path: root/transcripts/bitcoin-takeover-austin/texas-mining.mdwn

Texas mining

Gideon Powell, Griffin Haby

These two are going to talk about why Texas is going to be the bitcoin mining capital of the world.

GH: There's never been a market for stranded energy. Bitcoin has fixed problems that we've been dealing with for decades and decades, and the thing about chasing energy.. thought it was the opportunity of a lifetime, I'd rather have stranded energy in Texas really. I'd like Gideon to talk about energy and how much god has blessed this state.

GP: Specifically when God made Texas he had bitcoin mining in mind. Jesse talked about the whambam trifecta of wind, solar and hydrocarbons out in West Texas. But also the climate. When Jesse and I started in 2017, and we were studying global power markets to build a power market and his nerd brother was mining ethereum or something. One of the big problems thought was that oh it's so hot in Texas but from a physics problem it's not a problem unless you're in Houston. The first mine in Texas was 50 MW pure money laundering operation in Houston built in 2015 or 2016 and we just stumbled into it and said holy hell that's a huge facility. The climate in West Texas is arid, dry, and really that's one of the most important thing is that you need dry air to run these things.

GH: To see where this is going, you have to look to the past. I would put 5 bulletpoints of Texas history together. Genesis was the first one, God put all the natural resources right here and smiled as he did it. Then some Spaniards came over to look for gold, hard money. Imagine that. So they come over, they incentivize all these settlers and say I'll give you this huge swath of land and you get everything from the heavens to the center of the earth and oilman say man center of the earth let's go look for oil. Cowboy culture, you have all this land and this independent spirited way of life that started here. Mexico happened, and basically they tried to come up and there were these par outlaw guys coming up and going to Tejas state. They had a cannon to defend themselves against comanches, and then they realized these wiley Texans ... then we said we will govern you from Mexico City and they said ew're going to take that cannon back. We said, come and take it. That's still in our ethos. I run with some guys who will die on that hill with me. You have private property rights, you have a culture of don't tell me what to do and get off my land. In 1830-1840, then there was English common law and we get private property rights. Along came 1901 little town in Boueamount, you had Spindletop and all of the sudden a ton of oil comes out of the ground and then there's this wildcat mentality. You bred a cowboy with private property rights and a risk taking attitude about controlling your own destiny. You might lose it all, but you might win it big. So you are incentivized to go out there, explore with your own materials and capital and there's a lot of upside. That feeling is still there. You can literally look at the bitcoin mining people out there, it's almost the same as the oil/gas business in terms of the model. The grid de-regulation has innovated the cowboy we will shoot you if come on our land, and with that mentality coupled with cheap energy keeping on coming from the heavens to the center of the earth the future is so bright and limitless.

MB: As someone who recently moved to Texas, it's a bit jarring to me as someone who goes to bitcoin conferences around the world... the Houston meetup is an eye opening experience. It's a whole bunch of wildcatters who are saying what's going on with this bitcoin thing, it's making money, it's exciting to see these people getting interested in bitcoin and they aren't sure what's going on but they are sure there is something here and they want to learn as much as possible. That mentality is very apparent as an outsider coming in.

GP: Someone tweeted that West Texas has a bunch of resources, sure, but it has that culture. That wildcatter mentality is one lineage, but another one is the whaling community from the Dutch... there was a whaling cartel up in Nantucket. They were controlling the price of whale oil, and then some wild capitalist came in and said they were going to compete. Some crazy asshole drilled sideway, and now we have too much oil, and we're undermining totalitarian regimes around the world. Specifically in Texas we use bottom up innovations to drive down the price of energy down to the absolute detriment of the most evil institutions globally. Really when commodity prices go up, that tells you either go compete with it, or find more of it. Globally, most of the power globally is controlled by corporations. Texas has the most free market grid in the world and anyone can come here and innovate. That's where ERCOT was huge in this bottom-up permissionless system in the energy market. Then you layer in the bitcoin miners who are some of the most innovative people in the oil business have gravitated to the bitcoin path. Bitcoiners are constantly making mistakes but learning from it and moving on. Here in Texas there is a culture of yeah you're going to fail who cares dust your boots off and get back out there.

GH: We've been boom and bust, but all the sudden I talked to this old seasoned veteran oil guy and me explaining to him that all of the sudden I mean yeah you love high gas prices but what if I told you we'd be celebrating low gas prices because we can mine bitcoin cheaper than everyone else. His wheels you could see them spinning. The energy in the room is palpable when you go to the Houston meetup. There are some cities that understand bitcoin faster than most. NYC understands financial markets. Silicon Valley gets tech and innovation. Chicago, commodities. Wyoming, ranchers with low time preference. Nashville, not sure. Texas, and I can say Dallas is a big financial center, it's not NY, but in Austin, you have more people leaving Silicon Valley to innovate here, and commodities we do a bunch of those in Houston. Miami, they hate commies so they are in good company.

GP: I'm still in the oil and gas business. But really, it's less about a framework of commodity like oil and bitcoin merging but more of a framework of capabilities and how do you figure things out in a mutually beneficial way? Thinking about man now I'm rooting for lower prices? Whenever oil would spike, growing up, my dad would smile and I would smile, but when we were out infront of people in public we wouldn't smile. But now, the energy price going down puts a smile on my face. Bitcoin miners are wildcatters. We built the first mine in West Texas and people told me don't call it a bitcoin mine call it a blockchain mine. I told them, no, it's a bitcoin mine and I fucking love bitcoin. The boring slow data center people will come later. All the infrastructure takes time. With the culture of Texans, just go build it and they will come.

MB: What about the concern that Texas will be the next China in terms of mining centralization?

GH: you should be concerned. When I talk about $100 oil, you're talking about the best minds on the planet. If you go out and see deepwater off shore semi-permissible drilling platform and the guys that thought that up and the super technical deep science guys that they solve problems like you said. They are going to walk into a bitcoin mine and it will be child's play for them. We will have serious innovations, and it might happen during a bust. They are busy now with hydrocarbon prices, but cheap energy is going to expand more bitcoin mining here in Texas. It's a beautiful marriage of the business cycle. It's exploding here. Once we start manufacturing chips and build our own ASICs in this state, I don't know how you can compete with us.

GP: Were you alluding to secession? We don't talk about that publicly.... But yes, the centralization is a concern. We have 7 to 10 GW of projects in Texas alone. It's a concern. But everone in this room? Go compete. Go build. That's one of the coolest things in the bitcoin mining industry. There's no secrets. Start with land, then interconnect into the grid, off-grid is cool but from a scale standpoint off-grid is difficult. I truly believe in the next few years, we will have 5 GW of hashing, and then in the next 10 years at least 10 GW. If the federal government wants to ban bitcoin, one of my absolute missions is being involved in building out so much bitcoin demand response mining on the grid that they can't turn us off. They will say we have to have htis because reneewables have caused too many problems. Any power trader and anyone involved in the grid knows that bitcoin mining is an absolute game changer. ERCOT is currently 80 GW which is huge. We will drop 10 GW into there in the next 10 years, but bitcoin is going to $1 million, $10 million, $100 million in this inflationary environment and we're going to need 100s of gigawatts. I think we will build out 50-100 GW in Texas in my lifetime. Globally we're going to need 100s of gigawatts so don't let us do it all in Texas. Go out and compete.

MB: We should be racing to get the energy sector integrated with bitcoin mining as soon as possible. We don't need to wait to ask permission from politicians to say yes.

GP: In the oil business, why is there a public narrative to shame oil companies? Well, they never worried about branding because you were going to buy oil no matter what anyway. In bitcoin, yeah we need to say why it's important, but let's just go build this and show why this is critical. Grids in Europe and California are screwed. People are going to die. We saw it here in Texas and that was a travesty. Bitcoin mining and more energy batteries, we're going to fix the grid and we will usher in an energy revolution that we can't comprehend. The industrial revolution was acute compared to what we're about to do in West Texas.

GH: Geopolitically, you don't hear any states that have a lot of natural resources really anti-bitcoin. China obviously they love control but they don't have any natural resources so that was a no-brainer. Russia's central bank said we're deep Soviet Commies and we need to get rid of this, but someone in Putin's circle said wow we have lots of cheap resources so let's not kick out bitcoin mining here. It's the cheap energy states where the innovation is allowed to do it, then your cheap natural resources states will be second. Senators from a natural resource state like Wyoming are going to be different from a Senator from MA where there's no natural resources. The human flourishing argument is that more power is how you get to where you want to go.

GP: Your access to low cost reliable power.... if you care about human prosperity and the sanctity of life, then producing more energy at a higher and lower cost is critical.

MB: When Texas becomes the mining capital of the world, it is going to force other states to adopt ERCOT like systems.

GP: Texas is huge, but we're the testnet. Everything we're doing with ERCOT is absolutely critical, but we will win, we will stimualte the economy. The Texas miracle the last 20 years has been great, but has largely benefited the cities but we're going back to these smaller communities in Texas to benefit them. In other states, when they consume energy, they dont have bottom up innovation. What bitcoin miners are going to do here, we need to scale to other states and to scale globally to fix all the grids. We need to be able to tell our story and be successful.

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