012 Ryan MacLeod - Bitcoin Specialist & Laboratory Technician at Canadian Nuclear Laboratories

012 Ryan MacLeod - Bitcoin Specialist & Laboratory Technician at Canadian Nuclear Laboratories

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Ryan MacLeod: [00:00:00] I'm pretty sure the United Arab Emirates is mining Bitcoin with those new reactors they just turned online. There hasn't been much like fanfare and announcement of it, but the reactors came online and then like a few months later it was announced that there was a partnership with marathon Digital Holdings, which is one of the like top five Bitcoin mining companies in America.

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Mark Hinaman: Okay. Welcome to another episode of the Fire2Fission Podcast, where we discuss energy dense fuels and how they can better human lives. Today we've got Ryan McLeod, who's a laboratory technician at Canadian Nuclear Labs up in Canada. Ryan, how you doing?

Ryan MacLeod: I'm doing great. It's a beautiful Monday morning up here in Canada.

Mark Hinaman: Fantastic. We've actually spoken before, which is super fun. You were on the Young Professionals in Energy podcast with a panel last year, and very excited to chat with you again, specifically, just you You know, we've had a foray into uh, bitcoin mining and talking about how it can be done with [00:02:00] nuclear.

And so, we'll, we'll dive into that. But for those who haven't heard you before, you know, you've been on several other podcasts, but for those who haven't heard you why you give us a little bit of background on yourself and yeah, why, why you're interested in, Nuclear and.

Ryan MacLeod: Thanks, mark. So my, as Mark stated Ryan McLeod, I'm a laboratory technologist at Canadian Nuclear Laboratories.

And recently, within the last, yeah, early 2021, I started to take an interest in Bitcoin in parallel with my. With an interest in learning about the small modular reactor developments that are going on here in Canada and abroad, and then as I learned about how Bitcoin mining is a massive consumer of electricity, but also incredibly flexible, it can provide services to, to act as, as a flexible load for power plants to.

Basically improve their economics by, by ensuring that they no longer have to curtail their electricity, there's now a global market that they can sell their electricity into merely by just having computers to, to plug [00:03:00] into their power source. It doesn't really matter what power source, like, I'm very excited about the projection of where it can go with nuclear power, but it's happening with hydroelectric, it's happening with wind, with solar, geothermal.

There's even a guy in Hawaii trying to set up a. Ocean thermal energy conversion plant that's going to be financed by the Bitcoin mining that is associated with it. So there's a lot of excitement on the Bitcoin and energy front in the over the last year that is only escalating as it's looking like higher probability that Bitcoin miners and power plant owners are going to eventually just be one in the same.

It's just going to be another tool that electrical grids can. To just improve economics, to improve stability. It's got a lot of potential and, but not without its own controversy.

Mark Hinaman: Ab Absolutely. Yeah. And we can talk about a couple of those points.

What are you most excited about in the nuclear?

Ryan MacLeod: I'm very excited [00:04:00] that we're finished building some large nuclear reactors around the world. The ones in the United Arab Emirates, and then the Vog reactor in Georgia. And then I think the, the Hinckley Point Sea Reactors almost finished up in the uk.

There's lots of excitement about the small modular reactors, and there's many countries pursuing as many as 70 different designs using Sizes of outputs different cooling types. So it'll very, very much increase the ar, the applications of nuclear power beyond just having like one large power plant in one central location that powers like a city or an industrial sector.

But now, With the small modular of the reactors, we can deploy power plants that run on nuclear fishing, as small as like five megawatts, one megawatt that can be deployed to like remote communities that and transfer them off of diesel or like upgrade coal plants to nuclear plants where you don't need like a full gigawatt but only like 300 megawatts would be [00:05:00] sufficient.

There's lots of talk about using small modular reactors for their heating capacity as well, cuz. The some of these reactors will be able to generate heat up to 6, 7, 800 degrees Celsius, which will enable them to apply to be used in various other industries like chemical production petrochemical stuff, various other Applications outside of just the pure electrical sphere.

So we'll see lots of like absolutely hydrogen electrolysis type of stuff and it's very, very exciting for all the different peripheral technologies that can benefit from, from nuclear power and it's being pursued very, very vigorously, especially here in Canada and several European countries.

Mark Hinaman: Yeah, there, there's a project being built at cnl, isn't

there?

Ryan MacLeod: Yes, Canadian nuclear labs will be hosting the demonstration unit of ultrasafe nuclear companies, five megawatt micro modular reactor. So that's okay. That's what we're getting into. So that'll be the first new operating reactor [00:06:00] that's Canadian Nuclear labs has built there's, yeah, we have several research lab reactors here.

But our major ones, the N R U and the nrx have been shut down of just after their 50, 60 year operating. But it's very exciting.

Mark Hinaman: Yeah, absolutely. That's us. S n c do, do you know the timeline on that or how, how soon?

Ryan MacLeod: We we're expecting 27, like 28 if things get delayed, but it, it is hard to predict in the current environment with financing and supply chains and everything is very much outta whack.

So it's, it's an optimistic timeline and I hope we can hit it, but it's, it would not be a surprise if it got, if it slipped a little bit considering the broader macroeconomic environment we find ourselves in right now.

Mark Hinaman: Sure, sure. No, that's, that's interesting. And I've, I'm familiar with U S N C and I know some of the folks over there but I, I'd forgotten that.

Yeah. They're working on the project at cnl. So, I'm curious, what, what kind of [00:07:00] lab work

do you do? Tell me a little bit about your day job.

Ryan MacLeod: Yeah, I, I operate a lab along with a, a partner and we do the, the day-to-day analysis of the, the scrape campaigns from the can-do reactor fleet, and that's where they, they take a sample from the inside of the pressure tubes, and then we monitor it with mass spectrometers to determine how much hydrogen and deuterium has.

Ingres into the the met metallic structure of the, the zicon pressure tubes and it just monitors the, the corrosion rate so that there is a lowers the probability of there ever being a one of these pressure tube cracks and that can leak moderator water into the cooling water is, there was an event that happened way back in the seventies and then that's what initiated the, the commissioning of the laboratory that I now operate.

I basically just, Babysit and troubleshoot the machines and make sure they continue running samples.

Mark Hinaman: Yeah. Is the corrosion rate significant or continuous? [00:08:00] Linear?

Ryan MacLeod: It's, it is pretty linear and continuous. Like you'll, you'll, you can see the graphs just go a nice straight line over 30 years. And then once they reach a certain threshold, then that's when they do things like shut down for the current refurbishment plan at the can-do reactor fleet.

So we've currently have two, maybe I think three reactors down for insurance right now and they should be back operat. Sometime early next year. So it's, we're in a weird spot here in Ontario cuz we, we we're not at maximum capacity cuz we've, we're trying to extend the life of our our reactor fleet here and well into the sixties.

Yeah. 60 years. Right.

If you're take good care of them, they lost a long time.

Mark Hinaman: Absolutely. So how, how did you get involved with Bitcoin mining or how'd you get interested in it? And t Talk to us a little bit about the competition that occurred last year and your guys' travel to the Japan.

Ryan MacLeod: Yeah, I got into Bitcoin. I came into it [00:09:00] for the number go up when there was that very exciting bull run in the beginning of 21, where it shot up from like under 10,000 per Bitcoin to over 40,000 in very short period. It attracted a lot of people that aren't, were. Entering the space. But I really started to dig into it when I learned about the Bitcoin mining process and the way that it can convert, just converts electricity into hash rate, and then that's what contributes to, to the network to generate new blocks and add them to the ledger.

It was when I heard about a company called Upstream Data. They are building small data centers with a, with a with a gas generator inside of them that can be easily transported to any oil site that has a flare gas problem or just gas that they cannot afford to build the infrastructure to bring it to the market.

So typically that will just get burnt on site because there's really nothing else to do with it. But then there. There's emissions liabilities, there's economic liabilities. [00:10:00] It's, and it's bad, bad practice, but there's really no other way to deal with it. To, yeah, in order to get the oil that, that we need for countless other products.

So what these guys did is they just started. Feeding that what gas that would otherwise have gone through a flare stack and they just feed it into a generator that then feeds these computers and then generates the hash rate and then gets rewarded in the Bitcoin. And so it took a liability that that oil producers were having and it just, it flipped it into a new monetization stream.

And then when I was in a conversation with my wife, Heidi, we. She threw out the idea of doing that with small modular reactors, especially since we want to deploy them to a wider range of applications in remote locations. There's not always going to be like a certainty of demand for that electricity, and a lot of power projects will not get built just because of that demand uncertainty.

If like, if you don't have an anchor customer for that power, Then you're not going to find investors very excited [00:11:00] to get in, be a part of your project, and then that's where these projects typically fail. So, Then the idea, like I just started thinking about the idea a lot and reaching out to others, like how this could work and how we can apply it to the, the small modular reactors.

And, and then you start going on these other tangents, learning about grids and all the electrical engineering that goes into, to balancing and managing a grid and how the PE plants work and, and how transmission congestion works. And then you just start seeing all these little liabilities. You're like, well, Well if, if they're over generating here, then we can plug in the miners here and then they'll just absorb that load.

It's, it's kind of like a battery, but not quite a battery cuz like a battery is something that you can, you, you store the, the electrons in and then you can take them out in their original form. Whereas bitcoin's more like condensing electricity into a secondary product that's used on a secondary market.

Something like, like steel. Like we, we condense energy into [00:12:00] steel and then it allows us to defy gravity with the structures that we can build. And this is just a way to do that digitally. And it provides a really good opportunity for power plants and power plant owners to monetize electricity that they otherwise would have no value for because it would either be over generating and then that causes liabilities to, to the grids and, and power systems.

It could be like undersupplied, and then you're going to have situations where your, where your higher priority customers aren't receiving the electricity that they need. So what I'm pushing for is with the Bitcoin mining, we can increase the size of the power plants that we want to build wherever we want to build them.

And then we can use the Bitcoin mining as an anchor customer to ensure that they've always have somebody at the margins to pay for their electricity. That can also shut off should there be a situation where there is an increased demand from the local grid [00:13:00] on on, or like something like, like a hospital would take much higher prioritization than a Bitcoin mine.

Like if you would go up the stack of what would turn off first in a situation where grid capacity needs to be freed up for other customers. So it's. It adds a very effective new tool to power producers. And there's all kinds of new innovations of how they're, they're using it throughout the world. Like Africa is of great interest.

Like lately, there's countries going in or companies going around Africa and trying to find like very small power opportunities, like a hydroelectric dam that generates like 70, 80 megawatts, but then the community only needs 30 megawatts. But because of that, that major gap, then yeah, it's hard to find somebody to, to finance this project.

So they'll fill in that 40, 40 kilowatts with the, with like that's only like 10, 11 asics. And then, yeah, then they can turn them on and off as the community needs that power. And then it can also, because [00:14:00] they have that extra power. Or that money stream coming from the Bitcoin miners, they can offer a lower price per kilowatt to the rest of the customers.

So it's ultimately becomes a win-win win for like the power project owner, the grids, the, the, just the general users. Like it's, I think it's got a really good shot at working and Gotcha. I, I think it's going to, before we know it, these conversations like this are just gonna be like, yeah, like it's.

Mark Hinaman: So, one of the members of our team is very excited about Bitcoin mining and, and another one, doesn't think that there's much value in it.

In my experience, that seems to be a common sentiment that people are either all in or don't really understand it. So, but what would you say why is Bitcoin mining different from other cryptocurrencies and what value does it. For society more broadly.

Ryan MacLeod: Well, having an open, decentralized ledger that anybody can participate in and anybody can use to exchange [00:15:00] value permissionlessly and with that being censored is of a great value to the world right now, especially since we see that some people. May have woken up this morning and not been able to access the funds in their bank for all we know, like Swiss Bank just had to take a massive bailout. So that system is precarious itself. So it's the people with Bitcoin are sleeping comfortably tonight knowing that they they have custody of their wealth and that they can send it to whoever they need to send it.

They can make payroll if the, they're caught in a situation where they can't access their bank accounts. Like, I don't know exactly how this is all gonna play out, if this is just the early stages of like similar to like a 2008 type of crash, but watching banks fail is never a good sign. But having an alternative that people can start to transition towards is of great value.

And the Bitcoin mining, the proof of work algorithm that it uses, and yes, like I've, I've heard the [00:16:00] complaints that if they don't see the value of the, the token, they don't see any value whatsoever for the mining process. But it's like any commodity, like it has a production value. That's if, if the pro, the cost to produce it is less than the cost that you can sell it on the open market, there's going to be an incentive for people to find opportunities to generate it.

For less than they can sell it on the market for. So if you've got electricity less than 6 cents kilowatt hour, right now, you are in a really good shape and you will be mining Bitcoin profitably. And then if the value of Bitcoin goes up in conjunction with the banking system going down and the liquidity being injected into the system.

To prop everything up, that's just going to be more money sloshing around trying to find a home. And yeah, bi Bitcoin. A good, good home for it because you can take self custody of it. Like once you've [00:17:00] moved your Bitcoin onto your device and you have your private keys, there's nobody that can take that away from you.

There's nobody that can stop you from using it. The worst that they can do is to complicate your ability to exchange. The government issued fiat currencies for Bitcoin. That's, that's really the only. Avenue they have that can really choke off Bitcoin, which somewhat argue that that is part of what happened with these banks that crashed because the three major banks, the signature silver Gates and Silicone Valley, they were all heavily invested in the crypto industry.

So, They to shutting them down would be a massive blow towards the entire crypto industry, just because it makes it difficult for banking. Like it's, there's many industries that have trouble with their finances just because they aren't an acceptable industry that the banking industry wants to participate with.

Like we've seen it with like cannabis and like pornography type of stuff. [00:18:00] Sure. It's, it's, it's very complicated to get a bank when that you're in those lines of works. So, and then also there's, there's people around the world that just don't have banks. There's 2 billion people that don't have a bank account.

And now with a smartphone, you can have your own bank account that is your own self custodys. And it's, it's actually quite impressive. But then, yeah, yeah, like the, the proof of work versus like the proof of stake, like those are completely different. Protocols. So we're, we're,

Mark Hinaman: so let's, let's just dive into those.

What, what is the difference between proof of work and proof of stake?

Ryan MacLeod: Well, proof of stake is similar to like shareholder type of the system where whoever holds the most shares of the token gets the most rewards from the newly issued tokens. Whereas in Bitcoin, With the proof of work algorithm, it's a computing process that's using electricity in the, to have a real world connection [00:19:00] between the, the ledger and the power that's used to create it.

So it, it gives it like what's the word I'm looking for? An un forageable Costliness is what it, what it's referred to in I think Nick Batia came up with that concept with it that a good money has to. A costliness associated with it. If your, if your money can be created with just the, the stroke of a key, then it's not good money and it's ultimately going to, to dilute.

And everything measured against it will be disrupted. It's, it's like, It's like having a measuring stick that's made of elastic and it's difficult. It's, it's difficult to make accurate measurements when one day your measure ring stick is, is one meter and then the next day it's a meter five and then, and then it's 95 centimeters.

Like on paper it will say that all of the houses are the exact same square footage, but when you actually go and measure them with a stable, Measuring stick, [00:20:00] they're all going to be, be different. And like that's what's happening in our current fiat system. And the crypto like proof of stake system is just a digitized version of just the stakeholder capitalism where he who ha has the largest bags, reaps the largest rewards, which, so then it just fulfills the prophecy of like, who, who has the most more will be given.

And then it, it just keeps filtering more towards the top layer. Of these institutions. And then the problem is they're so easy to spin up these like proof of stake cryptocurrencies, that, that, although there's a few of them that have like good technological value and maybe providing something that, that our society will find use for.

But the problem is most of them are just outright pump and dump schemes, whereas somebody will just create something. They'll give, yeah. They'll, they'll, they'll, they'll give all the tokens pre mine to like their buddies or early stakeholders, and then they'll, they'll pump it up with a bunch of slick marketing and then they'll sell it on retail as soon as it [00:21:00] goes above the cost of the Dan.

Used to produce it, and then they'll just keep cycling through that and, and it just turns the whole thing into a casino and it, and it distracts people from like the actual value of something like Bitcoin where like it's, it's just a completely different fixed commodity. It's just a piece of software that people engage with on the internet where, and then everything else, someone.

Cloned the code that Bitcoin runs on so they can say, oh, we're going to make Bitcoin, but we're going to make a trade off, and it's going to be bigger blocks or faster blocks, or just every time that there's been a trade-off made, it makes. It sacrifices something somewhere else. So like the Bitcoin focuses on security and decentralization on its base layer.

It sacrifices the scalability. So I'm sure you've heard, and many have heard that like that it only processes seven transactions per second, but that. Is at the layer that would be compared to like the [00:22:00] way that the central banks settle their books with the, the fed wire or the Swift system. Whereas now a second layer built on Bitcoin, the lightning network is enabling higher throughput.

But it does, it does sacrifice a little bit on the on, on a few trade-offs, but it enables near instant. Near free final settlement transactions with anybody anywhere in the world. So it takes that seven SE seven transactions per second throughput at the big Bitcoin base layer and essentially, Makes it infinite at the second layer is similar to how like the, like the internet protocol layer, like we don't really talk about like TCP and ip.

That's the first layer of the internet. The, the layer that we're using here is like the sixth or seventh layer that's built on top of that. So, so the bitcoin, the base layer is the foundation and then everything that's built upon that will improve its usability and And throughput. And then you can do things like like the Lightning Network enables you [00:23:00] to, you can have a wallet that has various different currencies and you can send them to somebody and they'll receive it in whatever currency they want to.

But behind the scenes, it's using the Bitcoin infrastructure instead of the typical fiat banking infrastructure, which most of these banks don't even communicate with each other cuz they have to have like, like bridges built between them because the, the, like the software and their systems. Are not they're not interoperable the way that the, the Lightning Network is now.

Mark Hinaman: The piece that always stands out to me is, The decentralized ledger, you know, at its foundation. It's, it's essentially an accounting system that we've gamified. For people not familiar with it, they, you know, saying the mining and having coins and tokens and wallets, they, you know, these are kind of just terms that.

Have helped to gamify the, the system and, and give it a structure that is easier for people to understand. But at its core, we're essentially just using energy [00:24:00] to cloud, compute and keep track of transactions. Yeah, pretty much it's, am I oversimplifying it there?

Ryan MacLeod: Yeah, it's an immutable ledger and yeah. And the minors are, Are competing with each other to be the first to issue the next new block that gets appended to the ledger, but they're collaborating with each other to build the ledger.

And then with each new block, that's adding a new layer of of energy that would need to be overcome for somebody with nefarious intent to go back and try to rewrite a block that's already established in the blockchain. So it's, it's essentially creating an energy force field around the entire blockchain that protects it from being changed or, and it, it prevents counterfeiting of the, of the token because there's tens of thousands of people running an exact replica of the entire blockchain just on their computer.

And all of those nodes check and verify each other's work. And then when a minor presents a valid block, [00:25:00] The nodes all confirm that that block is valid. Like cuz it's, it's a very difficult time consuming process to find a valid block. But then once you found that block, it's very easy to validate that you found that block.

Kind of like just going through a pile of keys to unlock a door. If every, everyone's searching through those keys. Once you find the key that works, anybody can take that key and be like, yes, that works. You, you win the prize. But then what's cool about the Bitcoin mining is the difficulty adjustment.

It forces the block time to be a constant 10 minutes. And anytime that it starts to deviate away from that 10 minutes after 2016 blocks, it will recalibrate itself and it'll make it. Difficult to find that next valid block either by, you know, essentially just by, by using that analogy that I use, just adding more keys to the pile, right?

And then, and then if, if it gets slower, they'll take more keys away from the [00:26:00] pile. And then it's, and it just, it's, it's a dynamic equilibrium between, the more computing power there is, the harder it is to find a valid block. And then the less computing power, the easier it is to find the blocks.

Mark Hinaman: Right. So we, we can use the technology for bitcoin mining and you know, there's specific computers that are built in to, to run the software.

But the, this application has a parallel or identical application for cloud computing, right?

Ryan MacLeod: Yeah. Kind of. But the cloud computing is more, needs to be like, stable and on all the time. Like, do you, you. It's not as friendly to interruption cuz that would disrupt people's services and whatever they're using.

Like if it's a sure, like an AWS server or Google server, like they need 99.99% uptime, which, which is great and they will definitely provide a large, stable load for nuclear reactors. But where, where I [00:27:00] find the, the Bitcoin mining the most exciting is in its flexibility in how they've been able to serve various ancillary.

Products in various grid applications that they find themselves in. Like for instance there was the storm in Texas a few months ago where the, the miners, they I think it was about 1.2 gigawatts worth of capacity was turned offline. That was just the Bitcoin miners that were, they freed all up that capacity to allow the grid to use that electricity.

So that's a really good service that they provide. And then like another way that we're seeing it used, environmentalists hate this one, but there's a lot more nuance to it than they seem to be willing to look into. But there's a coal plant and a natural gas plant that's mining Bitcoin and it's improved the economics and the environmentalists hate it because it, they claim that it revived a coal plant.

But what it's actually doing is it's making that coal plant run more efficiently because it's a peaker plant. And peaker plants will have less emissions per kilowatt hour of [00:28:00] generation if they're able to run at a stable load. If you are constantly taking your peaker plant, whether it's gas or coal or hydro, and you're ramping it up and ramping it down, you're putting unnecessary wear and strain on on your app.

And your turbines and just your whole system and you, you ruin your economics and it's just less efficient on your admissions per kilowatt hour. So what the miners are doing is, is enabling them to run at a stable load. So overall, they may be putting out like slightly more emissions than they would otherwise, but they're also like maintaining this facility so that it's providing jobs to that community, the emissions per kilowatt hours down.

Mark Hinaman: And it's the cost of that electricity is certainly gonna be lower too then.

Ryan MacLeod: Yeah. Because typically your peak are your for when,

Mark Hinaman: when you're not using it for Yeah. When you're not using it for mining, but using it for actually power load, it should be less expensive.

Ryan MacLeod: Yeah, it should. And, and especially since peaker plants are used as that mar marginal like energy provider, so they're often like the [00:29:00] top of the stack as, as the electricity demand goes up.

And if you can avoid having to, to access the power from the peaker plants, like you can keep your, your marginal emissions of that electricity and the cost way down. But as soon as that peaker plant gets tripped, like you're, yeah, the marginal effects on your, on your grid, start getting a lot more.

Outta whack and like the, the accounting for, for like the, the emissions and the the cost of the electricity Yeah. Starts to get a little bit more complicated. So yeah, so if you can just run everything stable, it just makes life so much easier for your grid operators. But then what I'm proposing here is now instead of trying to balance with peaker plants and like an a low a generation, that's that.

Variable. We can just build a base load that's far larger than we would've normally conceived because. You'll typically only wanna build at about 10% larger than what your, your expected needs are going to be [00:30:00] to minimize your economic losses to curtailment and surplus generation. But now by having the mining in play, we can build them far larger and then we can just turn down the Bitcoin mining when the local community needs to use that capacity.

Yeah. And then, then you don't, yeah. Then you don't need the peaker plant anymore cuz it's, it basically takes the peaker plant and makes it virtual on the, on a, on the load side.

Mark Hinaman: Yeah. So do you foresee that as being an opportunity to help catalyze nuclear?

Ryan MacLeod: Oh, absolutely. This this project that just came online in Pennsylvania at the what is it?

The Talend Energy Cumulus Coin Project at the Susquehanna reactor. They're providing a very good first example of, of how this relationship can be found, whether it's a company um, contracting with an existing power company and then using their [00:31:00] excess generation or. Or it's going to be the Bitcoin miners that just want their own vertically integrated power systems to, to just minimize counterparty risk.

Cuz a, anything that they can bring in-house to under their roof will benefit their bottom line. Cuz the less, the less you have to depend on, on any counterparties and like the risk of your electricity price going all over the price. Like if you have the asset and only it for yourself, you have a lot more.

Lot, lot more stable ability to manage that that asset.

Mark Hinaman: Right. So are, are there any challenges that stand in the way, and one, one that comes to mind and I'm just curious on your thoughts on this, is for any asset utilization of it and increased utilization to increased capacity factor, so to speak will make it more profitable. And when, when I've personally looked into mining you know, cuz I come from the oil and gas sector and [00:32:00] we've looked at putting it on flare sites and when, when I've done the economics, it's, it's challenging if you're not above a certain utilization capacity, you know, there, there's a cost to the miners and the cost of the computers.

So I'm, I'm just curious on your thoughts there, how variable or intermittent? Could this be to still be a profitable project?

Ryan MacLeod: It depends on a few factors. Like there's definitely the policy concerns. There's definitely your, your financing when, when you buy your hardware is, is a major point of how your your operation's going to look.

Cuz if you bought hardware on debt at the top of the market, then you are likely in a situation where you are, you are going to need to sell that hardware in order to service your debt, but you're going to be selling that hardware at a much lower cost because the value of the underlying asset that it.

The hardware is essentially a derivative of dropped significantly. So we're, we, [00:33:00] we're I think we've come back from the bottom, but who knows at this point, Bitcoin is a very fickle commodity that could surprise us onto the downside again, but it seems to be stable where it is, but so the hardware has also come down, so you have to, you have to measure, yeah.

You're all in cost of electricity is your major. Primary operating input and then your, your major capital inputs is, is the cost of your hardware. So you want to like minimize the amount perter terra hash that you're going to be paying. And so there's, and there's also different tiers of hardware that you can use.

Like you can use the, the newest outta the box off of the assembly line S 19 XP pros and you'll be. You'll have a much higher capital expenditure, but your operating expenditure will be much less. Or you can go for older equipment that you'll, you can pay a lot less for, but it's not as efficient and your [00:34:00] operating expenses will be significantly higher.

So it's, it's all about finding the right balance and what, what your personal business you want it to look like. Like there's, there's like the ones, the companies. Bankrupt or, or had had a bad time in the, the bear market were the ones that took on a lot of debt to try and pump up their their, their share values when we were in the bull market.

And that came to back to bite a lot of them in the butt. But then the ones that held tight and didn't get over their skis and played the more tortoise strategy, now they're well capitalized. They've, they've built lots of infrastructure and now they're able to buy the hardware very cheap. It's being let go of by these companies that are having to sell it much lower than what they paid for it to either service their debt or their payroll or just stay afloat in this very turbulent environment we find ourselves in.

But it, it seems, the price coming up a little bit. It seems to have taken a little bit of pressure off of the, the, the miners that had the [00:35:00] tightest margins. And then you've got home miners too. Like they, a lot of the people that are mining Bitcoin in their basement, they're knowingly doing it, not at a profit.

Most of them are finding some clever way to To use the, the heat exhaust to basically act as a space heater or myself personally, I have two s nine s rigged into my dryer cuz my dryer element broke. So I just, I had a heat source, so I just took ducts and I put them into my dryer. And I've seen all kinds of crazy, crazy engineering setups where they're, they're heat and pools.

They're heat and hot tubs. They're heating what's the, like the inline flooring Water tanks? Yeah. Just ducting it right into their HVAC systems greenhouses. Wood drying, like produce, like that OP opens up a whole other avenue of, of services that the Bitcoin miners can provide as well. Like, like if we do start building small modular reactors in Northern Canada where it's cold, having like, A space heater that [00:36:00] also just basically is a money printer would also be a huge benefit to these communities as well.

They'd be able to, to use them to provide heat for, for greenhouses and various other local services that these communities would need.

Mark Hinaman: Yeah. So what's the crypto communities perception on the fallen value. So the, the peak price was what, at least $5,000 US dollars per Bitcoin. And it got down to about $16,000 and, end of 22, the start of 23. What, what's the, I'll say consensus if there is one or perhaps two or three leading theories on, on the pull.

Ryan MacLeod: Depends on your perception. If you are in it for speculating and like gambling on just the, the value of the u, the, the commodity, then yeah, the ups and downs definitely will get you wrecked.

For the, the like or [00:37:00] get you rich. It could. It very could, but it's for, for every. Yeah. Get rich story. You hear there's probably hundreds if not thousands of get wrecked stories that you don't hear. Yeah. Yeah. But then like if you're a one of like the bitcoin. Like the HOKs, the maximalist, whatever they, they like to call the, their crazy laser eyed bunch on on Twitter.

It's very exciting community. A bunch of very, very diverse range of personalities in this community. But they are actually quite happy when the price goes down because they get to buy more SATs for less and they are. Well educated on what they hold, all of the peripheral industries and technologies that, that it touches.

Like when you. Taking Bitcoin seriously. Like you go through, you learn about the Austrian economics, Sian economics, monetary history, like just what is money in general, like how it came from being like rye stones on an island. Then it, and [00:38:00] then how it became gold and then how it became paper and just what we think of as money is a massive rabbit hole that many people have never been exposed to.

And then when you start learning about it, you, you start to see the. And history in a lot different way. And then, yeah, you start learning about mathematics and cryptography and, and once you've learned enough, you develop a conviction about this technology where there is very little that would shake these hardcore hoddles off of their Bitcoin until it is actually, many of them will never give up their Bitcoin.

They will hold onto it. Bitcoin is just what we use. They're, they're that set in their ways and they're that confident that that is the trajectory that we are heading on. But it's going to be a tough slog for the next few years cuz we're in the, we're in a very weird phase for fiat currencies. Like, and most people [00:39:00] kind of have the, like the fishbowl experience with Viet currencies.

Cuz if, if you're swimming in the water, you never really realize that you're in the water. It so, Most people don't. Really cfi it cuz it's just, it's just the way that it is. They take it for granted and they don't understand how the underlying like functionality of that money works. Like who decided that 2% was the optimal rate, that your wealth should be devalued every year.

Like, it's just, it's just a made up number that they were like, it's, it's large enough that we can continue to devalue the currency. But it's not so big that people are gonna start to panic. But now we start getting into these situations where inflation starts getting up six, seven, 8%. In some countries like ble, it's up in three figures.

So it's yeah, it's a weird place right now to be a Fiat Maximalist, and the banks are in a massive panic mode right now.

Mark Hinaman: That's a really interesting thought. I like your fishbowl analogy, and even for myself, when I finally realized [00:40:00] that money was intentionally made up in the collective imagination of all humans, it wasn't actually a tangible thing.

Yeah. It gives you kind of a different perspective of the world. Do, do you see any new business models emerging, minors with contracts or. Operating investors. What? Yeah. Talk, talk to me a little bit about how the space might, might change in the future.

Ryan MacLeod: We're gonna see all kinds of different power purchase agreements that the, the miners will try to seek out the lowest wholesale rate of electricity that they can get their hands on, and they'll, they'll make concessions in order to to get those prices.

Providing the, like, demand response services or, or any other ancillary service that they'll put them at the, at the, the first on the stack to be shut down when the grid needs that electricity. And in some cases they'll get paid for it and some just do it because if you have if you have an unregulated grid and you're, you your spot price of electricity is fluctuating.

The miners [00:41:00] will just instinctively turn off once the spot price of electricity reaches their break haven point, just out of economic Sure. Thinking. But yeah, there's an infinite way that these. Businesses can be configured and like some of them, like there will definitely be better strategies than other, but it, it does seem like the slow tortoise strategy of just building infrastructure and then filling that infrastructure with asics and then finding that, yeah, finding the power to go with it.

That seems to be the optimal strategy cuz the ones, the ones that got excited in the bull market, seemed to get a little bit too over their skis and. But it's good cuz it just, it, it, it recycles the capital through the system as if you Yeah. If you make bad decisions with your financing and you end up going bankrupt, then that capital just gets recycled into a company that managed, there's operation better and.

Ultimately for the ecosystem, it's, it's a good thing. It's [00:42:00] creative destruction is a good thing. You need to flush out the garbage every once in a while, which I'm pretty sure that's what's been going on for the last year, just in the wider crypto industry in general. Like we were coming off. Nearly a decade of incredibly low interest rates.

Like there was cash was flush everywhere. Everybody had tons of money to throw around. There were projects that were getting financing that really shouldn't have been getting financing just because everyone's just just throwing darts and just seeing what would stick and it's looking like, yeah, most of that's gonna be shaken out over the next few months.

And Bitcoin's just gonna keep ticking a block, ticking away. One block every 10 minutes. There'll be a few other cryptos that keep tagging along, but for the most part out of like, yeah, all the 20,000 plus cryptos, many of them are not going to see the next decade.

Mark Hinaman: Right, right. You had mentioned the hardware and there being variability in the hardware previously. Do, do you see [00:43:00] perhaps.

A specific type pairing well with nuclear plants, or is, is that even relevant? Perhaps that's an ignorant question, but you know, there, there does seem like there's a lot of options when it comes to buying minors. So perhaps for somebody that's ignorant about it, give a little perspective.

Ryan MacLeod: Well, optimally you'd, if you have lots of spare electricity, you'd want to go with the, the newest, most efficient hardware, cuz then you'll be getting the, the best like operating costs. You'll, they'll. Yeah, the, the newest mine right now I think breaks even at about 12 cent, 12 13 cents per kilowatt hour.

And the, the older S nine breaks even at around 3 cents kilowatt hour. So it really depends on your supply and demand profile. Like, if you expect like lots of day-to-day fluctuation and, and you. Expect that you're going to have significant periods of time where your mins are turned off, [00:44:00] that those will be the spaces that you'll wanna fill with your, your less sufficient miners, where, where you won't need them as much, but they're, they're there to capture the load if you need to.

And then you'll want to have your more top of the line miners. In, in a situation where they, they're available to be turned off or turned down, but you, you want to minimize the amount of doing that. You wanna keep them running as, as maximal as possible. And then just on the hardware front, there's new players entering the game.

Jack Dorsey's Company, I think it's called Spiral. I think they just announced what, what they're calling the mining development kit, which I, it sounds like they want to. More open source, the, the manufacturing and just the making of different types of asics. It sounds like they want to design a chip that then other tinkerers can take that chip and build their own asics around the chip rather than everything's pretty much been going through two companies micro bt and and Bitmain as.

Primary asic manufacturers, and [00:45:00] they're, they're based in China, so there's just jurisdictional risk if the, if there's any other trouble getting things to America out of China, if, if the tensions between these country, between these adversarial states starts to ramp up, it's beneficial to have domestic infrastructure.

To build these chips and circuit boards that we're going to need, not just for mining, but for just about every other industry that requires complex circuit boards in order to operate. So that's, that's why we're seeing, I think the Taiwan, yeah, the T T S M C, the Taiwan Semiconductor Manufacturing Company.

Yeah. They're building an operation, I think in Arizona or New Mexico. Intel wants to build new facilities in America. The more competitors in the space, building hardware and making that even more competitive is just going to give the, the miners more optionality as to how they build their operations [00:46:00] because maybe you want to be running your, your newest hardware at its maximum output, where you, you, you're burn, you're burning like almost four kilowatts and.

And then, yeah, so you want to get the most out of them as fast as possible, like when you're in a bull market. But then, mm-hmm. You flip around to a bear market, maybe you wanna run that same mine at 1.5 kilowatts, where you're not putting out as much hash rate. But you'll, you'll maximize your efficiency.

So at, at your, at your high hash rate, you're probably running at about 25 jewels per terra hash. But then if you, you can turn it down and run it at 21 jewels per terra hash. And, and just depending on the macro environment and the electricity costs that you're paying for, like, those are just different variables that the miners can tweak in their operations to, to, to match the situations that they find themselves.

These are very interesting people that have. Very smart engineers and they're [00:47:00] tinkering with these like every day. Like if anybody wanted to get like a good a really good website that has lots of data. It's called the hash rate Index. It's put out by a company called Luxor. They've got their own mining pool, they've got mining Is it firm firmware for the miners that gives you even more control than the stock firmware that you would get from bitmain.

You can control your, your power input more finely. You can control your fan speed more finely. You can grid them together so that you can have like a block of miners that you can control as one. Like there's, there's a lot of really cool features that are being developed and just, it's just more competition in the space and it's good.

Especially like in the open source environment, like I would like to see more of that coming to more energy systems, but it's this, this old way of, of everybody's trying to protect their data and everything's protected and sensitive. Yeah. And nobody wants to share how they've solved a problem because.

They want to keep it a secret and maximize the money they can earn on it. Whereas in the Bitcoin space, [00:48:00] it's like, so when somebody comes up with a new fix, it's, they try to share it with everybody and then everybody adopts it and then the entire ecosystem is better for it. So I'd, I would like to see more of that kind of ethos bleed out into the energy systems.

But we will see lots of lessons to be learned from the, these technologies working together.

Mark Hinaman: Absolutely. Do you know if there's any nuclear plants that are currently using Bitcoin or Par pairing with it?

Ryan MacLeod: I know with absolute certainty. The, the Susquehanna reactor in Pennsylvania is mining Bitcoin.

They just turned on a site that's using 40 megawatts. And then aside from that, there's a company called Oklo. They're one of the SMR vendors that's coming up with a new design. They have a partnership with a Bitcoin mining company that they're going to pair their reactors with once they come to the market.

I'm pretty sure the United Arab Emirates is mining Bitcoin with those new reactors they just turned online. There hasn't been [00:49:00] much like fanfare and announcement of it, but the reactors came online and then like a few months later it was announced that there was a partnership with marathon Digital Holdings, which is one of the like top five Bitcoin mining companies in America.

So that's an interesting development. And japan is another one of great interest to me because they are in the process of turning on their reactor fleet. And reducing their dependence on imported natural gas that has gotten very expensive over the last two years. So yeah, they're gung ho to turn the reactor fleet back on.

And it was announced in November, December a few months ago that TECO is going to engage with flexible computing processes and they want to implement that at various points in the grid where it would be able to strategically like, Surplus energy and so that they don't have to curtail. And I, I see that as a massive tool that they will be able to use as they turn this reactor [00:50:00] fleet on to keep things in balance when they go on, go when act reactors come up and then gas plants go down, there's going to be a very fluid period where there's going to be a lot of, lot of electrons on the grid that need to find a good home that may otherwise cause disruption in out of the The narrow frequency band that the grids like to operate within.

Mark Hinaman: Got it. So yeah, that's that, that's significantly more than I thought.

Ryan MacLeod: Actually. There was, there was another one. I cannot miss this one. El Salvador just last week announced that they are partnering with a company that's building a thorium reactor. So I don't expect to see that built before we start seeing the rest of the generation four reactor fleets come online.

But that is a very interesting development that the Bitcoin country is engaging with nuclear power.

Mark Hinaman: Yeah. That's, that's crazy. So how fast do you see this developing? How, how fast do you see it transitioning? You sound very bullish on it, [00:51:00] and I personally think it's a great idea.

Right. Do you see this becoming even more mainstream than it already is?

Ryan MacLeod: I do, I, I am confident that it will come mainstream. There's, there's a fight going on right now between the, those that believe that it's a hindrance to climate change because it is using power.

And sometimes the, that power that it's being used is, is coming from fossil fuel based power plants. Or the other argument that they'll get into is that, oh, that power that the Bitcoin miners are using could otherwise be used for some. Process. Like what? EVs or hydrogen production, and in some cases sure.

But then in other cases, like if you've got, if you're in the middle of a callit, you are not going to really care too much to have. Electric vehicles, you're gonna want to com combustion engines that far north and you're going to want like confidence in your energy [00:52:00] systems and you're not going to, yeah, you're the fur.

The further remote you get the, the higher. Complexity like your, your transport and storage constraints will become like when you do have other products like cuz just like, yeah, like, like making aluminum in remote like Iceland. Like you have, you have your storage, you've got your, your transportation, and then you, you are gonna have to have security be audit and there's, yeah, there's all kinds of like, other concerns that you have and constraints that you have to, to weigh when you're.

Developing like, different energy systems in northern and remote communities. So I think just the fact that the miners don't have the transport and the storage constraints, that gives them a lot more optionality as to where they can be deployed as opposed to certain other. Technologies, like chemical productions and, and electric vehicles.

So like they'll, there'll definitely be a place for them, but like I, I could [00:53:00] foresee like just an SMR being just off the side of the highway and then that's your charging station. And then it has, it's backed up with Asics for when it's not charging cars, so that it's always generating its full output and monetizing that, and then just take that money and then just recycle it into building more infrastructure.

Mark Hinaman: Absolutely. Ryan, leave us leave us some optimistic note. It's, it's been great to talk to you, but yeah. Where, where do you see this going?

Ryan MacLeod: I, I believe this is gonna be a very gradual and then sudden transition that we are gonna find ourselves in.

It's going to feel like it's very slow moving for the next few years. And then all of a sudden, once SMRs start hitting the commercial market once more, Bitcoin mining is engaged with by like major energy companies. Like we're already starting to see like Exxon and like Cono Phillips engaging with it.

The more. We see of that it's [00:54:00] that a trickle is going to become a torrent and we're not going to be like, it's gonna keep catch a lot of people off guard. And I am excited to see what happens, but I just, I hope that we do not have a complete collapse of the system before we can build these parallel systems that can take the load when, when it ultimately comes crashing down around us.

I hope, I hope, I hope we don't have any more banks fail in the next few weeks.

Mark Hinaman: We, we can leave it there, so Yeah, it's fine. Ryan.

Ryan MacLeod: The future is bright. The future is orange. We're building the lifeboats to get us off of the sinking fiat ship. That's, that's where I'll leave that.

Mark Hinaman: Perfect. Love it. Ryan McCloud, really appreciate the time. Thanks so much for chatting with me.

Ryan MacLeod: Yeah, thanks for having me.

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