Podcast: Kyle Herron on Mining Industry Challenges

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Synopsis:

In Episode 7 of The Sazmining Podcast, Will speaks with Kyle Herron, CGO of Frontier Mining. They discuss differences between GPU miners and ASIC miners, the regulations around mining, and more.

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Will Szamosszegi (00:00:04):

Welcome to the SA mining podcast at SA mining, we are bringing you into conversations with today's industry leaders and blockchain and cryptocurrency. Our goal with this podcast is to improve the understanding and adoption of blockchain and cryptocurrency. By giving you an insider's look at what's being built and inform predictions on what the future holds today's episode is sponsored by block by and cogent law group. Our listeners can visit block by.com/sa mining for an exclusive offer for cryptocurrency management and check out cogent law group for all your legal needs. Today's guest is a graduate of Chapman university and his goal is not just to build a company. He wants to create a movement as a repeat founder. He's now taking his progressive approach to tackle environmental degradation, political instability, and technological transformation. As the chief growth officer at frontier mining, he's working to power the internet of trust by enabling people to participate in the blockchain revolution. So with all that said, I'd like to welcome our guests, Kyle to the podcast.

Kyle Herron (00:01:14):

Thanks so much for having me, man. So it's a real pleasure, even though we have to do this across the country, man, I'm still glad we're making it happen.

Will Szamosszegi (00:01:20):

<laugh> yeah, same here. Why don't we start by having you tell us a little bit more about your consulting background and how that's played a role in your journey into cryptocurrency mining?

Kyle Herron (00:01:31):

Yeah, absolutely. You know, it was interesting. Uh, you would never think that, like, you know, my, my previous background in just working with, you know, early stage startups that were basically ideas on napkin, whatever lead me to the super niche space at cryptocurrency mining. But as you know, life is a, an incredibly circuitous journey and I'm super grateful that I ended up landing where I'm at now. Uh, but you know, my journey really began as an entrepreneur when I was around 12, 13 years old. And, uh, I remember as a kid, literally just taking like an eight and a half by 11 sheet of paper, putting everything that I possibly could on and taking, you know, Microsoft make Microsoft like 2000 or Microsoft office, 2003, taking my mom's computer, putting absolutely everything that I could in this sheet of paper, printing out a thousand of these, a thousand of these copies burning all my mom's printer, ink, and going and putting every one of these sheets into my local neighborhood.

Kyle Herron (00:02:15):

Um, and before I knew it, you know, after kind of putting out the fact that I could wash windows, my lawns and fix computers, uh, I started be able to be a little bit self sustainable and, you know, I was gonna generating my own income and, and that's really where it kicked off this. I kicked off this spirit of wine to be independent, innovative, ultimately, uh, because I realized that, you know, the great thing about living in the us is that we really afforded a lot of unique opportunities, particularly as entrepreneurs. So that's where it all began, but it's really started to kick off for me. Um, more formally when I was in college. So as you mentioned, I went to Chatman university, um, a Los Angeles native, but I went to university just about an hour south of LA. And, uh, you know, I had the opportunity while I was there to really get connected with the culture that I hadn't been super familiar with before, which was this whole Silicon valley tech movement.

Kyle Herron (00:02:57):

Uh, you know, being in LA, we kind of have what we call Silicon beach, which is sort of the little brother there, the Silicon valley, but even having that, we're able to still get a real strong taste of where the world is moving. Uh, and so for me, you know, I dabbled in different opportunities that came across my plate, whether it was building an app or whether it was launching a clothing brand or launching a concert production company. I mean, I did the whole like serial entrepreneur thing. Uh, even though I was like, you know, 17, 18, 19 years old, but you know, the interesting thing will that I picked up throughout that whole process, man, and I know, you know, this is a fellow entrepreneur, starting a business is really hard. Right. Uh, and I don't think that message, even though it seems so obvious is really that well communicated to young entrepreneurs.

Kyle Herron (00:03:37):

And I think that's why a lot of them have that pie in the sky mentality of, okay, well, you know, I see someone else doing it. I see that mark Zuckerberg was a billionaire by the time he was 25, that means I can probably do it. And so because of that, they get these really lofty goals and ideas, native of trying to impressively, chase what I wanted help bring people back down to reality, but more importantly, build a strong system and structure for what it means to take an idea from a napkin to a business. And so when I was in college, I decided to launch a company with a couple of my buddies called co and CEO still runs today. You can check it out@si.io. Uh, it's a fantastic organization. And it basically was all centered around the concept of helping startup startup. Uh, that was our mentality.

Kyle Herron (00:04:13):

The ironic part about it is that we were a startup. So we were a startup helping startup startup. And a lot of people called this out and we're like, how do you guys notice our businesses if you're still starting your own? Uh, and it's true, but we cared deeply and we were super passionate. And sometimes in America, all you need is passionate grit. It'll get you to where you need to be. Uh, and so ultimately we ran that company and over the course of the following years, as it started to transform and shape itself, uh, we ended up kind of moving into that world of consulting, which you had brought up earlier, uh, where we had worked one to one with entrepreneurs, founders, et cetera, and basically help them take whatever business stage they were in and help to scale that up. So if it was an idea on a napkin, like I've mentioned, we would take it from there and really get it to a point where it was revenue generating.

Kyle Herron (00:04:49):

If it was already revenue generating, we'd figure out how we can 5, 10, 15 exit, et cetera. Uh, and then we'd actually implement the strategies in place. But the interesting thing is how do you draw the line from consulting all the way to mining, uh, because it's a pretty big leap to go from what I was doing to what I am doing. And the story of that ultimately began with the bull run of back in 2016 and 2017, uh, just like many of us who got into this industry, you know, we got into it because it was very financially friendly to us at one point in our lives. Uh, unfortunately it hasn't been over the course of the last couple years, but at the time it was super exciting. It was a super new, you know, kind of, it was kind of this, this new niche opportunity to make money.

Kyle Herron (00:05:24):

And it was almost a get rich, quick scheme. So I was like, this is probably too good to be true, but I've always had a passion for emerging tech. So I'm like, okay, let's go take a look. It, uh, watched the documentary on Ethereum, on Netflix. And before I knew it, you know, I became pretty captivated about the space. So was a retail investor. I got Ethereum when it was like 15 bucks and, you know, saw a lot of success. But what was interesting is I didn't take this step. This step from being just a retail player to an actual professional institutional player until I had a couple clients come to me when I was running my consulting business, who said, Hey, we are, we got this idea to build this thing on blockchain. And as it turned out, well, wasn't much of an idea.

Kyle Herron (00:06:01):

It was more of, again, the pie in the sky mentality. I see these initial point offerings going off for hundreds of millions of dollars with basically no real product or, or service behind it. And I want that money. It was a, it was a super weird time, man. It was a super weird time, but you know, my company was really well skilled with, you know, areas like graphic design, branding, marketing, et cetera. So they're like, Hey, can we both get, like, do you want us to build your website for this like crazy ICO project? They're like, yeah. Let's like, they just ate it right up. So ultimately that's how I got into the space professionally was working with early stage ICOs and kind of helping them get their businesses off the ground through that process, eventually learned about the technologies behind blockchain. And, uh, as you can see now we're getting a little bit closer to the world of mining. So that's how I got into the cryptocurrency space. Probably an opportunity to pause there for a sec. Will, do you want me to take the leap into how I got into mining too, because that's what's own crazy path.

Will Szamosszegi (00:06:51):

Yeah, definitely. I mean, one thing I would like to say is that I can definitely sense the passion and sense that entrepreneur entrepreneurial spirit within, uh, within you and all the companies that you started. So really excited to hear how you made that jump into mining.

Kyle Herron (00:07:07):

Yeah, well, like I said, man, you know, like being an entrepreneur in the us, like there's one thing that will always differentiate you and it's basically how hard you hustle right at the end of the day. Um, because you can have a product that looks just like the person next to you, but if you work harder and you care about it more, you're gonna get a lot farther. Right. And that's really been the story of my existence too. Like I'm, I'll, you know, will happily admit, like I'm not the most innovative person on the planet and I don't have the greatest ideas, but I will outwork you. Uh, and that's sort of like the mentality that I try to stress upon our team and all the people that I work with in my current, in my current role and in previous roles is like, just bust your butt.

Kyle Herron (00:07:40):

And like, you will get to where you wanna be in life. Uh, so all that being said how to make the leap to mining while I was working with these early stage ICO companies and kind of getting a feel for the industry, starting to understand the technologies behind blockchain, starting to get a real feel for what it meant to run a cryptocurrency based application. Like I, I, I knew that the internet ran on servers, so I'm like, well, the blockchain space must have something that's powering it because it's not just, you know, some concept in the cloud, like this is a real thing. Uh, and the timing was actually super serendipitous. Uh, so I'd actually just gotten back from doing a little bit of a speaking tour over in Southeast Asia. And one of my buddies from when I was in high school, saw one of the videos and me speaking and he hit me out and then he said, Hey man, what are you up to?

Kyle Herron (00:08:19):

And I'm like, well, you know, I'm doing this thing where I'm kind of learning about, you know, kind of working with various crypto companies and doing this consulting thing. He's like, dude, I hate being in corporate right now. Like I want to consume trip to, this is my actual now current co-founder of frontier Arlan who came and basically said, you know, I want to, I wanna join you in your venture. Um, but Arlan didn't last long because Arlen's a super sharp hardware engineering type. And so when he came down and started working with our team at co at our consulting firm, he was pretty obsessed with crypto at the time too, during this fall run. And so he said, us, Hey, you know, on that incubator that you guys are working out of, like, do you pay for power at all? And I'm like, actually the whole thing's free.

Kyle Herron (00:08:53):

And he's like, okay, I have an idea. So he brought down, you know, basically a couple PVC pipes and graphics cards and shoved him into one of our closets. And that is where the journey in crypto mining began. Uh, he had basically built this kind of like makeshift rig and we were running it out of our office and it was making an absurd amount of money because at the time GPU mining and will speak more to what that specifically is. But at the time mining as a whole was a very profitable venture. Uh, and so even running something as simple as a couple graphics card on literally PVC pipes was actually enough to generate, you know, real cash. Uh, and so ultimately we started running this thing down, our incubator Arlin started to realize like, Hey, this is actually like a real revenue generator. And so what he started to do is he kinda started to fill out his own network and see like maybe someone else is interested in this.

Kyle Herron (00:09:38):

And so people got word of it eventually. And he actually started selling these machines. Uh, and then his father owns a large data center company based out of Los Angeles. And so he needed a place to put the machines, started putting up there as he's working as he's one of my hires. Uh, I know that he's like never paying attention to what we're doing at co. And so I'm like, dude, what are you working on man? One day he came and basically told me what his vision was, uh, in term in the mining space of building these machines and helping portfolios for investors and create strategies and not, um, using mining as the vehicle. And so I said, this sounds really interesting. And so after he gave me that he, after he plugged me with that initial idea, it was probably about four months later that we formally decided to partner up together and form frontier, uh, and the journey kind of launched from there. So I'll pause. I don't wanna go too deep into frontier cause I can keep talking forever, but that was how I made leap in mining.

Will Szamosszegi (00:10:29):

Yeah. Wow. That's a very interesting journey. So you guys actually started with GPU mining just to lay the foundation there. Can you explain what GPU mining actually is and how it, or, and maybe start with what a GPU is?

Kyle Herron (00:10:45):

Yeah, yeah. Absolutely mean, you know, the crazy thing is will, this space is so fricking complex, man, and I'm not one of those people where I'm not the most tactical person in the room at all. Like my partner is definitely the most tactical person in the room, even though he would say, he's not, he definitely is me. On the other hand, like I, I came into this industry as basically like business guy, you know, like I'm a business marketing sales guy, an entrepreneur core, like through it and throughout, but I'm not, you know, some ultra technic person. And so I didn't even know what GPS were when I actually came in. Uh, I just knew that they were used for gaming and that's how most people know GPS as like, if you're a hardcore, like a gamer or something like that, you game a lot in your computer, you probably have one or two of these graphics cards shoved into a box under your desk. That's powering most of those, like, you know, crazy video games, like call duty and all that, where you can hardly graphics.

Will Szamosszegi (00:11:28):

They got very Mixive because of the minors <laugh>

Kyle Herron (00:11:31):

They, there was a period of time where, I mean, there was a period of time where like the video was a great stock to invest in particularly because of mining. Uh, the ironic thing is that the video then doubled down in their inventory in 2018, expecting the mining boom, just to lift off and then the market crashed. And so the video stopped crashed too. So if you're an investor in the video back in 2018, I'm sorry, I was with you though, then, uh, 20, 19 and 2020 been more friendly thus, because they've kind of tempered their expectations in terms of what they're gonna sell, but all that being said back to your question back to your question. So, um, GPU's very simple. It's called a graphics processing unit. Um, basically it's a specialized type of computer chip that allows you to perform tasks at very high speeds.

Kyle Herron (00:12:08):

I mean that, that's the easiest way to break it down. Um, what did, what do most GPU cards get used for is a question I hear all the time and the majority of people use GPU cards for gaming. Like I mentioned, film rendering, and then now they're also moving into the realm of like artificial intelligence, um, you know, big data processing it it's essentially you could consider it to be like the backbone of many super computers is, is a graphics processing unit card. Um, the future super computers, like the quantum computers, won't be relying on those, but a lot of the computers of today's world that are, you know, processing the majority of our data are using GPU based cards. Um, in fact, let's say for example, that you want to, you know, start SAS mining.com. For example, I would guess that you have a host like a GoDaddy or something like that, uh, that host is likely hosting your website on a GPU server somewhere around the world.

Kyle Herron (00:12:54):

Uh, and so GPU cards had a lot of application prior to cryptocurrency mining, but what people realized was that the unique thing about these GPU cards is that they are very flexible in terms of the applications that they can be used for. So not only are they super powerful at being used for things like film, rendering, artificial intelligence, processing, big data processes and gaming, et cetera, but they can also be applied for mining. Uh, and so that's when people started to make relief of saying, okay, I see if there's this card, it can process data at to really high speed. I know that cryptocurrency mining is effectively just processing data to really high speed. The two worlds met together. And before you knew it, people were transferring their GPU cards over to cryptocurrency mining.

Will Szamosszegi (00:13:33):

Yeah. And that was the core of what you guys were doing in those early days when you were setting up these GPU rigs and you were processing very large amounts of data and earning, uh, digital assets as compensation.

Kyle Herron (00:13:46):

Yeah, exactly. So, you know, our experience really began with, we literally had a couple GPU cards laying around and we wanted to shove them into a box and see what would happen. And when I say box, I mean like a computer box or a server box, um, and that's where, you know, that's where it got started. And then of course, if you look at what GP mining has become now and for your audience, if you're not super familiar with it, you know, you can literally just type in GPU cryptocurrency mining on Google and you'll see what it's become. It's now become, you know, like a formal server chassis. So it's, you know, basically a four by eight box with a bunch of cards in it, couple of fans. And that's what mining essentially is. It's just putting as much computational power towards the blockchain as possible in the hopes that by doing that blockchain will come back to you and reward you for basically exchanging your computational power.

Will Szamosszegi (00:14:29):

That's one form of mining. Another one that whenever we're talking about Bitcoin, uh, type of mining is using a different type of hardware called Asics. Yeah. Is that something that you guys are actively doing today or are you guys still focused on GPU mining?

Kyle Herron (00:14:45):

That's a great question, man. So, you know, it's interesting is that for the first, so we've been, we've been around with frontier for about three years now. Um, when we, we first started the company, we were predominantly focused on GP mining. Uh, in fact, the first year-ish of the business was basically all GP mining based. Uh, but what we realized was that, and you know, this is a fellow great entrepreneur man. Like when the market doesn't receive your product, well, you have to pivot. And for us, the market did not receive our product. Well, reason why, well, the market had crashed and GP mining is not known as being the most profitable form of mining. So when the market crashed, you have to imagine the GPS were the first ones to basically turn off. Uh, and so that forced us into a position where we had to figure out, okay, well we really still wanna be in this industry, but how can we survive?

Kyle Herron (00:15:25):

And that's when we started to dig deeper into what you just mentioned, which is the other type of mining called ASIC mining, uh, and for your audience, just so they understand GP mining and ASIC mining is it sounds complex and wordy, but really all it is at its core is that GP mining uses a special, a special type of graphics card, which can again be used for things like film, rendering, AI, et cetera, ASIC mining uses a special type of chip called an application specific integrated circuit. Uh, and what that essentially means is that it's application specific, unlike a GPU. So when you're using an ASIC, you can basically only do one task with that, with that ASIC. So a GPU again, can be flexible across multiple applications, an ASIC when it's designed by a manufacturer can only do one thing over and over and over again.

Kyle Herron (00:16:07):

So in other words, the Asics are more consolidated with their power in like in the simplest way of describing it. An ASIC can mine, one cryptocurrency very, very, very well. A GPU can mine, hundreds of cryptocurrencies kind of well, and you can see as a minor why you could, why it would be strategic to do one or both because with GPU is you have the ability to, you know, kind of change around your coin and go towards what's profitable. And a lot of GP minors, what they'll do is they'll actually do that specifically. They'll do what's called profit switching. So they'll look at, let's say there's a hundred coins to mine. And you know, one is like, we'll call coin a profitable one day and coin B profitable the next day and coin C profitable. The day after that every single day, the GP minor is shifting over to the most profitable coin automatically Asics on the other hand are much more specific.

Kyle Herron (00:16:53):

So they do have the ability to mine, a few coins, but generally they mine one coin and the most popular coins that can be mined by Asics are Bitcoin Ethereum, um, like coin and Z cash. So there's a lot of individuals that now use Asics predominantly, I'd say our industry at this point. I, I mean, this is just a speculation. This is just a guess, I would say 85 to 90% of the cryptocurrency mining industry is ASIC based. Um, it's cheaper, it's more efficient. You make more money, simply put, uh, GP mining will probably, it probably will continue for reasons that, um, you know, ASIC, there are certain coins that are ASIC resistant. So in other words, they do not allow for ASIC mining, but the reality is that what will end up happening with most of these GPU cards is that they're gonna get transferred to other applications and as a demand for AI film, rendering, cloud gaming, all that stuff increases, um, you know, there'll be people like Amazon and Google and Facebook buying those GPU cards and minors sticking with basics, most likely.

Will Szamosszegi (00:17:49):

Yeah. It's, it's funny to hear how you made that progression and made that pivot, cuz that's something that we actually did as well in those early stages, GPUs from a business decision, they sound very great because you have that flexibility to go to other types of, uh, algorithms and process data, uh, for more than more than one type of algorithm. But as soon as you get to a point where it's just not profitable to mine, any of those algorithms, then you really start evaluating. Okay. It might make sense to just go and focus on this particular vision of Bitcoin that we believe in where the return on investment is much, much better than you would get on any other type of GPU,

Kyle Herron (00:18:29):

Just a numbers game at the end of the day, you know, like a lot of this industry is as cool as it sounds and as fun as it sounds and as captivating as it sounds in terms of all the technological applications and backbones blockchain that are, that are required by mining, um, at the end of the day, like it's a numbers game and if your minor is not making you money and it's not profitable and it's not ROI and a reasonable amount of time, you're not gonna, you're just not gonna do it. It's not a strategic investment. And so that's why most of our industry is shifted towards Asics. I mean, with the GPU, you're talking about like, you know, a 36 plus month ROI period. It just doesn't make sense. Um, especially in an ever-changing market with adjusting difficulty and adjusting Bitcoin price. And we can speak more to difficulty later if that's, um, if that's a little bit, you know, wordy for your audience, but you know, the reality is that like you have to look at it from a financial perspective and uh, it's pretty obvious when you look at the numbers that ASIC mining is the way to

Will Szamosszegi (00:19:17):

Go. Yeah. Well I think that that's a great, a great segue into diving, into difficulty and sure. Uh, and how that relates to minors and how that relates to the hash rate on these different networks. If you wanna just go about explaining that in the way that you see best.

Kyle Herron (00:19:35):

Yeah. I mean difficult again, I think the problem with crypto honestly will, and you know, we've, you, you and I have both seen this as guys who've been in this industry for a long time is it seems like everybody wants to make it seem more complex than what it actually is. There's

Will Szamosszegi (00:19:48):

A lot of terms. <laugh>,

Kyle Herron (00:19:49):

There's a lot of unnecessary. Like there's, it's like, it's like, it's like being a lawyer. Like they, in the, in the world of lawyer lawyers speak, they call it legalese, uh, in the world of crypto. There's like a crypto ease as well. And there's no need for it, honestly, because it only makes the space seem more complicated and less likely to be adopted by institutional or retail players. Cause if you don't get an investment, you're not gonna wanna invest in it. But the bottom line is that we want more people involved in Bitcoin. We want more people involved in mining. This is this benefits, our industry, this benefits, the future of decentralization, this benefits the future of democratization of, of, of how money is transferred and spent. And so we really want people to get involved. Um, so for us here at frontier, we're big on trying to, you know, create clear, simple ways of understanding how this industry works.

Kyle Herron (00:20:33):

Um, and so that leads right into how I like to describe difficulty. So difficult is a super easy concept really at its core. I always think about it like this. Um, I like to think about it in terms of like, if there is a pie, like let's call it an apple pie sitting in the middle of a desert, right? And there's a lot, this is such a silly way of describing it, but there's a lot of hungry rabbits. Let's put it that way, right. And the rabbits really want the pie, right? Uh, the, ultimately what will end up happening is you have a hundred rabbits all going towards the pie. Who's gonna get there. First. It's gonna be the fastest, strongest rabbit. And that rabbit that gets there first is gonna take the biggest bite of the pie. That rabbit might even get two bites of the pie or three bites of the pie.

Kyle Herron (00:21:12):

And then the rabbit, the next rabbit will come behind him and he'll take a bite. And then the next rabbit, the next rabbit before, you know, it like the slowest rabbit at the very end may get there and may get a bite. But the likelihood that rabbit will get a very, very small bite. He'll get a crumb right in the world of Bitcoin. It is almost identical to that. Uh, the only difference is that the rabbits are computers and the pie is a Bitcoin. Uh, so the way the difficulty basically works is it's a concept in mining of basically network competition. So these rabbits are all competing against each other to go get that pie. These computer servers are all competing each other to go get the biggest slice of Bitcoin basically. And so the idea is that in as a, as an individual investing in this space, you basically want to continually upgrade your rabbit or your computer hardware, uh, to be able to have the fastest, most efficient computer so that you can get as much of that Bitcoin as possible as quickly as possible.

Kyle Herron (00:22:04):

Um, that's the essence of, of difficulty, but the reason that it's such an important thing to note in this space is because, um, as more rabbits or as more computers are chasing that same or that same pie or that same Bitcoin, um, it becomes more and more difficult to get large chunks of it. And so what you hope is that the pie or the Bitcoin in this case grows in size. So in other words, you hope that the price of Bitcoin increases so that there's basically more to go around, uh, because the idea is that if you now have 200 rabbits all going after that pie, you need that pie to double in size for everyone to still get their fair share. If the pie stays at its current size and there's 200 rabbits, then everybody gets less and now they have a, they have basically those rabbits have a smaller and less, less exciting, um, incentive to go get that pie. And so in the mining space, what you really want to happen is number one, as an investor, you wanna make sure you have the latest and greatest, fastest computer out there. Um, and then secondarily, you wanna make sure that as there are changes in difficulty, so as it gets harder to mine, Bitcoin, you want the price of Bitcoin to proportionally increase. So that ultimately the end result is that there's a negligible change in profitability. That that's the ultimate goal as a minor.

Will Szamosszegi (00:23:17):

Yeah. That's a really interesting analogy. I, I have not heard that one yet, but I'm, I might have to take that. I might have to start using that.

Kyle Herron (00:23:25):

That's all yours, man.

Will Szamosszegi (00:23:26):

<laugh> yeah. And, and that is true. You as more and more rabbits in this case, more and more minors come into that competition. You need the price of Bitcoin to be able to support that and, and the analogy, the pie to be big enough. So you don't have any rabbits starving to death in that scenario.

Kyle Herron (00:23:43):

Yeah. Cause ultimately the rabbits die, right? Yeah. And that's what happens in the world of mining too. Like eventually the computers that are, that are, you know, not efficient enough or not vast enough, they just become unprofitable and you have to turn 'em off. And so they effectively are dead and they get, they will literally, at some point they'll become door stops. I mean, you can go online now and you can buy a minor from three years ago for like 10 bucks. I mean, they're not worth anything anymore. Um, except maybe a door stop or if you go somewhere. I think the other crucial part to understand about mining is that there are multiple variables that go into being able to have a successful rabbit or a successful minor. Um, of course the price of Bitcoin, which we talked about and the difficulty, the level of difficulty is super important.

Kyle Herron (00:24:24):

But the last piece that people don't seem, um, to always think about when they're entering this industry, is that the computers don't just run for free, uh, you know, they need power and they need internet and they need management. And that's what we do here at frontier. So the goal with frontier is to provide low cost, power, internet, and management, um, along with a suite of other really captivating services that people can feel free to check out our website, shameless plug will. But that being said, uh, you know, the idea really here is that you wanna make sure that you drive your cost, not as much as possible because the thing is in analogy of the rabbit. Once you go get the pie, think of it like this, like you go get the pie well, for those rabbits BA like in, I haven't gone this far at the analogy before, but the idea, the idea is with these rabbits, like after they've, let's just, let's look at it like this after they've sprinted towards that pie, they're tired, right?

Kyle Herron (00:25:14):

They're hungry. So they want to eat the pie, which means the amount that's left over is not that significant. So in other words, to power the rabbits to basically fuel the rabbits, to be able to go get more of the Bitcoin, um, you have to give them some of the Bitcoin. And so very it's very, I mean, the analogy almost plays out perfectly in terms of mining, because what ends up happening is after the computers go and earn the Bitcoin from mining, for example, they then have to pay us to keep the, to keep the minor powered and online and field, so to speak. Right? So that's the other factor that's really crucial is then you have to make sure that not only does difficulty in the price of Bitcoin play really nicely with my mining operation, but also is my operational cost to actually run the minor, playing friendly enough. So that my end, my net net net take home is profitable to a point where I can, you know, ROI my initial capital investment. And, you know, however long I feel comfortable being exposed, which for most people in our industry is about 12 to 18 months where you feel comfortable having your capital exposed and then you wanna make sure that you are why you're hard cost.

Will Szamosszegi (00:26:14):

Yeah. And you touched on a, a very important point within that, that whole analogy, but particularly on the efficiency of being able to run your operations. So there are many minors that the, the way that I, I tend to look at it is you have a spectrum of where the mins all fall along the spectrum in terms of cost. And so the, the price of Bitcoin's go, let's say today, it's at $11,000. There's a certain amount of minors who are, who are producing Bitcoin at $11,000, 10,000, 9,008,000 and, and down and down and down until you have the most efficient mins who might be able to produce Bitcoin at, around like somewhere in the ballpark of three to $4,000, right? Yeah. Yeah. And, and consistently taking in all the costs, taking in the management, the overhead, the electricity, everything mm-hmm <affirmative>. And as soon as the price drops, that's really when you wanna make sure that in your analogy, you're the fastest rabbit or that you're the most efficient minor, and you're producing the Bitcoin at the lowest cost, because then as many other mins start to fall off and go out of business, then you're still there getting a larger piece of the pie because there are less, uh, rabbits that are going for that yeah.

Will Szamosszegi (00:27:28):

For that piece. And so, yeah. Yeah. I think that it is really important that when people decide to go into mining, they either understand all the different variables and are able to run a very efficient shift themselves to be able to mine profitably, or they go, and they find a company that has already figured it out and is within the lowest cost here of being able to operate these machines and produce Bitcoin. And, and I think that that's a good segue into this concept of hosting. So hosting, uh, is when you're not necessarily taking over the entire life cycle of producing that Bitcoin, you're not purchasing and building up a facility and, uh, purchasing the minors that are going into that facility, but you're actually just taking on one part of that process. So with that, mm-hmm, <affirmative> how about I pass it off to you and you talk a little bit more about, uh, your hosting service and how exactly hosting ties into cryptocurrency mining.

Kyle Herron (00:28:26):

Yeah. So I, I think there's a couple key areas of the cryptocurrency mining, uh, supply chain that are important for, um, you know, anybody in this space to understand, but particularly people that are new to the space to get it. Uh, so first and foremost, you gotta have money to play. That's probably the biggest one for people to understand. Like if you, this, this, the industry is getting to a point where there's so much activity in it now that if you have less than 50 K to spend, it might not be worth it. Um, because the reality is like, you just don't have that much swinging power, so to speak when you're going and buying hardware, or you're going and negotiating with companies like ours. Like if you wanna get your costs down, which is your end goal, cause you wanna limit your exposure into space, you gotta have some buying power.

Kyle Herron (00:29:07):

Uh, so that's probably the first piece to understand is like you have to be decently financed to enter into mining. Otherwise wait until you have the money, save up for a bit, um, or go and raise capital or get some financing or get, you know, get a loan or something like that. Um, more options like that are cropping up now with the increase in acceptance, in cryptocurrency as a whole. Uh, so, you know, getting a personal loan from a bank and using it for mining is actually more acceptable now than it was when we first started. That's for sure. And that's only a two year window, so, or excuse me, a three year window. So I can't even imagine where the industry is in three years from now. Uh, that being said, the second most important layer of course, is your hardware purchase, right? You wanna drive cost down.

Kyle Herron (00:29:42):

You want to get a really strategic purchase. Like you had just mentioned will in terms of making sure you have a highly efficient machine, you wanna basically have a machine that consumes the least amount of power. Cause that's your number one expense and has the highest output. So which is called hash rate in our industry. So it's your processing power of your machine is called hash rate and that is effectively the output of the machine. Uh, so again, first two layers are financing and then sourcing, right? You wanna make strategic, you wanna make ultimately very strategic decisions on both those fronts. And then the last and crucial piece is now that you've got the computer, you gotta get it online. Uh, and that is where companies like frontier step in. And that's really where a new industry has cropped up in the world of mining, um, which is the co-location space or the data center space.

Kyle Herron (00:30:21):

Um, data centers have obviously existed for a long time, so we're not reinventing the wheel over here, but we are making the wheel run a heck of a lot more efficient, uh, because the reality is the data center, the data center industry is known as being very antiquated and clunky. Uh, and the reality is that like an antiquated and clunky industry usually means higher cost for the end client, because they're just not running super lean like the new, you know, technology companies. And today do the downside of this for the average cryptocurrency minor is that you can't really call the data center around the corner from you because they're gonna charge you up the Wazu and you're not, you're not gonna a profitable mining operation. So because of that, that basically left a gap in the market, uh, over the course of the last, let's say five, six years.

Kyle Herron (00:30:58):

Uh, and that's a gap that we are attempting to fill with frontier, which is where you can provide a similar level of service to what a traditional data center would provide, but do it at a cost that is 80% less in some cases, in some cases, even more, which is a tough problem to solve, but, you know, shout out to the ingenuity of Americans. We've managed to figure it out over the course of our existence, how to get things cheaper ultimately, and how to be lean as entrepreneurs. And, uh, that's really what the hosting industry, uh, in our industry has had to do to be able to stay viable, particularly in an ever-changing market. Uh, so I'll spin it back for a second and explain exactly what we do so that your audience kind of gets a full picture here. Uh, again, when you buy one of these machines, there's three key components to making sure that they actually work.

Kyle Herron (00:31:41):

Uh, number one, power, obviously number two, internet, that's probably an obvious one too. Number three management, a little bit less obvious. Uh, the reason I say it's a little bit less obvious is because the computer hardware that we're used to using is like, you know, our phone, our laptop, et cetera. They don't really require that much maintenance. You know, maybe every once in a while, you'll take your computer into apple or Microsoft and you'll have them, you know, fix a crack screen or you to keep key come loose in your keyboard. But for the most part, you know, they run for multiple years without major issues. Minors are a different animal. Main reason why they're different is because effectively what you're trying to do is you're trying to squeeze as much out of this little box as you possibly can. And you also are trying to get it to run 24 hours a day, 365 days a year.

Kyle Herron (00:32:24):

So you're basically stretching the limits of this computer as much as you possibly can. And inevitably what ends up happening in that process is like the computer just has a lot of problems. Uh, and so because of that, you need, you know, a skilled team of technicians who can basically go and watch over your stuff. Um, and, and somehow in this magical world of mining, a company like mine is supposed to step in and say, okay, not only are we gonna get you low cost power, but we're also gonna get you really low cost management services because it's a constant battle of my company and our clients of saying, we like we can, we, we have such slim margins because we need to support the fact that miners need to say profitable. So like it's a very, it's a very unique balance to get a data center company to work in this space.

Kyle Herron (00:33:02):

Um, and if you get it right for my fellow data center owners out there, it's great, it's a volume play and your business can perform really well at scale. Um, but you know, if you're not drawing in volume to business, like it just doesn't make sense. Um, so goes back to the importance of having, you know, strong, basically strong growth team within your company. Uh, that being said, uh, you know, really the way that we fit in for many clients is we take the weight off their shoulders, that they wouldn't be able to manage on their own. Uh, so getting back to that power internet management thing, uh, a lot of people tend to ask me like, well, you know, I, I get what you do, but why don't I just do that at my house? Uh, well, the reality is that your residential electricity rate probably would never support a mining operation.

Kyle Herron (00:33:39):

Uh, so you have to go to people like us. And what we do is we basically scour around north America trying to find cheap power. Uh, and you're, if you're wondering where cheap power comes from, if there's actually a lot of it in the us right now, um, you can find it. For example, if you go down to, uh, place where they drill oil, a byproduct of oil drilling is natural gas. That's released from the earth. And typically what we have to do with natural gas is we actually have to burn it. So we have to burn it off into the atmosphere because if we just release it to the atmosphere, it is a highly flammable, highly toxic substance that we can't just put out in the world. Uh, and so the government says you gotta flare it off, which is, uh, so if you ever to take a flight over Texas or North Dakota, you may actually see some of these big flares coming out of the ground and that's natural gas getting burned.

Kyle Herron (00:34:20):

It is a, it's still not great for the environment, but it's better than just kicking natural gas, uh, on its own out there. Uh, but the reason I even bring up natural gas is because these are examples of places where cheap power comes from. Uh, you can put a generator down on a, on an oil field and you can just turn that natural gas into electricity at a very low cost. Uh, other places that we tend to go, like we go to a lot of distressed data centers. We go to a lot of former industrial plants. So like a paper plant or a power plant. That's no longer functional and we'll go draw the, you know, they, they consume tons of power, but as you know, a lot of manufacturing is left the us. And so because of that, there's a lot of these stranded sites that are basically scattered around the country, looking for someone to come in and consume power, uh, and actually pretty fascinating what these companies do.

Kyle Herron (00:35:02):

I mean, you know, we've had the opportunity to work in tiny towns of, you know, 500 to a thousand people who have one paper plant in their town, that's supplied employment for everyone. And then that paper plant left cuz you know, they went and moved to Mexico or the China or something like that. Uh, and the reality is that paper plants consume a ton of power and that's where Bitcoin minors step in. Um, because we consume a power too. I mean we consume enough power to power up like an entire city, for example. Uh, and so ultimately the end, you know, kind of my conclusion of this whole grant here is that, uh, you know, data center and co-location hosting is really crucial for mining, but it's been interesting to kind of see how companies like mine have figured out how they can stay alive and keep their clients profitable. And the way you do that is you go to very odd locations across north America to find very cheap power. And believe me when I say it exists in the strangest corners of the country, uh, but it exists for a reason. And mainly because our country is built off the back of industry.

Will Szamosszegi (00:36:01):

Yeah. Well said, and I can definitely attest to, to that. That's one of the things that we're also doing. We're always looking for cheap power and it's one of those things that when someone's getting into mining that it really does until they truly know what they're doing. It makes sense for them to go and learn more about the business and become a subject expert before they go and try and run every single area of an operation.

Kyle Herron (00:36:27):

That's a great point.

Will Szamosszegi (00:36:28):

Yeah. Cause I mean just negotiating those power rates alone is a whole animal in and of itself.

Kyle Herron (00:36:35):

Yeah. And, and again, that's really what we try to do with frontier is like, we totally get it. It is a hard industry to get into, even as someone who's just a retail minor who, you know, goes online on eBay, buys 20 mins, like, well what do I do now? Uh it's and like realistically people are not going and gonna go negotiate their own power deals cause they don't know what they're doing. So that's the idea where frontier steps in, you know, we provide basically an all inclusive, very simple billing structure and under just the end, easy to understand model where all you basically do is you buy those minors, you ship 'em to us and you pay us a monthly flat fee and you go online, you figure out how much your minor's gonna likely profit per month after paying us the fee. And you make a decision of whether that's we're the right fit for you. Uh, but the idea is we wanna simplify what you described will cuz you're right. The behind the scenes is a bizarre, crazy, very, very complex world.

Will Szamosszegi (00:37:22):

Yeah, definitely. So moving on, I guess, past the mining and to yeah. What all the mining is tied to, which is in many cases, the price of Bitcoin, I'd be interested to hear your outlook on the future and how that it's going to progress between now and the next having,

Kyle Herron (00:37:41):

You know, it's, it's a super funny question to ask. Will I remember, uh, it says, I, I, I referenced back to this on a lot of PE on a lot of podcasts when people ask me this question, uh, like what does the future of Bitcoin look like? Uh, and I remember there was a podcast I was on probably two years ago. Uh, maybe it was yeah, about a year and a half, two years ago. And the guy asked me like, okay, so, you know, blockchain is this big thing now, you know, Bitcoin, is it 20,000 at one point there's, uh, international adoption, et cetera, et cetera. Like what's the future. And I'm like, I don't know. And I think there's not enough people in our space saying, I don't know, because it is a 100% fully speculative market at this point. Um, as people might know who invest in Bitcoin, there's no rhyme or reason for why it goes up and down a lot of the time, uh, we, I can give you a million data points that say, well, this is why Bitcoin just jumped from 9,500 to 11,000.

Kyle Herron (00:38:27):

Uh, but realistically, a lot of this industry is just driven off a sentiment. A lot of it is just emotion. A lot of it is just people saying like, uh, I don't really trust my company's currency. I'm gonna go put some money into Bitcoin. Oh wow. Bitcoin's up like 15%. I'm gonna go put more money into Bitcoin. And now it's at 30%. And before you know it, you have this crazy artificial inflation and then the market crashes super hard a week later, people are like, wait, what happened? I'm like, well, because the market was artificially inflated. So I I think will to answer your question more specifically, we have a long road with this industry in terms of having real world actual applications. Um, I think we're just now, just now starting to see where this, where cryptocurrencies can be impactful in the world. Um, I think with the economic pressures that were put on the really on the global economic or excuse me, the economic pressures put on the entire cut the entire globe, but the entire global community experience this, um, particularly due to the pandemic, we're starting to see like why Bitcoin matters because when you have national currencies collapsing like Brazil, Greece, et cetera, it makes you understand why a globalized decentralized currency makes a heck of a lot of sense in a globalized world.

Kyle Herron (00:39:34):

I mean, we already are in this globalized space. We already are in a predominantly decent centralized space too. I mean, we're right now will we're doing something that used to be centralized specific old leader, radio stations, and now you and I can, we have decentralized radio and we can shoot this podcast right here. So it doesn't make se it doesn't make sense that money wouldn't eventually do that too. And that is where I ultimately see the sort of the first, the first wave of impact coming with with cryptocurrency is that we're going to, we need to decentralized economic system a hundred percent to just keep up with the times ultimately. Um, and because of the fact that, you know, candidly speaking, like most countries, currencies are, are artificial. They're not real. I mean the us dollar, the gold standard doesn't exist anymore. So like the us dollar is just kind of a made up concept at this point.

Kyle Herron (00:40:18):

Um, I'm sure that we will shift to digital money, even if it's not cryptocurrency in the next, I would go as far as say within the next decade, um, France is already starting to have that conversation about shifting to digital money. So this is a long-winded way of saying well, that what I ultimately see happening is that there will be a slow adoption of countries moving to digital money. So basically getting rid of like actual physical currency, uh, then during that time, there'll be a slow adoption of cryptocurrencies by governments as particularly governments who have collapsing national currencies. And like I said, we're already starting to see that right now. So that's what I see happening on like a governmental level. Um, on a personal level though, I think it's gonna be a great asset class. You know, I think it's gonna be an awesome asset class to put money into because it's proven that it doesn't really, it it's, it takes a lot to take down Bitcoin, I'll put it that way.

Kyle Herron (00:41:07):

Um, you know, we've now seen it go through everything. We've seen it go through insane that market swings. We've seen it go through a pandemic. We've seen, we're seeing it kind of go through a recession right now and it's proven that it's still here to stay. So I do think the future is positive for Bitcoin. Um, I do think that we will continue to see governments warm up to it, institutional investors warm up to it. Uh, but in terms of the actual application of it beyond a speculative asset, I think that that is still yet to be determined at this point.

Will Szamosszegi (00:41:37):

Got it. Yeah. I mean, it's, it's really interesting to have this conversation now in this, uh, COVID environment, after seeing the fed increase its balance sheet about 75% just within the past year and how that's so different, you mentioned it's not tied to the gold standard anymore. And we look at a system like Bitcoin, where it's technically tied to the minors and exactly what we're doing. So if that thesis of viewers ends up playing out to some degree, maybe a little few of the details are a little bit different than how you outlined it, no matter what, it's still showing that the future of crypto is so much bigger than where it is today.

Kyle Herron (00:42:18):

Yeah, yeah. A hundred percent. I mean, the, I, I, don't the, a number that I, that I never seem to have on hand is the number of people in the world that have, um, that actually have bought cryptocurrency or used cryptocurrency before I recently heard though, I think it was one of my friends mentioned to me was about 75 million people in the us out of a country of 3 33 or about three 30 million. So, you know, that's a significant adoption rate about 30, 40% or something like that. Uh, so I do think from as like I said, from a speculative asset class, like it's a heck an investment and I do think people will play with it for a while. Um, as a transactional tool, I think in time, people will start to shift over to it, but we're gonna need to have some sort of, like I said, we need to have either a collapse of national currencies or we need to have a government that comes behind it and says, like we are pro crypto or pro digital money at a minimum, um, for crypto to start to be adopted on a transactional basis.

Kyle Herron (00:43:10):

Uh, because again, like, you know, guys like you and I will, of course you and I are like super bullish on crypto. I'm sure you bought things with cryptocurrency before, but then I looked one generation up at my mom and my dad. And like, they're not, they're not buying things with cryptocurrency. So it'll likely my my guess is that it will slowly be adopted by society. When, again, governments come behind it, digital money becomes more prevalent. And then candidly speaking as the older generations start to frankly, die off. I mean, I love I mom, but you know, when, when baby boomers and generation, um, and the generations that preceded them, uh, ultimately are no longer here anymore. And we have, you know, young, progressive policy makers and whatnot. Uh, then I do think that cryptocurrency, or at least digital money in some form, uh, will be, you know, kind of the new standard in society.

Will Szamosszegi (00:43:54):

Yeah. And in terms of using it on an everyday transactional level. Have you been staying up to date with any of the projects that are working on building that mass adoption?

Kyle Herron (00:44:07):

Yeah, I mean more or less. Um, I, I mean the one, so this is another question I get a lot too, and I do kind of keep an eye on like the transactional tokens that are available nowadays. And there's a lot out there for people to pay attention to. I mean, I think the ones that are probably the most interesting are just stable coins. Um, these like USD backed coins because they do serve as a transactional tool, but honestly, the tool that nobody seems to ever bring up. And I personally think it's the most powerful, um, for trans for transaction cryptocurrency as a business, at least, and frankly, per person to person as well, tool, uh, person to person as well, uh, is a tool called BitPay. Um, I'm, I'm not sponsored by BitPay or anything. Uh, Coinbase commerce is a similar platform, but the way BitPay works is great.

Kyle Herron (00:44:49):

And like someone asked me a little while ago, like why does every business not accept crypto? And I couldn't give them a good answer. Um, there's literally no reason for it when you have tools like BitPay. Uh, and for those of you, those of you in your audience that don't understand what BitPay is, uh, it's basically like an invoicing tool, like a QuickBook, for example, or a Stripe or something like that. But the difference is that you can bill your customers in crypto and you can receive the equivalent amount in us D so if you need to bill a customer for a thousand bucks and the customer's like, I wanna pay you in crypto. And you're like, eh, I don't believe in Bitcoin. Well, not only are you completely cutting out a huge portion of your potential customer base, secondarily, you're not recognizing if there are tools out there now that will do all the hard work for you.

Kyle Herron (00:45:27):

Uh, so I think from a transactional standpoint, that will, that makes a heck of a lot of sense to me. You know, having tools that can basically automatically convert your cryptocurrency back into a currency that you trust makes a, makes a ton of sense for businesses. Uh, and again, if we're increasing a place where we're looking at globalized commerce and international currencies collapsing, like as a business, I don't wanna accept, you know, like whatever, uh, whatever, for example, like greases currency had much rather have my grease customer pay me in Bitcoin. And then me, if, even if I don't trust Bitcoin, I'd rather have them pay me in that. And me receive USD, um, versus having to play with, you know, depreciating national currencies.

Will Szamosszegi (00:46:02):

Yeah. Definitely pay they, they actually have a, a card if someone wants to get involved with paying for things in crypto bid pay has, has a card that allows 'em to do so that's they credit for just over a year? I believe.

Kyle Herron (00:46:16):

Yeah. It's really interesting. So, I mean, there you go, right? Like that's where I see transactions happening. I don't know if we're gonna have some special coin that does it, but I could see people getting clever with how they use Bitcoin. Uh, and like you said, the card is a perfect example of that.

Will Szamosszegi (00:46:30):

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Will Szamosszegi (00:47:46):

What is your favorite book or movie?

Kyle Herron (00:47:49):

Yeah, I mean, this is a great question, man. Um, in terms of, well, you know, here's the interesting thing is like, I, I am, I'm definitely a believer in technology through it and throughout, but like more so than anything, I'm a believer in the human psychology. Uh, and I believe that if we're really going to reshape society, we don't start with fancy technologies, but we start with understanding people ultimately, right. And so to understand people, I'm, I'm, I'm obsessed with understanding how people work and how their brains function. Uh, and there's a great book that really got me kind of inside the minds of, uh, how human psychology works. It granted it slanted towards negotiation in sales, but I don't, I think it gives you a lot more color than that. Uh, it's a book called never split the difference by Chris Flo.

Will Szamosszegi (00:48:31):

It's great book. Yeah.

Kyle Herron (00:48:32):

Yeah. It sounds like you read that one too. It's kind of a classic in the business world, but, and it's, and I don't want to come off like, you know, I'm strictly some business guy and I can't think bigger than that, but I think that ultimately I'm, I'm under the same impression as you will. And that I, I ultimately want to create a society where people feel empowered to do what they want, uh, and, and ultimately to chase their own passions. And I think that things like cryptocurrency and blockchain enable people to live in that extremely democratized fashion, right. Where you can live an independent life because you have an independent financial system, for example, and there's a lot to come after that too. But I think to get there, we have to understand people and we have to be able to really, really be able to communicate to people why they should be looking at life a little bit differently.

Kyle Herron (00:49:14):

And I think books like never split the difference are really crucial to doing that. So that's where I live on that front movie front. I'll answer that one too, since you threw it at me. Um, there's a lot, there's a lot, man, honestly, uh, I mean, I'm obsessed with the idea of what is beyond planet earth. So inner stellar has blown my mind to this day. Um, there's also a great one for, I'm also very obsessed with what is on this earth, because as you probably know, I think what is it over 50% of our ocean? So yet to be discovered or even, um, you know, because we just don't have the ability to travel down there. Uh, there's a great movie called life of pie, which is a cool story is basically how some guy discovers more of what this earth has to offer. So I'm really interested, you know, in kind of understanding, not only is what, what is here, but what is out there and, uh, you know, things like, I, I, it gets away from blockchain, but ultimately I look at technology as being the tool for us to achieve whatever that greater thing is that we want.

Will Szamosszegi (00:50:08):

Yeah. Well, since, since you brought that up, I kind of want to dig down this, uh, this rabbit hole with you of space travel, and I'm sure that, you know, what's going on with SpaceX and how there plans to try and go and colonize Mars, uh, what are your thoughts on how that mission and that vision is going to progress over the next decade or so,

Kyle Herron (00:50:33):

See, this is where the question starts get much more interesting. Blockchain's great.

Will Szamosszegi (00:50:36):

I'm willing to dive deep. <laugh>

Kyle Herron (00:50:39):

No, blockchain's great, man, but you know, you're right. Like the, the ultimate goals here are, how do we survive species long term mm-hmm <affirmative> um, I, I do think that blockchain will have applications to allow us to do that. Um, bringing it back to where we started this whole thing, but in terms of what the future looks like, and what's beyond plan of earth, uh, I mean, look, here's, I, I am not, I do not try to be a pessimist in life. I really do try to be optimistic, but I also try to be somewhat, somewhat of a realistic optimist, so to speak. Um, my realistic optimism tells me that we're probably going to kill earth. Um, I don't like to describe it like that, but there's enough information out there to show that we are basically sucking the life outta this planet. Now, whether that happens tomorrow, whether that happens in, you know, a century from now, whether that happens in 500 years from now, the bottom line is like we will eventually utilize the resources, uh, too much.

Kyle Herron (00:51:28):

We will eventually over basically overextend our planet. Uh, and at that time we're going to see more significant damages to the planet. And I think we already started to taste them just over the course of the last year. You know, we saw massive fires in Australia that we had never seen before. We're also seeing things like insane global conflict, uh, and even in my home, in my hometown of Los Angeles for seeing massive race wars. So the reason that I bring up all these various layers is to make, to is to kind of emphasize the fact that like we are destroying the planet one way or another. Uh, we're destroying the environment. We're destroying our relationships with people, uh, and above all, we're living in a society that does not feel empowered to do what they want to do. And you can't create a successful world unless individuals feel empowered to chase their dreams and passions, because that is ultimately what's create what creates change in society.

Kyle Herron (00:52:15):

So that's my high level on the, on the real nitty gritty of what it means of what this all means. It ultimately means that we're gonna have to leave the planet at some point. So Elon's idea of going and colonizing Mars makes a ton of sense, in my opinion. Um, I think that it will be extremely logical within our lifetime to see people living on Mars. Uh, Elon's already making such dramatic strides towards doing that. Of course there's like blue origin and whatnot with Bezos behind it. Um, so I think you'll continue to see billions of dollars poured into the idea of dominating space one way or another, whether that means, you know, going and taking over Mars or the us starting a space force, uh, you know, like the bottom line is we're gonna dominate space and humans have already gotten a lot of their junk up there anyway. Like I think there's, there's thousands, thousands of satellites that exist up in the, uh, you know, up beyond the atmosphere right now. So, you know, we've already started to make our footprint up there. I think we're going to continue to,

Will Szamosszegi (00:53:07):

I would like to dive down this rabbit hole and I think that you, you brought up, uh, human versus machine surgeries. And so I'm not sure if you've been staying up to date with Neurolink and the work that they're doing there. Uh, another one of Elon's companies, right? Uh, the, what they're trying to do is they're trying to implant this chip and the surgery is so difficult that a human can't attempt it. So mm-hmm, <affirmative> what they're doing is they're threading the, this, I'm not even sure what to call it, but threading, uh, threading within the blood vessels within, within the brain. Yeah. And the, the needle is so small that it is one, the one seventh, the diameter of a hair. And so these types of surgeries can only be done by machines. And it only makes sense that the best surgeons in the future are going to be machine driven

Kyle Herron (00:54:02):

A hundred percent, a hundred percent. When you talk about things like Neuralink, that will be an inevitable reality without a shadow of a doubt. Uh, it actually, in many ways, I, I, I, uh, it, it sort of is already a reality. I, I like to tell people that we don't understand, but we're already cyborgs. And the world has actually prepared us to be that, yes, the minute that smartphones became a thing, uh, we became cyborgs in a way, because effectively they're already attached to us. I mean, we feel like we dis we can, like, we have volitional control and we can distance ourselves. But realistically, like who is ever without their phone, it is always within reach. And frankly, you'd be a far less powerful human without that phone, always on you. Um, you know, it's your communication tool, it's your knowledge base. And it serves in so many aspects.

Kyle Herron (00:54:45):

And so I feel like we are already being nurtured as a society to live in that sort of more cyborg style of culture. And so when, when, you know, when apple comes out and says, Hey, great news, we've got these really cool glasses that you can wear. Um, and apple will do a better job than Google did, but like, we've got these really cool glasses you can wear. They're, they're stylish. And now you can have, you know, an AR display of the world. We're be like, yeah, that sounds pretty good. And then they're like, well, even better, a couple years later, we have contacts you can wear like, yeah, that sounds even better. Like I get my phone in my eye. That's great. And then they're like couple years later, they're like, we have an even better idea. We'll just take your eyeball out and put a cyborg eyeball in there.

Kyle Herron (00:55:19):

And now you'll have optical zoom and you'll be able to see through walls and all this stuff. And we'll be like, yeah. So the way that, the way I look at it is that like major technological companies are just nurturing us to get to that point. Ultimately, um, it's a, it's a very effective capitalistic strategy to slowly release technological innovation. So you start with something that's as simple as an iPod, you eventually level up to a phone that phone will level up to an apple, watch that apple watch. Now, now you're comfortable with wearables that out levels up to glasses, those glasses level up, so forth and so forth to the point where you're like, yeah, I'll just get a chip installed in me. Um, you know, we, it sounds crazy today, but if you just look at how the diffusion of innovation works, it's so logical that we will eventually be, you know, half, half, half man half bought.

Will Szamosszegi (00:56:02):

Yeah. That, that's very interesting. And I, I do completely agree that when you're, if you're going to try and get someone to accept that end product of in that case, the extreme, oh, we'll take out the eyeball and put in this, this, uh, non nonhuman version. Uh, yeah, you can't just bring that up right away. You gotta build to that. And that's something that we see a lot of time, uh, with, without diving in down a whole nother rabbit hole with governments and privacy type type issues. But in this particular case, do you think that this is part of the strategy that's currently being pursued by some of these tech giants? Or is it something that's happening organically because of just the rate of innovation. So that's happening where they're making these slight improvements over time, and then it gets to that point, or do you think that they're almost slowing down innovation on some of these fronts to make it accepted over the long run? And it's a very definitive question, but I I'd be interested to hear your perspective.

Kyle Herron (00:57:07):

I think it's, it's, it's the, the writing is a hundred percent on the wall that they are intentionally slowing down the release of innovation

Will Szamosszegi (00:57:13):

Really

Kyle Herron (00:57:14):

For oh

Will Szamosszegi (00:57:15):

Yeah. I mean, that's interesting.

Kyle Herron (00:57:16):

Well, and here's my theory on it, right? I mean, number one, as two business owners, what would make more sense? Let's just say, will that you and I both have the most innovative product in the world, like you and I happen to just, we just, we have it. I don't know what it is, but like you and I just happen to have the most innovative product to ever exist of all time. And we both know that the everyone will buy it if we put it out instantly, but here's our problem will, we don't know what the next iteration is. So we have a final product, right. Only we don't know what comes after that, but we start looking at our product and we're like, well, you know, the, the interesting thing is this thing is such a good product. That what if we just released like one feature?

Kyle Herron (00:57:55):

Like what if we just released 5% of the products? And we made hundreds of millions of dollars doing that, I would guess, well, if you and I were at a whiteboard in a room, we'd be like, yeah, sounds like a good idea. And then we will seem like a really innovative company because next time we'll release 5% more of the product in 2, 2, 3 years down the line, and then 5% more and 5% more. And by the end of it, we have become an absolute multi-billionaire multi trillionaire behemoth in our industry, all because we had a really cool product idea. Here's an example of this that I've always found interesting Siri, uh, which we know is our little AI buddy on our iPhones began recording in the early 1990s. We didn't see that on our phone until early 2010s or something like that. So it goes to show that like apple knew exactly what they were doing.

Kyle Herron (00:58:42):

And then you go even further down the line to something like the military, where I am fully convinced the greatest innovation is occurring in the military. And the reason why is because we pour billions of dollars into it every year, I mean more, more money than any tech company could ever raise goes into the military. Uh, and then you think about things like, you know, like area 51, for example, which I'm not here to speculate that area. 51 is a bunch of aliens in it, but I am here to speculate that area 51 has an, a ton of ultra crazy innovative technology in it that we will not see for several, several, several hundred or maybe not several hundred, but several tens of years, um, because they don't have to, you know, they're gonna keep building and innovating on us so that we have it.

Kyle Herron (00:59:23):

And one day they may use it for purposes that may freak us out. Uh, but the bottom line is that like, as a species we're not ready for what smart people have to offer just yet. Uh, and it takes time, you know, like a very interesting theory that I studied when I was in college was called the diffusion of innovation theory. Uh, and the concept behind is basically like, how do you appropriately diffuse new concepts to the public, uh, without scaring the living daylights out of them. And you do it by doing a very slow role. So like, yeah, you know what? We'll like, I could go from having a landline in my house to having a little phone in my, like in my pocket. Like, that's, that's a logical jump, but you can't imagine like people going from a landline to having like an apple watch, like it would, it would, people wouldn't buy it. They'd be like, ah, that's just like, that's too much. Like that's, I don't get it. I don't understand how that works. So apple then says, it said, like says instead, okay, well, let's shove a ton of products in between number one, so that we can make a ton of money. Cause we're capitalists after all. Uh, and number two, because we don't wanna scare people away from us. We wanna incentivize people towards us.

Will Szamosszegi (01:00:24):

Very interesting. Going back to that, that whiteboard example, right? You have the most innovative product in the world. And I do agree that logically it would make the most sense to release little by little, rather than just coming out with that final product. Uh, if the major companies today let's say had innovations that were much further down along the line, do you think that it's, they're at a point where cuz there there're more than one company working on it, right? So let's say apple has this innovative product. And then all of a sudden they're worrying about potentially Google trying to do the exact same thing and release that next iteration. So do you think that it would still be possible for a company like, uh, apple to have that far down innovation and still be holding it back until a competitor put something out? Or what do you think the dynamics are at play on the competition side of, of where innovation is and what the public's seeing versus what's behind closed doors at these companies.

Kyle Herron (01:01:25):

That's a great point then. I mean, look, that's a great question as well. Here's a, here's a deal like a company like apple, they don't care. They don't care what the competitors do. I mean, if you look at Android Androids and open source platform, that was miles beyond apple software like years ago. I mean they had, they had, they had, I, I can't specifically speak to them cause I can't think off the top of my head, but more advanced cameras, more advanced AI, better layouts. The whole thing, more customization on the phone. Everything Android is way ahead of apple, but going back to human psychology, apple doesn't care because they know people like their products more and they know they make simpler more easy to understand products. Why do they do that? They do it intentionally. The apple is the apple. iPhone is a super, super regimented phone in terms of the, in terms of the way it's structured.

Kyle Herron (01:02:12):

Like you follow a very specific formula when you, when you get one of those talking everybody's home screen, like basically looks the same, right? It's like, like a grid layout of a bunch of different apps. You had an Android phone, be whatever you want. And so I don't think that I, I think that really smart companies don't just want to innovate. Like that's not their number one goal. Their number one goal is that they want consumers to adopt and enjoy their product. And you have to be able to play into human psychology to be able to do that. Apple did a great job with that. They didn't scare you. They didn't overwhelm you. They said, we're gonna simplify this crazy new technology. And we're just gonna give you a prepackaged phone with basically a pre a prefabricated home screen. And here's your big, the big message button and your big phone button.

Kyle Herron (01:02:54):

And you, it works just like your last phone. Unlike Android that came out and said, oh, well, great news. Like you can, you can have 10 different background and you can have a screensaver and you can organize your apps this way and you can have your phone, wake you up and read you the weather in the morning. Apple didn't do that for years. Uh, and a perfect like perfect example of this that just drove all of my tech buddies like absolutely insane is if you look at the new iOS that's coming out, which is, um, Apple's iPhones operating system. I can't remember. I think it's like iOS 13 or 14 or something like that. Uh, it's home screen looks identical to an Android from like four years ago. <laugh> they, they took a bunch. I mean, and it's like, dude, here's the, here's the best part, man.

Kyle Herron (01:03:33):

This is like where I always, uh, where, where I always find it particularly funny. If I'm apple, I look at an Android and I say, you guys go do the market testing. Like you guys go fail. Like you guys go play with all of your different features and whatnot. Try your different layouts on your home screen. Like you guys see what works five years later, we're gonna take, we're gonna watch how your consumers responded to that. We're gonna pick the best possible version of what you did. And we're gonna have that template in, on our, on our, on our phones, on our iPhones. Uh, and then we're gonna deliver that to all of our consumers and they're gonna be like, oh, well this is really novel and new because it's different from the last iPhone, you know, layout. But to apple, they're like, oh, we were way like we were way outta this and we'd have to pay a dime for market research.

Will Szamosszegi (01:04:16):

Yeah. Wow. Well, I'm really glad that we went down this rabbit hole. I got one last question for you, but sure, man, before we ask that question, can you just tell everyone who's listening where they can connect with you online?

Kyle Herron (01:04:30):

Yeah. You know, this is, uh, this is another rabbit, so I'm sure will you and I could sit down and have, you know, hours of conversation and um, but I'm actually not for, for very specific reasons. I'm not big on social media. Um, so it's a little bit tricky to track me down. Like things like Facebook, Instagram, Twitter, things like that. Um, but you can definitely find me on LinkedIn. So I'm easy to type my name. Just Kyle, Aaron frontier, your mining I'll pop right up. Um, feel free to add me on there. I'm, I'm very liberal in terms of, uh, the people that I accept and kind of con converse with because you just never know what great mind is out there. Uh, and then secondarily, please go ahead over to frontier mind.co uh, that's an easy way to get in touch with me, obviously.

Kyle Herron (01:05:06):

Um, kind of the front word facing image of the company. In many ways you can find me in our chat bubble bottom right corner on the website, but you know, we're big believers that, uh, all this stuff we talked about will all this stuff that we talked about in terms how we wanna reshape the world, how we wanna travel, you know, become inter planetary species, et cetera, et cetera, all of it's achieved through the means of technology. Uh, and I, I strongly, I strongly try to impress upon people the importance of at least understanding one of 'em, whether it's blockchain, AI, automation, space, travel, you know, autonomous vehicles, et cetera. Just try to get one. And, uh, over at frontier, we can certainly help your audience understand at least the blockchain side of it.

Will Szamosszegi (01:05:42):

Great. So the last question it stems initially from the quote, I believe it's from bill gates, who said that many times people overestimate what can be done in the year, but they underestimate what can be done in 10. So let's say that we move forward 10 years and we're looking at the cryptocurrency mining industry. What do you think is it's going to be like,

Kyle Herron (01:06:09):

That is a tough question to answer, man. Um, cryptocurrency mining specifically in 10 years may very well not exist in its current form. I'll say, um, because eventually like I it's, it won't happen the next 10 years, but like eventually profits are gonna get so thin, uh, with the increase in hash power and the increase in institutional involvement that it will be an industry that unfortunately probably gets very centralized. It'll probably be a significant amount of large institutional Blairs with an enormous amount of money, squeezing out the little guy and data centers like ours centralizing a lot of the hash power underneath our roof. Um, so I think the goal of Bitcoin becoming a decentralized system will get challenging without a question. Um, but, but I do not think this is a bad thing for Bitcoin because moving away from moving away from having government back digital or the government back currencies is a gosh darn good step for the decentralization of, of, of basically money as a whole.

Kyle Herron (01:07:09):

Um, but to answer your question on an even bigger level will, uh, I don't look at mining as being the end all be all for the understanding of how computational power plays a role in the world. Uh, I think mining is an important, it, it, it was the important, it's an important proof of concept to understand that computational power in the future has value to it. Right? Um, as we create further decentralized systems, people will trade computational power for money, right? So right now is it's sort of a, you could call it a trade, right? The like blockchain, if a personifying blockchain says to a minor, Hey, I gotta, I got a deal for you. I will give you money. If you give me your computational power. I think that concept will continue to grow. Um, I really strongly believe that computational power will be one of the greatest currencies of the future.

Kyle Herron (01:07:54):

I think the people that control computational power will become the behemoth companies because the demand for data is only growing, uh, the demand for cloud gaming, cloud computing, film, rendering, AI, processing, automation, et cetera, is only growing. And all of that rests on the backs of really, really, really powerful computers. So if you're looking for a new sector to invest in any sector that has to do with computational powerful power will be an interesting one. If you're thinking about what will be a of extreme value in the next decade, it will be computational power as a whole for blockchain, for AI and for all these technologies.

Will Szamosszegi (01:08:32):

Kyle, thanks again. This was a lot of fun.

Kyle Herron (01:08:35):

This was great, man. Thank you so much. Well, thank you to your team. You run a great show over here, man. I'm wishing you guys the best.

Will Szamosszegi (01:08:40):

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

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