LOL, Nico. My heart beats Bitcoin, but not that slowly.
I did spend a long part of my life as an endurance athlete, more than 10 Ironmans, ultramarathons, etc... So yes, my resting heart rate is low. But not that low!!!!
Nope. At least not in the medium term. First of all we've built Elektron around Bitcoin and the Bitcoin ethos. Our founding team comes from Bitcoin. (Good and bad as it could create blind spots for sure).
More important - mining is still very profitable (even at current levels) if newer gen machines are used and you can source low energy.
For example, S23 hydrosat 6c power still mine BTC at ~30k. Of course you need capital and access to energy.
I truly believe the risks on AI/HPC are mostly miss priced. A few points:
Much higher capex needs than BTC mining. The capex is much heavier per MW.
Technology is just emerging. AI will see their version of CPU => GPU => ASICs.
In AI you sign contracts in fiat. In BTC mining you get the best savings technology ever invented. (of course you could always buy BTC with AI revenue).
Stranded energy and Bitcoin mining seem like a match made in heaven. Do you think there is a lot of new opportunity here, or have people identified most of the low hanging fruit?
Mining is a buyer of last resort for electrons when no one else needs them, and a seller of first resortwhen the grid is stressed. It is the most agile load the power sector has ever seen.
The obvious low-hanging fruit has mostly been identified: flare gas, curtailed hydro, stranded wind and solar, remote generation with no transmission, weak grids with excess off-peak power. People know where many of these pockets are.
There's still a massive educational effort that needs to happen with energy and utility companies. They hear Bitcoin and come to all the wrong conclusions.
But we've had good success in places like Brazil where there's a ton of excess wind and solar built with limited distribution.
Just checked the Pool Deep Dive. clean luck/P&L stuff.
A few pools are showing interesting signals on streaks, header-first, and cross-pool moves lately. Worth layering any of those deeper forensics if it's not already in the plan
Usually hashrate keeps grinding higher through the pain. Price falls, miners get squeezed, weaker operators sell or restructure, but the network keeps making new highs because newer machines, cheaper power, and deployment pipelines keep pushing hash online. There's also a lag between purchasing, delivering and installing of machines.
This time looked different. Just look at the shape of the curves below - it's a gradual grind down. This is different. Seems like miners are all gradually being flushed out. Great for those that keep their compass pointing north and can weather the storm.
Was just discussing this with our team this morning. We are actively exploring a project in Oman. This is a bit concerning.
If the government forces regulated miners in its jurisdiction to use that pool, and that pool controls the block template - there's some potential damage... The pool can censor transactions, blacklists, ignore certain txs, shape what goes into blocks, and potentially coordinate around protocol fights.
I’m optimistic over the long run, but I think this is the most important unresolved question in Bitcoin’s hundred-year model. Anyone who says it is obviously solved is hand-waving.
Today’s fee market is not carrying the load. The subsidy still pays miners. Fees are tiny most days. After the ordinals/runes spike, fee share collapsed again, and the mempool has been quiet (lots of txs went to ETFs, and other factors collaborate here).
Long term I'm optimistic: Bitcoin base layer blockspace becomes more valuable as Bitcoin itself becomes more important. High-value settlement, self-custody, Lightning channel management, institutional cold-storage movement, all create real demand for final settlement...
I do think a lot of the mempool being empty is because of: 1. the bear market; 2. a lot of financial volume went to ETFs (separate discussion if good or bad). At least some of the trading volume below would have gone to the bitcoin blockchain.
ETFs do bring new players as well. I think it's a net win for Bitcoin in the long term. But brings noise in the ST.
I've been in love with computers and coding since a very young age. Then I went to work in finance (Economics intrigued me because I grew up in Brazil with raging inflation). I was also lucky to learn Austrian School Economics back in 1997. Way before it became popular.
Hash rate has come down a fair bit from 1200 EH/s, and maybe it will come down further. This may feel like a trick question, but how much is enough hash rate to feel like Bitcoin is secure?
I'm convinced we're witnessing the first bear market in bitcoin's hashrate. Wrote about it in the article below. On Section 4 I discuss exactly this point:
TL;DR quotes:
First, two things that are almost always confused. Private-key security, the cryptography you rely on when you sign a transaction or move coins, has nothing to do with hashrate. Elliptic curves and SHA-256 don't care how many machines are mining. Your keys are as safe at 400 EH/s as at 1,200 EH/s; that is a different problem entirely. This nuance is also frequently missed on quantum discussions but I’m not going there on this newsletter.
What protects Bitcoin isn't the absolute number on the hashrate chart. It's the cost asymmetry between attackers and the value at risk, and that asymmetry remains enormous.
Do you expect the trend of increasing aggregate miner revenue that you identified in your article to continue?
"In dollar terms, aggregate miner revenues have generally increased from epoch to epoch despite each halving. Era 3 averaged roughly $2.1 million per day, Era 4 roughly $11.6 million, Era 5 roughly $31.9 million, and Era 6 so far roughly $40.1 million."
Is it true you have a BPM of 21 !?
LOL, Nico. My heart beats Bitcoin, but not that slowly.
I did spend a long part of my life as an endurance athlete, more than 10 Ironmans, ultramarathons, etc... So yes, my resting heart rate is low. But not that low!!!!
Can you tell us more about the project your working on?
https://elektronics.dev/
Sure thing. We've open sourced most of the research analytics we use at Elektron there.
I've been a huge proponent of Open Source Software for a while. With AI it becomes inevitable (easy to reverse engineer almost anything).
Lots of data, simulations and charts there!
Are you pivoting to AI?
Nope. At least not in the medium term. First of all we've built Elektron around Bitcoin and the Bitcoin ethos. Our founding team comes from Bitcoin. (Good and bad as it could create blind spots for sure).
More important - mining is still very profitable (even at current levels) if newer gen machines are used and you can source low energy.
For example, S23 hydrosat 6c power still mine BTC at ~30k. Of course you need capital and access to energy.
Scroll down here for the ASIC break-evens:
https://elektronics.dev/analytics/asic-compare
Capital structure management is key. Miners that manage their capital well will thrive in our opinion.
Also, everyone is pivoting. We love being the contrarians in the room now.
I do not dismiss AI. It is real. It is a massive new source of power demand, and any serious energy company has to understand it.
But Bitcoin mining and AI are not the same business.
Finally, I think the time to invest in AI will be after this current cycle. Lots of froth right now... Let it deflate first.
In a Bitcoin Park article from a while back, they quoted you saying 'Bitcoin is a significantly less risky business than AI HPC."
Can you explain this a little bit or has your thinking on this changed at all?
I truly believe the risks on AI/HPC are mostly miss priced. A few points:
AI will go through this in its own way (but it will be a combination of software and hardware disruption)
Stranded energy and Bitcoin mining seem like a match made in heaven. Do you think there is a lot of new opportunity here, or have people identified most of the low hanging fruit?
I wrote this in one of my newsletters:
Mining is a buyer of last resort for electrons when no one else needs them, and a seller of first resort when the grid is stressed. It is the most agile load the power sector has ever seen.
Yes, there is still a lot of opportunity.
The obvious low-hanging fruit has mostly been identified: flare gas, curtailed hydro, stranded wind and solar, remote generation with no transmission, weak grids with excess off-peak power. People know where many of these pockets are.
There's still a massive educational effort that needs to happen with energy and utility companies. They hear Bitcoin and come to all the wrong conclusions.
But we've had good success in places like Brazil where there's a ton of excess wind and solar built with limited distribution.
This is definitely my experience. So many people are really unwilling to think of bitcoin as anything but a scam.
Do you have a bitaxe or home miner of some sort?
BitAxe, Hammer and Avalon Nano 3 :)
I love tinkering with everything.
Check out Zagury's article on the state of Bitcoin Mining (#1488335) here:
https://twiiit.com/alphazeta/status/2053918448065929516
Love the open-source analytics drop on elektronics.dev. those ASIC charts are gold .
On our end we've been poking at pool forensics (streaks, weird transitions, that sort of thing) in the mining dashboard.
How are you seeing the bigger operators navigate this drawdown? Any patterns standing out on the pool side?
Have you seen this one?
https://elektronics.dev/analytics/pool-analysis
Just checked the Pool Deep Dive. clean luck/P&L stuff.
A few pools are showing interesting signals on streaks, header-first, and cross-pool moves lately. Worth layering any of those deeper forensics if it's not already in the plan
You wrote in your newsletter “Hic Sunt Dracones” that:
We are living through what is almost certainly the first real bear market in Bitcoin's network hashrate.
What did you mean by that?
Usually hashrate keeps grinding higher through the pain. Price falls, miners get squeezed, weaker operators sell or restructure, but the network keeps making new highs because newer machines, cheaper power, and deployment pipelines keep pushing hash online. There's also a lag between purchasing, delivering and installing of machines.
This time looked different. Just look at the shape of the curves below - it's a gradual grind down. This is different. Seems like miners are all gradually being flushed out. Great for those that keep their compass pointing north and can weather the storm.
Welcome!
What do you think about the Oman National Bitcoin Mining Pool?
Was just discussing this with our team this morning. We are actively exploring a project in Oman. This is a bit concerning.
If the government forces regulated miners in its jurisdiction to use that pool, and that pool controls the block template - there's some potential damage... The pool can censor transactions, blacklists, ignore certain txs, shape what goes into blocks, and potentially coordinate around protocol fights.
Not ideal for sure... Bad potential precedent.
Block templates should belong to the miners.
What a coincidence! Solid insight on this, thanks!
Don’t forget to smash the lightning bolt button on the left ⚡
How optimistic are you that a sustainable fee-market for miners will develop in Bitcoin?
I’m optimistic over the long run, but I think this is the most important unresolved question in Bitcoin’s hundred-year model. Anyone who says it is obviously solved is hand-waving.
Today’s fee market is not carrying the load. The subsidy still pays miners. Fees are tiny most days. After the ordinals/runes spike, fee share collapsed again, and the mempool has been quiet (lots of txs went to ETFs, and other factors collaborate here).
Long term I'm optimistic: Bitcoin base layer blockspace becomes more valuable as Bitcoin itself becomes more important. High-value settlement, self-custody, Lightning channel management, institutional cold-storage movement, all create real demand for final settlement...
Epoch after epoch (in fiat terms) - daily miner rewards keep going up:
https://elektronics.dev/analytics/blockchain
I keep expecting mining fees to pick up, but we seem to be stuck at ~1sat/vB. At least blocks aren't as empty as they were a little while ago.
Things like the rumors around Iran accepting bitcoin for tolls make so much sense, but I suspect we won't see anything like that any time soon.
I do think a lot of the mempool being empty is because of: 1. the bear market; 2. a lot of financial volume went to ETFs (separate discussion if good or bad). At least some of the trading volume below would have gone to the bitcoin blockchain.
ETFs do bring new players as well. I think it's a net win for Bitcoin in the long term. But brings noise in the ST.
https://elektronics.dev/the-bid/
Cool charts! I hadn't seen those.
Does look like a correlation there (hard to know which way it works though):
Section 5 below address this as well in more detail:
https://x.com/alphazeta/status/2053918448065929516
https://twiiit.com/alphazeta/status/2053918448065929516
Welcome
Hi All!!! Great to be here.
How did you get started in Bitcoin?
I've been in love with computers and coding since a very young age. Then I went to work in finance (Economics intrigued me because I grew up in Brazil with raging inflation). I was also lucky to learn Austrian School Economics back in 1997. Way before it became popular.
I was primed (and lucky) to grok Bitcoin early.
do you have a favorite lightning wallet?
Have to admit I'm not a heavy lightning user... But....
I've used Breez, Aqua, Wallet of Satoshi and some times Cash App. Tether Wallet also has lightning now.
Also used Zeus on my node.
Hash rate has come down a fair bit from 1200 EH/s, and maybe it will come down further.
This may feel like a trick question, but how much is enough hash rate to feel like Bitcoin is secure?
I'm convinced we're witnessing the first bear market in bitcoin's hashrate. Wrote about it in the article below. On Section 4 I discuss exactly this point:
TL;DR quotes:
First, two things that are almost always confused. Private-key security, the cryptography you rely on when you sign a transaction or move coins, has nothing to do with hashrate. Elliptic curves and SHA-256 don't care how many machines are mining. Your keys are as safe at 400 EH/s as at 1,200 EH/s; that is a different problem entirely. This nuance is also frequently missed on quantum discussions but I’m not going there on this newsletter.
What protects Bitcoin isn't the absolute number on the hashrate chart. It's the cost asymmetry between attackers and the value at risk, and that asymmetry remains enormous.
https://twiiit.com/alphazeta/status/2053918448065929516
It is wild to see this...
Pretty solid drawdown.
Do you think the treasury companies are going to weather this bear market?
Some yes. Most no.
Do you expect the trend of increasing aggregate miner revenue that you identified in your article to continue?
"In dollar terms, aggregate miner revenues have generally increased from epoch to epoch despite each halving. Era 3 averaged roughly $2.1 million per day, Era 4 roughly $11.6 million, Era 5 roughly $31.9 million, and Era 6 so far roughly $40.1 million."
Absolutely. Fundamentally nothing changed with Bitcoin through this bear market. Still the best freedom money ever found by humans.
Bear markets are brutal... And we tend to think it's game over. We've been here before. And will be here again.
Just look how many times Bitcoin has been killed... And reborn.
https://elektronics.dev/the-bid/obituaries
bitcoin is dead. long live bitcoin!
https://twiiit.com/alphazeta/status/2064333766617702722
What's the most surprising thing you've learned since founding Elektron Energy?
Ahh I wanted to ask about the Tether, XXI merger and where his place is at in the new company
What's the biggest pushback you get from grid operators when pitching them? do they still think mining is a waste of power.
What's something you believe about bitcoin that few bitcoiners agree with you on?