Sazmining Podcast Episode 31: the Risks and Rewards of Bitcoin Mining

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Synopsis: 

In this episode of The Sazmining Podcast, Will speaks with Brett Garman, President of The Blockyard LLC. They discuss Bitcoin's high's and low's, the risks associated with Bitcoin mining, and where the industry is headed.

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Will Szamosszegi (00:28):

So Brett, I would like to thank you for coming onto this podcast. Uh, you are deep into the mining industry. You've got some really fascinating insight. So how about you just talk a little bit about how you got involved in mining and then we can dive right into the things that you're seeing today on the, uh, front lines.

Brett Garman (00:46):

Yeah, sure. Um, so, uh, I was a hobby minor and, and then in 2016 I had a, uh, heart attack at work. I was, uh, air traffic controller, Charleston, South Carolina, and multiple other places in the world. When I was in the military, before that, and the ambulance was called, they came and picked me up and put electrodes on me and stuff. And then after, uh, about two weeks or so of testing and stuff, they came back and were like, Hey, that was not a heart attack. Your heart's fine. You had a panic attack, you have anxiety issues. And so the FAA grounded me yanked my medical certificate. And so I had a bunch of little, I was always, I've always been a Tiner. I had a bunch of side projects, one of which was Bitcoin mining. It was just like a hobby. Like I said before, I just started spreadsheeting out, everything that I was doing to see where I could make revenue.

Brett Garman (01:31):

You know, they took care of me, the government, like I, I could see that I had to do something else. So with the family and everything, I had three kids, uh, I had, I just had another baby, actually. I wanted to spend more time with the family anyway. So it kind of worked out. So Bitcoin mining on all my spreadsheets. That was the one that looked like it had the most promise when I saw the numbers. Like I, it made sense. And, uh, I put my life savings into it. Not at first. It started to gradually, and then it was like a snowball effect where next thing you know, you know, I started with like a mine of 12 miners, a S nine S nines. And then at some point a light bulb went off and everything clicked like, Hey, this is the future. I put it all in and built like a half megawatt out in, uh, old Navy shipyard in north Charleston.

Brett Garman (02:14):

It's no longer there. They sold the building. And that was, that went out of business probably two years ago, three years ago. Now, you know, we had 300, a six at one point running. And the whole thing I had, I knew nothing about Bitcoin mining yet there was no consultants or anything. Like we just had to figure it out and, uh, learned a lot from that experiment, very expensive experiment. Uh, that was my introduction into the space. And you know, of course that took me one minute to say, but it was like, uh, two and a half year process of really going all in on, on Bitcoin mining. Then when, uh, bear market happened in, um, was that 2017? Yep. Two 18.

Will Szamosszegi (02:49):

So you started mining in 2015?

Brett Garman (02:52):

No, no, no. I started buy, uh, I started like understanding Bitcoin in 2015, I saw a, a Ted talk and followed the rabbit, uh, led me to buy Bitcoin and then led me to Bitcoin mining, which led me to Bitcoin repairs. Like, so I went and got it minor certified by Maine in 2019, which was at, towards the end of my, uh, mining experience on my own income. I was gonna build a repair center and I felt like that was a natural, uh, evolution of things. You know, you build the mine, you learn how to repair your own minors. And it was like, Hey, now I can fix other people's minors too. So I thought that was good. But then the landlord sold the building and then it was the bear market. Bitcoin was like three was, it was crazy. I shut it down, got into web development.

Brett Garman (03:38):

Andd a bunch of clients that way. And I was just building websites for about a year until this like re most recent, uh, rocket ship took off in January of this year, like a year ago. Then I started getting these calls again, um, people that have seen a YouTube video about me or something like that. And they're like, Hey, can you come help me do this? That? And I was like, sure. You know, it's kind of fun, but now I'm like all the way in again. And I don't have time to do web development or anything like that. I'm just building this business. Uh, the block air's been kind of taken off this year, like gangbusters that we could talk about that later if you want. But, so that's what kind of got me into Bitcoin mining. And it's just been like, even to the point where they called bit name called me back this year. And I went and did the first cohort in the United States for the S 19 repair. I was the lead instructor for that. And, uh, that was just like a month ago in West Virginia. I think they're already on cohort three. So, uh, now it's like, I'm kind, I kind of feel like a veteran a little bit. Yeah. I just, it's only been a couple of years, but I guess in like crypto years, that's like, you know, like dog years, right. One year equals seven. So

Will Szamosszegi (04:44):

Yeah, I it's actually crazy when you think about it, just because the industry's so young people who've just been in the industry for, let's say since 2017, I mean, they've been through a lot. Yeah. Then you go all the way back to 2015 and 2013 in the grand scheme of things, eight years doesn't seem like that much, but in crypto years, it's like as far back as you can really go when you're talking with people.

Brett Garman (05:07):

Well, yeah, like 2011 is like, when you know, you're about talking about Mount go and all that. And then like, I actually have friends that were, that lost money on Mount go. And those guys are like, uh, the Yodas, you know, they're like, that was only like two or three years before me, but still they're like the master yo or the, the guru of Bitcoin, cuz they were back then they it's like a badge of honor to lose money on Mount guts. Right. <laugh> oh yeah. I I'm not that early, but

Will Szamosszegi (05:33):

Yeah. Well, from your perspective right now, uh, I know that you have a lot of insights into what's happening in mining things that you're seeing, things that you're noticing. I'd just be very curious to hear how you think that the next, you know, year plays out within this industry. Uh, everyone's looking at how the different cycles and previous havings have, or havings have played out and now we're kind of looking at what's coming next. Uh, and that's all within the context of all the craziness that's happening with. COVID just the global financial system. So I'd be, I'd really be interested to hear your take on what's going on right now.

Brett Garman (06:08):

I got pulled back into the mining world with my sabbatical there. It was only like six months, but again, that's like 3.5 years in crypto. Right. So I can pull back in after 3, 3, 3 0.3 0.5 years, crypto years of being absent. And then now I'm like, okay, it's just another FOMO cycle. Right? People are just losing their minds. They're paying, I I've sold like my S nines off for like I'm basically gave them away. And then like I had an S 19 on back order that was just coming, I was gonna play with, it was like batch one S 19. And I had a bunch of credits in my Bitmain thing. I got it basically for free, but it was like 2,500 bucks. So as soon as I got it, I sold it for 3000 and I like, I couldn't believe it. I was like, she gonna pay 3000 for this.

Brett Garman (06:52):

Okay. But now if you know anything about S nineteens, they're going for like $11,000 right now, that's insane. And so I just naturally thought that that was, it's gotta be FOMO. Right. And, uh, maybe it still is a lot of these guys that I just described as Yoda or, uh, gray master or whatever, even I'm hearing from them that they're all kind of starting to say that this time is different. I'm, I'm almost at 50%, but starting to believe that that this time is different, you know, maybe it's not, maybe there's still gonna be a pullback, but definitely feels different. And when I'm out in the field right now, we've got the Blackard has teams in a couple different locations around the country right now at working at these 25 plus megawatt facilities. And I mean, you there's a lot of capital that's been deployed that isn't just gonna go away during a bear market.

Brett Garman (07:44):

So that tells me there's gonna be some kind of solid support level that we haven't seen in. Like we had in the past, like in the past I had a half megawatt mine, probably. It, it, it was either the largest in South Carolina at the time or one of the largest, like, I don't think there was a lot of competition. I think there might have been one up in Greenville that I heard about that might have been in, in the, uh, five megawatt range. But I was, I was a pretty big mine for five, for half a megawatt that was decent. Now. You're just like, that's nothing, that's a drop in the ocean. Now you've got just 25 megawatt farms just popping up there everywhere. So like, that's not gonna go away too easy if you know how hard it is to build a Bitcoin line from scratch.

Brett Garman (08:24):

You're gonna put in a lot of time and energy to build that. You're not just gonna walk away from it when the market hits. And even if you're six months at a loss mining, I don't think you're walking away from it either. Especially if you're a publicly traded company so that the whole dynamic has changed. I mean, I'd like someone to do research on like how many publicly traded mining companies there are, because I think those are the ones that are gonna probably weather the storm, but there's gotta be over 10, right. There's gotta be probably around 20. And if each one is like to build a 25 megawatt, I mean, that's tens tens of million. I, I mean, I can't even imagine it's gotta be at least 20 million. I don't know. Like I don't have that kind of money. I just work for them. So I know what they pay us. I'm telling you, that's a lot of money to walk away from. So in that sense, uh, this time is different. Um, I think there'll be a lot more stable, uh, bottom to look at now, I guess that would open up a whole nother question about economics of Bitcoin mind. So like what creates these bottoms? That kinda thing I dunno about

Will Szamosszegi (09:24):

Actually just to take a step back and make sure I'm following you properly. So what you've noticed is that there's just so much more capital coming in. So a lot of these people sure are saying that this time's very different and that the floor is going to be much higher because there's so much capital that's into the mining that is going to hold up a higher floor. Is that yeah. Is that right? Or, yeah. Am I missing anything? Well,

Brett Garman (09:46):

Well, like the, the thing is like the cycle, the bear bull cycle has happened six or seven times. I now maybe even eight and it's always the same pattern. It's kind of like, there's a micro pattern inside of an adoption curve and like an adoption curve being the adoption of any kind of technology, like a microwave, for example, it starts out here slow, but it exponentially, but then it levels off. Um, I don't know if I'm in the screen or not, but it levels off. And Bitcoin is kind of like that in my opinion, this is not financial advice by the way. But my opinion is it's like an adoption curve, but inside of that, you have micro, um, you have micro adjustments and that kind of follows the whole loop loop loop thing that you see, like these waves. It's really interesting that that occurs in, in, uh, in a wave form as well, which is, is kind of, um, interesting, cause most things are in wave forms.

Brett Garman (10:38):

And the fact that Bitcoin is functioning as a wave, uh, it's wave function shows me that it's mostly mathematical. And so I kind of approach things mathematically like that. And if you, if you do that, you can extrapolate out and make price predictions. But it's really, what's hard is to understand where the variables are. And so I was plotting when I was mining. I don't do this anymore cause it's kinda time consuming, but I had a charter I did about 18 months of plotting and um, every day I would come in, it was part of my morning routine where I would check on, um, my phone where the spot price of Bitcoin was that would plot what the price per te hush. What I was earning per te Ash is on a daily basis. For example, today it's 26 cents per te hash is what one te hash earns in a daily, in 24 hour period.

Brett Garman (11:25):

And then I would plot that and then I would, uh, put the date. Then I would put what my electric cost was, where my meter was. I would do a manual meter reading and I would just track it out. And I, then I would turn it into charts and graphs and try to extrapolate out, like where would we be in four years after the next avenue, which was like right now. And I don't think, uh, I was accurate, but I was, I feel like I was on the right track cause IED to 60,000 right now, and then crash to about 40,000 over the next two years I think is what I was thinking. But yeah, I don't know if that's gonna happen, cause that was based on information at the time. But I think if there's like this other guy that I like to follow pretty genius actually on his charting, in my opinion, he's genius cuz he's I can invented all these metrics and he knows like on and off chain analysis and stuff like that.

Brett Garman (12:17):

His name is, um, Willie. Woo. Have you heard of him? Mm-hmm <affirmative> yep. Yeah, that dude is genius. And then there's another guy, Jimmy song, who I had the pleasure of meeting a couple times. He's actually given me a couple referrals that I could hire that I have hired those guys that they're pretty good with, but Willie woo in particular has really come up with some interesting, um, metrics, uh, way beyond what I could ever do. So, but I like the way that they think about that stuff. So my opinion is such that I look at what Taha is earning from a mining perspective. So to 26 cents of te hash, and you've got a hundred of those, you know, that's, you know, you can just kind of predict where that goes. And then basically what you ask yourself is like during the bear market, what is my learnings per te hash gonna it be?

Brett Garman (13:07):

Or you could also say, okay, given difficulty adjustments of 10% per epoch, epoch being in 2016 blocks, where do we see ourselves in, at the next happening? Where do you think, where do you think that price, that earnings per tear hush is gonna be? And you, you can easily figure that out. Just using map, like take 26, cut it in half and then, but you've gotta also think about where the difficult's gonna be based on the predicted amount of passion power. That's gonna be on the network at the time. So it really is a pretty easy math problem. If you have a spreadsheet, you just kind of figure it out and then give yourself a, a deviation of whatever you think is reliable, 10 20. I don't know. And you can come out to probably one to 2 million per Bitcoin. And uh, but after the next happening, after the next bull run, but then you'll probably have a pullback and see that's kind of where the pullback is. Like traditionally been like 80% pullback. That's what I think some people like my friends are saying, that's gonna be different. Like it's not gonna be an 80% pullback. Like it's gonna be more like 50 or 40% pullback.

Will Szamosszegi (14:12):

Sorry to, to just jump in. Cuz I think you've touched on a really interesting point here is like with all these different variables you can go and you can really have some sort of predicted analysis onto where the price is going. And one of the things that a lot of people out there were predicting earlier on in the cycle was that by the end of the year, we'd hit a hundred K. Um, and that's, that was the, the prevailing narrative. And right now it's December 23rd. And I don't know what the price is as of right now, but it's probably in like around, just under 50 K, like 49 K that is nowhere near the a hundred K that everyone predicted. So my question to you is when do you think we're gonna go and hit that next leg up and why didn't we hit that hundred K that everyone was talking about before the end of the

Brett Garman (14:58):

Year? Yeah, that's the really question, right? Like, so like economists, there's like a couple different schools of thought and economics and uh, the ones that I think are more accurate, the ones that take into account emotion, cuz I think emotion can't be, I think it's a necessary, uh, metric. The hard thing is to measure emotion. Somebody created a sphere index thing that I think is pretty cool. I don't really know how it works, but I think when everybody thinks it's gonna go above a hundred, it's not going to. So I think once, uh, we get some micro capitulation to occur, which is what's happening now and people become, so right now we're finding a floor on who controls that floor in my opinion. And there's, this is debatable. Like, but my opinion is the minors because who controls the supply in economics, you have supply and demand, right?

Brett Garman (15:43):

And who's the supplier, what's the minors like every 10 minutes a block is created and there's your supply of Bitcoin? 6.25 Bitcoin are created and plus transaction fees. And so there's your economics. That's the whole basis of Bitcoin that makes it work is the decentralization of store value or transfer value or cash Peerless, peer, uh, peer tope cash system. However you wanna frame it. It doesn't matter. It works because of the economics of game theory, which is incentivization. And that is the same thing that makes pretty much anything work in this world. That is, uh, what set my light bulb off like so many years ago. Um, that made me go all in on this is that there's a solid way to incentivize something to occur. And in this case, it's the supply of Bitcoin is controlled and it's incentivized appropriately and decentralized enough to be stable.

Brett Garman (16:39):

So you need to go all in on it. Like in my opinion, if you like money anyway, you should go all in on it. The, the thing is, uh, predicting all that is very, very difficult because who can predict, uh, human emotion. I mean, who knows where that's going. So I think right now you see people kind of micro recapitulating, the holidays they risk is they wanna get rid of some risk. They wanna buy some presence for people. They don't know what's gonna happen with COVID. We've got, you know, all kinds of stuff going on. So probably once people realize it's not gonna go much lower than where it's at, or maybe it does go a little bit lower, then they'll become convinced that this is the floor is in and they'll just start buying it back. And then once the first couple whales buy some bunch of Bitcoin and it'll just trigger a, a, buy another, another cycle up and then, you know, it probably will go above the last time highs.

Brett Garman (17:32):

You might see your 80 90 K and it'll do it again. So like, so what I would think is, um, based on that per on that synopsis that I just outlined, which is again, just my opinion. You're probably gonna see that continue that little loop cycle continue. I don't think the bull market's over because we have a ton of hash power to come back on. I mean, just based on for what I know from the word on the street, like I have no hard evidence for this, by the way, but I still think we have probably one to one to two gigawatts of minors that could come online before July. And I mean, and that is like quick, like if that happens by July, I would be surprised it does. But I think they will probably start coming online by may, June, July. Like a lot of people make promises.

Brett Garman (18:22):

They can't keep like, and it is a lot harder to build a Bitcoin line than you think it is. Like most people think you just put 'em in the shipping container and plug 'em into power and you go, um, you know, that works great on a spreadsheet, but there's a lot of obstacles and barriers to entry to that. So I think you're probably gonna see them continue to come online. They'll just start to come online probably may, June and July. And it'll just continue until that caps out. You won't see the bear market settle in once it caps out and you see your earnings per tear, hash drop down to like 11 to 12 cents, or maybe even maybe 16 sides. It just depends on like how cheap people's power. So there's another metric you gotta track. Like these guys go into Texas are, are getting insanely cheap power and they've got such a great, um, marketplace for that, with the ERCOT, you know, how they trade and sell, uh, power credits and all that stuff like that is the model right there, man, because if Bitcoin becomes, um, although that's gonna change the dynamic, isn't it.

Brett Garman (19:26):

So if Bitcoin, if Bitcoin drops and it's not profitable or mine, even in Texas, then their hope is maybe to sell the power credits back or they're gonna play that that game. But now you've, you've got every minor in the world in Texas. It might, they, they might not be able to even sell their power back cause there's gonna be so much power there, you know, just like not being used. So this is gonna be really interesting to see what happens. And I think, I think what you're gonna see is like some form of mining such centralization occur, actually mm-hmm, <affirmative> most likely it's gonna have to naturally happen. Somebody's gonna have to, you're gonna see like some kind of like coalescing of, of minors, like kind of like in, um, the oil industry, somewhat not, you know, you're gonna have to see some kind of a collateralization of this stuff somehow be behind, behind an organization or something. I dunno. I dunno how what's gonna happen. It's gonna be fun to watch though.

Will Szamosszegi (20:20):

Yeah. So if, if we were to summarize that, what you're seeing is you're seeing a tremendous amount of minors coming online. Uh, you said over a gigawatt ramping up within, let's say the next six months, if it takes longer six months to a year, that's a tremendous amount of hash power coming online, which is gonna change a lot of these dynamics, making it harder to mine, new coins. And the whole big question is what's happening to the price as that's happening. You would think logically if it's becoming more difficult to mine and you're seeing more capital come in on the mining side, then it makes the Bitcoin network more valuable. So you would assume that that next leg up in Bitcoin price is happening at that time. Mm-hmm <affirmative>. And that seems to be the prevailing narrative. Everyone thinks that you're gonna have this next run up. I personally am of that opinion, but then you, you brought it a step further, which was interesting on the actual power price that these mins are getting on the electricity. And so you're, you're saying that you think that the electricity is so cheap for some of these larger miners, that the other miners that aren't as large, aren't going to be able to compete if the price drops. And so if that happens, you're gonna see mine become more central.

Brett Garman (21:28):

Right. And what I've been telling some of my clients, and I understand that they don't listen. Like I get it because I didn't listen either. And I didn't listen to myself. Like you get, you get all excited and you want to just deploy capital. I know that feeling and you wanna do it as quick as possible. Uh, and so, well, you're willing to like put yourself into a, a position where you're gonna pay. Like right now you could probably, you're gonna be able to mine with 10, 14 cents. I mean, I didn't do the numbers, but I'm willing to bed the next gen equipment. You could probably mine just about anywhere and make money right now. But those are gonna be the first to go like, honestly, 6 cents a kilowatt hour, half of that. They're gonna, I'm not gonna make it either. I don't think,

Will Szamosszegi (22:07):

But that brings up a really good question. I'm wondering after we go through this next cycle, you just with so many minors coming online, what do you think that price floor is gonna be for the minors of this next cycle? Just to, and to put in it to perspective my understanding of the last cycles, like the floor before started shooting up, you had to get, be getting power at around, like running it hosting, not just the power costs, but running it at about 7 cents all in. Is that, was that the floor that you saw during the LA the last cycle that is just like what I was seeing and sensing, but I guess that all depends on your uptime, but what, what was the floor of the previous cycle based on your estimation and what do you think that the new floor is gonna be in this next cycle?

Brett Garman (22:52):

Well, I know exactly what it was cause I documented it all, but my, my rate, my only rate was, uh, 5.90 cents, which wasn't bad, especially in South Carolina. And that was because it was a lot of handshake deals. Like I was piggybacking off of this industrial guy and like electric company didn't even like, he, he worked it out with me. That's all I had to pay. Like, you can't actually get that rate where I was at. Like you, unless, you know, like you just worked it out on the side, that kind of thing as another reason why, when they sold the building that didn't transfer. So like I would've had to go back up to the eight, 9 cent range, which would've definitely not worked. So, but at 5.90 cents, where during that, that run, Ike was not profitable. I was floating. I had to float month after month, I was using credit cards.

Brett Garman (23:37):

I mean, I did, I knew it was temporary. I was doing whatever I could to keep it going. I just had to make it till the market returned. Just, couldn't just, couldn't keep it going. <laugh> and that's what a lot of people that's gonna happen to a lot of people. And what I saw was during the worst part of the bear, the mining market, during that time, it hit 6 cents per tear, hash. That's what, that's, what it was earning 24 hour period. It hit that for like two to four weeks. And that was the lowest low. But on average, I think probably for most of the bear market, I saw 10 to 14 cents and there was some uptime, there was a couple bright spots where like maybe a week or two, I had, I had to hit like 18, 20 cents per te hash. I probably remember correctly. And then, you know, I was like, oh, we're back, you know? And then go down again. Yeah. But like, but it rode that it rode that for months, like probably six, six to eight months. But the total market cap of Bitcoin at that time was, I don't know, man. I think it was like 20 to 30 million coin market cap.com. I mean, it wasn't nothing like this, like aren't, we what's the total market cap of Bitcoin right now. Does anyone do you know? Yeah.

Will Szamosszegi (24:45):

It's gotta be one, 1.1, four, 9 trillion as of few days ago,

Brett Garman (24:51):

Trillion. I mean, that's like

Will Szamosszegi (24:53):

Interesting of Bitcoin's market cap. Yeah,

Brett Garman (24:56):

Yeah,

Will Szamosszegi (24:56):

Yeah. It's over a trillion. Yeah.

Brett Garman (24:58):

Yeah. That's, that's incredible. That's great. That's great news. So we've got like different environment. So like now, now, I mean, I guess you're gonna get to a point where everybody, that's not probably a publicly traded company will not survive or somebody who doesn't have the money to float the losses long enough. The question would be like, what is the length? Like how long do you need to prepare to float your losses? Like, can you operate at a loss and what are those losses gonna be? Because your electric bill, if you know how electric bills work, you know, you've got a demand charge in there. Mm-hmm <affirmative>. And so even if you turn off completely turn off, you have to pay that demand charge. And it ranges from, I've seen as low as $2 per kilowatt to as high as $17 per kilowatt, depending on where you're in the nation.

Brett Garman (25:43):

And I've done a lot of sites, selection research in different states and there's some pretty sweet deals and another, one's not so much, it really depends on what you're willing to give. And, um, yeah, you're gonna be paying, even if you turn all your machines off. So it's gonna be really a matter of who can survive the longest at a loss and like how much can you withstand? So if you take that logic and you extrapolate it back to where I was, and I say six to eight months of losses and my losses weren't like tremendous. They were just like, you know, 10 grand, you know, in a half megawatt mine, it wasn't much, I think, you know, 10, 10 grand a month or something like that. Cuz you know, there's operating expenses too. So I actually converted everything. What I say at 5.90 cents, kilowatt all in that was just energy cost.

Brett Garman (26:27):

If you, if you, if you take all my other expenses that I had, like I had, uh, two employees, I had, um, you know, the rent, there was equipment and maintenance, all those expenses put in and then I would calculate what my total operating cost per kilowatt hour was just cause I was thinking in terms of energy mm-hmm <affirmative>, you know, it was actually right around 10, 10 to 11 cents per kilowatt hour. Okay. Yeah. So if you took all that out, I probably was breaking even on the mining side. So I, I had to pay out of pocket every month just for all my other operating expenses, which were kind of controllable, which is nice thing about it was, you know, I could, I didn't need my personal assistant anymore, you know, maybe as laid her off and you know, and then, you know, I was able to cut costs in other ways to keep things going. I was being as responsible as I could to figure things out. So I kind of like that, that you control those kind of costs. So that will help some people if they start thinking in that direction. But yeah, I, I might have lost, uh, did I answer that question or I might have been getting off track there. Um, this is

Will Szamosszegi (27:29):

On <laugh>

Brett Garman (27:30):

Podcast and like it's been like two years, three years since I ever did a podcast. And my first one was pretty terrible when I looked at it, when you said, Hey, do you wanna do a podcast? I looked at that podcast and I was like, oh God, I hope I don't look like that again. <laugh> but uh,

Will Szamosszegi (27:45):

No, I think, I think you touched on it. I would just say that it's, it's fascinating cuz we're just, we're trying to figure out what that floor is gonna be for the minors in this next cycle. And that's something where it's really hard to give an exact number, but I think it's important for people to see what it was in the past. Because if you see in the past, the floor was at this power price. If you're locking in power, that's more expensive where you would've gone under in the previous cycle, then that's a bad idea because you're gonna be going into these, this next cycle where things are gonna get more competitive. You have bigger players coming in, you have more sophistication coming into the industry. Yeah. So the margins are gonna get squeezed. It's gonna be more difficult. So I think for any minor out there is listening.

Will Szamosszegi (28:27):

Just keep in mind what happened in the past and try and figure out are you locking in a deal? That's going to allow you to run a profitable business during the bear market. If your electric rate isn't gonna be that high then budget for make sure you've got operating expenses for at least six months covered when you're ha when you have such high gains, don't, don't get shortsighted about it, right? Granted, this isn't financial advice. But I think that you, you have a lot of minors out there who are watching this that are trying to figure out, okay, what, what are the decisions that we're gonna make? How are we gonna stay afloat during that bear market and people who are new to it and that they could get wiped out. And it's gonna be important that when they do have the opportunity to cash in those big gains, that they're just aware that there's gonna come a time when the mining is not going to be nearly as profitable because you have all this equipment coming on, you have like over a gigawatt of equipment coming on. That completely changes the difficulty. And a lot of that power, a lot of that equipment's coming on at cheaper power than you might be running. And so if that's the case and you're listening to this, you, you wanna financially plan for a bear market if it does happen.

Brett Garman (29:35):

Yep. I do. Yep. I think that's the key. And uh, so the 5.90 cents did not work for me in the past. Then it would be foolish of me to try to do that again. Now I need to be definitely below that. And I also need to probably a lot below that I think, yeah, I, I, I firmly believe you should be in the 4 cent range at a minimum. Like even at first I was like, at the beginning of this year, I was like, yeah, anybody, anybody above 4 cents is gonna get wrecked. And that was my, my thought process, but I know a lot, a lot of big minors that are hosting people and they are some of them as high as 8 cents. And now they're even doing profit sharing at like 10% on top of that. And that's how desperate people are to get their machines running.

Brett Garman (30:22):

And they're still profitable after all that mm-hmm <affirmative> uh, but those that's not gonna last, uh, that kind of deal is a short term deal to get your kind of foot in the door type of thing. And people are even doing outrageous deposits and stuff just to get their riders online. And there's a lot of money people that have invested in that kind of thing. And that tells me that it's gonna be a lot harder to get people to this time around. I think those people though definitely need to be saving their money. If they have a long term contract, ideally you don't want a long time contract for hosting. I don't think the hosting companies will like me saying that, but that's gonna be a whole nother economic thing. If you're building a mind just to host for people, that's one, that's one set of problems.

Brett Garman (31:06):

That's one model. Then there's the model where you've got, you're a big company you're funded independently. You have your own miners and that those guys are probably more secure. They don't want to host. Then you've got the other, there's only a couple of these like Bitmain for when they manufacture and then they host their own machines and they build they're building their machines. I mean, if you think about it, I bought an S 19 for 2,500 bucks when they first came out and that was during the bear market and, and it was just starting out. So that tells you, like, if they're, if they're even just doing like a hundred, hundred 50% margins, I mean on their, on their product, they're building those machines for less than a thousand bucks. You know, they're killing it right now. And you know, when I first researched the mining industry, I was like, well, if mining is so great, why aren't they doing it themselves?

Brett Garman (31:50):

I researched that. I'm like, oh, they are. So they first mind themselves. Once their minds are filled up, they're selling the, their surplus to us. So I would say at the bottom of the barrel, like the people that will last any outlast, everybody is gonna be like, Bitmain can, you know, Avalon, you know, what's minor micro BT in a Silicon, all these manufacturers, they're the ones that are gonna win, like outlast anybody else. And then the second tier people are the guys like, uh, riot, blockchain. And, um, you know, that, that kind of model, that they're just massive, massive. They know how to trade energy credits. They know all the stuff that they need to know about all these metrics that we've been talking about. You know, those, those will probably be the next, you know, they'll probably, you know, I don't know much more about them, but, you know, but the small guys like building in their garage, you know, buying an $11,000 minor and putting it in your garage, I, I will not in good conscious recommend that to anybody.

Brett Garman (32:50):

Honestly, first of all, you might burn your house down, you know, with the, the constant load going through your walls, residential, uh, conduit and, and electric transmission is gonna melt your over time will degrade the, the insulation around your, around your, uh, cords inside the walls. And once that happens, there's an arc and arc creates a spark, a spark inside a drywall and, and wood. It's not a good combination. You burn your house to, I mean, even if you had an electrician put in a 30 am circuit, I highly recommend you don't do that. I didn't know that at the time that I was doing it. And, uh, you know, my breakers, I constantly feel them and, you know, they were getting hot, but I didn't realize the threat. Like I didn't do it too long. It was just a couple months. But over time, if you do that long enough, you, you're definitely at a fire threat. So I would definitely take this opportunity to warn, warn these guys, not to do that. But

Will Szamosszegi (33:44):

Yeah, well, that's a, that's a good warning. I think that right now, we're at the time where you're past like the retail minor, being able to go and compete there. If, if you want to get involved, the options right now are, are very limited. I think that it's gonna be important eventually for mining to become decentralized. And I think that that's something where we're not at that point today. I still think that Bitcoin sound money, best money ever created. It's gonna work. Even if mining is within a handful of big players that are geographically dispersed around the world. But I do think that that with people owning Bitcoin, they should have the chance to own Bitcoin minors. And I'm hoping that that becomes a, a reality as the industry continues to grow and mature. I also think that you're gonna see a blending of the mining industry and the energy sector, and we've already started to see it. But I think that as the industry continues to mature, that that's going to, to overlap even more and more. And you might see a lot of the biggest energy companies in the world become the biggest minors, the biggest minors in the world, merge with some of these energy companies. I think that that's something that's inevitable. Really?

Brett Garman (34:50):

Yeah. I like the idea of, uh, what's cool about doing all that. Like if you start thinking in terms of that, that's actually pretty genius and there are people already doing that. Um, but I think that that's probably the future. I think you should probably look at supporting the grid instead of trying to do a 24 7 constant load situation. You have demand response where you can go in and during their off peak hours suck up the energy. That's costing so much money to just keep on line. That's the whole, the whole premise of the demand charge that they give you, that you have to pay, whether you're running your minor or not, that's supporting the infrastructure to keep the grid powered. So you can have a demand response. Like if you turn on your light switch, power is ready and available. You don't have brownouts, you don't have blackouts like they do in third world countries or second world countries like we're in the United States.

Brett Garman (35:42):

We don't really have that, unless I guess you're in California or some other similar states where they have some energy issues. But generally speaking, like if you put a Bitcoin mind in next to a substation somewhere, that's hugely beneficial to the community. I I'd recommend like people should probably reach out, try to get to know their co-ops like originally I wouldn't entirely think about that too much. Cause co-ops are, uh, they're not wholesale. They buy, they buy wholesale and sell retail. So they could, they're always gonna be more expensive than who they're buying it off of. Right. But co-ops are non-profits and they are looking out for the community and they try to put money back into the community. Like someone like dental would be really, uh, should, should be really interested in finding ways to lower costs. And by having a Bitcoin line as part of a co-op, you could lower costs of energy for people, you, they can buy wholesale.

Brett Garman (36:30):

The, the wholesaler doesn't care what you do with it. They've already bought it. And so they've gotta do something with it. And this would put a lot of money back into communities. I think in some way, another, another way would be, um, um, renewables. Like, so if you had access to renewable energy, that's another situation where it's not always getting bought. Um, and it's getting bought at lower rates during off peak hours. Like if you have a wind farm or solar farm, well, solar farms kind of got taken over, like, so you have these things called, um, I've got panels on my home. Uh, what do they call it? Solar credits, I guess. Or it's like net, what's it called? Net neutral net.

Will Szamosszegi (37:10):

Net metering.

Brett Garman (37:10):

Net meter. Net metering. Yeah. Yeah. It's like a blanket rate and it's like really pathetic buybacks on it. But if you've got like a solar farm, you know, I don't know how it works in every state naturally every, uh, utility's gonna be different. So you've gotta look at their, their rate schedules and everything, but like imagine, um, uh, utility only buying that you get a higher rate during peak hours, which is only like, uh, peak hours are usually what, uh, six, six to eight hours a day. Um, they vary depending on the season, but you've gotta, then, then they give you this little cheap rate during off peak hours, which is like 80% of the time. Well, imagine if you just take that power and put it into your Bitcoin line Outback, you're gonna make a lot more money off that renewable. Then you would, if you were to sell back to the grid, but then like let's say Bitcoin crashes and, um, or your minors go offline. Well, now you just flip the switch back to the grid and you can still get money for it. It's not just sitting there not being used. I think that's pretty genius. And from what you were saying, that's kind of what you were thinking, am I right?

Will Szamosszegi (38:13):

Yeah, I'm almost, and this is where it gets very philosophical. But I think at its core, when you look at Bitcoin as sound money and you look at Bitcoin mining as a support, like the underlying foundation, Bitcoin mining is almost like a battery in cyberspace, right. It allows you to go and capture value today and put that value, fundamentally changes humans' relationship with time and with energy. And I think it's something that's so fundamental. That's going to shape the fabric of reality, uh, not just today, but into the future. And I almost see that playing out as something like distributed computing systems around the world, kind of like what you said, where let's say that you have different distributed computing centers, where you have the ability to mine, Bitcoin, which is supporting Bitcoin's underlying network of sound money for human society. I think that that's something that is many years away, but I think that it's where the incentives are eventually going to drive it.

Will Szamosszegi (39:15):

And I think it's important too, for the currency or the reserve asset that everyone has access to, to be in the hands of everyone. Uh, it's a very different paradigm than the way that the financial system today works. Because today you have, you know, a monetary system where everything's pegged to the dollar and we're still going and the dollar no longer pegged to, to gold. So you can see central banks printing away and, uh, counterfeiting the work of society, basically taking the money and energy of society. And that's something that doesn't happen with Bitcoin. You know, the monetary policy for Bitcoin for the next a hundred years, you don't have to worry about a single group, suddenly changing the amount of money and circulation cause that money represents the work of everyone in society. So it just doesn't make sense to have one group that has the power to print more of it and distribute it.

Will Szamosszegi (40:07):

However, they'd like, it's a very broken system today. And I think that Bitcoin fundamentally solves a lot of those issues, but I mean, this is, you know, years away, but I think that it just really puts it into perspective, the work that, that you're doing, that every other minor's doing everyone who's building within this ecosystem, they're fundamentally changing the way that society's gonna run and make it much more egalitarian, much more fair, much more accessible. And we're lucky cuz we're in the us, but not everyone's that lucky. And I think that a lot of people are going to really benefit from the work that all of us today are doing. Uh, so it's important that we all succeed in what we do.

Brett Garman (40:46):

Yeah. And so to that point about like the decentralization of mine, we gotta be careful though, if you've got all these big mega minds, they're gonna become so huge that it's not gonna be, it's not gonna be something that the small guy can get into in like, let's say Africa or, um, you know, south America has a big, they're starting to really grow in their mining presence. From what I hear, I haven't been down there. I kind of don't want to go down there cause I just, the fear of the unknown, I guess, uh, doesn't sound like at someplace I belong, but uh, uh, you know, I do hear and have talked to people down there that are building large Bitcoin mine and um, and they have been for quite some time, but what about, um, like the small guy, like, and back to the renewables again, like what if there was a way that we could, um, I just kind of had an idea when you were talking.

Brett Garman (41:39):

I was like, what if there was, and this is I the pipe dream, like, and there's probably not a way to do this yet, but cause that would be cool if there was a way to like have a package deal where you got a minor with a solar panel on top of it, but you know, you, you would need a lot of solar panels for a minor, but I'm just saying like, if there was a renewable way to have like little micro mines, just for like maybe like a, like a village in Africa where they could just set up one minor or whatever. Yeah. But it was like an all in one deal. And then that could generate enough revenue for that entire village, you know, and they would be renewable energy. And then when they maybe needed to charge their laptops or something, they could just plug into it as well.

Brett Garman (42:20):

Cause I mean, on the grand scheme of things, if you're producing, um, you know, 5k w cuz that's probably what you would about need for a next gen, you know, to be reliable, uh, five KW of power, you know, you still charge yourself phones and you'd have computers in their hands and maybe even a satellite phone or some way they connected to the internet too. So you'd be basically powering a whole entire village with a Bitcoin minor, uh, with a solar panel on top or whatever, you know, I, I don't think it's feasible right now, but at some point I would like to see something like that. Um, and that would definitely give people the, the ability to be de decentralized a little bit more, you know, maybe it wouldn't be Bitcoin, maybe something like that would have to be something a little bit. Maybe Bitcoin's just gonna be, maybe it's too late.

Brett Garman (43:05):

Maybe it is gonna be so big that it's industrialized. Maybe we you're gonna have, do coin being empowering. <laugh>, you know, you have a bunch of script mins down in Africa or something everyone's living off a doge coin. I mean, that could be possible too. I mean, it doesn't have to be Bitcoin, although that is my favorite. Uh, and it's pretty, I'm kind of a maximalist, but it's all arbitrary. I mean, it's just, you know, I don't wanna get into that discussion, but uh, I mean, I am a fan of, uh, the memes at school <laugh>

Will Szamosszegi (43:34):

Yeah. Well, I think what you just touched on is I think that that's a reality that, um, I would love to help push into reality. It's definitely something that's far away, but I think it's going to happen. And I think that it's needed really, if, if you're going to fundamentally improve humans' relationship with all these things with one another, with energy, with time with our planet, I think a lot of this goes back to the work of, uh, Jeff Booth. And we actually, that was an episode we launched earlier this year and Jeff is just absolutely incredible the way he lays out his, uh, his thesis in the book, the price of tomorrow, it'd be way too much for me to lay out right now, but definitely go check out that

Brett Garman (44:16):

Book. Let me write that down. Hold on a second. The price of tomorrow,

Will Szamosszegi (44:19):

The price of tomorrow, um,

Will Szamosszegi (44:22):

She just lays it out so perfectly. And I think that a lot of that comes down to the power of Bitcoin, the power of Bitcoin mining and the transition of society to renewables, I think is going to fundamentally shape a lot of these things. So mm-hmm, <affirmative>, it's fascinating to talk through it. I, I really liked, uh, the way that you just put it though, um, with how you could see, you know, in different villages around the world, different areas where you could see renewable energy being merged with Bitcoin mining and really helping out different areas around the world.

Brett Garman (44:54):

Uh, yeah, I do think renewables is the way to go. I think that's where I want. That's where I personally wanna see things move to is the renewables and using Bitcoin to make that more profitable so we can get away from that the antiquated system. I think we've gotta upgrade. We've gotta upgrade society. Uh, the way that we do business with this planet needs to change as well. Um, how that happens? I don't know. I, I just, I would like to be a part of it in some way, you know, I know we can, it's not gonna happen overnight. It's like, you know, you've got this big barge in the ocean traveling at 11 knots and you've gotta stop on a dime. It's not gonna happen. You just do it in slow increments. And maybe this is one way we can maybe move towards a way to incentivize people to move to renewables pipe dreams at this point. But hopefully we can get there.

Will Szamosszegi (45:46):

Yeah. Well this has been awesome. I'm gonna ask one last question. So I'll ask it now and then we'll let people know where they can connect with you and the company. Um, and so the, the question is, uh, what is one thing that you like one belief that you hold to be true within our industry that you would say the majority of people out there would disagree with? Um, so that's the question to, it's a tough one.

Brett Garman (46:13):

Um, yeah, people would disagree with, um, yeah, there's always somebody that's gonna agree. Like there's no guarantee that everyone would agree, but yeah. What was this follow up? You gonna say something

Will Szamosszegi (46:24):

Else? Yeah, I was gonna say like, uh, while, while you think on that, where, where are some places that people online can connect with you or, or the company?

Brett Garman (46:32):

Oh, um, yeah, so we opened a repair center in Charleston, like three days ago, we got our first shipment already, um, their S nine S we're just gonna test and consolidate them. The, the client wants to know how many are actually working and then we're gonna take like all the bad ones that are not working and make as many good units out of the bad units that we possibly can. And that's as easy, pretty easy job. Um, so I took our website down and put it in maintenance mode because I really wanna put some prices up and I wanna start, um, like, uh, taking orders. Like you can send your minor to us and we'll fix it and send it back. And I haven't had time to build that website out. Um, so usually it would be black yard IO, but as soon as I can get that up, hopefully by January, um, January 16th, I'm gonna be down in Miami with the lot of our crew.

Brett Garman (47:23):

Uh, we've got crews working out in the fields. Some of them are coming down probably like four or five of us into the north American Bitcoin conference. And we're gonna just like try to get to know more people in the industry. So you could probably, you can just email me, uh, Brett RTT block, yard.io. I'm on telegram as well as Brett Garman or Bri. Yeah, there go pop up as Brett G but on there as well. Um, but as far as your question, the question was, um, what is something that I believe the whole true that not many people would agree with? And I think like about how value it's created, um, I, I think that DOE coin of things like DOE coin people overlook the power of emotion and the value of people believing in something, even if it is just for fun, think about it to the Bitcoin.

Brett Garman (48:21):

Maxist, I'm talking to myself here. If you wanna be objectively true. Kind of in the philosophical level, Bitcoin started the same way people were like, oh, it's a meme it's like, or memes didn't exist back then. But like, people were like, ah, yeah, it's just for hackers or whatever. It doesn't really have any value unless you believe it has value. Like even, and then like they, everyone points to the pizza. You know, that kind of had first tangible effect. Like people bought two pizzas for whatever it was 10,000 Bitcoins and, you know, oh, people make excuses about that, et cetera. Well kind of like something like do coin or these other a coins. I kind of like all kind of doing the same thing that Bitcoin did. They don't. Yeah. Yeah. They're kind of pointless, but people believe they're valuable, then they are valuable. And if that belief continues and grows in some cases, then at some point it, it, it, it crosses this point of no return where it it's off and it actually has solid value. And like, like Bitcoin does now and Ethereum and some other things that have established themselves. So I think a lot of people would disagree with that, but I think also a lot of people would agree with that. So, but that's about the most controversial thing I can think at this point.

Will Szamosszegi (49:34):

Yeah. Well, that's fascinating. Um, thanks again for coming on. This has been a lot of fun, Brett.

Brett Garman (49:40):

Thank you for having me.

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