Site icon Stephan Livera

SLP299 Adam O – Bitcoin Optionality for Oil & Gas

Stephan

Adam O of Upstream Data joins me to talk about the massive opportunity for energy producers and Bitcoin mining. We chat about: 

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Podcast Transcript:

Stephan Livera:

Adam welcome to the show.

Adam O:

So awesome to be here, Stephan. Great to take the time. Glad to talk with you. Thanks so much for having me. A crazy 2021, and this is the perfect time I think, to talk with someone like yourself and kind of catch up and I guess reflect.

Stephan Livera:

Yeah, for sure. And so when I first came across, you were Denver Bitcoin, and you’re now Adam O. So do you want to tell us a little bit about how you became Denver Bitcoin and how you got into all this Bitcoin stuff? And obviously you’ve got a big focus on mining, so I want to hear a bit of your story there.

Adam O:

Yeah. Denver Bitcoin was not like something I intended to be like a pseudonym of mine, right? Like I, didn’t the reason I made my handle Denver Bitcoin was cause I figured I would be talking about Denver and I’d be talking about Bitcoin. Like that was literally my thesis behind the name. And because with Twitter, it’s good to talk about things that you’re really passionate about and there’s an aspect of Twitter that’s cool with like localization, right? Because like you can catch live things happening in downtown where you didn’t necessarily need to know what’s happening, but then you see on Twitter, there’s a music festival and it’s like five miles away, you know? So I guess that was my reasoning behind it. The reason I came to Twitter was I found Twitter after I’d kind of already gone down the Bitcoin rabbit hole a little bit or at least had gone down enough that I was really excited.

Adam O:

And that happened when I was in the oil and gas industry in early 2018. So it was like, I think it was like late January, early February of 2018 is when I was reading some articles about how the bubble had popped because Bitcoin is crashing right. For 20,000, it was, I get it just past 10 or 9,000. And so I was reading these stories and I had a good friend that had told me about Bitcoin years earlier. And so I actually went to investigate Bitcoin to just to figure out how the scam worked. Right. And then back in my mind, I assumed it was a scam. And so I just went to go discover the mechanisms of the scam. Like who were the guys that pulled the wool over the eyes of a whole bunch of people with this Bitcoin thing?

Adam O:

And so I figured like my assumption there was that the crux of the scam would probably be wherever this thing is produced, right. Whoever’s making these Bitcoins is probably the one that’s like making out well, right. Like that’s just kind of like my inherent assumption. So that’s I went to go learn how Bitcoin was mined. Like what the hell is Bitcoin mining? What’s the production of it. And in that process, I learned how thermodynamic laws are coupled with computer science and no matter how efficient you make a computer or you make a circuit, I guess would be the way to say it. There’s still some nominal amount of electricity that is required to execute the most basic function of a computer, which is a hash right. In Bitcoin we talk about hashes a lot.

Adam O:

And so when I understood that, like just, I mean, by the way, that wasn’t really hard concept for me to understand, it’s not that complicated of a concept, right? It’s like, Hey, if you want a computer to do any kind of computation, you need at least a little bit of electricity. Like it might be an incredibly small amount, but you need some. And so like once I understood that, and once I really thought about that, I went, holy crap, like this is not a scam. This is an open and competitive energy market is what this is. I mean, I saw it right there and I was working in oil and gas. I was working with upstream oil and gas operators doing production management and production accounting. So I was dealing with like daily data capture numbers and dealing with all the different really there’s, there’s three things.

Adam O:

There’s oil, gas, and water is what gets accounted for in the oil field. And so I was learning about all the day-to-day productions in the oil field and how to account for these volumes and submit monthly reports. And so I was just getting really well versed in the energy industry just by happen chance that I was in this job. And then I learned about this Bitcoin mining thing, and I went, holy cow, like I know where there’s a ton of energy guys are just wasting because like they have no home for it. Right. They have no means by which to bring it to market for a profit. And so like from there, all I needed to do was run the numbers of, Hey, what does it look like to convert natural gas to electricity, to this magic internet money stuff to dollars, I guess like, is that investment going to look at all attractive for oil and gas producers?

Adam O:

So I set out to figure that out because I’m not a mechanical engineer, I’m not a petroleum engineer. I didn’t know these things, right. So I, the good news was that I had a ton of resources. I was in the oil and gas industry. And so I was tapping everybody I was speaking with. And inevitably, once I ran the numbers, I realized, holy cow, this is like — compared to a pipeline, right. Investment. Like this is very competitive. Maybe if you believe that Bitcoin has a value proposition, if you see Bitcoin for what it is, in my opinion, then it’s almost hard to compare a pipeline. Like mining Bitcoin almost looks more attractive, but…

Stephan Livera:

Actually let’s jump onto that. I just want to understand a little bit there. So can you tell us what are the typical things people think about when they’re considering a pipeline investment versus say how does that compare with Bitcoin investment?

Adam O:

Well it hardly, okay, so I’ll say this. I mean, I’m bullish on Bitcoin, right? There’s a thing about a pipeline that’s really nice as you can. There’s a massive amount of volume that you can push through a pipeline. Right? And so like a lot of the oil and gas wells we’re talking about and not just oil and gas wells, but like gas fields, right? Like pads of wells like the volume of gas that we’re talking about a pipeline is really great because you need like, that’s the amount of gas needs to get to a, dense populous. It needs to go to like Atlanta and Dallas and like be consumed because to generate power onsite would be insane amounts of power. So there’s that aspect of a pipeline. But when it comes to a Bitcoin mine, there’s a lot of other benefits.

Adam O:

Like one, it can be any scale, right? So like you can build a Bitcoin mine for just a little bit of gas, so you can build it for a lot of gas, right? When you talk with pipelines, like the aspect is this. If I just have a little bit of gas and in order to bring that gas to market, I have to build a a hundred mile pipeline to connect to whatever the nearest main pipeline infrastructure is around me. All you do is run the numbers on that. And you look at the cost and it’s like $10 million. And then you look at the amount of gas you have and you’d say, oh, well, like in order for us to do that, it’s going to be 500 years before we make our money back. We’re not building a pipeline.

Adam O:

Like, so we’re just going to burn the gas and keep producing oil. And so, pipelines are really expensive. It’s regulatory hell to invest in pipelines and really producers. I mean, that’s like the last thing that they want to do unless they are intentionally drilling gas wells, and they already know that they’re going to have to build that midstream. Like it’s not fun. And then if you have a leak somewhere in the pipeline, it could cost you hundreds of thousands of dollars just to find the leak, let alone repair it. Right. Like just to figure out exactly where the leak is in these 20 miles of pipe that are under the ground. It’s a nightmare. And so a Bitcoin mine is really flexible way to sell gas. It’s this way where, and then here’s the thing your well can stop producing. I mean, you can’t just pick your pipeline up out of the ground and go put it somewhere else.

Adam O:

And with a Bitcoin mine, you can just pick up this modular infrastructure, right. Go drop it somewhere else. And so there’s like this flexibility, this lack of counterparty risks that makes a Bitcoin mine potentially way more attractive than a pipeline. But that being said, people still need energy. And so these massive volume wells like Bitcoin isn’t there yet. Right? Bitcoin, isn’t valuable enough to take all of the energy in the world and start mining it. Right. I mean, it’s just, we’re not there yet. It’s not even there to where we should take — We can take all of this waste energy, all of this excess energy because it’ll get to a point where the next marginal investment isn’t attractive enough. We’re like, yeah, they might be profitable, but it’s not profitable enough. I’m probably better off spending money over here.

Adam O:

I’ll get a better return than I will mining Bitcoin with some out on my gas. It’s a really exciting thing. Like, I mean, that’s what this kind of came to light that’s when I stumbled upon upstream data and became a customer of theirs and quit my job and went full force into this. And so that’s when Denver Bitcoin really got born was later on that year. I think it was like August or September of 2018 when I got on Twitter. Cause every news article about Bitcoin brought me to Twitter anyway. It was like, or it had a tweet embedded in the article. And so I was like, I guess apparently this Bitcoin culture lives on Twitter. Like I guess I have to make a Twitter account and in order to participate in like get up to date news on this.

Adam O:

And so I made a Twitter account, which was not something I wanted to plan to do. But Twitter’s ended up being amazing, right? Like the way in which to connect with people. I mean, it’s essentially how I was able to start a consultancy with oil and gas companies which inevitably led me to the, I am in today with upstream data, working with oil and gas producers, building out Bitcoin mining projects for these guys. I mean, it’s a crazy world, Stephan. I mean in just, the last thousand days of my life has been just a whirlwind. Right. It’s just been crazy. Let alone the Bitcoin price in between there. Right. And let alone my own like personal finances and everything else all in between there, it’s just, it’s a wild ride.

Stephan Livera:

Yes. Sure. And it changes a lot of things about how you think in many different ways. And I suppose, I mean for you, you’ve come down the mining pathway. So how did you get involved with doing like — what was it like when you started your own first mining, like I presume you would have started your own little operation before then actually expanding it out and selling it for other people.

Adam O:

Yeah, exactly. Well, I initially started just with the home stuff, right. Like I think much like a lot of people maybe do where they start in their garage. Right. and I was actually using this AntMiner v9. That’s on my wall here. It’s a horribly unprofitable machine right now. I think it only does like four Terahashes per second. And it pulls like 900 Watts or something. It’s not a great machine. But I needed to get my hands on something to tinker with. I think I paid like 50 bucks for it. It came with the PSU, which I think the PSU allow, like that thing has to cost about 45 or 50 bucks to manufacturer. Like just the materials alone are like 50 bucks. So I got it for free almost in a way. And so I started just with that because I had to get my hands on this, I had to kind of understand like what this actually is?

Adam O:

And for me, I had to tinker with something like I have to feel it. And so I remember getting the V9, I configured it. I remember configuring it. This is the solution. I configured it to some mining pool, which I don’t even think is around anymore. I can’t even remember the name. Like they went defunct because they were paying out. They ended up paying out more than they were winning in blocks. It’s just one of those things. But I remember configuring it and like, I remember getting to the point where I can, I typed in like my stratum code and I reset the miner. And then I saw my hashrate come live on the interface. And like, then I saw my projected rewards for the day. And I mean, within like the first day of running my machine at my house and just getting that kind of intimate experience with what it’s like to just mine Bitcoin, I realized really quickly like, holy crap, this is so applicable to the oil field.

Adam O:

Like this is almost looks like it was made to be in the oil field. You know what I mean? Like it seems almost designed for it. Because it’s just a bare bones piece of circuitry hardware, right? it’s nothing fancy. They’re not trying to be necessarily, I mean, I guess with some of the newer stuff you could say they are now with like the S19 pros and stuff, which are incredible pieces of technology, seven nanometers, but some of that other stuff the 16 nanometers S9s like, it’s awesome. Like I was like, man, the oil field is going to love this. I have to get involved yesterday. Otherwise I’m going to get cut out. Right? Because in this current moment, right back in 2018, I was like these oil and gas producers. They’re not going to take any magic internet, money, risk.

Adam O:

They’re not going to spend a dollar on this machine. They don’t care the circumstances. But that’s not going to last. I was like, they’re going to change their mind inevitably. So for the moment I can come in and provide value. I can say, Hey, I’ll take the capital risk on all this weird hardware you don’t want to buy. You just need to let me come and buy your gas from you that you couldn’t sell yesterday. Now you can sell it to me for maybe not what you would get at the market, but still way better than just burning it. And so when you can come with it, to them, with that proposal, then they were like, okay, like there’s no downside for them, right. There’s absolutely no risk for them. No money up front. Literally. It’s just like, let me put this thing on your oil site at the end of the month, you’ll get a check.

Adam O:

And so that’s exactly what I ended up brokering with through, upstream data. And then I had Steve Barbour and upstream data build the infrastructure that I’m still using today. I’m in the oil field and mining. My dad was my business partner and he’s a boomer. He’s a 70 year old boomer. So investing with him was like, I mean, has been a total ride. it could going from, I mean, he thought he was going to lose every dollar of this investment. Like truly he invested the money, like willing to have lit it on fire essentially. And now he sees like this great utility and he’s totally a Bitcoin bull. And so it’s just, it’s been a crazy thousand days. Like I said, it’s just been wild. And so, but one thing I do know is that Bitcoin mining as an energy technology, as a means by which to deliver energy to market low friction is probably the most disruptive technology since the internet, I’d say arguably like it’s as disruptive as like electricity itself in many ways, because it changes the entire kind of power generation and energy production game.

Stephan Livera:

Yeah. Let’s dive into that a little bit more. So why exactly is it going to change the broader energy market in that way?

Adam O:

Optionality. It’s sheer optionality. So up until now, there’s really only been one place to sell electricity and that’s to human beings in populous centers to the grid. Right. I mean, there have been historical examples. Not very many, but there’ve been some examples of companies like Microsoft and Amazon. I think maybe even Apple, like they have done deals with oil and gas companies who had stranded gas wells to put data centers out in the oil field. Like out on a stranded gas well, but those are circumstances where they’re very specific. It’s like, if you think about it, right, Microsoft, if Microsoft puts a data center somewhere, like there’s a security aspect, like a physical security, you can’t just have somebody walking in to the fricking building like anybody. Right. and then there’s like the aspect of these data centers can’t go down.

Adam O:

Like they can have no downtime because then people’s phones stop working and billions of dollars gets lost. Like, so it’s any downtime is unacceptable. Whereas Bitcoin is this whole new kind of technology, almost different than setting a Microsoft data center out there because it’s completely flexible. you can turn it off, turn it right back on. Like nobody’s affected the network’s not even really affected. I mean, even if it is because you’re so massive, it’s only in the short term. But regardless like it’s a very flexible autonomous market. And so the sheer optionality that now exists, where everybody in the world, whether you’re producing hydroelectric energy, nuclear, solar, wind, no matter what, the fact that you now have a secondary market, somewhere else to sell electricity, changes your entire business plan, it’ll change the way in which you build, right?

Adam O:

Like the actual physical pieces of infrastructure you build as well as the footprint, but it’ll, it’s gonna, it’s going to change all of the economics, all of the projected economics for the better for all of them, right? Because instead of now having to project out peak and trough demand and try to plan out years of human electrical consumption, you can say, Hey, no matter what we know we’re going to be selling this much electricity all the time. Because even as the grid dips, we’ll sell it to Bitcoin mining. And then as the peak demand on the grid goes up, right? Well turn off some of our Bitcoin miners and provide the grid with everything it needs at a price that it’s willing to pay. And so every single energy producer is better off, but beyond that now energy producers are incentivized to go out and find places where they have stranded assets or stranded energy sources, like stranded geo-thermal stranded hydroelectric, stranded natural gas.

Adam O:

And as long as they can get an internet connection, they can create a downstream market for themselves. All they need to do is generate power and convert that power into computational work, which is a relatively easy thing to do today. In other words, they need to acquire ASICs, which they’re not fully commoditized by any means, but they’re relatively plentiful and they’re becoming more plentiful by the day and said, we need a lot more ASICs. We need a lot of semiconductor production — serious money to be invested into, in my opinion erecting, foundries, and micro electronic fabrication facilities here in North America. But regardless, that’s going to change everything in one way where it’s really, I mean, this is — Bitcoin is really powerful. and it bleeds through the incentives of day-to-day business activities and economic activities to a degree that’s really striking.

Adam O:

And one way that I think it’s gonna impact oil and gas, that’s kind of exciting. And I don’t hear a lot of people talk about this, and maybe I’m a little bit, maybe I’m just too bullish on Bitcoin on this point, but I think it’s truly going to change the way guys produce oil wells. Currently when guys are fracking, like horizontally exploring for oil primarily they might drill a vertical well, and then they’re exploring horizontally. And if they discover an oil formation, or if they’re in a formation and they think they found some oil, they will sometimes inject the living hell out of that well, right. they’ll inject a ton of pressure that will be, and what they’re trying to do is blow off all the gas, right? They’re trying to get all the gas, immediately blow all the gas out of the wells so they can get to the crude oil because they don’t even have a midstream.

Adam O:

They don’t even plan to sell the gas. This is an oil play. And in that process, often times what they end up doing is leaving a lot of hydrocarbons on the table. When you look at the overall production of the well, where I think with Bitcoin, now they’re going to be incentivized rather than to inject the living hell out of the well, and go after that oil, they’re going to slowly inject that well, and they’re going to seep out every cubic foot of gas, and they’re going to bring it to market by mining Bitcoin. And then once they’ve brought them a significant percentage of that gas to market, and they’ve taken a lot of that pressure out of the, well, then they’re going to attack the oil, right? And then they’re going to maybe inject harder, but they’re going to be more patient in their production, right?

Adam O:

They’re going to have a lower time preference. And what they’re going to find is that over the total production of like the overall production of the, well, the lifespan of the well, the overall production is going to be greatly increased by double digit percentages potentially. And so it’s crazy Bitcoin mining is potentially going to incentivize energy producers to lower their time preference, be more patient and more maybe diligent. You could call it when producing. Because now they have a mechanism by which to bring that to market and earn a profit from that diligence, right? It’s not just virtue signaling, and I’m saving the environment kind of things anymore. Regulators no longer need to hold a gun to their head and say, Hey, quit wasting this gas. The market’s going to hold a gun to their head and say, Hey, if you keep wasting this gas, you’re a monetary fool.

Adam O:

And you’re not going to be able to compete and you’re going to get run out of business. And so it’s just like this really natural way for efficiency to get pushed forward and for innovation to get pushed forward. And so I don’t know when people come in and I guess that’s why I even engage in the argument of Bitcoin and its environmental impact was I early on I was seeing how positive Bitcoin’s impact on the environment was how, how many layers deep it went. And so when I started seeing guys, even in early 2019 middle of 2019, talk about Bitcoin’s environmental impact, I was like, I have to participate in this discussion. I have to bring my ideas to battle because I’m seeing something that maybe other people don’t recognize, but it’s far beyond just finding home for some wasted energy. It changes a lot more than that. And the outcome is a positive environmental impact. So it’s it’s one of the, probably one of the technologies that should be most celebrated by those who call themselves environmentalists. And yet it’s really ridiculed. And so a frustrating world we live in, right. It’s just how it goes.

Stephan Livera:

I mean, it’s really interesting. You were saying there. A lot of it is around the ability to make projects work that previously would not have been possible. So there’s this idea that you can set up a project and that you can now sell this level of capacity because even if the grid doesn’t want it, the Bitcoin miners want it right now, I suppose the challenge people might say, and they might be thinking, this is, but hang on. What about the opportunity costs? And does that mean I would have spent all this money to buy Bitcoin mining equipment, then now it’s just going to sit idle. How would you answer that kind of question?

Adam O:

I think that’s certainly a factor of the discussion, right? I think that’s how you appropriately scale your project is. I mean, if you’re in a situation where you’re selling to both the grid and the Bitcoin network, right? If you’re essentially bouncing back and forth, constantly switching the percentage of your total energy, that’s going to one or the other, what I would say is that you would want to properly scale it from the get-go and saying, Hey, like we should install this many Bitcoin miners. So that it’s likely on average, 80% of them, 90% of them are running like 85% of them are running pretty much all the time. But then right, when we get to peak demand, we’re going to have to drop it down to like 20 miners and you know what I mean? And that, like you would get it to where the majority of the miners are on all the time.

Adam O:

And then the other thing I would say is, well, maybe that would be, this would be a situation where you wouldn’t, you wouldn’t leverage the newest mining hardware, right. This might be a great, and that’s a lot of what I’m talking about with guys in the oil field that are using flare gas is they’re, they come to me and they’re like, Hey, can you get the latest and greatest AntMiner S19 pro? And I’m like, yes, I can supply that for you, but I don’t recommend it. Right? Like, first of all, this is your first time doing this. So buying $7,000 – $8,000 machines is just a big risk, right? It’s just some capital risk there. But beyond that, this is the oil field. Like your advantage is the fact that you have the most economic energy. You don’t need to be the most efficient horse in the race. You’ve got like almost free energy.

Adam O:

So the S9 is efficient enough and it’s durable. And like so like those kinds of conversations are what I have with these oil and gas producers who maybe come in after doing their preliminary kind of Googling research, maybe they have some kind of understanding of what Bitcoin mining hardware is and what they’re buying. But they have the idea that like, if they’re not the most efficient machine, like they’re moments from being obsolete. And that’s just like sometimes like, Hey, take a breath. Remember where you’re coming from. That for guys that are on the grid with eight, 8 cent per kilowatt hour power. Yeah. They need efficient stuff because like they run the numbers and their price floor is higher and their energy ceiling is lower. When you look at guys in the oil field, like you don’t have these issues and you don’t have an energy supply issue, so efficiency, isn’t your problem.

Adam O:

You have a capital supply issue. So really what you need is your dollar to be efficient when you spend it and invest in this. And so maybe the older stuff is actually more appropriate for you. And like those kinds of conversations, this becomes a real technology to them. When you have those conversations with guys, right, it becomes, it’s no longer just this magic internet like they just imagine somebody like in a dark room with all these little green lights everywhere, like coding with a black screen and like hieroglyphs on the screen. Like, it’s not that this is oil and gas producers, petroleum engineers, some of the smartest people on earth, they could learn how to mine Bitcoin, the user interfaces are not that challenging. Albeit, they’re not the easiest things in the world, but I mean, these guys drill 7,000 foot holes and produce hydrocarbons, right? I mean, these guys are not idiots. So we, our philosophy at Upstream data is that upstream oil and gas producers ought to be the biggest miners of the future because they’re in the position to compete. Right. They’re in the best position to be the most competitive, because the amount of wasted energy, in the oil field seemingly immeasurable, right. It’s seemingly endless amounts of gas.

Stephan Livera:

Yeah. So it’s really an excellent opportunity that you’re outlining here for people who are in the oil and gas industry and really why they should be trying to learn more about Bitcoin and about Bitcoin mining, because, and obviously there’s two main angles. One is to get involved in Bitcoin mining themselves, and well, they want to hold some Bitcoin. So they want to think, well, before I’m holding a large amount of Bitcoin on my balance sheet, or if, as an individual just personally holding Bitcoin, they want to know a bit more about this thing. What is the case for Bitcoin? And so I suppose that’s all part of that journey as well. So has that been your experience as well? When you are teaching people about Bitcoin, who are from the oil and gas industry, what’s that been like teaching them?

Adam O:

It’s been, I mean, here’s the thing like initially for the most part, most of them are highly skeptical. Some of them, there’s some younger oil and gas engineers on the team that like, are kind of maybe in the closet passionate in the closet, Bitcoin bulls. And, but for the most part, like they’re relatively skeptical and they like the fact that they don’t have to take Bitcoin risk. Right. They like the fact that they could sell their Bitcoin at the end of every day. It’s a good old dollars. Right. Which for them, it makes sense, but that’s been said, this is the thing Bitcoin will teach all of us, Stephan. And I love that you brought up this point because there’s another point I really want to make on this.

Adam O:

But if you think about the oil and gas producers and we, and sorry, my dog’s upset. We had customers, we had customers that from back from 2018. So our customers back from 2018, they look like geniuses at the end of 2020, right? when Bitcoin’s price is running up, they look like absolute geniuses. when Bitcoin’s crashing guys don’t really think about them. So like, in the mind of the oil and gas producer, you gotta think if any of those companies that were maybe mining Bitcoin with their flare gas in 2020, if they were selling all their proceeds throughout the year, I’m sure that they got together in the Virginia 2021 and were like, Hey, so maybe this year we only sell 75% because look, had we held, just even 10% of what we made last year when it ran up from 10,000 to 50,000 – 60,000, like it would have been like we made $50 an MCF of gas, which is like 25 times better than the pipeline market.

Adam O:

You know, and so Bitcoin is going to train them. Bitcoin will teach them that it’s probably worth holding some of this, right? Yes. This is a great tool to go from gas that you can’t find a market for to US dollars, which is what you denominate your company’s success in. But that thing in between, you might want to hold a little bit of it because in fact, it’s been appreciating the last 12 years. And so that’s one way that they’re getting taught. But a lot of the conversations I have with oil and gas producers, the part of the conversation, I think that’s the most exciting. And really the part of this that gets me the most excited on a long time horizon is I believe Bitcoin mining is going to kind of separate the doers from the guys that are just on cruise control in the oil and gas industry, right?

Adam O:

The petroleum engineers, the oil and gas producers and exploration companies that take this technology seriously and take a serious look at it and at least give it the level of seriousness that it’s warranted so far. Maybe you could call it what $600 billion of seriousness, right? As a market cap or something, those oil and gas producers, those engineers who go out and figure out how to price a Bitcoin miner, right? So that they can look at an Ant Miner s9 and tell you whether or not right now it’s overpriced or it’s under priced. They’re going to be better oil and gas producers this decade than the guys that aren’t. They’re going to be able to do more with the exact same amount of hydrocarbons, right? With the exact same oil and gas well, they can bring more value out of that than the guy who has no idea what a, what a Terrahash is.

Adam O:

They’re going to be better oil and gas producers. They’re going to — the cream is going to rise, and they’re going to be able to take this and leverage it to their advantage, use that competitive advantage to beat out their competition. And that’s what I’m most excited for. I’m most excited to work with the companies and build for the companies that are excited about taking this technology and beating out their competition this decade, because those are the companies that are calling me, right? Those are the companies that are looking at how they can do more, right. They’re not complacent with their current oil and gas production and their portfolio. They’re always looking at, doing better. And as that happens, then the entire industry comes because nobody wants to be left behind. Right. Then everyone’s afraid to be the people that can’t compete. And then we have an incredibly strong Bitcoin network and an oil and gas lobby that’s on our side, right? Like who needs coincenter when you got the oil and gas lobby on your side. Right.

Stephan Livera:

So, yeah, so it’s winning more and more people to the cause if you will. And so it starts with, here’s something that can solve a little bit of a problem for you. And then eventually it becomes, okay, this is now something you want to hold, as you were saying. And it starts small. Obviously they might only say, I’ll keep a little bit of Bitcoin and then slowly, Okay. Keep a bit more, a bit more. And eventually they get to a point where they just want to hold it as much as they can. And as I’m sure you’re aware, a lot of the Bitcoin miners now are able to hold more of their Bitcoin because now the in vogue way seems to be, to borrow against your coins or to borrow against equipment and not actually sell Bitcoins. But yeah, I guess that’s a little bit of a different side of it, but yeah. So, yeah. So in terms of oil and gas, like where do you see it? What are some of the big stumbling blocks right now for people who are already in oil and gas and haven’t gone down this pathway yet? Is it just that they are maybe closed minded or is it just that they don’t know or what’s the, or do you think the market is not big enough yet as in Bitcoin’s market is not big enough yet?

Adam O:

I think Ted Cruz, as distasteful as it is to quote Ted Cruz I think Ted Cruz actually said this just yesterday, regulatory clarity is probably what I would say the biggest hurdle, right? There’s a risk factor there that this is the issue. Right. And here’s a great example of it. So where we’re, I’m currently mining Bitcoin, like where my current Bitcoin mine is the oil and gas producer that operates the well that has vent gas that our Bitcoin mine is consuming. They ask to purchase our, my Bitcoin mine at one point. Right. but then they were unable to, because like, apparently their business insurance would cancel them if they got involved with holding cryptocurrency mining equipment. Right. Because the business insurance has no way to calculate that risk. Right. So by their means, like they, from their point of view if a company is holding Bitcoin miners, like they could be involved in all sorts of horrible international criminal activity, you know what I mean?

Adam O:

I have no idea. Like, apparently it’s beyond what they’re able to calculate, right. That risk at least currently. Right. it’s too early. And so I think they’re just too early, so they’re hands off. They’re saying like, Hey, we can’t insure you if you do this. And so companies can’t mine Bitcoins, if they can’t be insured. Right. Cause they can’t do any other business if they’re not insured. And so there’s that’s right. So there’s regulatory, un-clarity insurance is a massive issue. I think if you’re going to set out, you’re going to really scale this out throughout your production portfolio and your oil and gas wells. I mean, you’re possibly talking about 10, 15, $20 million of computer hardware out in an outdoor environment right now, while at upstream data, right. The hash huts we build are all weather and will bear all insane environments of the oil field, but still you want insurance, right?

Adam O:

Because somebody backs a truck into the dang thing on one day, just the guy that picks up oil, like you just want insurance. And if you can’t get insured, it’s almost like a non-starter for a lot of these series of oil and gas companies. The flip side of that coin, that’s kind of cool, the kind of silver lining to that is, and one of the ways in which Bitcoin is just so unique is the small mom and pop operators are kind of, it makes sense for them to get involved first. Right. They’re more inclined to take this risk because it’s a bigger benefit to them. The risk of like, maybe not insuring $20,000 of some equipment it’s like they can’t get insurance for that. They’re like, okay, taking the risk and maybe just the stuff breaking and they’re out the money.

Adam O:

And like they’re fine with that. Like the small mom and pop oil and gas producers, I think they have a headstart because they’re just, they’re more inclined to kind of absorb some of that risk that large corporations have way too much red tape to even talk about. And so it’s likely that we’ll see smaller oil and gas companies integrate this more thoroughly throughout their production before the bigger companies really come in and get serious about it. But the thing is that once the big companies make a move, they move really fast. Right. And so like once they decide that they want to build this out, that they’re going to allocate this much of next year’s budget to it, like it’ll happen really quick and they’ll catch up fast. But, and I think we’re just right before that moment, we’re right at this exploratory phase, I think where all oil and gas companies in the world right now in some way, shape or form are taking a serious look at what it’s like to mine.

Adam O:

Bitcoin, what do the costs look like? What does the ROI ballpark me on ROI. Are we talking 10 years, five years, 200 days, like, everyone’s at least doing some due diligence to get that information. A lot of them are pulling the trigger and starting with like a pilot project, right. Getting their feet wet. A couple of them are already like sold on this being a serious tool to leverage in the oil field and they’re incorporating it in all their onsite operations, right. Anywhere that they’ve got excess gas, they’re making sure to go put a mine. And so it’s that Parker Lewis it’s the, what is it that gradually then suddenly like we’re at the then, part like we’re just at the end of gradually just before, suddenly in this moment of suspense, right?

Stephan Livera:

Yeah. That’s pretty cool. And so it just comes down to more and more people waking up to that aspect of it. And it also brings up that whole conversation around the energy mix of Bitcoin, right? Like how much is renewable, and like this whole conversation about fossil fuels. And I think obviously some of this comes into the discussion around whether you view fossil fuels as a good thing, like a net good thing for humanity. I know you probably have some thoughts on that.

Adam O:

Yeah. How could you not, I mean, just sit there and say that fossil fuels are not a net positive for humanity is to just lie is to just be a liar, in my opinion. I mean it’s hardly even worth picking apart it’s crazy. I’m looking around me right now and I don’t think there’s anything around me that could be here if it wasn’t for reliable economic, electricity, and reliable and economic electricity is predominantly provided from fossil fuels, like coal and natural gas. This is the predominant driver of the electricity that powers the world. And none of this would have been manufactured without economic electricity. None of it. It sure as hell wouldn’t have been shipped to me. I mean, like, I mean, even dog food, wouldn’t be available at the grocery store for 20 bucks if electricity wasn’t abundant and that fossil fuels weren’t prevalent today.

Adam O:

I mean, it’s just nuts for people to villainize them. And here’s the thing like I’m no, I don’t think there should be like zero regulation of all processes of oil and gas or something like, no, and by the way, I think oil and gas companies are much more stewards of the environment than people give them credit for. But yeah, there’s definitely places where waste can be cleaned up. I think any waste everybody should look to mitigate waste or at least reuse or recycle in some capacity waste. But gosh, the benefit of fossil fuels, I mean, it’s crazy that it’s just absent of the conversation and there’s just been this brainwashing this mainstream narrative that just the fossil fuel industry, that the energy industry is just like these crooked mean guys in suits that just they just want to burn mother earth for profits is like the, it’s not, I mean, I work with these people every day.

Adam O:

That is not who they are by any means. It’s crazy to me. So I think the ESG narrative is damaging. I think it truly causes a lot of harm and it’s tough to measure the negative externalities that arise from the bastardization of incentives. But I mean, look at what fiat money does, right. I mean, ESG is just another kind of mechanism of that, right. Carbon credits, in my opinion, are it’s more of an accounting scam than it is anything. It’s a means by which to just create this new column in the accounting book and like that can offset all of these other economic losses because of these virtue gains that are measured in units of carbon. I mean, it’s a very, I think it’s a very dangerous and damaging incentive system.

Adam O:

Right. And I hate kowtowing to it. I hate the idea that you have to talk about how like energy consumption as though it’s a bad thing. I don’t think consuming energy is immoral. I think energy consumption is amoral, right? I think it’s if energy consumption is a moral than literally every single person on the internet is just like, we’re all just sitting on the internet, destroying the earth is what is going on in the minds of these people. Like, it’s very bizarre to me, consumption of electricity is not a bad thing. And yet we’ve been told that and it’s hard to, it’s really hard to reverse it. Right. So it’s hard to even get people to challenge the idea that consuming electricity is a bad thing. For some reason, like it’s bizarre.

Stephan Livera:

It seems that the narrative and the constant propaganda of, oh, see, and of course I don’t agree with this, but they say things like, oh, see, we’re going to transition away from fossil fuels to the supposed wind and solar. And it just seems very not aligned with reality because people are living in denial of what feeds them and clothes them and houses them, and people just sort of virtually signal about what they wish the way they wish the world would be.

Adam O:

Yeah. I mean, I wish that too!

Stephan Livera:

Rather than understanding the technology that’s in place.

Adam O:

I mean, I wish like it was just rainbows and unicorns too. Like I wish we could just put out a big old solar panel and then just easily distribute all the energy to the world and never like, I wish that too. It’s just not reality. It’s detached from reality. Like you said you’re right. It’s like this kind of fairy tale idea, but everyone’s going along with, everyone’s like, yeah, we’re transitioning. We’re going to be completely fossil fuel free by 2035. And I’m like, no, we’re not like, no, we’re not. I’m like, trust me, Boeing didn’t just build jets to have to decommission them in 10 years. Like no way. I’m sorry. Like it’s just not, it’s an honestly what that would mean. It would mean for humanity to revert back to what 18th century, 19th century lifestyle, or like, well, so what we should all go back to burning logs every night.

Adam O:

Like, like the emissions from that is going to be better? I mean, what are we talking about here? Like we have to create heat still. We have to generate power still. I mean, this is electricity is the means by which we leverage technology. It’s the means by which we improve quality of life. The fact of the matter is there are people today that still don’t have electricity. And there’s people that are like billions of people that don’t actually have economic and reliable electricity. And I think Bitcoin is going to be the mechanism that gives them electricity. Right? I think it’s going to be the incentive to generate power because you can earn a profit that people are going to go and provide these emerging communities and remote communities that don’t have electricity with electricity, because until they can consume it, you can mine Bitcoin, right?

Adam O:

So you can erect a solar plant and you can use it predominant, maybe a hundred percent of your power in the beginning of your mining Bitcoin with it. But then slowly as you build out infrastructure for this community, and maybe become able to consume electricity, you can then taper off, right? And then you can relocate your Bitcoin mine to the next place. You’re going to do it, right. There’s to be a capital incentive to go do this really good thing, to go provide electricity to a market that doesn’t have it right to supply what isn’t meeting demand where now the only time that that happens is through like the Gates Foundation, right? And then the gates foundation, like has their thumb on this community. And it’s more of like a mafia relationship because really the gates foundation is doing this at a loss, right.

Adam O:

They’re burning money every year to provide electricity. And so if they leave, nobody else is going to come in and replace them. And so everybody’s like, please don’t leave. We want the electricity. Well with Bitcoin mining, like if the person that comes in and provides electricity, behaves tyranically and tries to cheat the system that way, well, somebody else will come in and just out-compete them produce power at a better rate, right? Leverage Bitcoin in order to do it at a better rate and put them out of business. And so it makes people play fair. It makes the upstream oil and gas producers play fair, right? The pipeline companies in the oil and gas industry, pretty much since the beginning of time, since beginning of oil and gas have been able to walk up to the producers and say, Hey, listen, I’ve got a pipeline here.

Adam O:

Like you’re going to sell me your gas and you’re going to sell it to me at this price. Otherwise, like screw off because what are you going to do with it all the only, the other thing you can do with it is burn it. And now the oil and gas producers get to come to the table and they say, Hey, pipeline company, if you don’t give me a good price for my gas, I’m just going to mine Bitcoin with it. Like, I don’t need your pipeline anymore. I have a market that will pay me this. And so if you’re not going to pay me something comparable, I don’t need to do business with you. And just that sheer optionality is going to make is going to make the midstream. It’s going to make everybody have to play more fair. And I think it’s going to bring up the market to a higher equilibrium. Right? Like, I think we’re what we’re going to find is greater efficiency. The consumers win, the producers win, all the, when it’s beautiful, right. It’s free market. Yeah.

Stephan Livera:

So that’s a really interesting way to put it. And so, yeah, it’s really about in negotiations. It’s about what’s your alternative. Exactly. And because now there is an alternative, it actually makes it a lot better for that. So I guess in some ways it’s weakening the power of the pipeline owner and helping the oil and gas producer in some way.

Adam O:

Yeah. And it gives the upstream producer another tool, right? Like it gives them a little bit of something else to bring to the table. Right. but I I think Michael Saylor has said this before, but he was talking about it from like the billionaire or a company’s point of view where if the bank treats you poorly, you can now just say, okay, bank, like, I’m just going to take my 10 billion or whatever, and I’m just gonna move it over here. Like you no longer get to have my, have my Bitcoin. Right. So you now get to respond to being treated poorly in the marketplace. You have just that, just that optionality, just the threat of being able to move your money, changes, how the bank treats you in the same way with oil and gas, right.

Adam O:

Just the optionality. Just the fact that these producers could potentially go, go buy a Bitcoin mine instead of sell to the pipeline is going to change the way that those discussions go. And, yeah, it’s a real, I mean, I got to imagine it’s happening across other industries that I’m not even aware of yet. Right? Like this is the Bitcoin through all day-to-day economic incentives. it’s this very set, like, I guess insidious kind of signal, I guess the signal, right? It’s an economic signal in the minds of every participant in an economy. Right. So it’s just pure signal out there. And the Oil and gas producers can’t deny it. They can’t deny the price in the sky. Right? when Bitcoin is at $50,000, they had to pick up the phone and figure out if they should be mining. Like if this mining Bitcoin thing is serious, because no matter how many great arguments you tell them, they look up at that number and that’s going to be the strongest argument of all.

Stephan Livera:

Yeah. That’s funny. I mean, I’ve mentioned it before, but so many things in this space are indexed to the price. Whether we like it or not, number go up, drives developers, hash rate, more wallet downloads, podcast downloads. All of these things are basically index to the price. So as the price runs up, more people get interested. And so even if we don’t like some people don’t like the kind of overly price pumpy moon boy behavior, some of that is a bit over the top, but fundamentally number go up does drive a lot of these other things. And we believe it will drive freedom, go up and number of people going up as well. So I think that’s probably the interesting point and question as well, around oil and gas and what it takes more of them to get into this. And of course the smaller Bitcoin is as a market, the less interested they are, but the bigger it becomes well now it’s starting to make a lot more sense for them to actually get involved. Right. And so I guess it’s all a matter of time. Yeah.

Adam O:

Yeah. Risk, risk decreases as price goes up. Right. It’s one of those counterintuitive kind of anomalies with Bitcoin where the bigger it gets, the less scary it becomes. At least to the investor, maybe the more scary it becomes to the regulator. So I think, I think the most powerful manipulator in the room is price. And nothing’s going to change that because I, like I said, I mean, I was going around 2018. My boss, Steve Barbour had been even earlier than I was, I mean, just getting laughed at, by the oil and gas guys initially. Right? Like, I mean, back in 2018, when you talked about mining Bitcoin in the oil field, it was, it was a humorous topic for like 99.9% of the people in the industry. And obviously as it kind of should have been, right. That idea is just like, oh really?

Adam O:

Like that’s going to be this magic internet money is going to, it’s going to come infiltrate oil and gas. Okay. But then here we are like, here we are. And this is really serious. The most serious oil and gas producers are looking at this. And the greatest outcome of all is Bitcoin is going to become far more hardened and far more decentralized geographically, right? The hash rate will be much more spread out than it has been the last five years significantly. I mean like China kicking out all the miners, a gift from God. I mean, I’m not, I don’t see where it’s where it’s some kind of an attack vector or like it’s a long con of some sorts. I mean, maybe I’m missing something, but as far as I can tell, it was just a gift from the heavens and we should all celebrate it. And in celebration, bring on some hash rate here in north America, because like the future is ours now, right? I mean, if they, if they just quit the game, like this is the best time for these oil and gas producers to take a look at this and get started because they have significantly less competition than they would have had four months ago. Yeah.

Stephan Livera:

Yeah. And also wanted to get your thoughts on the Bitcoin mining council, because I know this is also a big topic in the industry. And so I guess maybe let me let some of the I’ll lay some of the foundation a little bit for people. So I guess some of the arguments here are around this idea now, Michael Saylor and others in the Bitcoin mining council might frame it like, okay, it’s about education. We’re trying to just form an educational council to teach people, Hey, this is what Bitcoin mining is. And they’re trying to disclose statistics about the percentage of Bitcoin mining that is quote unquote sustainable. And I think the number I’ve seen thrown around is about 56% meaning either usage of wind and solar hydro, or where they’ve paid for a carbon offset. So what’s your, I guess kind of thought on that idea, is there value to that idea of having a voluntary open Bitcoin mining council?

Adam O:

There’s value to the idea, but I think, I think it’s possible the binding council is made in complete good faith with complete I guess altruistic and altruistic intentions rather than malicious intentions. I don’t think that that’s their goal was to become the mafia regulators of the industry by any means. But it’s just one of those, one of those things where it’s a slippery slope, in my opinion, where it’s a fine line, right? It’s a real, you quickly cross over the line between, Hey, we just wanna, we just want to know what percentage of your Bitcoin miners are on quote unquote, renewable energy so that we can report accurate data so that people can have information so that we’re transparent and how we’re conducting this new industry. There’s a fine line between that.

Adam O:

And Hey, we need to know what percentage of your miners are renewable. Otherwise we’re shutting you down, right? Or otherwise, like you can’t be a part of the carbon reduction mining council. And if you’re not a part of the carbon reduction mining council, you don’t get the carbon reduction and council credits at the end of every month. And you’re trying to mine without these carbon credits that this council is now releasing to incentivize people to mine on renewable, then you can’t even really mine like you could end up up a lot of things and you can screw up the incentive structure of Bitcoin pretty well by creating. I mean, by creating carbon credits, honestly, if you think about it, it really, if a ton of upstream energy producers get involved in mining Bitcoin with wind and solar.

Adam O:

And they’re getting a ton of carbon credits from the government. They’re essentially being subsidized to mine Bitcoin. Right? And so if they’re being subsidized to mine Bitcoin, they could scale to the point where you, unless you have like essentially free energy you can’t line Bitcoin without a subsidy, right? Because these guys are essentially mining at a loss in terms of their power, but their subsidy brings them above brings them into profitability. I mean, that’s, that’s where that’s called dead weight loss, right. That’s called creating dead weight loss in a market. And that’s what the government does best. And so at the same time that I think, I don’t think that these guys have bad intentions. I don’t hold any grudges against them. I think that the possibility of this becoming something worse and iterations of it to some degree it’s scary to me.

Adam O:

Right. and I like to, I honestly don’t like that risk. And so like, I think I might err on the side of it may do more harm than good, but I’m not going to argue that it does no good because I think there’s definitely some good that it can definitely, I mean, certainly some good that can be done from that and writing some clarity. I mean, obviously look at how fricking ignorant the lawmakers are in the United States. I mean, they’re literally regulating an industry that none of them understand and they admit that they don’t understand it, but they’re going to regulate it anyway. I mean, so obviously like maybe some of those things, like, should we have a Bitcoin only lobby? Right. I think obviously now it seems like we showed, like, how did this stuff get in the infrastructure bill come out of nowhere?

Adam O:

Like I thought that there were crypto lobbies in Washington, like what the hell happened? Like, you know what I mean? Like I’m all over. I’m sitting here. Like, I’m not sure if it’s feudal or if it’s worthwhile, like, it seems to me to be futile because obviously look like they make the rules of their own game and they don’t care if they even understand what they’re regulating. So yeah, hard to argue that we should spend money and time discussing with people. Like maybe we should just build out our industry and and then fight them once they arrive. So I guess it’s about now. Okay.

Stephan Livera:

A few things I wanted to add there. So one interesting point, I think touching on the point around the Bitcoin mining council, I think it’s one of those things where I agreed that there might be a future risk there because as an example, this is probably a good example. Sir John James Cowperthwaite, a British civil servant and he was the financial secretary of Hong Kong from 1961 to 1971. And so he has a really interesting example because do you know why he did not want to keep government statistics? And he was famous for this? And the reason for that is because he knew that government technocrats, when they had these statistics would try to manage them. And so I think it’s if we, obviously you can see where I’m going with it, right?

Adam O:

No, that’s it. No, you’re right. That’s a great example. And

Stephan Livera:

This is something that libertarians speak about as well from an economic statistics perspective, because they say, look, if you give all these economic technocrats, these statistics and this data, they’re going to try to manage it. Right. And so in the same way, we’re out here saying, oh, look guys, we’re 56% renewable in terms of the US mining, et cetera. Well guess what some politician years down the line or some regulator years down the line, it’s going to say, huh, it’s 56%. Well, that’s not enough. We need 90%. And if you’re not renewable, if you’re not wind and solar as preordained by the green church, you’re not allowed to operate. Or maybe they’ll apply pressure on the loans. And maybe they’ll say they’ll apply pressure pressure through the financial system and say, Hey, you’re not allowed to give loans and credit unless they are preordained green. And so exactly this is potentially where the angle and the risk could come in.

Adam O:

So and to that point, and to that Stephan, we’re already there, right? Like I just, I had a phone conversation last week with an oil and gas producer, a good friend of mine here in Colorado. And he’s currently drilling wells and not many people maybe kind of know how this works, but companies that go out and kind of explore for wells, right. They go on, they try to raise money so that they can drill. Right. And so like, they have a budget that they want to get to. And, but he said, he literally told me he was like, listen the issue. He’s like the reason I like this Bitcoin mining idea is not necessarily because of the money that we’re going to make. He’s like, but because of the ESG right. Of the environmental aspect. And he’s like, not because the regulators are penalizing us, but because unless we have a sexy ESG story, we can’t get any money.

Adam O:

Nobody will invest in us because we’re the dirty oil and gas industry. And so in order to invest in the dirty oil and gas industry, people will only invest in the companies that have the sexiest, greenest, cleanest story of this dirty industry. Right. And so they’re only investing in the cleanest newest kind of oil and gas producers. And so the reason that he likes this is just so that he can turn around and get money so that he can go drill oil wells. He doesn’t really care much about mining Bitcoin at all. Like he just wants money to go drill oil wells. Cause that’s what he is. He’s an oil man. Right. And he’s a producer. But he can’t get the money unless he sells these guys a sexy story. And so when I tell him what I told him, this he’s like, I like this story because I can tell that to these guys.

Adam O:

And they’ll like the story and give me money. And so it’s just this, which is just a big virtue signaling game. It’s nonsense. It’s like, no, no, hold on. People should invest in this technology because it’s really worth investing in like the saving the planet and saving humanity points aside. Like this is great technology. But you’re right. That’s exactly it’s already happening. Right. We’re oil and gas producers right now are having a hard time getting anybody to invest in them. Whether they’re coming from like hedge, they’re asking for hedge funds to invest or banks or whatever, unless they have a sexy, I’m saving the planet, I’m green story. And so it’s already happening. We’re there. Right? So I’d say, I mean, historical data has shown us that the risk is 100% that such a such kind of a council could become corrupt. And I like that government statistics one, too, because on the surface, right? The initial reaction to saying we shouldn’t do government statistics is like, why wouldn’t we want the information that’s so foolish, like be ignorant to the data, but you’re right. Like, inevitably it just becomes this manufacturing of statistics rather than statistics or trying to push a story rather than reflect something that’s already happened or taking place.

Stephan Livera:

Exactly. The metric becomes managed. So that’s one way to think of it. And I look in fairness, I can’t, we can’t expect people like Michael Saylor to be out there 100% toeing, the anarcho-capitalist libertarian line, which obviously we might like that, but we don’t know he’s got a different aspect that he has to represent, but it could also be true to say that it’s maybe it’s just part of what is helping Bitcoin grow larger. And then it it might just not matter in the end, like let’s say in 10 years time, if Bitcoin has just grown that large, it might just be, it might’ve become an unstoppable train by then. So, who knows.

Adam O:

Well, yeah. I mean, I think the cool thing about Bitcoin is got this unique quality where it only, it only attracts enemies that are just too small to crush it. So like an only attracts the US like the government right after it became big enough to defend itself against the government. You know what I mean? Like, cause the government, I think the US government specifically could have crushed Bitcoin in 2013. Like I truly think they could’ve like destroyed this thing and probably like sent it packing for good. Maybe it would have popped back up somewhere else, but they probably could have afforded it pretty good. Maybe 2012, but now there’s no way. Right. And so it’s like, by the time Bitcoin’s enemies, even realize it, it’s too big to fight. And that’s one of the, I don’t know, it’s just like this perfect balancing quality of Bitcoin is that when it’s, when people don’t care about it, they could crush it, but they don’t care to. And then when they want to crush it, they can’t.

Stephan Livera:

Yeah. So yeah. I don’t know. I mean, it’s, it is still like the, if you thought of the US budget security spend is it would be higher than Bitcoin’s obviously much higher than Bitcoin’s security spans, but at the same time, they wouldn’t necessarily be able to go and get like, acquire that many ASICs to try and commandeer, the network, or try to dos the network because there’s a constraint there on that too. But I guess it’s a complicated story.

Adam O:

Well, and the energy. Yeah. I mean, where do you get the energy? Right. I mean, like to try to get that much energy in one place, like it’s really hard to do. Like, I mean, when we’re talking about gigawatts of power, like there’s not just gigawatts everywhere. And so like actually erecting, these things takes time. and at this point, I mean, that’s what I think about Bitcoin security. Like sometimes when people say hash rate is equal to security, like kind of, but I think it’s like, it’s kind of like a step system where, where once Bitcoin’s at like a hundred exahash is, or 200 exahash is, it’s not like 220 exahash is 10% more secure, really like really 200 X is you just like beyond attack, like beyond what’s possible to attack. So it’s secure, like checkbox not like secure.

Adam O:

Right. So you’re thinking of it more like a binary, it’s more binary in my opinion than it is a spectrum. Because like, I mean, once you’re out, like a, what is it a a Zeta hash, right, right. Once we get to a thousand X, a hash is like, it’s not like another exa, hundred exahashes really does all that much to the security. But yeah, it’s kind of the binary aspect. And right now I’d say it’s beyond attack. Right. plus there’s just so many people paying attention to Bitcoin. So many people actively operating nodes, like not just passively having a node running, but like they’re operating lightning nodes or whatever. And so the node operators really are the gatekeepers here. Right. So even if somebody were to get that much power and hashrate, I think they’d fail. I mean, I truly believe that they would fail and they waste a lot of money doing it.

Adam O:

And the Bitcoin price would plunge probably, but then it would cover because it’d be hard. I mean, it’s hard. So I think we’re about to learn really quickly though, that there’s only like one government hard money out there and all these other ones are really subject to regulators will, and we might see, we might see a fight here, like, I mean, but this recent infrastructure bill, like it’s, we’re kind of at the point now that I think Marty Bent said it, it was like a shot. That was the shot that was heard around the world. Right.

Stephan Livera:

A couple of angles here. So I think it, it might be one way to think now, of course, I know, I believe in an anarcho-capitalism libertarianism. So I certainly don’t want to see, I believe in the free market and fully privatized everything, but I think maybe some thinking of it like, oh, don’t engage at all. Or maybe you, maybe you should, if it’s, if it’s in like a low cost way that you can concurrently employ every strategy available to you. So of course open-source software, open-source hardware development effort, Bitcoin businesses. Absolutely. That should be the main focus, but would it like, is it the end of the world to make some phone calls or to maybe put some money into Bitcoin lobbying to at least try to stave off the worst of it? That’s I guess that’s my perspective.

Adam O:

No, I mean, I’m, I’ve been battling back and forth with that the last few days. And even cause like the last couple of days I gave some crap to Coincenter on Twitter and like I got some pushback from some people and people that I respect greatly, you know? And I don’t know. I go back and forth on this. I mean, Stephan I have a really hard time. I mean, I have a hard time buying chairs, right. Have a hard time buying shoes for myself right now, rather than just buying some Bitcoin. And so the idea of like donating to a lobby, I would really need to be like, it would need to be an individual that I spoke to one-on-one and they compelled me. Right. Like they gave me a really good reason as to why me specifically as to how it’s going to impact me or, or mining in the oil field.

Adam O:

Right. and how they’re specifically going to like their plan to approach it. And it made sense to me because as far as I’m concerned, like, I’m not really sure what the lobbyists, like, what their methods of trying to push regulation are. And so for me, it’s almost, it seems to me like, kind of like a black hole of money where you just like, you companies just dump money into this thing. they always just allocate half a percent to, for lobbying. And so they’re going to if you’re the one of only three lobby companies in this industry, you’re going to get some money and then you don’t really have to do much because Washington sucks. And so nobody’s gonna blame you when you come back and just say, oh, the crooked guys so it’s like just kind of like, there’s like full, they have full kind of deniability of results.

Adam O:

Right. And I don’t like that. I don’t like putting money towards something where people can have full, have full preplanned excuses as to why they don’t need to deliver anything. So I go back and forth on that that I obviously with what just happened in Washington, we got to get, we need some voice. I mean, I would, I would give my voice to it, right. I’ve spoken with some people that are looking to start a Bitcoin only lobby that reached out to me. And I said, happily, I would like speak on behalf of what we’re doing and why I think regulation could stifle some really great things that are going on with bitcoin mining. But obviously we haven’t had very many compelling or intellectual people give those arguments in Washington because these guys have no idea what the is going on. I mean, and we had no idea that this was coming, so I I’m a results guy. Right. And the results I see right now are pretty, are pretty low. And so the money spent so far seems to not have been very well-spent. So I’m, having a hard time thinking about donating give it, given the results. Right.

Stephan Livera:

I think a Bitcoin only lobby would, I think a lot of Bitcoiners would feel more comfortable donating money for that, as opposed to be always in the back of their mind, worrying if there is some kind of shitcoin apologia going on as well. Yeah. They’re out there trying

Adam O:

To get like any NFT legislation, like yeah. Like I don’t care about NFT legislation, man. Like I really don’t,

Stephan Livera:

But I think it’s also fair to say that this bill got held up because of all the lobbying. So maybe it’s a, it’s a lobby that’s going to grow over time and we could argue that potentially politically Bitcoin has become more powerful in that sense. So maybe it’s not necessarily just the lobbying that it could also be politicians that have to try to cater to the Bitcoin a voting base, if you will, that they might. So obviously people like Senator Cynthia Lummis, obviously it’s probably at the top of that list and other and other prominent voices. So maybe there might be more people like her coming out of this.

Adam O:

Yeah. And I think there’s game theory here, right? I mean, the government’s made up of individuals. And so these individuals are that they benefit from Bitcoin’s characteristics just as much as I do. And so and not to mention, they get to work on the game of regulating it, so they get to buy a whole bunch of it and then they get to come together and say, oh no, by the way, we’re going to totally let Bitcoin be like viewed as a currency and then price pumps. And they get rich. I mean, I’m, I totally think Bitcoin will kind of do the same thing to their minds as it’s done to everybody else that plays this game theory. But, and I do agree with you. Like, I hope that the maybe politically Bitcoiners voice becomes more powerful, more, or I guess more politicians are inclined to listen to the concerns of this industry, of this community.

Adam O:

I think maybe for me personally, it’s just, I hate that game so much. I’m probably not going to be the one that participates in it. I just, I it’s just so I really like doing honest business. I I value honesty and character probably above most other things. And like in Washington and with politicians, you don’t get that man. Like you get a whole it’s all facade. It’s a lot of saying, it’s just it’s yeah. It’s just all saying things and getting elected saying that, saying the thing to either get into power or retain power,

Stephan Livera:

But here’s the point like course I’m with you. I think

Adam O:

You’re right. We have to play the game. Like it’s either, if we, if we don’t participate, we’re going to it’s it’s

Stephan Livera:

Like, you might not be interested in politics, but politics might be interested in you.

Adam O:

No, I understand. I get that. Right. and it’s part of the reason I want to, I’m probably going to be like in Wyoming or South Dakota here soon, and like I want to be left the hell alone as much as, as much as anybody else. Right. and I don’t, I don’t like think that people that are putting effort toward, toward that are bad. I mean, honestly, like good on you. That’s fantastic. I like, I don’t have, I maybe I just have more disdain for some of these regulators than others. And it’s just really hard for me to give them my hard earned money. Right. I mean, they’re already taking so much of it. It’s like, it’s hard for me to spend money because I really don’t know if that’s how the impact happens. That’s why I said I’d absolutely lend my voice or my time. Right. It’s like if I could give a testimony that might be shown to lawmakers personal experience from the industry, I’d happily do that. It’s hard for me to just give money because I don’t know. It’s like, I feel like I’m accommodating

Stephan Livera:

This. I appreciate that. And I think part of it is

Adam O:

Like lobbying game of nonsense I dunno. It’s like, there’s gotta be a better way. Yeah.

Stephan Livera:

I, it’s sort of, I think we all have somewhat conflicted feelings because at the same time, it’s like, it’s a dirty game, but there’s some people who are willing to get their hands dirty to go play in that game to at least try to tip things in the Bitcoiner favor. Arguably, so yeah.

Adam O:

Yeah. Good on them, I guess I mean good on them and if they’ve got the talent for it, like awesome. Like I hope I wish them all the success in the world right. I’ll benefit from their success. So I definitely don’t want like Bitcoin lobbyists to fail by any means. Of course not. I I’d love to see some, some legit like regulation of over oversight of Bitcoin that was logical. Right. Like things that actually made sense. Right. So that we were defending against things like oligopolies and and market manipulators rather than defending against things like innovation. Right. Rather than I think at the, at the end of the day stifling that like let’s let’s cycle monsters, you know? Yeah. But

Stephan Livera:

The way, the way I would put it is it’s more like we don’t even necessarily need a government regulation of market competition to have perfect competition and things like that. What we, but I think, no, we don’t, like, I guess bringing it back to the main point really is most of the work is in the open-source software, open source hardware, Bitcoin mining education, like that’s where most, I think that’s where most of our efforts should be. There may be a little bit of effort or money or resources or time as disgusting as politics is. I think you might, you might discussing is politics is

Adam O:

Convinced me that as disgusting as it is as disgusting as it is. I mean, I will say worst case silver lining is that it reminds me of why Bitcoin is so awesome because, it renders a lot of this nastiness obsolete in many ways, right. And at least early, hopefully takes away a little bit of power from these swamp creatures that just print money at will without any, without any thought of it. It’s, I like that you brought this up because the overarching point is this, we all want Bitcoin to succeed. And I think we all, I think for the most part, most, most people that understand Bitcoin think that Bitcoin will succeed whether or not there’s thoughtful regulation around it or not. It’s just the point a to point B what’s the path, right?

Adam O:

So this is the thing I think, inevitably central banks and the politicians that they own currently aren’t going to go down quietly and if Bitcoin truly renders their money, printing obsolete, and really going to, it takes away all of their power. I don’t think they’re going to go down without kicking and screaming and doing some really, really crazy things like crazy regulation, making Bitcoin illegal kind of thing right. As the last ditch effort. Right. But maybe I’m, maybe I’m out of bounds. Like it’s like, oh, they can’t go from regulating it and calling it a money and recognizing it as a currency. And then all of a sudden, just like, yes, they can, but they absolutely can, have you ever heard of emergency measures? Like have you not seen the last year? Like they can’t just tell you that you they can’t make you show them that you’re vaccinated, but yes.

Adam O:

They can like, yeah. Like they will you give them an inch and they’ll take a light year. And so, yeah. I don’t know you’re right. I mean, I, maybe, maybe I should. I’m gonna think more about that. I think I’ll tell you this. I mean, if the right person approached me, if I truly saw somebody that said, Hey, this is our course of action for how we plan to get this regulation in place. And this is why we think it’s going to be helpful. This is how we plan to do it. Like, it’d be hard for me to not support that. But what I see right now, it’s just kinda like, yeah, throw that money and hope for the best. And I’m, I don’t play that game.

Stephan Livera:

Yeah. And I think to reflect maybe the point that same our friend might event would say is that it’s not just that Bitcoin is going to be fine. What we’re talking about here is if you care about your local country jurisdiction and the people who are doing the Bitcoin development, Bitcoin mining, Bitcoin education, whatever in that country, they’re the ones who might suffer. And if you want your country or your area to do well, that’s where you have to be able to, as disgusting as it is, maybe have some political engagement or some lobbying engagement to try and stave off the worst of it to give Bitcoin more of a chance to grow until it gets too big to like just realistically too big for anyone to really stop this thing.

Adam O:

And too many people involved for it, for the people to allow it to become like public enemy number one, because too many people are winning off of Bitcoin. Right. Too many people, are benefiting from from it. So I dunno, I mean, that been said, it’s also really like the regulators is also really easy for them to put in a couple of short positions and then get together and ban it, it’s so easy for them. It’s so easy for them to like rig the game in their favor. I mean, like Polosi with her Tesla buys and stuff right before, like they pass law that Tesla’s are gonna be used for government cars. It’s like, come on. Like, how the hell is this legal? But I guess they get to, they get to live in that world. And we just, it’s their world. We’re just living in it.

Stephan Livera:

Yeah. But look, I think the broader message though, that I see is that Bitcoin is going bigger and I just don’t see it being stopped at this point. And so there’s a massive opportunity for people, whether you are holding Bitcoin, whether you are mining Bitcoin, there’s just so much opportunity to come in this next, call it five to 10 years as the industry is really going to that next level. So do you have any closing thoughts for listeners out there if they think about how they should get involved or maybe if they’re in the oil and gas industry and they’re thinking, okay, this guy is talking about Bitcoin, what should I, what should I do? What’s my next step?

Adam O:

Check out upstream data.ca that’s that’s. I think the coolest stuff that’s going on in the oil and gas industry is there I’m right along with Marty bent over the great American mining. So they’re awesome guys doing awesome stuff. I think often what you just said, one of the kind of closing points I’d like to make is that right now is a time of overflowing opportunity. Kind of like what you mentioned, not just in Bitcoin, really in the world and with the internet, but definitely in this industry. And it’s one of the driving reasons as to why it’s so easy for me to, or like why, I guess it’s crazy to me to think about these people going out and scamming and making vaporware tokens and dropping them on people.

Adam O:

Because if you want to make an honest buck, like if you want to truly make an honest make an honest dollar, make some, create some honest value, there’s so much opportunity to do it today. All you gotta do is go learn about whatever you want to do. Right. You just have to go and be passionate about it and dive in, start talking about it. And it probably won’t be very long before you’re getting paid to talk about it and do whatever it is you’d like to do. And so like I would just encourage people that maybe you’re sitting there thinking like, man, I want to get involved in this industry. I don’t know where don’t know how I would just say what part interests you the most, go obsess over it and talk about it and get talk to everybody who knows anything about it.

Adam O:

And I think what you’ll find is you’ll, you’ll get back a lot more than what you put in. And plus there’s no excuses to people that sit there. Like, man, I have no opportunities today. It’s like. Like the world is, the world is endless opportunities. If you’ve got a little bit of creativity, a little bit of motivation and you can go out there and really really make something of yourself. And so I I’d say don’t be discouraged go, find whatever you’re passionate about and just run with it and see where it takes you because there’s no downside here, right? Like with the internet, you almost don’t even need a college degree anymore to become an expert in whatever specific thing you’re interested in. So I signed off with that check out upstream data for sure though. Really cool company, great founder, great team. We’ve got like, I think we’ve had like 125 big pipe lines delivered to the oil field as up to date. And so doing a lot of cool things over there, helping a lot of oil and gas producers learn about this stuff and take it on.

Stephan Livera:

Well, I’ll put all the links in the show notes and Adam has been a very enjoyable chat. Thank you for joining me.

Adam O:

Thanks so much, Stephan. You’re awesome. I love your show. Keep doing what you’re doing. Keep up the good fight. I think I’m going to see you at a BBB, so I’m sure I’ll see you here in just a couple of weeks.

Stephan Livera:

Yeah I will! See you there.

Stephan Livera:

Awesome. Cheers man.

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