Whit Gibbs - Bitcoin Mining For All

Hi, you're listening to Stephan Livera podcast, a show about Bitcoin. Today, for episode two hundred and fifty-nine, my guest is Whit Gibbs of Compass Mining, and we're talking about his background in mining, how the mining market is developing, as well as how individuals can get more involved. First, a message for the sponsors of the show. Lend at HodlHodl is a non-custodial Bitcoin backed lending platform so you can lend and borrow globally and anonymously. Don't have your money lying around, lend it and earn attractive returns if you've got stablecoins. HodlHodl's lending allows you to earn twenty five percent APR on average, one of the highest in the market. There's also no need to sell your bitcoins even if you are short of funds. This is a way to get some fiat stablecoin liquidity without the need to trust your part, your money to any one individual. On lend at HodlHodl, your BTC collateral always remains locked in escrow. Lend A Bitcoin DeFi allowing peer-to-peer lending and borrowing directly between its users. With HoddleHoddle's Lend platform, you set your own terms and you put up offers depending on how long you wanna borrow or lend and the interest rate. Go and check it out at lend.hoddlehoddle.com. CipherSafe dot io are the creators of the CipherWheel product, so if you have a Bitcoin hardware wallet and you've got that bip39 seed, the twelve or twenty-four words, make sure you've got that backed up in a way that is fireproof, waterproof, rustproof, petproof, and tamper evident. The CipherWheel comes in a wheel shape and it masks the words of your seed, and you slide in the, the tiles of the letters for each word, and it also has a padlock tamper evident seal so you know if it has been opened. Make sure you or your loved Can access those bitcoins if an accident occurs. Go and order yours at ciphersafe dot io and use the code livera. Compass is an online marketplace making it easier for everyone to mine Bitcoin and enhance the Bitcoin network's security. The anti-cloud mining option, Compass helps you buy your own ASIC and secure hosting at great facilities around the world. For years we have all heard that mining is only profitable if you're investing tons of money, but now with Compass, everyone is able to tap into economies of scale and access reasonably priced hardware and cheap industrial. real power rates. And if you are unsure about how to get started with mining Bitcoin, Compass offers hardware and hosting bundles, which eliminates the need for advanced technical knowledge and allows you to quickly get started. Visit them at compassmining.io and start mining Bitcoin today. On to the show.

Wit, welcome to the show. Stephan, thanks for having me on. I appreciate this. You've been a long time listener. It's good to be on the show.

Yeah, for sure. And I, I, I like what you're doing, over at Compass Mining, and I thought it's time So just for anyone who doesn't know who you are, tell us a little bit about your background.

Sure. So I am the co-founder and CEO of Compass Mining. Compass is a Bitcoin mining marketplace. Basically, our goal is to help as many people as we can have access to mining Bitcoin, right? We've heard for many years that the Bitcoin mining network needs to be decentralized. we think more about it being democratized, and that is giving everyone the ability to mine Bitcoin. And that's really our mission, is we just set out every day to help everyone get started, whether they're a big miner or a small miner, we wanna help them, you know, start mining Bitcoin and help distribute and secure the Bitcoin network.

Right, and I think the typical story for a long time has been, "Oh, you're new, you shouldn't be doing it, you need millions of dollars to get started." Is that true or is that changing now?

You know, that is what I kept hearing, and for me, I'm just one of those guys that like, if you tell

Because I heard you had to have a lot of capital, it was a very hard process to get into, you had to have a, a big network in China with the distributors. so, you know, my co-founders and I, when we set out, we were just trying to figure out how could we overcome this, because certainly there are people who aren't millionaires who want to mine Bitcoin. I mean, we weren't millionaires and aren't millionaires, we wanted to mine Bitcoin, right? So, that's really, I think, the narrative change that's occurring right You can get it set up somewhere and now you can do it.

Yeah, and I think the other one is there has been so many scams in the space, right? So cloud mining, right? So how, I guess, for people who are new and maybe you haven't seen this in the space, historically and even today, there are probably still a whole bunch of cloud mining scams out there, and unfortunately, it is a space rife with scams, and there are some legitimate players in the industry. So can you tell us a little bit about how you're thinking about that and how you explain the- difference between, you know, cloud mining and legitimate mining.

Yeah, so cloud mining is one of those things where, I mean, like you've got Genesis Mining, who, I mean, clearly they're not a scam, but it's, it's, it's not often favorable. You know, if you're in a bull market, everyone's making money at everything, so it's, it's chances that you're gonna buy into anything, whether it's cloud mining or mining or really just buying Bitcoin and holding, you're going to make more money. That's gonna, your value Mining, right? Because you don't own your hardware. So it opens you up to the opportunity to be scammed because you have people on the-- you, you know, the counterparties, the people on the other side of this, who they can sell you anything, and because you don't physically own the hardware, you have no way of protecting yourself, right? If I sell you a cloud mining contract, basically what I'm saying is, okay, I have hardware that's hosted in some facility, and I'm just gonna transfer you the Bitcoin associated with the hash rate that you're purchasing. Now, Bitcoin's price goes down, you've committed to a contract that you're locked into, and you're generally not gonna benefit from the big price moves, you know? Whereas with mining, you have an asset in the ASIC that's correlated to the price of Bitcoin. So, you know, like take this year as an example, right? People who were buying ASICs in October twenty twenty, they're buying them for a thousand bucks, two thousand bucks, now those same ASICs are worth three, four, five, ten thousand dollars, and they've mined the Bitcoin associated with it. So you've got that The whole benefit of, of being an actual miner versus a cloud mining.

Of course. And I think with Bitcoin mining, it seems to be very much a case where obviously the ideal case is to get into it during the bear market, because at that point, nobody wants the Bitcoin mining equipment or relatively less people want the Bitcoin mining equipment, and potentially it's easier to get the relevant deals done in terms of power sourcing and things like that. So can you maybe explain some of that dynamic where, you know, maybe people get a bit exuberant in a bull market and then they're running Into things and they're kind of overpaying for things compared to relatively in the bear market, but, and not having the expertise needed to actually make it work for the long term.

Yeah. Well, I mean, look, FOMO is real, right? Like we all get it. You know, you see, you see Bitcoin at thirty-five hundred and maybe it's attractive to you, maybe you're not really hip to the game and it's not, it's a scary thing. But then when Bitcoin's at fifty K, everybody wants to buy, right? That's when we start

Subconsciously, we're programmed to buy at the top of the market, right? And what we try to do at Compass is we guide people like, okay, give in a little bit to your FOMO. Like, you know, Bitcoin's at fifty-four thousand dollars right now, maybe buy an ASIC, but don't spend all of your capital on ASICs right now. You know, string this out. Let's, let's assume that you're gonna be mining for the rest of your life, right? You're gonna be supporting Bitcoin's network for the rest of your life. So deploy some These Bitcoin ASICs are gonna be less expensive, buy two or three times as many as you would buy right now, right? So it's all about just structuring that. And really, I think people are getting-- they're getting smarter, you know? We've seen a couple of these cycles now, you know, people understand that when the price of Bitcoin turns down and, and we see a price, a price drop, should we see a price drop, that these machines are gonna be less expensive. On the flip side of that though, I mean, it seems to me right now like every

Not many sellers to, you know, fill those orders, so it's really hard to project that we're gonna dip down too much lower, but I'll knock on some wood just in case.

Of course. And it is a very interesting dynamic as well, because there's all these different moving parts, right? So obviously the price of Bitcoin is a very important part, the price of electricity is an important part, the price of mining equipment, how reliable that mining equipment is, what are some of the key-- I guess those are probably some of the key inputs, right? So maybe if you could spell out What's the impact of some of these different inputs on a person's decision when they want to become a miner?

Sure. So if you're looking at getting into mining, really there's four major inputs, right? You've got your, your CapEx, your OpEx, you've got the price of Bitcoin, you've got the price of power, right? And your, your CapEx is your upfront cost. What's it gonna cost you to build a facility, buy your equipment? Your OpEx is your monthly expenditures, right? What's it gonna cost you to maintain the operation of your machines,

Which is pretty straightforward, right? You're buying the power that's gonna, you know, make your machines hash and mine Bitcoin for you, and then you've got the price of Bitcoin, which, you know, is a variable that isn't within our control. So when you're looking at a market like now, the beautiful thing is that there's an abundant amount of cheap power, right? because of COVID, because of people working from home, because of less people just being out and about, there's a lot of companies, there's a lot of, of industries That they once did, which of course changes the supply and the demand and drives those prices of power down, and we're seeing now that there's a ton of abundant cheap power, the challenge now though is, is there enough hardware? To support it, right? Because that's the other thing, is where do you get the ASICs? And Bitmain, Whatsminer, Innosilicon, all of these companies, they're working really hard to meet the demands, but, you know, the real reason that we're seeing the prices on these machines skyrocket is there's just not enough supply. I mean, it's just, you know, what are you gonna do if, if you can't get machines? and, and, you know, it's been, it's been interesting to navigating these markets because we've

Up, but we're seeing tons of very big miners that are just not able to secure enough hardware to meet the, you know, capacity that they have available to mine Bitcoin.

Yeah, so that's a really interesting dynamic that I have heard of where essentially the Bitcoin mining manufacturers, so people like Bitmain and Whatsminer and so on, they are competing for space in the chip fab. And so, and as I understand, there's a bit of a variability in that, demand because obviously Bitcoin's gone through these bo boom and bust cycles, if you will. And so then what's happening over at, say, the TSMCs of the world, the Taiwan, semi-uh, conductor manufacturing, companies of the world, they have been more like, "Oh, you guys are a bit too variable in your demand. I would rather sell that space to, you know, Nvidia or something like that." And I guess it's kind of that dynamic that's making it hard for, Bitcoin miners to go and create more, to build more ASICs, which in turn allow, you know, everyday people like you and me and others to actually

Equipment, so that's what we're seeing, this mining equipment price is just going through the roof right now, right?

Yeah, I mean, if you think about it, you've got TSMC and, you know, their biggest clients, one of their biggest clients is Apple, and, you know, every Apple product has a chip, you know, and we all have an Apple product in our home. I mean, I'm talking to you on one, I'm wearing one, right? and then the other major fab is Samsung, and of course, Samsung is a massive player.

So Companies competing to get the allocations with each other, they're also competing with the biggest international companies that are out there. And as we get to a, a place where, you know, everything has a, a chip, everything is smart now, right? Like before, you could walk in your house and like your refrigerator didn't need a chip and your stove didn't need a chip, but now everything does. If it's a, a, any device in your house is gonna use these smart chips. So we're now competing, and, and Bitmain and MicroBT are now competing with these different ma- Massive industries. And of course, if you're TSMC or you're Samsung, who are you gonna give your allocation to? Right? You're not gonna shun Apple for Bitmain, you gotta give it to your, you know, you gotta give it to your biggest clients. which is why I think a lot of people are excited to see that, you know, TSMC is building a factory in Arizona and Samsung's gonna be opening a, another factory in the States. So it's hopeful that some of the allocation that's being manufactured at these facilities is gonna go to Bitcoin miners Mining ASIC manufacturers. Hopefully, we'll see.

Yeah. And so I guess what we're getting at there is that if you are an individual getting into this space, not having the networks, the relations built up, the-- knowing who to go to, where to buy it, how to buy it, the logistics, those elements can be challenging for somebody who's new to the space, and you might end up overpaying relative to going to, you know, using a partner who can help you source the equipment in an appropriate way and in a cost-effective way, right?

I mean, if you're a smaller player in the game, it's nearly impossible to be able to, to source hardware for yourself. And that was really the onus for us as we were getting started, is we wanted to be able to provide this collective buying power for smaller, smaller miners, right? Like we're able to group together, you know, a lot of small orders and then make a big order with a Bitmain or a large distributor so that we can then pass on those cost savings, you know, because the alternative is-- I mean, there are people that sell one ASIC, Premium, which of course turns and, and digs into your return on your investment and your ability to, to profitably mine Bitcoin. but you're absolutely right, it's a very difficult thing. If you don't have an established network, it's nearly impossible to, to get started mining on your own. And I think that's really why most people just, they, they may consider it, but then they immediately stop because, as you start to dig down the rabbit hole, you get so many no's before you ever get to a yes that it's disheartening.

Yeah. So You are just thinking like you're an individual and you just wanna try and do home mining, you've also gotta think about factors like, noise and heat, and these are all, you know, depending on what, what your home, if you're gonna do it at home, well then, have you got somewhere you're gonna do that? I mean, you're not just gonna have it in your home, and these, these things aren't quiet, right? And, you know, our families or friends might not be, you know, comfortable with that. So I We have to think about then for, you know, that retail individual who wants to, you know, be able to contribute in terms of security and potentially they wanna try and earn some, Bitcoin as well. So, it might also be good to just talk about, you know, from an ROI perspective. I think that's also been really interesting to see over the last few months. We've seen a few people try and do the home mining thing and say, "Hey, I found some people on Telegram chat groups and I ordered the Bitcoin miner and I set it up in my garage I found some way to deal with the noise and because of the price run up, a lot of them have actually ROI'd very quickly, right? They made back their money very quickly, right?

Yeah, it's right now and as I mentioned before, is in a bull market everything is profitable, right? So your breakeven on your power price is higher, you can mine at a higher price per kilowatt hour, and it seems like it's, it's working, right? But we get a year down the road and maybe now you're losing money every month from mining. I mean, there There's a reason that people who do it at an industrial level, they set certain like benchmarks for what they're willing to pay for power, and then they don't pay above that. you know, most home-- I, I can only speak for the states, but most home miners in the states are paying between twelve and fourteen cents per kilowatt hour as like a national average And there are machines that will allow you to turn a profit right now if you're mining at that. But once hash rate increases, once diff-- once difficulty increases, your machines are just not going to net the same that they did, and it's no longer gonna be a profitable game. And if you haven't already ROI'd, now you're, it's basically sunk costs, right? Because, once that market turns on you, you're really never gonna be able to ROI on those machines if you're paying too high of a power price. And that's, you know, it's Granted, right? We, we take for granted the fact that like what's going on today is probably gonna keep going on forever, when in reality that's generally never the case, right? So-

Yeah, I see. Yeah, so I guess there's a few different dynamics here. So one is Bitcoin has what's called a difficulty adjustment. So as more hash power comes to the network, the difficulty rises, meaning your mining equipment becomes less, profitable in a sense. And so, but right now, as we were saying earlier, there's kind of this shortage, if you will In the ability to create new Bitcoin miners, so it's kind of like there's like a ceiling or a cap on how much higher the difficulty can go just for now until that sort of supply blockage, if you will, gets alleviated a little bit, right?

You know, it's crazy, this is, i-it's a very unique time in the market. Obviously, we've never seen Bitcoin's price where it is, but also this is like a, a golden period for miners because difficulty isn't increasing right now. Like the last epoch, difficulty dropped, it should be increasing. Everyone Hey, look, it's, it should be increasing, but you get, you know, the news out of Inner Mongolia that they're gonna be, regulating or increasing the prices for crypto miners' power, Bitcoin miners' power, and, you know, that causes hash rate to drop because those people have to move. And you've got like ten percent of Bitcoin's hash rate located in Inner Mongolia, so that allows others to keep mining profitably, even though that, you know, there's tons of people that are ordering machines, for some reason they're all not coming online, and it Internally in our mining groups, it's like, "Where, where are these machines? " You know, you hear all the time that like, "So-and-so's ordered multiple thousands or tens of thousands of machines, "and they're spaced out over a year or so, but still some should be coming online. And it just, it makes me wonder if, you know, people are buying these machines without building their facilities. Maybe they're just sitting on hoards of machines, and, you know, one month we're gonna see a massive spike in hash rate and difficulty, but we've really kind

I mean, it's been great as a miner, like you're, you're making good money, but you're just kinda waiting for that hammer to drop, you know?

Yeah, yeah. Because eventually, like, so it could be that maybe some less experienced miners have bought equipment and they haven't been able to plug it in yet, or maybe, or maybe they were more like, "Let's buy it now while we still can, and plug it in when we can," aspect, and maybe they-- so they've got all these miners that aren't literally not being plugged in yet, and It's, it's a funny dynamic there, but it's, I think to the point you were making though, is that this is like a golden age right now, because you wanna be careful, because you wanna make sure you're staying within the reasonable ranges that are conservative. Like, so even if we weren't in a crazy, crazy bull market, would you still be profitable? And I think those are some interesting sort of points. Maybe if you could outline, you know, like when you're not in a crazy bull market, golden age, what are some of the typical levels people would be looking at Perspective, and like the unit, the mining, equipment perspective.

Yeah, we always, you know, when we're putting together bundles for newer miners, our benchmark is to try to help them return on their investment in twelve months or less, right? I mean, Bitcoin's price is gonna do what it does, but we look at a couple of key metrics to make sure that we're setting them up for some, for a success as best as we can, you know, one of those is the power price. We wanna make sure that they're as close to six cents per kilo Watt-hour or less as possible. on Compass's site, you know, we, we have a very hefty screening process for facilities that wanna list. Basically, anyone that comes on the site and tries to list at seven cents is an auto reject for us, because we just see that as, you know, people trying to capitalize on the bull market. They're gonna end up locking people into contracts that are unfavorable, and that's just not what we're about. and then the other side of that is the, the hardware cost. For newer miners, we try to, to work out second hand hardware deals that have some kind of guarantee, but that are gonna come in at a more favorable price per tera hash, right? So, you know, like our, our first bundle that we ever put together was with S-17s, and S-17s are like notoriously the worst ASICs that Bitmain ever released, right? but we had a very good guarantee that we were able to get on them, and the people who bought those ninety days, right? So, I mean, for us that was a huge win, for them it was a huge win, and we've just kind of tried to continue that trend, like finding good value that we can then pass on to people who are getting started, because like your first couple of machines, it's a learning process, you know? And like unlike college, we don't wanna make it something that riddles you with debt forever, right? It's, it's needs to be a learning experience that you can, you know, you can enjoy and you can come out of profitable Getting into hardware, it's just very important to stay cognizant of where we're at in the market. Like the exuberance can overtake you very quickly, and while I think that now is as good of a time as any to get into mining, it's just, you know, you, you crawl, then you walk, then you run, right? You gotta pace yourself and get into it slowly.

Yeah, yeah, that's a good, analogy. And I mean, we often use that when we're teaching Bitcoin newbies about self-custody, right? We Things. So I guess this is maybe a good way then, like, what are some of those steps in the mining world?

Yeah, I mean, the first thing is that you need to have someone that you can lean on for advice, right? Because mining is, it's cutthroat by nature, you know, if you were coming into the market with a hundred million dollars, chances are you wouldn't be able to find anyone that would give you advice because you would basically be the person that's about to wreck difficulty for them, right? but, you know, with us, we don't really

Customers, we're here just to help people get started, so we're keen on that. We wanna make sure that like when you come in, how do you set up a, a pool account? How do you get your wallet connected? Where should you look to source hardware? Where's a good place to host it? We wanna be your Sherpa of sorts to get you, you know, up the mountain so that you can mine Bitcoin profitably. I mean, it's very important to have that per-that person or that, that party you can rely on. and it's, you know, A ton of credible sources of information, or at least that would be what a lot of people have you believe, but there are so many really great people in the mining community that are willing to at least get you started, give you some kind of tidbits of information that will help. You just really have to be ready to study. If you're just coming in with money and you expect that you're gonna make money right away, it's not gonna happen. You have to have a willingness to really dedicate yourself to learning, just like with anything with Bitcoin, right? Because one misstep, right? Put your

You're stuck, you know? This is, this is a, a beautiful opportunity in, as you know, Bitcoin is, but it's very unforgiving, you know, if you make a misstep in any aspect, there are definitely fallbacks to being your own bank, certain pitfalls.

Of course. And I think, yeah, it's just like Bitcoin, like you have to just sometimes, you have to get your hands dirty and make a mistake and then learn that way, because sometimes, you know, someone can guide you and they can try to put guardrails there and try to steer You just have to make a mistake before you really learnt it properly, and that's unfortunate. Now,

I've got to ask you, man. So,

yeah,

somebody comes to you and they're new, they're green, right? No experience. What's your first step to guide them into kind of getting into things?

Well, for me, I'll say, "Hey, buy a small amount and start learning." And I might set them up on a phone wallet and say, "Hey, do you wanna buy, you know, twenty bucks or something like that?" You know, just a small amount Fees, et cetera. And then I'll sort of tell them, hey, you need to start listening to my podcast or start reading, you know, read Vijay's Bullish Case for Bitcoin, read SafeDee's The Bitcoin Standard, read Parker Lewis, you know, watch what's going on in the space, and then ask me your questions as you go. You know, that's kind of how I typically, if I'm talk-- if I'm talking to a total new coiner or, or a pre-coiner, that's basically the kind of And this is an area where obviously I'm not as, I'm more, I'm like a Bitcoin generalist, right? I can't be as, especially knowledgeable about mining as you are. so I guess that's kind of a funny, yeah, that's kind of just the way it goes, right? and I think, you know, there'll be all these little dynamics and things that I wouldn't understand, like, you know, as an example, let's say understanding that being a miner isn't the same as being a mining pool, You can repoint your hash power to a different pool, let's say if you don't like what they're doing or maybe you're getting a better deal somewhere else. These are some of the dynamics that, you know, you have to learn about when you're becoming a miner.

Yeah, well, listen, you bring up a great point because, I mean, we, we really believe in this idea of your hash rate under management, right? If you look at some of the biggest wealth managers in the world, the biggest funds, their metric is assets under management, right? Well, if Bitcoin is the If you're a miner, your hash rate that you personally have under management, it's power, because like you said, like, yeah, we vote every day with our spending dollar, miners vote with their hash rate. If there's a company that's doing well, like, let's say you wanna mine with Slush Pool or Luxor or F2Pool or one of these notable mining pools, you point your hash rate in their direction, and by doing that, it's a vote of confidence that they're going to do right by you, right? But you have the ability to shift that, you have

Everyone has that power, and for us, getting more people to mine is putting, like, literally putting power back in each Bitcoiner's hands, because if not, we're basically relying on like twenty people to control all of Bitcoin's network, you know? Because I mean, that's, that's really what it's becoming if we don't start to kind of take that back and reclaim some of the power that, I mean, was once only in the "quote-unquote" little guy's hands, right?

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Well, and they do, you know, big, big companies that have exposure to Bitcoin, they are certainly looking to get into mining so that they can defend their position. Because, you know, I mean, you hear it all the time, right? Like there's a ton of hash rate in China, and there's a ton of hash rate in other places. And while I don't think that the Chinese government

Buy a house, you're probably gonna put a security system on it of some, some sort, right? Like you wanna protect that investment. And it's the same thing with Bitcoin, you know, you wanna have the ability to have some control over everything. I mean, that's why people run nodes, you know? It's, it's not just this like cool participation trophy, it's allowing you to, to really participate in Bitcoin's blockchain, which, I mean, the, you know, the, the coins are cool, but the technology that's, that's underlying those coins is really the important

Yeah, I see. And so let's say that person is new and they come to Compass Mining and they're like, "Okay, I wanna buy a miner. Like, what does that look like? And then what's kind of the process there if they wanna, you know, buy a miner and set that up in one of the, Compass Mining facilities?"

Yeah, so I mean, basically, if people come to our site and they wanna buy a miner, we have a great sales team that will guide them through the process. I mean, our site is automated, so they

Buy a machine and it comes with a twelve month hosting contract. We've got those offered right now in Russia and in Canada, and then those change with availability, but it's all very straightforward, right? You have the ability to, to get out of fiat and get into Bitcoin, you can pay with, you know, credit card or bank transfer and spend your fiat and get into something more, more appropriate, or if you wanna spend Bitcoin, of course, we'll take that as well, and you're able to buy the machines, buy your hosting contract, and then once everything

Nobody ever touches your coins, everything goes directly to your wallet. We simply bill you for power every month, and you pay that as you'd like, and you're, you're mining like anybody else would.

Fantastic. And so, if you could maybe outline, so I guess that example where you actually had some Compos mining customers who ROI'd from, was it October, and then I think they ROI'd in February because obviously the crazy, you know, bull run that went on. But let's say it wasn't such a crazy, crazy bull run, what kind of ROI Are we talking a year or a bit more?

Generally, a year to, to fourteen months, that's kind of our benchmark. I mean, it's, you know, it's not anything that's able to be promised or guaranteed, but that's when we're setting it up, that's what we're looking at, right? Twelve to fourteen months in these kinds of market conditions is, is our aim, right? Yeah. We want people to be able to see that and continue to scale.

Yeah. And I guess if people get lucky, right? Like, let's say someone buys in now,

See, we hit some crazy bull run up to like two hundred and fifty thousand, well then they're gonna be ironing really quickly then, and then, who knows, maybe then it crashes down to fifty thousand again. So then, you know, they might have to deal with that volatility as we all do in the Bitcoin world.

Absolutely. I mean, look, it's, it's a, a very real factor that, that is the, the gift and the curse of Bitcoin, right? the beautiful thing is, i-if you're just looking at a way to stack sats, this is You invest that into mining, every month you're spending fiat on your power bill, you just keep accumulating the Bitcoin, right? And on a long enough time preference, you're always going to make money. It's been proven, like no matter the price of Bitcoin, if you buy it today, ten years from now, you're good. So if you're able to do this and use this as a way to just get out of fiat and into Bitcoin, why not? You know, you hear the argument all the time, like, "Well, what if I just bought Bitcoin? " But then the c

Still one Bitcoin, you know? But if I buy a mining rig, I'm literally just gonna keep printing Bitcoin for as long as that mining rig is running.

Yeah, that's a good way to put it. And so I guess the real good point is once you have ROI, then you're basically in kind of a it's all gravy, baby situation, right? Because now it's just Bitcoins coming in and, you know, free and-- Obviously, you're paying power, but it's just, other than that, it's just, it's all pure profit at that point.

Yeah. And I Feeling, but in reality, all you're doing when you're buying mining, a piece of mining hardware, is you're looking to generate that amount of Bitcoin in return, but chances are, you're not gonna, you're not gonna sell it and put the fiat back in your bank account, right? It's just gonna be this like mental thing where you're like, "Oh, I've made my money back on my machine," and that's, you know, that's something that it's a very important hurdle to overcome. Now, if you're mining at scale and ten thousand dollars, when you have five or ten thousand dollars in Bitcoin, especially in this market cycle, it's not like you're gonna liquidate that, right? You're just gonna keep mining and let it keep accumulating and just feel good about the fact that, you know, it was sound, it was a sound investment.

Yeah. It's funny as well because I think people thought that older miners would kind of eventually, like, older mining equipment would eventually just become not worthwhile, right? Like, it's not even worthwhile plugging in. But I've heard at these current price rates and the current difficulty

Really old mining equipment for listeners who aren't familiar, but it's like this funny world where now old mining equipment is actually still viable, right?

Listen, if you have any mining equipment, plug it in. Like right now, it's just everything is making money. the Bitmain S9s, which, you know, are now five, six years old, they're, they're making bank, you know? Depending on your power price, you're doing really well. And I think the break-even power price on those is like eleven or twelve cents per kilowatt hour. Which is crazy if you think about it, considering that like during the summer of twenty twenty, people were literally, like, if you would pay shipping, people would send you as many as you would, right? And now each of these machines are selling for three or four hundred dollars and they're ROIing in eight to twelve months. It's crazy.

So I guess, you know, it's a, it's like, it's like that equivalent of, what's that saying? It's like, you don't know who's swimming naked until the tide goes out, right? It's like, yeah. Yeah. There'll be, there might be a lot of people out there who are on these really old mining equipment and with bad power prices, but still profitable for now. And that's the crucial part, for now they are very, you know, profitable, but then who knows, in if, if difficulty rises or if important to think about, getting electricity deals because the typical home mining person might be paying a lot more in electricity compared to the kind of, if it's specifically sourced as part of a data center, mining data center, where you get a specific rate at five cents or six cents per kilowatt, right? Kilowatt hour, yeah?

Yeah, it absolutely is. It's, it's critical to be in a, a favorable contract. You can't really mine at home, right? I, I'd never advise anyone to mine at home, especially if, if you're married, there's Like ASICs are wife repellent, right? Like it's just they're, they're, they're loud, they draw a lot of electricity, they're hot, they're-- it's, it's just nothing that's favorable to run in your house, which, you know, for us is a big reason why most of our power rates are basically passed through. Like we're not, we're not in the business of like adding crazy markups on power because it's, it's really, it's critical for people to get those rates. Like what you're paying for an ASIC is important That ensures the, the longevity of, of your machine. You pay, I mean, especially with like the newer machines that are very efficient, your power rate makes a, a pretty significant difference, you know, six cents versus seven cents is a game changer in any market, so, you know, it's, it's very important to be looking at that.

Yeah. So let's say that hypothetical new customer, they're walking through, they go to compassmining.io, they, they, you know, they purchased a machine, and then the next step, I guess, is probably looking at

They kind of get the machine to the facility and then get it all hooked up?

Yeah. So for us, I mean, this is kind of a funny analogy, but prior to Bitcoin, I, I worked at a, a website called PuppySpot dot com, right? And there, we were an online dog brokerage, and we spent a lot of time screening breeders because when you're buying a puppy, it's like a, it's a part of your family. So, you know, if, if I'm buying a dog online and I don't get to meet the parents, I don't get That, and that taught me a lot about, you know, the buying experience as I was coming into Compass. And with Compass, we do a lot of due diligence on these facilities. We make sure that they're properly screened, we either have machines with them or we know customers that have machines with them. We've done interviews, virtual tours, we're making sure that this is a facility where we would put our machines, right? Because if we wouldn't, there's no chance that we would put other people's machines there. And, you know, as a part of that, once To list on the site, we will then roll those into bundles for people who are new to the space. So if you wanted to come onto Compass and you wanted to buy a machine, and let's say you just wanted to buy one, that machine would already be pre allocated to a facility. So like the T-17s that we have for sale that are in, in Canada, right? They're at a facility in Winnipeg. If you buy them, the machines are already there, they don't have to ship, you don't have to wait, they, you know, will switch over

You don't have to worry about anything. And that's generally how we try to operate.

Gotcha. So it's kind of already there, and that way you're getting a fast setup as well, rather than spending the time waiting for shipping, especially during all this COVID, drama, might take more time to get over there and all that.

Yeah. Yeah, it's, the logistics can be a challenge. You know, you've got machines that are coming from China. I mean, especially if they're going to the States or to Canada, you've got customs you

have The facility, because then it just makes for a better experience for people who wanna start mining. 'Cause you, I mean, like when you buy, you wanna start mining right now, right? So, so we wanna help you do that.

Yeah, you don't wanna leave money on the table there. And when it comes to mining equipment, why the, what's miner and how are you thinking about the different, you know, brands and different pieces of equipment out there? Why the what's miner M30

plus, right? Yeah, the, the what's miners are, I

Their production has, has decreased, I would say, or maybe not decreased, maybe they're, they're just sold out, they don't have as much available inventory, so a lot of people are now turning to the, you know, back to Bitmain, because of the recent transition in their leadership. I think they got a lot of negative press, but, you know, the machines so far that they've been putting out are great. We're not, you know- We're brand agnostic, right? We want people to have what they want, and then we, we want to steer them towards machines that are reliable. And at this stage, from what we've seen, really anything coming out of the Whatsminer camp has been super durable, very profitable, and the newer Bitmain machines have also been great.

Yeah. Okay, and so I guess also from a reliability perspective, what happens then if, you know, you buy a machine and it starts to break down and you need maintenance cost on it or you need to replace it, like what,

what Warranties, which is great. So generally across the board, it's twelve months. older machines, you know, those are more bespoke based on the seller's wishes. but if you're buying a new machine, generally you're gonna have a twelve month warranty on it, which is great.

Okay. Yeah.

Used to be six months, but everyone's kinda stepped up their game. What's miners set that standard and now everyone's reaching for it.

Right, yeah. it's funny, it's like you see, even car manufacturers, they compete on their warranty

So it's kind of an interesting, that's like another area where they are, the mining manufacturer, mining machine manufacturers are having to compete on that level as well, yeah?

Yeah, yeah, and you know, I think we're gonna start seeing a lot more insurance products that come available for people who are buying six. I think this is something that we're gonna see more and more, because the, the current process of, of returning these, it's a bit clunky and it takes a long time. So, you know, I think we're gonna start seeing people that are gonna Or, for people who are buying these things.

Yeah, that's an interesting one as well. So how are you thinking about some of these more, I guess, financial products that are coming out into the mining world, whether it's insurance or maybe other, use of financial products, maybe whether it's loans for new miners and things like that? That, is that something you're starting to see more in the space?

We are seeing it more in the space, and I'm super bullish on those. You know, anything that, that gives more financial options to miners, I think is a Any other commodity, you've got the, you know, the futures contracts, you've got, different loan products or financial services that are available to people who are, you know, producing commodities, whether it's, you know, loans for farmers or people who are, mining gold or whichever commodity you'd like to use. So those being offered to Bitcoin mining is just a, a further step, it shows the maturity of the industry, and I, I really think that it's going to actually bring some stability to the market overall.

Right. And there's also been a little more discussion, Historically, the discussion was, "Oh, see, miners have to sell some coins for their operating costs and so on." But then it seems like that narrative is almost changing a little bit as well, with some miners coming out and saying, "No, see, we're actually getting fiat loans and using fiat credit to fund our operating expense so that we can keep on holding Bitcoin." Has that been the experience you've seen from your discussions in the space too?

Yeah, it's, you know, I tend to look at these larger miners and do as best as I can to figure out why they're thinking

Bitcoin than someone who's invested a hundred million dollars in infrastructure, right? And this is the mindset that they're all starting to adopt. Like, I don't wanna sell my Bitcoin, I just wanna keep borrowing fiat and I'll deploy fiat and, you know, that way I can, I can see the appreciation and the value that, the asset that I really value, which is Bitcoin. And, you know, that's why I kind of talk, talk like that as well, you know, like on a monthly basis, spend your fiat on Bitcoin mining equipment so you can get out of it and into Bitcoin

It's interesting how, the conversation has shifted, and part of that is, I think, the availability. So maybe in the past it wasn't as easy to get a fiat loan for these things, but maybe now it's becoming a bit more feasible for some people.

Yeah, it is. And I mean, we had the Black Thursday event, which is actually almost-- it's almost been a year since then, right? and that was basically due to, you know, cascading liquidations across the mining space, you know, and that was traced back to, to loan products

That actually created a, a, that, that was a, an event that needed to occur to help people get a better perspective on how to properly use those tools. So we're seeing now this year, people that are, they're just, they're hip to the game, you know, and they're not selling their Bitcoin, and that, that dried up, sales side is really, I think, what's contributing to the positive price action we're seeing. I mean, you see these big buys coming in, but it's supply and demand, you know? Nobody's selling, doesn

Yeah, and that, that whole conversation as well around how, you know, if you think a long-term holder is bullish, well, long-term miners are even more, because they've put in a massive investment in terms of capital cost, ongoing operating cost, and so if we're thinking more objectively, really, long-term miners are actually even more bullish on Bitcoin than, say, a typical holder.

Yeah, I mean, if you think about it, like there are people who have invested hundreds of millions of dollars in infrastructure, right? We have public companies that are- Or, I mean, DMG just announced that they did a seventy million dollar private sale to, to raise, raise money to buy equipment. You see a lot of the American companies, I mean, hundreds of millions that they're, they're investing in infrastructure. and I mean, if that doesn't indicate that somebody's long on Bitcoin, I don't know what does.

Right, yeah. And I think it's also a good, interesting sign to see that mining is distributing a little bit more around the world, right? So, this is more of a narrative in earlier years of, "Oh, it's all in China and China could shut it down and blah, blah." I mean, even though that wasn't a hundred percent true, because it's more like there are miners all over the world and they might be pointing some of their hash power Miners, because they can repoint somewhere else, right? and, what's your view on kind of how that's going to develop over time and what, what kind of the current state of that is nowadays?

So I mean, the, the hash rate is distributing. We're definitely seeing more hash rate, you know, in North America. I think as we see more North American pools emerge, we'll see, you know, even more of a distribution. But all the manufacturers are in Asia, right? Like the, the fabs are in Korea and Taiwan. All the Bitcoin Manufacturing centers outside, but it, it's basically Asia-centric. So we're gonna keep seeing growth in Asia because they have first crack at all the hardware, you know? And hardware goes on sale from a manufacturer, they open it up to the Chinese market, usually a week or two before they open it up to the, the Western markets. So that's an edge, you know? I, hopefully we see a manufacturer emerge in the States that can, you know, that can help get another boost for the Western Hemisphere, but it's, it's a stretch, I would say. I,

Yeah, I see. and as I understand, it's also about the having that ecosystem around it as well, like not just the manufacturing, but how do you repair it and logistics and all these kind of pieces that kind of have to work together to make it, a good system and a good place to maybe quickly set up and get your mining equipment going in a North American setup as opposed to the China setup, let's say.

For sure, man. I mean, it's also very cost effective and, and very fast to get a mining farm set up in China. I mean For a fraction of the price and a fraction of the time, right? I mean, they've been doing this for a very, very long time, and they're good at it, they really are. Like they've earned the edge, you know? I, I know a lot of people may not like to hear that, but these- The Chinese miners, they're not there by accident. It's not like just because they're next to Bitmain, that's all they are. Like, they're, they're skilled, they know what they're doing, and they, they really have busted their ass to get this edge, and like, you can't fault them for that, you know?

Yeah, yeah, for sure. yeah, totally fair points, and, certainly, I think you, you know, this industry a lot better than I do, right? and also might be a good spot to

exciting time for us. The, the raise was, it was a learning experience for us as a company. we were able to align with some great strategic partners. Galaxy Digital led the round, and we had CoinShares involved. Amanda from Galaxy Digital and Meltem from CoinShares were both gracious enough to join our board of directors, and I gotta say, learning from the two of them has been, it's been epic, man. Like getting to pick their brains, it's, it's been great, especially for me as a, you know, a first-time founder and Of a company like this, but, you know, I think that the, the coolest part about the raise is that we were able to align with people who have a desire to gain exposure to mining, but are, are really just trying to, to find their way through it. You know, when we're talking to people like CoinGecko or, you know, Zach Prince from BlockFi, we're seeing people who, who wanna get involved and are trying to figure the space out, and, you know, Compass, w-we just, we make it an easy trusted partner for people like that because For us as a, a founding team, it was, it was validation for sure, right? Like anytime you have people who have found success or are, you know, leaders in an industry that are willing to put their stamp on you, I mean, it makes you work harder, but it's also incredibly validating.

Yeah, I mean, it's great news for you guys. I think, it's, it all bodes quite well. Obviously, we're, you know, going through this kind of crazy bull run up, so we'll see a lot of demand coming in, Right, hash power, you know, downloads, users, wallets, developers, like everything basically. So, yes. I wonder then, you know, what, what are some of the things you're looking out for as Bitcoin takes, goes to that next level?

Yeah, for us, I mean, when it comes to where Bitcoin is going, I mean, I, I just moved to Miami because I'm excited about the things that the city is doing. I think that the things that I'm looking out for are areas where I can support the Bitcoin ecosystem, right?

Are, we're, I mean, we want everyone to see, know, hear about Bitcoin, you know, whether it's supporting podcasters that are doing great work, whether it's, you know, working with people who are trying to help grow small communities in the space, whether it's moving to a city just because they say, "Hey, we're gonna accept taxes, tax payments in Bitcoin," we're gonna do everything that we can because like we're staking our future on Bitcoin, right? So if we're gonna like talk the talk, we gotta walk the walk, and that's Keeping an eye out for anything that we can do to support the ecosystem, because we, I mean, it, it's the most important thing that's ever happened in my lifetime, right? So I'd be negligent, frankly, if I didn't throw full weight behind everything that's, that's going on in the space.

Yeah, that's fantastic, and, I, I think it's probably a good spot to close it up here, but, I think, you know, you got-- it sounds, you know, to me like you guys are going from strength

Ski, so an old throwback to the, the anon days. and then, you know, for Compass, you can just go to compassmining dot io, get on there, we'll help you get set up and start mining.

Fantastic, thank you, Whit. It's been a pleasure to chat, and hopefully we can, chat in person if I c-if I get, if I manage to get out of here and get to Miami. Let's

go, Stefan. I expect to see you down here for Bitcoin twenty twenty-one. It'll be a blast.

I hope you enjoyed the show. Coming up next episode, I have Luke Dasher. So he and I recorded a conversation about Taproot activation as well as SegWit. So make sure you're subscribed in your podcatcher application, search Stephan Livera podcast in Spotify or Pocket Casts or AntennaPod or whatever podcatcher application you use, and you can also find my website stephanlivera dot com slash two five nine and you'll find the show notes for this episode. That's it from me. Thanks, and I will see you in the citadels.