:26:58):

Yeah, definitely. Especially because the, my, our revenue is directly tied to that number, uh, in terms of the price of Bitcoin. So we, we really like to see when it's going up

Jimmy Vaiopoulos (00:27:11):

Hundred percent, a hundred percent it's, uh, and we have a whole matrix. We actually monitor it minute by minute. And, uh, because you have, we have fluctuations and energy price. We have fluctuations and difficulty and, uh, fluctuation of Bitcoin price. So we know exactly. And we also have, um, eco mode, full mode and like different modes that we can throttle on our machines. And so we have so many different kind of variables in the mix that we're always, uh, updating that on, on a real time basis, making sure we're maximizing our, our, our profitability. So it gets complicated and there's like always people looking at it or making sure that's always being done correctly. So, uh, it's interesting that way, right? Like you always, that's the part you have to always stay on your toes and making sure that, uh, you're thinking about things the right way.

Will Szamosszegi (00:27:59):

Yeah. Another area that I actually am really curious to talk with you about is in the financial products world, where a lot of these products currently are being created for institutions, whether it be options or futures and many minors, whenever I speak with them, they are aware of these financial products that are being created, but they're not actively participating quite yet because they haven't reached a certain scale or size within their mining capabilities or their team where they're really interested in participating in those sorts of hedging activities. And you guys are one of those companies that are very large, where you have the hash rate. Uh, but the, the question is, are you actively doing any sort of hedging or trading, or is that something that is on your radar? And you're thinking about getting involved at some point in the future, but not yet actively, uh, trading those financial products.

Jimmy Vaiopoulos (00:28:56):

Yeah, no, it's, it's a good question. So we're, we're active. I always look at the future's markets. I think it, um, you know, it, it helps paint the picture of the, the Bitcoin market and, and the optimism that, that that's built in and, and how people are thinking of, uh, of Bitcoin. But so, so I'm always keeping an eye on it. We, uh, I've had many discussions on it, but my view in terms of how is that people invest in hu to get full exposure to Bitcoin. And so, you know, and so it would hurt me to put something in place that could limit the upside and also thinking about it, you know, spending money and making a bet to limit the downside, too. Right. And, you know, you have these, you know, fencing things where you can have limited limit, limited cost outlay and have limited downside, limited upside, but it's, it's not really what we've been selling.

Jimmy Vaiopoulos (00:29:51):

Right. We are exposure to Bitcoin through the good times and through the bad times. And so our stock has gone up and down with Bitcoin price as, as needed. And, and, and if Bitcoin's down, people get it that we're hurting and if Bitcoin's up, they get it, that we're doing really well. Right. And so we don't have to explain that as much. Uh, and so, you know, we, and I've taken a page out of the, uh, the gold mining industry. They've over their history. They have experimented with hedging and, uh, and those are very low cost hedges, especially compared to Bitcoin. And, and thankfully the cost of hedging in Bitcoin has come way down. Like, it's very impressive the, the, the, the fees for, for, for it now, but in, in, in the gold industry. Yeah. Again, you saw these, uh, these, you know, some firms hedging, some firms didn't, and now almost all do not hedge. And the reason why is because they wanna provide that maximum upside. And, uh, and, and I, and I think, you know, again, they've, they've stood the test of time. They've kind of tested both, and I think we're providing similar exposure just to a different asset. And so I, I don't see us using hedges in the, in the near future, but we always stay openminded and, you know, we're always taking a look at it and it's, it's always an option, but just, we just don't see it happening in the, in, in the near future.

Will Szamosszegi (00:31:17):

Got it. Yeah. And you, you touched on a really interesting point there too, with the analogy between gold mining and cryptocurrency mining, obviously gold, mining's been around a lot longer than the type of mining that we're doing, uh, for digital assets. So in that regard, do you see similarities in the two on that might give insight into how cryptocurrency mining might play out based on what's happened in the traditional gold industry and consolidation among some of those firms as, as time went on? Uh, or do you think that Bitcoin and cryptocurrency mining will play out in a different sort of way that is, uh, that is unprecedented from the gold perspective?

Jimmy Vaiopoulos (00:32:02):

Yeah, so I think there are a lot of similarities now in, you know, while Bitcoin's still in its kind of frontier phase. Uh, but I do see it taking a different direction over time. Cause really what we're providing as a minor is infrastructure, uh, for the security of the Bitcoin blockchain. And so, so, so this is a core part of what, uh, what's needed for block, uh, for, for the Bitcoin blockchain. And it's gonna be well better, understood over time as these players get much bigger, uh, into estimating. What, uh, what, what the potential revenues for, for Bitcoin miners are, especially as Bitcoin starts to become less volatile. And so I see Bitcoin mining eventually becoming a little bit more, uh, of a, you know, starting to have similarities with something like a utility as well, where, where it has steady. And, you know, you have an investment, you have a good idea of what that return is gonna be.

Jimmy Vaiopoulos (00:33:00):

You know, you gotta have major companies and this gonna be, you know, considered an infrastructure play on some level, uh, you know, with the steady return with, you know, if we're a public company, we could have steady dividends and something along those lines. Uh, but, but, you know, the Bitcoin has to go a very long way to get there. And so we're going through the cycles similar to gold. And, uh, and, and there's a lot of factors that, that depend on this. If we actually see Bitcoin become the storage of value, uh, and, and see some, some governments embrace it on some level, then you're gonna see a lot more of a steady price and, uh, Bitcoin minors becoming a lot more of an infrastructure play, but it's still to be seen in a big way.

Will Szamosszegi (00:33:41):

Yeah. That is a very fascinating prediction there. That, that was the first time that I think I've heard that, uh, that prediction, uh, and the way that you tied in the utilities and, and also the volatil the aspect on volatility of Bitcoin. And you think that we're gonna reach a point where Bitcoin's volatility is, uh, I guess is much lower than it is today, where you're reaching a more, much more stable type of price.

Jimmy Vaiopoulos (00:34:07):

Uh it's, it's, it's so hard to say, uh, like, I, I, I hope it does. I hope it, you see a lot of stability in Bitcoin over time where governments, people can rely on that to, to not only hold it as a storage of value, but as a way to actually transact with some level of, of comfort. Right? And so you, you're gonna need to see again, governments really embracing it, and you're gonna need to see, you know, a certain level of adoption to get there, which again, I, you know, I don't think we're, you know, this is a medium to long term view, but it's, it's something that is definitely a possibility in our future and something I hope to see, like I hope that's volatile up. And Bitcoin was up so much is because the dollar goes, goes down in value through inflation.

Jimmy Vaiopoulos (00:35:05):

And so, um, we wanna of that inflation inflation really savers, right? It's people who just put money in their bank account and them save money for something that they wanna buy in 10 years, but it's, you know, governments print money and it's essentially a tax on those savers, uh, devaluing that and putting that money elsewhere. And so I'd rather see less of that inflation tax on, on savers and people be more comfortable putting their money in things like as a of value. So they can actually have real savings, right? Like that's, that's the, that's the whole core of it. Right? And so the more stable is, and you know, of is available to people the more, uh, these people can trust in, in it to save money. Um, but of course, there's, government's a little bit disincentivized to do that cause they don't want people leaving the dollar. Right. That's that hurts the dollar. So a little bit of a, uh, adversarial view there between the two.

Will Szamosszegi (00:36:10):

Yeah. And one of the, the core messages and value propositions of is this aspect of decentralization. And that's something that a part of SAS, a part of any other cryptocurrency mining company, we're all supporting the network. You wanted to change the ledger or the system of the amount of that. Each person holds can't do it individually and neither can any other minor because you have that decentralization. And one of the, this leads to the, the point that I've been discussing with a handful of other minors is right now, we're seeing decentralization among mining companies. We see more mining companies popping up and we see very large mining companies gathering larger amounts of power, but the overall network continues to grow more and more minors, more and more power come onto the network. I've heard a couple of different answers to this question that I'm about ask, uh, yeah. The question is in the future, do you see a future where you truly have continued decentralization of the Bitcoin mining network or are you seeing a future where it's, it could be a mix, I guess, anywhere in between completely centralized with one person, one entity controlling everything and completely decentralized, where do you think the Bitcoin mining industry is going to fall along that spectrum of decentralization?

Jimmy Vaiopoulos (00:37:42):

Yeah, no, it's, it's a great question. So I think people are starting now to realize the importance of our global society. And I think that's only gonna are that individuals across the world are gonna be drawn towards something like Bitcoin and, uh, and it, and it's a need that, um, that, that we're not gonna be able to hold back. And so given that, that, that importance of is gonna be understood and realized, I think it's gonna be almost a, you know, it's security thing that there's gonna be a spread of, uh, mining capabilities around the world to ensure decentralization, decentralization, exists, ones country. And, uh, you want that security in your own country as well. If you think for the behind this's money specifically north America. So that comes here. So you're starting to see that I think people, and this is, this is kinda on an individual, uh, level, you know, eventually I think you're gonna see this from, from regulatory level, that you're gonna more security and more power in country, and a lot of countries are gonna, and although I think that powers be between fewer you're, you're gonna have a lot of the global powers hold a good chunk in each of between each of them to, um, to have that, that, that, that power and thereby having that security over the system.

Jimmy Vaiopoulos (00:39:29):

And just don't think at any point, the we're gonna see any one country or one company reach over 50%, uh, you know, you have with their, their hands decentralized screw over the system, all that Bitcoin you have is gonna be worth this, right, because it's a fully transparent, uh, system. So you're gonna know immediately if there's some funny business going on, which is very rare and complicated and hard to do, but if someone actually goes and ventures to do that, uh, it's not, not gonna benefit that. Right. It takes a lot of capital. It takes a lot of effort. And if they hold Bitcoin, which is, you know, the store of a lot of value, you know, that that's all gonna be gone for them. So I just don't see the incentive for anyone even wanting to do that.

Will Szamosszegi (00:40:24):

Yeah. That, that's interesting. And it does make sense how each, each country will in an, in its own way, be acquiring hash power as they try to track that capital and that, and those minors to come and mind Bitcoin in their own

Jimmy Vaiopoulos (00:40:41):

Country. And, and you obviously, lots of things can happen, but that's already the trend I'm already seen. Right? Mm-hmm <affirmative> so you're gonna have all these countries that want in, they're gonna be valuable the road, right. So might as well have a lot of that knowledge and expertise where they are. So, and you're already seeing a lot of the global powers wanting minds in their country, seeing this already and seeing that importance already. I think that's only gonna grow.

Will Szamosszegi (00:41:09):

Yeah. And this is one of the topics that's extremely popular. Anytime you talk with anyone about blockchain it's how, how is the government or the jurisdiction that you're in going to approach your industry? And we've seen different types of approaches, particularly when we are speaking about, uh, potential options and futures trading and these different, uh, companies that could offer those types of financial products. There were certain jurisdictions that gave more of a green light to the company's building in, in those industries. Whereas other countries might have had the company slow down or go through more of regulatory hurdles to actually go and offer those products and services. So diving in, particularly on the mining front, what do you see as something that you think governments should do to incentivize minors, to build minds in their country?

Jimmy Vaiopoulos (00:42:03):

I, I think the, the biggest thing is, uh, it's just opening up, uh, their regulations in, in tailoring things to allow, uh, blockchain and infrastructure to build don't government needs go their way to incentivize is there is more than enough ways incentivize people to, to set up mining infrastructure and especially given how much power is taken and, um, and how much they rely on, you know, the 27 uptime and, and, and, and the jurisdiction that they, they are operating in. There are people that just wanna operate where they're in good jurisdictions, right? Like you get very cheap energy in Venezuela. You know, it's just Venezuela where you wanna set up a mining operation and invest a hundred million, you know, you know, maybe for some people yes. But for a lot of people, you they're gonna want go to those good jurisdictions. And so I think it's just as long as you are in, like, for example, Alberta we've found has been very crypto friendly, uh, in a great place for us to mind, we find other people going there.

Jimmy Vaiopoulos (00:43:15):

And so just being open mind to a new industry, uh, not being scared of it in any way. You know, we find fear that, you know, comes up as kinda a first they're like what they start understanding and explain it to them. They realize this is a good thing to have in your, like, this is something you want in your country, uh, in your state or, or, or whatever. And also just beyond that, I think the more that people government allows of, uh, ability for people build out infrastructure for blockchain just means the more people and understand it and, and be happy and also invest in, in mining, in, in their backyard. Like for example, you know, it was a bit of a, I heard a lot of things on both sides of the, on this one, but allowed or government allowed us banks to hold individuals.

Jimmy Vaiopoulos (00:44:15):

And so people, you know, I heard one, one side of the aisle saying, well, we don't want institutions holding our it's not needed on the other side. You know, it, it makes this easier for some people who may not be comfortable holding it in their own, you know, treasure wallet in, in, in, in their back pocket or in evolve, they trust these institutions and they're happy to do that. So I think these are things governments need to do more of and, and just open up. It's inevitable that this is all gonna, so the more we can think ahead and for this, uh, infrastructure to build up ahead of other countries, uh, just means we're, we're more, we're more at an advantage.

Will Szamosszegi (00:44:56):

This actually I thinks very well to innovation and very well to our particular industry just we've start in many times, people overestimate, what can be achieved in underestimated cryptocurrency, mining industry,

Jimmy Vaiopoulos (00:45:30):

You know, you know, what I, what I think it's good look like is a lot of what I hope it looks like as well. So, so, um, so what, what I'd like to see is, is, um, is more government and individuals embracing as a, of, to the level of holding reserves, uh, of, of way hold, obviously this, this, uh, this provide massive value, uh, upside part, give a recent number, but it's trillion market cap for gold. Uh, a lot is in reserves, right. Of billion ever taking that's lot of upside there, right. Also scarcity years having between that timeframe, right? So you, you're gonna have very little new Bitcoin that, that enter market scarcity is also gonna jump you. Some level of wealth transfer happens, becomes adopted. There's a lot naysayers that out out there, there. So, uh, so, so, so that's, you know, one of the things, and that's the storage value piece, the other piece is the adoption side of things.

Jimmy Vaiopoulos (00:47:05):

And so we already seeing level or layer blockchain technology starting to come out. And, you know, it's not really here north America much, but things like the lightning network and people finding ways to transact, uh, much more quickly than Bitcoin core on its own allows you, right. You wait five transaction to settle, which is great when to a transfer, especially when transfer the cost between it, but, uh, not great when you're buying a cup of coffee, but we're seeing Microsoft Starbucks, uh, you know, a lot of companies entering into this field and trying to solve these, uh, solve these, um, these problems of how we can use Bitcoin and, and grow the adoption, uh, in many different areas. So, so, so I think we're gonna make massive progress considering already these big companies are already behind it. And, you know, I, I think north America is gonna, there's already so many places in the world that they don't even have ways to do it in the traditional systems.

Jimmy Vaiopoulos (00:48:09):

Like people, you know, it's hard to get bank accounts in Africa and transact that way. I think, you know, the same way in India where people, you it's too hard to set up a phone infrastructure. So no land, a lot of country didn't have land. They just went cell, right? The same thing, lots of parts of the world where, you know, some people don't even need banks, right. It's just, they can deal completely in crypto currencies and without even need that whole infrastructure that was there before. So, so I think there's, you know, so, so Jack Dorsey sees a lot of that, uh, potential there, and, and he's obviously got two big companies that moves, right? So, so again, we're already seeing a lot of this stuff. So, so, so momentums already building up for that 10 year mark, where we can travel around the world, use our kinda reserve Bitcoin, uh, uh, holdings that we have and transact anywhere easily, very securely. Um, a lot of upside in it, most importantly, in my opinion, is provide average people a way to save money. Uh, there's nothing that hurts me more. Like I used to live in south America. I used to in Argentina where inflation got up high, I someones hundred for kids college and that's next year 50 right. Power costs. So, so way to fair all the world out their current economic much more easily. I think Bitcoin's a great way to do that.

Will Szamosszegi (00:49:53):

Yeah. A hundred percent. And I, I do think that that's a great way for people who might not necessarily be working full time. Like, like we are in this industry, still find a way to protect their wealth, have some of their wealth in. And when those payment methods get better and mature, there are actually cars that people can use now to find a way to easily pull from their Bitcoin wallet and pay almost like a debit card. But I think the infrastructure is still getting better and better. So ideally we'll have some options where you could have something like an Amex except it's pulling from your Bitcoin.

Jimmy Vaiopoulos (00:50:29):

Exactly. Right, exactly. Right. I mean, it's far better if you don't have to deal with any exchange fees. Yeah. Right. Like just deal, you know, people are just happy, accepting Bitcoin, right? Like there's no, nothing more to the story, right. There's no question of how do you get back us dollars or whatever other currency just you're happy holding Bitcoin. And you're spending that's especially international inter C's systems. And, uh, they, they, uh, it's not easy to open up a us dollar account there. As far as I've been told people have resorted to cryptocurrencies. It's just a common way to transact.

Will Szamosszegi (00:51:22):

I'd like to thank by for sponsoring today's episode block by provides wealth management products for crypto investors. I personally hold my crypto with block five because they pay me up to 6.2% interest annually on all of my crypto holdings at SA mining. We've hooked up all of our listeners with a special sign up bonus. All you have to do is go to block five.com/sa mining and sign up again, visit block five.com/sa mining for an exclusive bonus offer. It's a no brainer to earn additional interest with block by today's episode is also made possible by cogent law group finding reliable legal representation in blockchain is one of the biggest challenges when building a business unique to make sure that you work with a law firm that understands the legal frameworks that apply to the industry and has the ability to strategically help you grow your business. When researching law firms for SA mining, I found that cogent law group checked all of the boxes. Not only do their lawyers have expert level experience, but they also understand the blockchain industry, cogent law group gives you access to high end lawyers without breaking the bank. First

Will Szamosszegi (00:52:41):

Question is what is your

Jimmy Vaiopoulos (00:52:42):

Favorite book? Um, thinking about I'll give, you'll give a one and I'll I read recently that I absolutely so over iterations in, in many years. And what, why is something special in that context? So recommends and book read future of humankind, future of humanity was called by Kaku and it talks about human humankind and our, you know, earth is not gonna last forever. Neither is our, and I know this is obviously not just our eyes, but eventually human kind has to think about being interplanetary and, and, and exploring, right. Like just as a species, we've always wanted to know what was over the hill on the other side. Right? Yeah. So I've never read a book that talks so ly about the next steps become exploring space and going other planets and all that kind of stuff. And it talks about some amazing ideas and concepts

Will Szamosszegi (00:54:24):

Was by Kaku right.

Jimmy Vaiopoulos (00:54:25):

That's right. Yeah.

Will Szamosszegi (00:54:26):

OK.

Jimmy Vaiopoulos (00:54:27):

Yeah. He's theoretical physicist he's is a face that's kinda known in that, in that space.

Will Szamosszegi (00:54:32):

Yeah. He's, he's got a lot of great videos on YouTube also. Oh yeah. I've watched a couple of, couple of his,

Jimmy Vaiopoulos (00:54:39):

Yeah, no, it's I think that that's where that's, I first my interest and into, and was like big think or something on YouTube that, uh, that he some really cool videos.

Will Szamosszegi (00:54:52):

Yeah. Yeah. What was the most interesting thing that you learned in, in his book or just one of those things that when you read it, it just opened your mind.

Jimmy Vaiopoulos (00:55:00):

I've learned a lot about just even, you know, Musk and lot of the things thinking about how to get interplanetary, but you know, what it actually takes to go Intertel. So to go visit another solar system is, is, is, is mind boggling, right? So not only are you gonna need kinda, or would want stepping stones to get there, uh, you know, whether it's, you knows on to, uh, to, to comment and the outer outskirts of our, uh, solar system and, and kinda little jumping spots to get there. And, and also just the concepts of building self replicating robots to go out in these very dangerous areas. There's lots of radiation to build out that infrastructure and, and, and get ahead of that to research the so and so, so it's kinda the same similar concept, but you hard that teams doing that consciousness. Right? Yeah. And, and, and, and, and that's the easier way to go out there is, is just send that out there to space. And that out there puts is

Will Szamosszegi (00:56:41):

Iswell well,

Jimmy Vaiopoulos (00:56:41):

Uh, yeah, yeah, yeah. Singularity.

Will Szamosszegi (00:56:44):

Yeah. And he's, he's a big futurist, and that was one of the things that he mentioned, some of the technologies that he thought were going happen within our lifetime. It was just mind boggling, how quickly think some of these things are going happen. One of those being that, the technology that you just mentioned, which would be the ability to download consciousness, but, uh, and so essentially being like being able to upload your consciousness to the cloud, and then therefore, uh, in your example, able to, I guess, send that another that's very, very interesting.

Jimmy Vaiopoulos (00:57:19):

Yeah. Iwell, as far as I've genuinely thinks he's gonna be immortal, this, he, he's almost on it. Very interesting guy as well. It's love kinda thinking about all the potential outcomes alternatives of future's obviously it's in line parcel to my interest in Bitcoin, right. As a key part of our future as a society.

Will Szamosszegi (00:57:49):

Yeah. I mean, I think that the, the interest in these types of topics is it really draws in a lot of people to areas like Bitcoin blockchain technology, because you just, there's so much that you can keep digging deeper and deeper into all these topics, like, of course, blockchain and Bitcoin, but then these other topics of space travel, becoming interplanetary as a species. And, uh, and then just upgrading the human intellect with some of these things that neurals working on

Jimmy Vaiopoulos (00:58:21):

And yes, exactly.

Will Szamosszegi (00:58:23):

And who knows where, where that's going go

Jimmy Vaiopoulos (00:58:26):

Really. Right. Yeah. Some of it almost right. Potential, very interesting book, homo UALS into, of spooky, uh, future alternatives, uh, in, in the same light that we're thinking right now.

Will Szamosszegi (00:58:51):

Yeah. Yeah. After reading that book, I, I mean, I'd heard about the simulation theory before, uh, reading it.

Jimmy Vaiopoulos (00:58:58):

It was like the Fu in the future, we would want understand alternatives and make simulation at some point yeah. In our future. But I, I haven't seen,

Will Szamosszegi (00:59:04):

I think that that was the biggest jump in any of the assumptions too. Like that was like the biggest leap. The other one was just like, you have an unlimited time horizon and the other, and the third assumption in it is that you'd always be able to make an incremental improvement on technology. Right. Any point in time. So you're under the assumption that you're always and unlimited time assumption started in

Jimmy Vaiopoulos (00:59:36):

The, there it's, uh, uh, it's, it's, it's super interesting. Right. Cause I mean, you really never know. Right. It makes you question everything <laugh>

Will Szamosszegi (00:59:47):

Yeah, yeah. It really does. And then when you think about everything, that's possible, you, you just think that Bitcoin's gotta reach mass adoption with, with the way that technology's moving with the way that things are progressing, there's going to be a better, a continuous improvement and a better way to approach money and value. And the transfer of value and a system is as inflationary and can devalue the holdings of people within a society as the way that the current system set up. It it's, I'm not hating on the existing system. I'm just saying that there's ways to make it better now

Jimmy Vaiopoulos (01:00:28):

And exactly right. Yeah. I think, I think the question is just embracing what we've seen work in. And again, we've seen a lot of that start to happen. I, once, once you get to a certain critical level floodgates, more or less open, and there's no stopping at that point, right. Like just, you start getting real mass adoption just becomes part and there's no point in stopping. Right. It's so much, there's still a way to, we're not there yet, but we're moving in the right direction. That's for sure.

Will Szamosszegi (01:01:06):

Just 10 years when started, it started from a white paper to entire industry. I mean, hard to imagine where, where it

Jimmy Vaiopoulos (01:01:22):

Right, exactly. Right. Yeah. Like the, and I'm sure. Just like you said, you, we, we overshoot next year, but it'll hard. Comprehend Goss potential is, is, is, is huge for this. Yeah. And I think people are starting to realize it now, but still again, it's a, it's a slow crawl

Will Szamosszegi (01:01:50):

When you zoom in and you see the day to day activities happening, it can, it can always feel like things are moving too slowly or wish things were move faster. But then when you take few steps back and see what's actually going on in the entire industry and what's happening with, with the company, I mean, it's, it's incredible. What, what just a few years can do.

Jimmy Vaiopoulos (01:02:11):

Yeah. Best way to think about just thinking about, uh, when we started this to now and how the industry has come is, is really mind boggling. Like there's times where we couldn't even couldn't even get a bank account right now there's multiple banks to choose from. If we wanna loan it would've been next to impossible. Now there are many lenders, right? Like it's now, like in terms of the custodians, you, I mean, us banks are gonna start stepping into it, you know, fidelity. One of the large asset managers in the world is now setting up their own custodian. It's just a point now. So when in a stepped into the industry, so that's just time, it's easy that, and, and it's, but it's important to remember that, you know, we, we're moving and we're moving in the right direction.

Will Szamosszegi (01:03:05):

Yeah. Well, that's great. Thanks again for coming on this, this episode. And, uh, I guess the last thing is, are there any places on social media or online where you wanna let all the listeners, you, the company?

Jimmy Vaiopoulos (01:03:19):

Sure. First of all, thank you so much for having me. It was, uh, it was great chatting with you and obviously keep in touch and maybe do again sometime, uh, in terms of ways to connect with me, our website, our email, um, com and I get more active on social media, but my Twitter is act, uh, Jim J IM and then first part of my last name. So B a I, so J IM B a I O.

Will Szamosszegi (01:03:48):

Great.

Will Szamosszegi (01:03:48):

Well, thanks again. This was a lot of fun. We'll definitely have to do it again soon.

Will Szamosszegi (01:03:52):

Thank you for listening to this episode of the SAS mining podcast. Be sure to follow us on social media and YouTube for the latest updates and previews of upcoming episodes, full episodes and transcripts can be found on SA mining.com every Thursday. If you want to hear us interview a particular guest on a future episode, please reach out to us@podcastsamining.com.

‍