BTC218: Bitcoin Mining 101 w/ Adam Haynes (Bitcoin Podcast)
52:09 Share

You're listening to TIP. Hey, everyone. Welcome to this Wednesday's release of the Bitcoin Fundamentals Podcast. On this week's show, I have the talented Adam Haynes from simplemining.io to take us back to the basics.

Since focusing on Bitcoin full-time on the podcast, I find the conversations tend to only go deeper and deeper down the rabbit hole. But this week, we're going to take a step back because I know we have plenty of new people showing up to the Bitcoin scene, and we're going to cover Bitcoin Mining 101, a crash-level course. Adam does an exemplary job making this topic accessible. So without further delay, here's our chat that you can share with all your family and friends that always ask,

Yeah, but how does Bitcoin mining work? So this is the episode to find and share with them. All right, guys, I hope you enjoy.

Hey, everyone. Welcome to the show. I'm here with Adam Haines, and I am pumped to do this because you know what? So many of the conversations that we've done over the last year or so get so down into the weeds, and sometimes you got to zoom out. And I mean, the whole show isn't going to be 101 style, but when we started off here, I want to talk about mining 101. The reason I want to do this, when I talk to family and friends, one of the first things that comes up, they're like, okay, you're in Bitcoin. Help me understand what this is.

And then it almost always goes to, "Help me understand mining. How are you mining an imaginary coin that doesn't even exist? What in the world is that?" So this is where I want to start, Adam. And it's just a really simple question. Why do we need Bitcoin mining and what's the purpose of having this as part of the network? Adam Draper : Yeah. Well, just wanted to say I'm grateful to be here today. I've been a big fan of the show for a long time.

We're sitting here January 3rd, 2025 recording this episode and that's the 16th anniversary of the Genesis Block. So pretty exciting to be here running a Bitcoin mining company and getting to record a podcast with you here today on that anniversary. So thanks for having me. Really, really appreciate it. Robert Leonard : Great highlight, by the way. 16 years on the day. It's unreal. Nick Huber : Yeah, exactly. So maybe we could just start off with talking about what is Bitcoin mining?

Bitcoin mining is just the process of verifying transactions and adding them to the blockchain. Now, maybe we can break that down a little bit further because there's a lot of buzzwords that you hear in Bitcoin blocks, blockchain, so on and so forth. So really simply, a block is just a set of transactions. So Joe sends Bitcoin to Sally, Sally sends Bitcoin to Jim, so on and so forth. Every single block of Bitcoin has a

a few thousand transactions on average. And those blocks are added to the blockchain in a sequence. So there's one after another, on average, about every 10 minutes. And this is done as sort of Bitcoin mining's security in order to ensure there's no double spend. It's a very important and very unique process.

solution that Satoshi came up with in order to prevent the double spend and getting to that decentralized consensus for transactions, being able to actually verify a transaction without having to trust a centralized party. So that's kind of a high-level overview. Robert Leonardu : No, I love this last point that you just made is you're doing this without having to trust anybody. There's an article

written by a gentleman. He goes by Gigi. And the name of the article is Bitcoin is Time. We'll have a link to this in the show notes. And when you're talking about trusting outside entity, because I think the question that comes back to me whenever I talk to family and friends about this kind of stuff is like, well, why do you need them in blocks? Why do you need to do that? And I think Gigi would argue, and I'm curious if you agree or have another kind of take on this, but he would argue that the reason you have to have blocks is because

you can't trust somebody to tell you the time. So let's say we wanted to have these thousand transactions, you turn them into a block and you're saying, "Okay, what time is it?"

It's 9:23 in the morning on whatever day of the month of the year. And you would timestamp those thousand transactions as happening right at that moment in time. And then it'd be like, "Okay, what are the next thousand?" And then how are you getting that time and how are you getting it in a way where you're not having to trust somebody to tell you the time? Because if you have to trust somebody to tell you the time, whoever that trusted agent is that's marking these times, they

they have control of saying, "Well, it happened five days before." If they go back and they adjust the server, they could say it happened five days before or they can manipulate the entry of the time itself. I'm sorry, I think this is such an important point that you made though, which is you can't trust anybody and that's why these blocks exist in the first place. But go on, keep going.

Exactly. No, it really goes into the genius of Bitcoin itself and Satoshi. You've commonly referred to the blockchain sometimes as a time chain. And that sequence of adding transactions one after another, and then the verification that is gone through. So maybe we could get into nodes. I think nodes is maybe, especially as you're coming in, if there's new entrants coming into space, trying to learn more about Bitcoin mining, I think nodes are an important aspect of that. Yeah.

So what is a Bitcoin mining node? Or excuse me, a Bitcoin node. A Bitcoin node is simply just, it can be an everyday computer. It's nothing fancy. It does not require...

these crazy high power computers that you use for the mining, a node can simply just be an everyday PC. That node is going to be running the Bitcoin software and going through and it goes through and verifies that everything that is on the Bitcoin network is true and accurate as of now. So you will go through when you set up a node, we have a node running here in our office. When you have a node set up, it's going to go through and one by one, every single transaction since the very first Bitcoin block

it's going to go through and verify that all of those transactions are true and accurate. And it's going to take some time. It's currently, I think, around 700 gigabytes of data to go through and verify all those are true and accurate. And ultimately, those nodes is what gives Bitcoin consensus that all the transactions from the very first day that Bitcoin started 16 years ago to today are true and accurate. It has nothing to do with the miners.

The nodes are going to verify those transactions, they're going to broadcast those, they're going to send those transactions to the mempool. And then after the miners confirm those blocks and add them, then they're going to update that on the actual, the nodes are going to confirm that on the blockchain. So that's a little bit more in depth and it's very fascinating how important that is so that you don't have to rely upon that trust. You have these set of nodes around the world that anybody can participate in.

And that's extremely important as it goes to that double spend problem, because you, I, and everybody else, if we own Bitcoin, if we hold our own private keys, and we want to verify that the network is true and accurate, and there's no illicit activity going on, we can run a node and verify that everything is true and accurate every single block that gets added on average every 10 minutes. Trey Lockerbie : The only thing that I would add to help maybe illustrate this for people when you're talking about a node,

A real world kind of similarity to this in the gold market is you have what's called an XRF spectrometer device that will authenticate whether the gold is real or not. So you hand me a gold bar, I look at it, I'm like, okay, it looks like it's metal. I guess this is gold. I think it's gold. But you can take one of these devices and what you do is you use x-rays to excite the atoms inside the gold, and then the radiation that it emits back out of there will

will tell you whether it's a real gold atom or not, and that's how you know if it's real. In Bitcoin, the node that Adam is highlighting here is effectively looking at every single, like you said, every single transaction back to the Genesis block. And if it's not going back to the Genesis block, the math isn't going to work.

that's being performed because it's very easy to do the math in reverse, very hard to do the math to find a block in the mining process. But the node can check that math very quickly by basically starting at the last block. It goes clear back to the Genesis block and you can confirm that you're dealing with the real, in fact, Bitcoin when you would receive a transaction. So let's talk about the process of mining a block because I think that's where it gets

people will say, "Oh, it's doing complex math problems." And so dispel that rumor, talk about what in the world that is and how it's basically finding one of these blocks. Nick Huber : Yeah, yeah, yeah. I love the gold analogy. It really makes it an easy visualization to break that down. I just had a utility company visiting our headquarters here last week actually. The first question that we always get asked is,

What's going on here? What is Bitcoin? What is Bitcoin mining? They walk through, they see the computers sitting on the shelves, they see our repair team fixing these broken computers, and they go, what in the heck is going on here? The analogy to mining was actually first referenced in the white paper. Section six of the white paper, Satoshi talked about how expending CPU and electricity is analogous to gold mining. So that's kind of where the mining portion of things actually stem. This is not...

we're putting shovels in the ground and trying to find Bitcoin like any other commodity. This is very much using compute power and electricity to solve hash functions and then basically get that block reward, which is what the miners are all competing for. So as Bitcoin first started out, the Bitcoin block reward was 50 Bitcoin every single block, every 210,000 blocks. I'm sure most people have heard of this. Approximately every four years, every 210,000 blocks, that block reward is cut in half. So

so on and so forth until the very last Bitcoin will be mined in 2140. The gold analogy is, I think, very beneficial because you can look at expending real world resources in a large, large capacity in order to be able to produce Bitcoin. Trey Lockerbie : One of the things that I think is a really important highlight when we're talking about Bitcoin, everybody starts getting into the energy consumption.

And how they then draw this interpretation that the energy consumption within four years, and we've seen these articles for a decade now, that the energy consumption is going to take up half the planet's energy in four years from now. Why are these articles always wrong? What are they missing with respect to what's happening here? And for the person that's wanting the 101 newbie version or the, I'm brand new to Bitcoin, help me understand this. Why is that just a very bad take?

Yeah, it's a really bad take. I think there's an article a few years ago talking about how Bitcoin mining was going to use more and more energy than the entire world consumes by 2020 or something along those lines. And the reality of the situation is Bitcoin uses around 1% of 1% of all of the energy usage in the world. It's 170 terawatt hours of energy approximately right now.

There's a few components of that. I think there's been this assumption and kind of preconceived notion that energy usage is inherently bad, which is just not true. Energy usage is what's propelled us to have the quality of life globally higher than it's ever been in the history of the world. Our quality of life today globally is outstanding. You know what I mean? And it's only been excelled by the increase in energy production. So I'm a big proponent that we need more and more energy production over time.

not less. On top of that, Bitcoin miners in general are always seeking the lowest cost of energy in order to be able to be profitable. Bitcoin miners, us and everybody else around the world are very incentivized to go get that low cost of power as low as it possibly can be.

And typically that is going to be renewable energy, number one. Over 50% of the entire Bitcoin network, it's estimated currently, is using renewable energy. We're based in Iowa, Cedar Falls, Iowa is where we are based out of. In Iowa, we have the highest percentage of wind power production in the entire country for our state. So almost two thirds of our energy production here in Iowa is renewable energy, predominantly from wind energy.

You also have other sources of energy, stranded energy. So Bitcoin miners are very incentivized to go find those very low cost of energy and maybe those stranded sources of energy. And that's great. And again, I think that we are only going to need more and more energy production over time to continue to enhance that quality of life. It's one of the easiest metrics to track globally for human quality of life per capita is annual kilowatt hours of electricity consumption. Let's take a quick break and hear from today's sponsors.

As Bitcoin's role in global financial landscape evolves, understanding its potential impact on your wealth becomes increasingly crucial. Whether we see gradual adoption or accelerated hyper-Bitcoinization, being prepared for various scenarios can make the difference between merely participating and truly optimizing your position. This is why Unchain developed the Bitcoin Calculator, a sophisticated modeling tool that helps you visualize and prepare for multiple Bitcoin futures.

Beyond traditional retirement planning, it offers deep insight into how different adoption scenarios could transform your wealth trajectory.

What sets this tool apart is its integration with the Unchained IRA, the only solution that combines the tax advantages of a retirement account with the security of self-custody. In any future state, maintaining direct control of your keys remains fundamental to your Bitcoin strategy. So explore your potential futures at unchained.com slash fundamentals. That's unchained.com slash fundamentals.

I'm not exactly a tech genius, but I know one thing for sure. If I want my business to succeed, I need a good-looking website. Bluehost makes getting a website up and running easier than ever before. With their AI design tool, you can quickly generate a high-quality, fast-loading site instantly. I could customize, optimize, and monetize everything exactly how I wanted. And within minutes, I had my site up and running. You definitely don't need to learn how to code.

Bluehost has me covered 24-7 with top-notch security. I can sit back, relax, and focus on my customers, not outside threats. It doesn't matter if you're a content creator, an entrepreneur, or a blogger. Whatever your hustle may be, Bluehost has everything you need to build and secure your online presence quickly, easily, and reliably. So make 2025 your year and launch your dream website today. Head over to Bluehost.com and start building something special.

That's Bluehost.com.

Trust isn't just earned, it's demanded. Whether you're a startup founder navigating your first audit or a seasoned security professional scaling your GRC program, proving your commitment to security has never been more critical or more complex. That's where Vanta comes in. Businesses use Vanta to establish trust by automating compliance needs across over 35 frameworks like SOC 2 and ISO 27001, centralize your security workflows, complete questionnaires up to five times faster, and proactively manage vendor risk.

Vanta can help you start or scale your security program by connecting you with auditors and experts to conduct your audit and set up your security program quickly. Plus, with automation and AI throughout the platform, Vanta gives you time back so you can focus on building your company. Join over 9,000 companies like Atlassian, Quora, and Factory who use Vanta to manage risk and prove security in real time.

My audience gets a special offer of $1,000 off Vanta at vanta.com slash billionaires. That's V-A-N-T-A.com slash billionaires for $1,000 off. All right, back to the show. You know, something else that I think is an important consideration. So you could pull out a piece of paper and pencil and a calculator and start doing the math to mine a block.

Your chances of finding one is probably almost nonexistent doing it this way because you're so slow relative to a specialized ASIC computer that is fine-tuned to guess through the outputs as fast as humanly possible or as fast as a computer could possibly do it. Something that I think is lost on people on the energy side is Moore's law itself.

in that, let's just look at going back to mining gold, for example. You used to be able to go out there with a shovel, try to mine gold and find it. Through time, we come out with better inventions so that you can dig it up faster, that you can refine it faster. All of those things, we harness technology to get more efficient. We power this with energy to do it more efficiently than with our muscles. And

And I think Bitcoin mining is no different than that. A rig that we can purchase today is drastically different than a rig that you could purchase

eight years ago, that is consuming how much energy, how much more energy would you have to use with the rigs from eight years ago than the ones now? Like 10X more? Robert Leonard : Oh, easily 10X. Yeah. I think a very important piece that gets lost very quickly just because you're looking at the overall net energy usage instead of the efficiency gains that we've seen in the technology. And maybe we could go back a little bit throughout history of Bitcoin mining and see how things have developed.

When Bitcoin was first launched, all mining was done via CPU on a computer, which is a very slow, it's very slow and not very efficient way to do this particular process. About a year later after Bitcoin was launched, the famous Bitcoin pizza guy, Laszlo, he was actually the inventor of GPU mining. So graphics processing unit, it does a much more efficient job of doing these processes than a CPU does. Robert Leonard :

So that went on for a couple of years, and then we upgraded to ASIC, the application-specific integrated circuit, which is a computer in specifically a chip that is designed to do one process and one process only, extremely efficient. And we've seen large manufacturers such as Bitmain and MicroBT.

these units and continue to get them exceptionally more efficient over time. A few years ago, when we first were starting this company, we were looking at machines that were 35 joules per terahash is the rating of how much power it takes to produce one

tera hash of hash power. So now we're getting into the low double digits of the joules per tera hash, 12 joules per tera hash. So we've seen a 3X efficiency gain just in the last few years where these machines are able to produce a significant amount of more hash versus the power that they're using. Robert Leonard :

Adam, talk to people about this idea that Bitcoin is one of the most ESG friendly and incentivizes ESG probably more than any government policy or anything that's ever existed. People are probably hearing me say this right now. I'm rolling their eyes. There's no way. Explain how that is the case with respect to...

If there's really cheap and abundant energy and maybe no infrastructure there, Bitcoin is the only technology that I know of that naturally incentivizes the capturing of this super low cost abundant energy in said place of the world, anywhere in the world. Talk through this. Robert Leonard : Yeah, there's a few things I can touch on this. So one quick brief overview you can highlight is in new areas, there's this project called Gridless in Africa, if you're familiar.

with that project. And it's kind of this chicken and egg problem of you have a society that's looking to develop and obviously needs electricity production in order to continue to expand and grow over time. And so there's a demand for electricity. But in the beginning, when this growth is just starting, there's not much demand for electricity. It's incremental and it increases over time.

And then you have the developer situation of we need to create electricity generation and make an investment into producing electricity, but we know there's not going to be very much demand in the beginning. So you can help balance this chicken and egg problem by introducing a fixed level

load that's going to consume a very large amount of electricity all the time, 24/7, 365, and will be a buyer of that energy in order to help the economics make sense of deploying that energy producing project.

And that's really interesting. And Adam, I think it's important to also highlight to the listener, this energy that we're talking about is maybe a waterfall or maybe it's geothermal. It's already happening. This energy is going to take place whether somebody's there to harness it or not. It's going to be spewing over the side of the hill or it's going to be this hot water that's flowing through the ground, no matter whether you're there or not.

And so, now you have an incentive for somebody to go in there and build the infrastructure to start capturing it and to start powering the local community in a way that's never been done before because it takes a lot of money. It takes a lot of...

who's going to be the buyer if I spend $30 million plus to come in here and build the infrastructure? Is there going to be enough people to utilize it? Well, now with this, you've got a buyer. You've got somebody like yourself that'd be happy to set up some rigs there to start consuming this. And then there's the competition within the local community. Sorry to interrupt. This is

For me, this is the point that I find when I start having conversations with people, they immediately go, "Oh, well, it consumes too much energy." It's this, it's that. And it's really frustrating because it's literally the polar opposite. It's literally the opposite. Preston Pysh : It's fascinating because again, it's a misconception in the fact that people think that Bitcoin mining is going to be taking energy away from other use cases, from other quote unquote more important things.

which is just not the case if you analyze supply and demand. Very simply, Bitcoin miners need a very low cost of electricity. And anytime there's going to be demand for any other uses such as air conditioning, lighting, any of that, any basic function that's going to consume electricity is going to outbid Bitcoin miners. And that demand would drive Bitcoin miners away if there was not enough supply. So it's a very simple supply-demand analysis.

We can relate this to maybe our situation here in Iowa, where there's an abundance of wind energy. Like I said, we have the largest percentage of wind power production in the country. And you run into a very unique situation with renewable energies, as you and I both know. If the wind isn't blowing and the sun isn't shining, you still have to have energy produced from somewhere. And we can get into all this. It's definitely a long conversation on getting into the weeds of renewables and government subsidies and baseload and whatnot.

But from a high level, there's an abundance of energy here in Iowa, call it 98% of the time. We have a lot of windmills and a lot of cornfields here in Iowa, and that's about it. So what we're able to do is have very unique agreements with our utility companies, where in the off chance that there isn't wind energy being produced, it's a very calm day, maybe it's a calm day and it's also cold outside, so there's lots of demand for heating in the winter, we're actually able to curtail our operations

we can shut down our full load within 60 seconds at our facilities to help match that supply and demand. The grid has to operate at 60 hertz 24/7 365, or you get blackouts. And nobody likes blackouts during the middle of winter. So it becomes this really unique opportunity where you can actually incentivize the growth of more and more renewable energy

by building out these load centers that are flexible. And that's what a Bitcoin mining facility is. It's a flexible load center. We can very quickly ramp down and ramp up to match the intermittency of renewable energy. Let's take a quick break and hear from today's sponsors. I've been playing prize picks recently, and I have no idea why I waited so long. There are several reasons I enjoy using prize picks to get some football action.

First off is the ease of use. I can quickly deposit money into my PrizePix account with my MasterCard. Second is the opportunity set. With PrizePix, I can win up to 1,000 times my money. And lastly, the NFL playoffs are starting soon, so why not get involved in the action for the last few weeks of the regular season and even the playoffs?

So if you think Josh Allen is going to light up his next opponent for 250 passing yards, or if you think Lamar Jackson is going to throw for more than 1.5 touchdowns, PrizePix is the place to be. Cook up whatever hot take you can imagine with your friends and win real money this football season when you and your crew run your game on PrizePix. Download the app today and use code WSB to get $50 instantly after you play your first $5 lineup.

Download the app today and use code WSB to get $50 instantly after you play your first $5 lineup. PrizePix, run your game.

For decades, real estate has been a cornerstone of the world's largest portfolios, but it's also historically been complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real, tangible assets without all the complexity and expenses. That's the power of the Fundrise flagship real estate fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10.

4,700 single-family rental homes spread across the booming Sunbelt, 3.3 million square feet of highly sought-after industrial facilities thanks to the e-commerce wave, the flagship fund is one of the largest of its kind, well-diversified, and managed by a team of professionals. And now, it's available to you. Visit fundrise.com to explore the fund's full portfolio, check out historical returns,

and start investing in just minutes. That's fundrise.com slash WSB. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement.

This is a message from our sponsor, Intuit TurboTax. Taxes was dealing with piles of paperwork and frustrating forms, and then waiting and wondering and worrying if you were going to get any money back. Now, Taxes is easily uploading your forms to a TurboTax expert who's matched to your unique tax situation.

An expert who's backed by the latest technology, which cross-checks millions of data points for 100% accuracy. While they work on your taxes, you get real-time updates on their progress. And you get the most money back, guaranteed. All while you go about your day, no stressing, no worrying, no waiting. Now this is taxes. Intuit TurboTax. Get an expert now on TurboTax.com. That's TurboTax.com.

Only available with TurboTax Live Full Service. Real-time updates only in iOS mobile app. See guarantee details at TurboTax.com slash guarantees.

All right, back to the show. So a person who comes onto the scene and they see this and are saying, hey, this makes a lot of sense. The next question that you typically get is, should I just buy the Bitcoin or should I try mining and all of these types of questions? Typically, my response to the person is, don't overcomplicate it, just go buy Bitcoin.

I'm curious your take for a person to mine. What would be the argument? What's the advantage? Because anything that has an advantage has a corresponding disadvantage that's associated with it. So talk to us about what is that advantage for a person that would want to mine versus just buying the Bitcoin outright? Robert Leonard : Absolutely. It's one of the most common questions that we get asked. And I'll start by saying, I don't think it's all mining by any means. I don't think it's all buying necessarily. I think it's a happy medium of both. Through my experience of mining and through the experience of a lot of our clients,

One of the things that, there's a few benefits, like you said, there's pros, there's cons, so on and so forth, but it removes the emotions of having to actually go through and commit that buy is one of the big things that we've found over the last few years. When Bitcoin price is low,

there is a lot of human emotion involved. And regardless, you and I are both very much Bitcoin maximalists. I'm more sure about Bitcoin than I am the sun rising in the East, right? It can definitely get some emotions involved when you have drawdowns like that and, "Oh, I'll buy it lower," trying to time the market rather than time in the market. So that's one of the first things that we've seen is just the ability to be producing Bitcoin every single day, regardless of the price.

And then paying for that hosting, your electricity once per month, more or less. So that's one of the added benefits that we've seen to our clients. And- So it's a forced DCA, a dollar cost average is what you're really saying. Yeah. Exactly. It's a forced DCA. Now there is some additional benefits that we could get into with depreciation and some business benefits. Talk to that. Talk to the depreciation aspect, because I think that's important. Yeah.

So there's, first of all, I'm not a tax advisor, so I would recommend everybody listening to talk to your own tax professional. But these machines are assets that can be depreciated over a lifespan and you can do all kinds of different depreciation on them. Robert Leonard : What is the typical depreciation schedule? Like three years or what is it? Jason Lowery : Yeah, three to five, I would say on an asset like this. And certainly there's bonus depreciation, there's section 179. Everybody's situation is going to be just a little bit different on how

how you want to go about that. But it's like there are real world tax advantages to buying this equipment on top of the additional operating expenses of running the mining business that depending on any given person's situation could be lucrative to exercise those. Let's walk through the math because I think this is important for people that maybe aren't intimately familiar with how depreciation works in accounting and whatnot. So let's say a person, real simple, goes out and buys a $10,000 rig. And let's say you depreciate it over

three years. So you're basically taking a third of that cost, the $10,000, so you got $3,333. You're writing that down after the first year, you're doing it again after the second year, and you're doing it after the third year.

So the value of the rig itself becomes zero from an accounting standpoint, but you've reduced your tax burden by the 3.3K every single year, and you're mining Bitcoin during that entire time. Now, you are paying, help us on the gains. So you would be receiving this as income, each Bitcoin that you mine at that spot price that's marked the 1%.

Well, it depends on the payout. Preston Pysh : At the time that you receive from the point, it is marked as a revenue based upon the current spot price of Bitcoin. Yeah. From the pool. So if your pool pays you once a week or once a day or whatever that is, as soon as that is received to whatever Bitcoin wallet address you have set up, it's received as the revenue at that current spot. And then that's what you would pay the tax on with respect to getting it for like

I guess the whole thing would be considered revenue. Yeah. That'd be top line revenue. And then your operating expenses would be sort of like the electricity costs associated with navigating that. So just pulling further on the numbers, and sorry, I know these are like all off the top of our heads here. So let's say the energy cost is 6 cents per kilowatt. Let's say you bought a pretty new rig and let's just say $10,000 was the basis on the rig. I'm sure it's probably a 20 or whatever, but let's just say it's 10.

How long is it going to take that person just historically looking at the volatility and how Bitcoin moved? Are they getting that back at what? They're getting their principal back in two years, a year and a half. What's the turnaround for them to recuperate $10,000 worth of Bitcoin on a $10,000 rig? What would that be? Right, right. And this is where I'm not going to lie to you, Preston. There's no...

I don't think there's a single person who can sit here and tell you confidently exactly how the return on investment of Bitcoin is going to work. What's the ballpark? What's the ballpark? It's going to vary depending on Bitcoin performance, lots of different things. I mean, for us, we've seen some of our clients return their investment as quickly as six months. We've seen some clients that have taken two years or longer to recoup their investment. Obviously, there's a big timing aspect, just like buying any asset would be. But

But that's the ballpark is six months would be a best case scenario. Three years would probably be a worst case scenario based on past performance. And what energy cost are we talking? Is it about 6 cents per kilowatt hour? Yeah. So our rates that we charge are between 7 and 8 cents per kilowatt hour. We do appear unique things with our offering where we actually... So we have a full dedicated repair center where we include all repairs. We have bit mean certified technician where...

if a machine gets damaged or breaks down, because these computers run 24/7, 365, we'll actually include any repairs regardless of whether it's under warranty or not. Our goal, our offering when we talk to our clients, we very much don't really like to discuss a return on investment because we don't know. Nobody knows exactly how things are going to play out. And our goal is not to mislead anybody or anything like that. Our goal is to offer

the best service out there if you are looking to participate in Bitcoin mining and if you want to do this business. And we do that through a combination of a few different things. We do it by providing the low cost of electricity. We do it by having a full dedicated repair center where we include all the repairs and

And we offer a flexible pause period where if the mining ever becomes unprofitable, you're able to actually pause your units on our dashboard. And then we also have a marketplace where you're able to resell your equipment at any point in time if you'd like.

Preston Pysh : Interesting. This is great. This is helping people understand the business of mining. Okay. So Adam, where I want to go next is it appears to be there's this synergy between AI and Bitcoin mining that's starting to take place. Help us understand what is this? Is this something that you think is going to become a major theme in the coming five to 10 years? And just real briefly for the audience so that they can understand. So AI takes a ton of energy. It takes

that needs to be plowed through a GPU, which is very different than Bitcoin ASICs. But it seems like you have these data centers that

that are set up for Bitcoin mining, you have all the energy being plumbed into these data centers already, that if you put some GPUs there and they're willing to pay top dollar, that they can just basically point the energy over to the GPUs. They run their AI models, they get the output that they're looking for, and then they can just take that energy and point it back to the Bitcoin miner. Is this very real? Is this from an infrastructure standpoint, are we overcomplicating things

Help me understand your perspective because I'm, I don't know, a little cynical or what? I don't know. Yeah. Common question that we get asked just naturally in being in the Bitcoin mining space is talk of the town for the last year, 18 months, it seems like has been AI and all that good stuff. I'm going to take the other side of this one, actually. I think in the short term...

I think a lot of this is probably overblown. The way that I'm visualizing this, just talk out loud, is you're looking at the transition of a Bitcoin mining data center, which is really like a tier zero data center. It's the bare bones. It's as little CapEx as possible in order to be as profitable as possible on the mining side of things. And you're transitioning to a traditional style data center, which is 10X cost in CapEx in order to operate this equipment

It requires a lot of redundancy, battery backup generation, all these other sorts of things, because unlike Bitcoin mining, these traditional data centers cannot be a flexible load. They require five nines of uptime, 99.99999% uptime on an annual basis, and you're not going to get a standard Bitcoin mining facility as of today. Robert Leonard :

A few other points that I would add to that. Why do you say that, Adam? Yeah. Why is the reliability so much worse at a Bitcoin mining facility than one of these data centers? Because it can be. So on the Bitcoin mining side of things, we can be interrupted in order to have our cost of power be as low as possible. We can be off on off and it doesn't really affect operations at all. You cannot turn

an AI data center or even a traditional data center on off, on off, on off, it doesn't work. So they need that power all of the time, no matter what, no matter if the grid is under major constraints, it has to have that power in order to, in a traditional data center standpoint, make sure you can open the Facebook app and scroll your newsfeed and those sorts of things. So Bitcoin mining data centers

don't have to have that type of uptime. They can be flexible loads. They can shut down and it really doesn't affect day-to-day operations. And that helps continue to get the lower cost power. But it's a whole different ballgame going to that level of uptime with the backup generation, backup battery requirements, the networking requirements, and all of those sorts of things.

What other thing do you think is missed on this topic for the common person that's hearing about it? And first of all, do you see this progressing in this way that we described or do you think that it's like long off if not really even a thing? Yeah, my high level overview of...

AI and data centers and whatnot is, I think in the short term here, the next few years, I think a lot of what you're seeing is large, large companies, the Mag7 companies have a very large balance sheet and access to capital at next to no cost. And they are taking all of this money and they are throwing it at Nvidia GPUs and just seeing what will possibly stick.

My interpretation is there's no true business case on how this investment is going to produce any revenue that will recoup this investment in the future. They're just trying to be... It's an arms race. They're trying to get these things up and going as quickly as possible. And going in with a fingers crossed, we'll figure it out. We'll build the plane as we fly type of situation. And I think in the short term...

that's going to cause a lot of difficulty in trying to operate a business, trying to operate an AI data center business. If you have one customer and that one customer goes bankrupt, where does the revenue come from? That's where I think from just like a first principle standpoint is where is the revenue being generated today from all of this AI activity? Certainly there's lots of things going on and there's, and by the way, over the longterm, I'm very bullish on what AI can possibly do for the future. Don't get me wrong. I just think that

things of this magnitude do not happen overnight. It is going to take time and you are going to see a lot of, you know, over the course of the next few years, maybe a lot of bodies float to the surface over, you know, malinvestment. Yeah. Yeah.

Yeah, for sure. Okay. One thing that I think is interesting, you've had Bitcoiners beating the drum on nuclear for the longest time. Since I've been in the space, it's just like, we need to get to nuclear power. It seems like in this past year, because of the demand for AI and running all these models and the energy consumption to do this, that we now have a partner out

out there beating the same drum saying, we need to get to nuclear power because there's pretty much no way in the next 10 years we're going to be able to keep doing all of this and growing all of it without kind of transitioning to a nuclear world.

Talk to us about that. Talk to us about your opinion on renewables. I know you talked about how abundant it is there in Iowa, but when you compare renewables in the face of nuclear, which is very clean, where do you see this evolving? What do you think is taking place here? Is this a good thing? I suspect I know the answer to that, but let's hear your thoughts. I'm very, very optimistic and big fan of nuclear energy.

It's a great technology that's really a majority of the nuclear technology that we have running was developed back in the 1950s and 60s and built in the 70s and 80s. Here in the United States, we've had only a couple of reactors built since a majority of them were built in that time period. Most recently, there was a reactor that was just deployed, I guess, technically earlier last year, 2024, down in Georgia. There's a lot of, I think,

I think government bureaucracy and other things that get in the way of getting nuclear up and going. There's a lot of public fear over a meltdown and those sorts of things. But if you just look at the simple facts- Preston Pysh : The stats, yeah. Trey Lockerbie : It is the safest form of energy production per terawatt hour outside of ground mounted solar. It is an extremely safe form of energy production. It is very dense.

we should be building much more nuclear. We had a nuclear plant, have a decommissioned nuclear plant here in Iowa, actually, about an hour from where I live. And it turned into an interesting economic situation. And due to the abundance of the wind energy, the nuclear just couldn't compete. And you could look at it as you have maybe some free market disruption with government subsidies on the wind side of things. And does that disrupt the natural free market of energy production based upon where it would have gone? And so

so on and so forth. But I'm very optimistic about nuclear. The EAI has looked at, optimistically, I think a 3X increase in nuclear energy by 2050 in the United States. We currently have just under 100 gigawatts of nuclear energy in the US. It's a little under 20% of our production in the US comes from nuclear energy. And we're talking about 100 reactors or so, roughly. So I think that the opportunity for nuclear in the future

Especially with just, again, we need more and more energy production to continue to advance as a society. Energy is one of the most fundamental things that you need as a society or as a nation in order to propel things forward. Energy is a net input for everything, and nuclear will help a lot. Preston Pysh : Any other energy technologies that you're excited about or that you think are going to be instrumental in the coming decade? Jason Lowery : Yes, there's going to be more and more renewables going online.

Iowa currently has about 15 gigawatts of wind energy. They're looking to install another five gigawatts by the end of the decade, so a total of 20 gigawatts. Preston Pysh : Do you find that that is being shaped by public policy? And if the public policy wasn't there, would it be a natural incentive to do it that way? Robert Leonard : Well, it's an interesting thought experiment for sure. It's very windy here in Iowa, but you look at these windmills, a few different examples here in Iowa,

There's government subsidies for every kilowatt hour, every megawatt hour of energy produced by these windmills. So if you just look at the disruption of the free market, well, there's larger incentive because of that government subsidy to install these wind turbines. And you run into a situation where it starts disrupting the natural free market of energy

And pricing actually here in Iowa will go negative. Utilities will actually get paid to take power from these wind turbines because the wind turbines can run at a loss. They can operate because they're still going to get that subsidy on the back end.

And that starts to cause a whole bunch of wonky things to go on the grid. And renewables are intermittent. And there's always a demand for electricity. It's called baseload. That is the energy needed to heat your home, turn on the lights, run the air conditioning, so on and so forth. All of the basic things you always need to use. And

then we have what we call a peak load where it's the hottest day of the year and everybody is running their air conditioner, everybody's running their heater because it's so hot or cold outside, and you need more and more and more energy. And that right now is being supplied by peaker plants. Natural gas peaker plants are one of the most common forms of matching that demand with the available supply. Because if

There's no wind, there's no energy production from the wind, but everybody still has demand for energy to run their air conditioning during the summer. So you kind of start to think about the intermittency of renewable energy and what

What if we just had a large nuclear plant with a base load and then we sprinkled some renewables on top in order to supplement the changes in the demand? Preston Pyshenko I love that. Okay. So Bitcoin 101 or mining 101, what is the question that you get asked that makes you roll your eyes the most when it comes to this topic from family and friends? And then let's hear how you respond to that.

Yeah, the question that I get asked the most that makes me roll my eyes is there's a lot of misinformation, I think, surrounding mining. Luckily, most of my friends and family I've had some good conversations with over the last few years. But just in general, we've had to battle a lot of misinformation specifically related to mining. We've heard everything under the sun related to mining and how it's bad. Our facilities are going to emit 12,000 tons of CO2 per day

right there physically on site. Our machines are going to emit CO2. Robert Leonard : Pierre Richard has probably the best video. Nick Huber : I've seen it. I've seen it. Yeah. Oh, yes. Let's look at the parts per million. Yeah, exactly. So that's one of the big ones is just misinformation around our facilities. We're just a business looking to operate like any other business and it has some negative preconceived notions, I think, about our business and

the environmental impacts and the sound and some of these other things where we've been very successful in being able to set up our operations across the state of Iowa. And we want to be a friendly neighbor, don't get me wrong. We understand that there is some noise and things like that. But I think that we are able to locate in areas where we take a common sense approach to this. We don't want to set up our business where it's going to cause any legitimate problems for anybody. So I

Combating some of those has been interesting. We've had great success so far setting up different sites across all over the state of Iowa, but certainly have been some interesting comments and concerns that we've received over the last few years related to energy usage, sound, carbon emissions, and those sorts of things. Adam, are you active on Twitter? Yeah.

I just got through Twitter pretty recently. I need to be better about that. Big mistake. Big mistake. Yeah, yeah, yeah. I'm the type of guy that's kind of...

Don't know if anybody cares what I have to say, but some of the guys here on our team have been encouraging me to be better about that. So yeah, at Adam Haynes on Twitter. Our company is at Simple Mining IO. And then I'm more active on LinkedIn as well. Hey, so if you're listening to this and you have mining 101 questions, we'll have a link in the show notes to both his Twitter and his LinkedIn. I would prefer people to hit you up on LinkedIn because you get some of the most...

I'm going to use the word interesting here. Side chatter and side comments when it comes to Bitcoin versus Twitter, it's way more based on Twitter, but it's way more entertaining, I think, on LinkedIn. So we'll have links to that in the show notes. Adam, give people a handoff to anything else that you want to highlight if they're interested in learning more about Simple Mining IO or whatever you want to highlight. Adam Draper Yeah, no, appreciate that, Preston. The

Yeah, thankful to be here. And if anybody's looking to learn more about mining, we have a website where simplemining.io backslash insights. We have a lot of information. One of the biggest things that we try and do at our company is educate on mining, on Bitcoin and those sorts of things. So visit our insights page. And there's a lot of great resources there if you're looking to learn more. And then if you're interested in learning more about Bitcoin mining and how to possibly get started there, visit our website, simplemining.io.

And there's a start page there where you can schedule a call to chat more with us about that. Preston Pysh : Amazing. All right. And we'll also have a link to Gigi's Bitcoin is Time article in the show notes, so make sure you guys check that out. Adam, thank you so much for making time and coming on the show. Really enjoyed the chat. Adam Back : Awesome. Thanks for having me. Appreciate it. Thank you for listening to TIP. Make sure to follow Bitcoin Fundamentals on your favorite podcast app and never miss out on episodes.

To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.