Kirk David Phillips (0:1.634)
All right. My burning crypto question of the day is I've heard all about this Bitcoin mining or I don't know, coin mining. And I also heard it's really bad for the environment. So what do you have to say about that? Well, welcome to the Kirk and Robin show, bringing you crypto OG and newbie conversations in 21 minute chunks. So I'm really glad you asked that question. That's one of my favorite questions. Actually, that's one of the which one, which one? Because I asked you questions.
Well, it's, it's, it's, was Bitcoin mining. First of all, as people obviously want to know what that is because that's kind of hard for challenging for people to wrap their heads around, but it's the environmental question. There's been so much fodder about that in the past couple of years. That's been overblown. Maybe you could say some spin, doctoring and propaganda perhaps from maybe certain, uh, you know, certain constituents and so on. So I really love this topic. It's especially on the environmental side.
So first of all, you want to break down crypto mining first and talk about that. Wrap your head around that. I know that your journey started with a question about crypto mining. didn't exactly correct. Yes. Go for it. So that's exactly what happened. Somebody said, Hey, I want to ask you for some advice about some, some mining. My husband and I want to spend a thousand bucks on a computer so we can mine some Bitcoin and make some money. And I'm like, what the heck are you talking about? And that was like 12 years ago, right? 12 years ago. You better get, you better go get your facts straight.
Of course I was the one who didn't know what he was talking about. So anyway, so just the thing is, is talking about Bitcoin mining or actually any other mining on any other blockchain. actually took me about nine months to wrap my head around what it was. So if it doesn't make sense to you, then don't just grab a little bit of it and it'll continue to kind of digest over time, you know, as you go along. So it's not physical. Is that correct? But you need something physical to do it.
Well, it's analogous to gold mining as Satoshi mentioned in the Bitcoin white paper. So basically what, you would, the question is how much time do I have to describe it? If I had 30 seconds, I might say it in one way, a minute I might say it in another way, but essentially, yeah, well, we got 21 minutes. Thank you. Thank you, Satoshi. So, so the thing is if I had the
Kirk David Phillips (2:23.352)
distill it down into the most simple way to say it, which is that Bitcoin mine is essentially where participants basically supply computing power to secure the network. That's really what it is. And because Bitcoin is not a company, doesn't have a CEO, doesn't have an office building, doesn't have a corporate headquarters, doesn't have employees. Now there are companies that do participate. So there are formal entities and companies that do participate in the Bitcoin network, but the Bitcoin network itself.
and Bitcoin, the coin, is an extra could be part of the network is not a centralized entity. Okay. So suppose for just a second, slow down for a moment. Cause I'm still back on power to supply the network. Like that's, I'm still like right there. Like, what does that, what does that mean? What does that look like? What does that even, what is that? It's computing power. So supplying computing power, right? That's the thing that people are supplying. And the reason I was going down the
path about describing the decentralized nature of Bitcoin is because the whole question is, well, if it's not formal, like basically if you have a company, well, you hire a new employee, what do you do? Well, you nangle a carrot and say, here's your compensation package, including stock options and blah, blah, blah. That motivates them to come. Well, if you don't have that because there's no company, how are people gonna show up? Where's the carrot? The carrot is the Bitcoin mining rewards.
Right. come out of certain people who've choose to participate for the miners. Yes. For the miners. So basically what's going to incentivize one person or now what's basically industrialized operations. So what's going to incentivize a company to go invest hundreds of thousands to millions of dollars in specialized computer equipment, then hook it up to the Bitcoin network to secure the network. What's going to motivate them to do that? That's the question. So the, motivates them is, is the Bitcoin rewards.
that are baked into the protocol so that when they mine a block successfully, it automatically produces a Coinbase reward, which is the, uh, the Genesis. It's like the, first Bitcoin is, is born every block. There's some Bitcoin that comes along with every block that's mine. So the rewards are baked into the protocol. That's the point. Otherwise nobody would show up. Not nobody, but generally you wouldn't have an incentive. So again, this is, I'm to give you like the corporate analogy. Yeah.
Kirk David Phillips (4:40.610)
You know, like saying employees are incentivized. What's the carrot in the corporate analogy? The carrot in the Bitcoin situation is that there's Bitcoin rewards and we know that there's a marketplace and Bitcoin has value like any other market. Can you? Okay. So I'm, know, I'm a little bit stuck on like, is it producing exactly? So can you give me any kind of like analogy, something that I can wrap my head on and get around because it's like, okay, well, what, what, does producing a block even mean? mean,
You know, I mean, it's just it's like a Pandora's box, right? It's like one thing leads to another. Yeah, it's like it's a rabbit hole. It's a rabbit hole. But I'm trying to get you. I'm only just trying to scratch the surface right now. So that's why I just started off with saying that essentially just to give you the economics of it, if there's an incentive and then the incentive is the monetary incentive is the Bitcoin reward. And then what is the what's the consideration? The consideration is computing power. OK, computing power secures a network. Like I said.
uh I've heard different types of explanations as far as like talking about Bitcoin mining is like bingo or like a game of chance or like the lottery things like that. So again, you could, talk about this for, you know, hours. Like I said, I thought about it for nine months, the building. All you're trying to do is just grab some piece of it to make sense and then you're good because over time it'll make more and more sense. Right? So anyway, so what happens is that the miners are basically racing against one another.
Okay, so only one minor out of, know, however many there are thousands and thousands of miners that are out there. Miners think of a minor as one computer. Okay. Not a person, but a minor as a computer. So think about it. a specialized computer that has intense computing power, intense computing power designed specifically for one and only one thing, which is Bitcoin calculations. So basically, so basically you've got all these miners hooked up. Miners equals computers. Okay.
And the goal is to race around fast enough to make a calculation. That's the winning calculation. Again, I think of it as the lottery ticket, the power ball. It's to give us a little bit loosely, like a Bitcoin power ball. Whoever gets that lucky number in this case, it's you didn't just sit there, pick a number and then hope by chance this you're actually doing the work though. Okay. You're doing the work to try to be the winning problem solver. Okay. So, So, but can you, can you, um, compare this in any way to
Kirk David Phillips (7:6.062)
printing of fiat currency. mean, like, is there any way for you to make that kind of analysis? Oh, not at all. Not at So it's not like, I can just create money. It's not that or it is, but that's why I asked. Well, first of all, that's a conversation for another day, because that could be other blockchains, other projects and so on. So if you want to bring that one up as a brain teaser, just file that one away. But we're talking specifically about Bitcoin. No, there's no correlation at all.
in any way whatsoever to 24 hour printing presses. Let's just turn on the switches, print as much money as possible whenever we need it. As a government central bank, we just turn on the printing. Actually they're on all the time, multiple, uh, you know, manufacturing plants, if you will, minting operations, the mint, like the us mint and so forth. Right. And they just sit there just printing money nonstop. That's it. So that's the metaphor. This is not at all. That's the complete opposite.
Absolutely. 100 % complete. brain's just a little bit twisted. So anyway, so the miners are supplying computing power. And then like I said, there's these miners are racing around to be the one who solves this mathematical problem and won't get into the weeds on that. Cause that could provide even more confusion. But I just heard most recently what the, uh, the current hash rate is, which is just the total, um,
computing power supplied at any one given time. And it's, it's, uh, so like right now it's about 800 quadrillion hashes per second or 800 quadrillion calculations per second, which is this absolutely mind blowing. It's a number. basically the difficulty of the network, which is again, that just means the number of these computing power, right? The number of calculations that's going up like dramatically, exponentially. It's just, or if you look at it from the beginning of time until now, that's why
It's like an industrialized operation, meaning that you have big server farm type operations. And a lot of these Bitcoin miners are even publicly traded companies, interestingly enough. Right. Yeah. So everybody's trying to outcompete each other to win the block reward, which right now is 3.125 Bitcoin times say 80,000. So whatever that is about, you know, 240 to $250,000 if you were to win, if you were to solve the block. So when you solve that computation, what that means is you then get to add a block to the blockchain.
Kirk David Phillips (9:31.406)
So you get the Bitcoin reward you get the honor of Adding the latest block the newest block to the blockchain and think about the blockchain is like an office tower in New York Manhattan there's the crane building the latest skyscraper and you see them, know, whatever floor they're putting on today That's the latest block. The next floor is the next block. But it's finite, right? It's fine. Yeah, it's it's the ever-growing skyscraper that goes up into the sky in perpetuity and
Never ends. well, no, fine. I mean, because I thought I thought you could. Oh, I you meant infinite. Yeah, sorry. I it's infinite. It is infinite. Yes, it's infinite. But what about the limitation? There's only so much Bitcoin in the universe. That doesn't stop. That doesn't stop the block. The blocks. Think about the block. Stop the block. I like that. Oh, there you go. Stop the block. Stop the block. So a block is all you got to think of is a block is simply a container, whatever your favorite kind of word is for container, a bucket, a package.
Okay. An envelope, anything. A block is simply a container of transactions. So right now, if we did a Bitcoin transaction right now, whoever around the world is passing Bitcoin back and forth, sending Bitcoin from, you know, one wallet to another right now, those transactions basically get grouped together into a pool. So it's like temporarily kind of packaged together and the miners, the miners are all assembling them in a block ready to, if they happen to be the winning
minor, then they'll go ahead and like publish that block, is that container or transactions. That's how transactions get to the blockchain is in packages. does that publication of a new block help the crypto universe and people in it? What is the value of that? What's the benefit to humanity? guess. Well, there's two benefits to me and the first we have the most secure uh network that we've ever had. The most secure thing we've ever had in human history.
So basically, and this is in a network where you don't have to have any trusted parties come together. You don't have to, the actors don't have to know one another. You can have, uh, you don't have to trust any the other parties. And yet at the same time, the network is resilient. That's why this thing is beautiful. If you got to go, go read the Bitcoin white paper, the Satoshi white paper on this, it's actually an easy reads four or five pages. It's basically plain language and everybody should read it to get inspired. Then you get it like, wow.
Kirk David Phillips (11:55.532)
Okay. That's freaking amazing. So Bitcoin, mean, to me, Bitcoin is amazing every single day. Every day I look at it, I see a little bit newly, a little bit differently, and I'm even more all and wild and so on like every single day. So it's an amazing thing, right? However, so you have that. So you have the ability to transfer value among peers without a third party. So there's no banks. We've never had this before in human history. How do you do that in a way that is actually works and, and, a ledger that's
that's unalterable, right? That kind of thing. it's like, we always, the third party problem is the piece that couldn't be solved before. It always came to, oh, then we're gonna have some intermediary in the middle that you gotta trust. Well, we know what happens when you trust intermediaries. 2008, great financial recession and on and on and on. shenanigans. Third party equals financial shenanigans. Cause that's the way human behavior works. If something can be corrupted, it will be corrupt.
That's just how it goes. So finally, you have an anti-corruptible type of a network here. So there's just like an altruistic effort in a way. I mean, aside from the fact that individuals get some kind of monetary reward. Well, there might be an altruistic kind of a thing that goes along with it. It's a little bit like a religious aspect. It's just so awesome that people just love it and evangelize.
But no, it's just, it's just a superior network. It's the most superior network in the entire world of all networks. The most superior asset is Michael Saylor says it's the apex asset. Anyway, to move on quickly is that the other value proposition that's the one. people are still trying to wrap their heads around what is Bitcoin. Okay. Right. What is Bitcoin mining? What is Bitcoin? Right. And so on. Right. People are still trying to wrap their heads around that. There's nothing physical. I think that's the thing. Right.
Well, they don't they don't. Well, first of all, they don't understand why does it have value? But that's save that one for another day. Why does it have value? OK, so he doesn't have anything physical. so I guess we're getting to the environmental piece very soon. I guess that's hang on. Yeah, the cloud. OK, you're still hanging on. We're to get to the electricity piece. Right. So the other piece of it is, like I said, people are still trying to wrap their head around it. So and even getting to that, there's still a whole what I think is another parallel value proposition piece.
Kirk David Phillips (14:12.800)
into the Bitcoin equation that is overlooked, I'd say by image, only the OGS, I think the insiders, I'm saying insider, but the people who've been around a long time have studied it, realized this, right? So you got this, there's two parts. One part people are partially understanding and the other part's not understood at all. And the other part is the immutability factor. What's immutability? That means the, that means something that cannot be altered. Yes. Or in this case, it's, it's not, it's not, it wouldn't be accurate to say it's impossible to alter.
the Bitcoin ledger, right? So every one of the nodes is, and again, every, every miner is a node, but not every node is a miner. So you can actually run a node, but you don't have to be a nine miner. So you can actually participate altruistically, as you just said, specifically in Bitcoin, you can do that and run a node, but it also gives you the ability to make sure you have your own current version of the, of the ledger of the transaction set. So everybody has the same version. That's what's beautiful about it. This is replicated perfectly and beautifully. Everybody has the same record of transactions.
Right. But anyway, it's infeasible to alter the Bitcoin blockchain. That's why it's the most secure network in the world. It's the most secure record that we have in the entire world. That's the hidden value proposition. It would be a major pain in the ass or like it would be too expensive. Okay. It's a game. It's a game theory penalty. Think about it like that. Okay. So from like, know what that is either.
Well, it's just game theory has to do with game theory. could be like in mathematics or actually in games or anything like that. So it's just take it on the face value. Okay. Game theory. Just let it wash over. Yeah. Game theory. All right. So I know we do need to get into the environmental impact part. And I'm guessing that when you say we have these, are you not? Oh no, no. Sorry. Yeah. Go ahead. Well, when you have these like computers that are producing
that like massive amounts of power. That's where the environmental rub comes in. So what's the myth? What's the facts? You know, like there is something, some truth to it. So let's speak to the truth. Okay. Well, there we go. It's the perfect segue right from the immutability aspect. So again, this one thing to wrap up on game theory, which is the reason fraud happens in most places is because actually the it's fraudsters want to do the, I get the highest return with the least amount of work.
Kirk David Phillips (16:35.308)
Right. want to steal effortlessly. Right. Okay. So there's an incentive to do that because it's less work. Cause however, in this particular game, the incentive, if the incentive is to actually play by the rules, right. Rather than try to cheat. If you try to cheat, it actually was expensive for you. It would cost you money. It's actually rewarding to play by the rules. So it actually flips game theory around, which is really interesting. Okay. So yes. So what is the, what, why does computing power
You know, if it's so much computing power, then obviously that's going to be expensive, right? How do you run computers? What's the resource needed to run computers? And that's where the environmental fodder comes from. That's where the rub comes from. Well, let's speak to the truth of it. So what's true about it, it does take a lot of computing power, lot of requires a lot of electrical input. That's correct. Okay, great. Now. And yeah.
Yeah. And what else is there? So the first thing I think of, well, the first thing to acknowledge is it's, uh, this is a can taken completely out of context. The first thing I think of when I've ever heard this conversation, the very first thought is I think of USPF, the United States Postal Service and all those trucks that are riding around delivering paper mail. You want to take a talk about a complete absolute waste of resources, delivering paper mail, and especially in the age of a digital documents. Now I get that there's, we're not in Star Trek yet. Okay. So we can't, we can't beam packages.
and physical packages around. get that. Okay. We're not there, but anything else that's paper mail, which I still think is a huge majority of what's being delivered. It's an absolute waste having these trucks travel all over kingdom come all the maintenance facilities, all the millions of dollars in equipment, all the gasoline being burned up, all the oil in the engines being burned up. How about that line item? Okay. Let's look at that line. All right. Let's, let's, let's not beat up on the post office because they've been taken a lot of beaten for, think, no, not
great reason, but you know, like I get that. but if you're, you're not, if you're, let's not compare it to anything else. Let's just say, okay, yes, it burns up a lot of electricity. What, what is, what is, what is the crypto industry, if you will, thinking about in terms of solving some of that?
Kirk David Phillips (18:48.994)
So let's like maybe look forward a little bit. Right. Well, the first thing is if you're to look at what Bitcoin's burning up a resource, let's look at other companies, please. Let's be fair. Let's go down the list. Look at where they're wasting resources. Then we can talk about it. But until then, there's no conversation to be had. Don't demonize the crypto world. the interesting thing is actually Bitcoin miners are incentive. The number one cohort. All right. Of uh electricity consumers that are incentivized to
Go seek out and use renewable energy. There's no other group that does this. So they're looking for wind power, water power, any of these types of renewable renewable energies, including, yeah, including off gases from, uh, old, uh, dump sites, waste sites, and so on and so on. Old capped off gas, uh, where gas drilling used to take place. All these, they could, tap into these, these are wasted resources. Otherwise just actually literally going to waste. You can capture that. That's like free energy in that.
So anyway, we could go down that and have a whole nother rabbit hole there, but in the interest of our 21 minute commitment. So here's the thing. Here's the thing. When you look at the value of having something and I talk about human behavior, okay. And fraud and shenanigans, it's baked into human behavior. Unfortunately, if we look at how do we solve that? This is the immutability factor. We actually have something that's unalterable.
You mean the mining of crypto? Yeah, you can't change the Bitcoin ledger, which means you can prove that information hasn't been altered. You can have hashes of documents and prove that millions of documents have not been changed. No shenanigans. What's the value of that? I assert that the value of that is so high that actually I would actually phrase it the other way. And so, wow, that's all, that's all we're burning to get that value proposition. That's it. And here's the other thing we could wrap it up with. I want to talk about fraud. If you look at the global estimated global
for occupational fraud and abuse by the ACFE Association Associations for Certified Fraud Examiners. They estimate that global fraud and abuse is about 5 % of global revenue, which is trillions of dollars, which will place global fraud in the top 10 GDP for countries. So there you go. Fraud is a top 10 country, right? That supports my argument. That's it for today. Okay. All right.
