[00:01:19] Michael Schmid: Thank you, Preston. Yes. I love to explain be Bitcoin and go back because I think we sometimes spend a little bit too much time on like the really hard technical things and one of the things we’re trying to do is to onboard a lot of people. So going back to the basics, I think is from time to time, really good. 

[00:01:34] Preston Pysh: Well, the impetus for this, you and I, we were in Montana back in the fall and we were with a group of, call it 40 people or so, and some folks brought you and myself up in front of the 40 people, and there were some people that were there that really didn’t know that much about Bitcoin.

[00:01:52] They were interested in it, but didn’t really know that much. In fact, my brother-in-law was one of them, and I listened to your, everybody’s like, give us the 101, and I listened to your basically pitch or how you went about it, and I was like, oh my God, this is so much better than anything I have ever explained to myself.

[00:02:10] And I was super impressed and I just, you were so, so good at this. So I guess where I want to start the show is by asking you where do you think we should start when you are talking about Bitcoin 101? 

[00:02:23] Michael Schmid: Yeah, so what I’m actually trying to do is to start at the super basics, like let’s put ourselves into the shoes of Satoshi.

[00:02:33] What was the things that Xi Day, how did they came up with this solution? We don’t obviously know how exactly they ended up with, but I really like to understand things. Anything in the world. Putting myself into that person’s shoes and thinking like, okay, what is there? What tools do exist already? And what do I maybe need to invent?

[00:02:56] Or how do I combine existing tools? Because a lot of times new technologies, and that’s very much true for Bitcoin. Yes, it is a new invention, but it’s actually much more a very clever combination of existing tools that already existed, that created something that did not exist before. And so, yeah, I think we should totally go through that analogy that I’ve now given a couple of times.

[00:03:19] And so far it has helped really to understand people like, oh, okay, these are the problems that we are solving and this is how we ended up what we have today. 

[00:03:27] Preston Pysh: Yeah, yeah. Let’s talk. because especially in engineering, you always have to start off by defining what is the problem that I’m even trying to solve.

[00:03:36] If you don’t properly define that, it’s like how in the world can you possibly design a solution to the said problem? So I’m curious, correct, because there’s a lot of, you would think that this would be very clear cut, but I think if you asked 10 people in the space that have been here for a long time, what is the problem that’s being solved?

[00:03:52] I think you’d get a pretty good culmination of different answers that kind of point to it. But I’m curious what you would define the problem as. 

[00:03:59] Michael Schmid: Yeah, so for me, the problem that Bitcoin solves on a basic level, if you remove all the fluff and all the technology stuff around, what we are basically solving is digital scarcity.

[00:04:11] So up until Bitcoin was invented, I, there were other ideas, but none of them was as. Beautiful as Bitcoin that it solved a problem that in the digital world we could not solve before. And that’s basically how do I transfer something from one person to the other, that the person that receives it can be sure that I don’t have it anymore.

[00:04:32] Let me give you an example. In the real world, let’s say I want to buy a house from you. And I pay you in gold. We meet together. You take the gold, you can cut in it, you can verify that it’s actual real gold. You can measure it, you can weigh it, whatever mat that you want to use. And then if you are sure that this is gold, you can take it away and you can be sure that I don’t have the gold anymore.

[00:04:54] Why? Because you can literally look at the gold, you can verify it’s there. That’s how we have done, um, transactions, thousands, hundred, thousands of years between people, um, to verify that we actually have this piece of value transfer. Now, if we go into the digital world, there is a problem. The internet literally was invented for the fact that we can transfer information for free.

[00:05:17] So even though that we agree, let’s say I have a piece of string that represents the value of the house, and I give you that piece of string. Let’s say it’s A, B, C, D, E, F. When you receive that. You have no guarantee that I can go to somebody else, buy a second house and give them also A, B, C, D, F and saying, Hey, here is as well, because it’s a computer, it’s digital.

[00:05:42] That’s what MP threes and movies did like. It disrupted all these physical systems with making it digitally easy, copyable, um, between different systems. So that’s the problem that we are having. If we want the digital system, digital money, what Bitcoin is, how do we solve this problem that in the computer world, everything can easily be copied?

[00:06:04] And that’s what SAT Toshi tried to solve. Now, one of the solutions that a lot of people came up and fun fact, that’s what the government came up with, is to have a centralized lecture. So basically how this works is if I give you value, again, this string, you can verify, you can go to a central authority.

[00:06:22] Let’s say the government or a bank that says is, does Michael own A, B, C, D, E, F? The bank says Yes. I will go to the bank and say, Hey, I’m Michael. I will give it to Preston. And then you can walk away and you can basically, every five minutes, you can go back to the bank and verify that you still have this value.

[00:06:38] The problem. That’s what we’re doing. That’s literally, I’m describing a bank here. That’s what banks have done and they are a central entity. The problem though, with central entities are multitude. First of all, it’s just a single point of failure. If that central entity goes away, all of us cannot transact anymore.

[00:06:55] The other problem is it has a lot of attack points. If I am able to go in there and change something, whatever I want to change, but suddenly, oh, even though I transferred the A, B, CDF to Preston, now it’s back with me. If I have the capability, the technic capability to do that, the system is broken. And the last thing, and that’s unfortunately the one that we’re experiencing today is around corruption or just, yeah, we can just add a little bit more numbers.

[00:07:18] We just print a little bit more money. Oh, we spent a little bit too much as the government. Yeah, that’s no problem. Um, I’ll just add a little bit more values in there because there are a few people that will have Right. Access to that database. And so that’s what one of the main things is. We don’t want to do, we don’t want to have a centralized system.

[00:07:38] We want to have a decentralized system, and that’s what Bitcoin does. So what Bitcoin does is, instead of saying, we have one entity that has this lecture, we give it to everybody. So everybody has every transaction that ever has happened. So if you run a Bitcoin note on your computer or you buy dedicated hardware for it, you basically receive every transaction that ever happened.

[00:08:00] And so this way means that if your note goes down or your neighbor’s note goes down, there’s always a backup because somebody else always has a backup. Um, the problem though is if we have all these centralization, they’re extremely hard to synchronize. So how do we, with all these transactions. They cannot talk to each other all the time.

[00:08:22] So what technically would be possible if we are far enough of each other, but I want to transfer the A, B, C, D, F to somebody in Australia and on somebody in the US at the same time, there’s technically the speed of light could cause that somebody could do a double transaction. So what Bitcoin does, instead of saying we don’t do this in real time all the time, we do it in blocks or in batches of every 10 minutes.

[00:08:47] So every 10 minutes there is a new block that has a specific amount of transactions in it. And you can basically guarantee that if you want to do a transaction, you can see your own transactions. So let’s say we transfer the house, I do the transaction, you see it in the block, and then you wait a couple of more transactions because you can be sure that my transaction suddenly does not get rolled back or changed in another block.

[00:09:10] So that’s the 10 minutes of the 10 blocks, and that’s why we have these batches or blocks that happen every 10 minutes. The question is though, is which transactions do we put into these blocks? One of the things that I didn’t mention is about this decentralization. It’s not only important that we synchronize them at the same time, it’s also important that the actual size of the whole lecture does not get too big today.

[00:09:35] You need the Bitcoin. Blockchain is around six to 700 gigabytes big. This is already quite big. Um, hard drives are not that expensive. But imagine this would suddenly grow by 10 times or a hundred times. What would happen is that all these people that have these hardwares at their homes to run these blockchain, they could not run it anymore.

[00:09:56] And instead, what would happen is the only people that can afford to run these nodes are people with a lot of money. So we will have less nodes again, and we will create a centralization force again. Meaning we only have maybe five or six people in the world that can run these notes, and then suddenly these five or six people can collude again and can go in and change it.

[00:10:15] So we’re basically back at the banking system because we not only have one bank, we have a few banks, but in the end, they can all meet each other on a golf course and talk what we are going to do tomorrow. Um, so that’s one of the problems. So what we want to do is we want to make sure that everybody can run these blockchains.

[00:10:31] The Bitcoin blockchain, the more people that run it, the less likely it is that somebody can go in it and change something. So we do this to make sure that these blocks are not too big by itself, and Bitcoin makes this in a way that when you do an actual transaction, so when I transfer the house that goes between you and me and I send you Bitcoin, I’m not actually only sending you value.

[00:10:54] I’m also giving a little bit of that value to so-called transaction fees. I give to the network and we do this to signal to the network. How important is this transaction to me in terms of speed? So I want to do it, but maybe in the house transaction, maybe we say, okay, it should be done in the next half an hour.

[00:11:14] So I can look currently how many transaction fees exist and I can change my transaction fees so it gets, it is roughly the same amount of these next. So I can pretty sure be sure that it happens in the next 10 minutes if the transaction is not as important because I maybe do re or structure my own Bitcoin in some way.

[00:11:31] I can give it a little bit less transaction, but BA transaction fees. But basically what the system does, it orders the transaction by importance. So that when I create the new block as the person that can do that, we’re going to get there. Who is allowed to do that? I can look at the transaction fees and let’s say Bitcoin says you can only put in a couple of thousand transactions in every block.

[00:11:52] I can take the one that have the highest fee, I take them and I make a block. And this way Bitcoin ensures that the chain does not get too big too fast because each block has a max size. And we can predict how much the size of Bitcoin will actually grow over time. 

[00:12:09] Preston Pysh: So I just want to recap here for folks on the problem definition.

[00:12:13] We got into. We were talking the problem definition, but then we were also talking about all the tech challenges that you have to overcome in order to actually create a solution to this really big problem. But to kind of foot stomp, the real problem that’s being solved here really comes down to digital scarcity, and it comes down to the control of the money ledger.

[00:12:35] As Michael was explaining, if the governments can go in there and they can clack on keys. They can say, Hey there, let’s just say there was 10 million monetary units in the overall global economy, and they want to have a war with somebody. And they go in there and now they’ve got 11 million monetary units by clacking on some keys.

[00:12:55] It didn’t cause them any pain or angst to do that. They just kind of conduct those keystrokes and all of a sudden there’s more units and then they can assign that additional million units to whatever account number they want and they can pay for the war, they can do whatever. But the problem for all the participants in this system is there’s not 10 million units anymore.

[00:13:14] There’s now 11 million units and they’re buying power of the work that they’ve already performed has been debased and is not as valuable. Right? That is the problem at the core of what Bitcoin is trying to solve. Now to solve it. And Michael was getting into a lot of these, the time sink issue. How do you prioritize the transactions across the entire planet?

[00:13:36] How do you keep this decentralized long term? How do you get these coins into the economy in a way that people value ’em at first and so that you actually get real circulation? How do you make them initially valuable? Like all of these other things I would say are problems, but they’re technological problems in solving this much bigger problem of governments.

[00:14:00] Just debasing away your buying power and your money. That is the core thing that’s being solved for. So now that we understand what is the big problem that’s being solved, let’s talk about the technical challenges in much greater detail of how Satoshi went about this. I really like the first one that you bring up, Michael, which is when you really think about this, like if you were going to try to create the engineering solution to this really profound problem, the time sink is massive.

[00:14:29] It’s like, how can I have a transaction that happens from Australia to China or from China to the United States or wherever I. Do this for the whole globe and make sure that there’s not a double spend, that it’s all synchronized that, and this is the term I used to hear Trace Mayer say back in the day, he would define Bitcoin as triple entry bookkeeping, where you’ve got a copy, I’ve got a copy, and the whole world has a copy.

[00:14:57] And that’s what we’re really trying to do in creating a global ledger. So talk us through how Satoshi, and you hinted at it earlier, which is blocks, but really get into the nuance of like how complicated this problem is and how elegant the solution has been with it running as long as it has without issue.

[00:15:14] Michael Schmid: Yeah, so synchronization of databases is probably one of the most complex system in the world, and that has nothing to do specifically with Bitcoin. It’s just like if you try to synchronize anything, I don’t know if you know, but there’s literally sea cables built between London and New York Stock Exchange bought by companies just to ensure.

[00:15:35] That they have as fast as possible transaction times or like, I’ve heard this before, that like around the New York Stock Exchange are literally just data centers of companies that want to be as close as possible because it’s all about the speed. Like Flash Boys light speed. 

[00:15:51] Preston Pysh: Yeah. There’s a book called Flash Boys where they talk about installing microwave antennas because they could actually arbitrage trades.

[00:15:59] I think it was from like Chicago to New York. There was like a whole network of microwave antennas to speed up the transaction and actually to be able to front run other trade. The book’s amazing. Uh, Michael Lewis book called Flash Boys, but yeah, go ahead. Sorry to interrupt you. 

[00:16:14] Michael Schmid: No, no, no. That, that, that’s exactly like, that’s the thing we have to understand, like at one point people have incentivation to literally optimize hardware or build new.

[00:16:24] Under sea cables, which are millions of dollars because they know they have an edge over others. And Satoshi realized that if we would try to do a system that would instantly, in real time synchronize the whole world with each other, we would end up with a system that could be gamed and again, it would give value or it would give an edge to people with a lot of money.

[00:16:47] Mm-hmm. So him saying, let’s stop this, let’s only do it every 10 minutes. Mm-hmm. Is one of the massive thing. Because that allows, this removes all issues around latency. At least on Earth. If we actually go into planetary, this becomes an issue again, but that’s maybe a topic for another day. But within, at least around the earth, the latency of just the physical latency of speed, of light, of sending information between, let’s say the west coast of the US to Australia, um, is short enough, a couple of hundred milliseconds, that the 10 minutes, it would not be possible.

[00:17:25] It’s extremely unlikely that somebody could cheat each other because how this technically would work is that, let’s say I, for one way, I have access. I’m in Australia and in the US at the same time, and I transfer Bitcoin and I spend it in Australia, and I spend it in the US at the same time. If we would have very short block time, specifically block times shorter than the transaction time, the person in Australia would receive it and says, oh, I got it.

[00:17:50] I, uh, let’s say, here’s the house, or here’s the value. And it’s obviously not a physical transaction. Let’s say it’s a digital transaction. So I receive some kind of value from that person through the internet. And then at the same time, I do the same transaction with the same coins also in the us. And that person also thinks they received it, and then a couple milliseconds later, they realize, Hey, wait, we both received the same coins from Michael, but it’s already happened, one of them in one.

[00:18:16] And so one of them basically got cheated by me because I was able, and now this can be on purpose. I could literally cheat or it can just happen. Mm-hmm. Like, it just literally just technically happen. And so with these 10 minute block times, I can guarantee that a, a new block only comes out every 10 minutes.

[00:18:31] And also as the person in Australia and in the US I can just wait a couple of blocks to see if the transaction that my value was transferred is still in there. Because there is technical possibility, there is a thing called block reorgs where it’s possible that the blocks that I just, the next block is actually not the block that is going to be winning in the future.

[00:18:52] This happens every couple of weeks. 

[00:18:54] Preston Pysh: Let’s pause really fast. I just want to, uh, say, so if we have a minor that finds a block simultaneously. Both of those blocks are basically in limbo. You don’t know Yeah. How the chain is going to go moving forward. Correct. The next person that finds a block can choose which block they want to mine on top of.

[00:19:14] And that is how it’s determined which person basically wins. Correct. In that tie scenario. So, and if I explained any of that incorrectly. No, that’s correct. Okay. 

[00:19:24] Michael Schmid: Yeah. So basically if I want to be sure that the value that you transacted to me or that I transacted to you, you basically wait a couple of blocks because with every block of these batches mm-hmm.

[00:19:36] Points to the previous block. Mm-hmm. So that’s where the work block chain comes from. They are attached to each other, and yes, it is possible, and it happens from time to time that two blocks point to the same previous block because they were found within the short amount of time, and literally because the transmission of the block, while one miner found it and started to send it to the world, another one found it before that information arrived.

[00:19:59] And so they both point to the same block. And then all we do is that all the Bitcoin node, they’re completely normal. They realize, okay, there’s two blocks, and like you say, the next miner then decides which one, and then my node will realize, oh, that block over there is abandoned now. Or it does not, it’s not the newest tip that is called technically.

[00:20:19] And so basically all these transactions that happen in that block are basically undone. Mm-hmm. By, and so that’s a reorg. Now this can happen on purpose. We have had fights in the past because as a minor I could obviously choose which block I want to go next. But that’s why we’re saying you should wait a couple of block confirmations.

[00:20:40] That’s where that word comes from. And usually we say around six confirmations because the fact that then randomly an other block appears that have a longer tip than six is very, very unlikely. 

[00:20:53] Preston Pysh: Yeah. Yeah. And it comes down to statistics of, you know, when you’re looking at how many times can this happen?

[00:20:59] And I’m kind of curious, do you know how many times we’ve had a block found simultaneously in a row? Has it ever reached two or is it always just been one that has been found simultaneously? 

[00:21:11] Michael Schmid: That is a good question. It definitely happens from time to time that two blocks are found at the same time. Yeah, 

[00:21:16] Preston Pysh: yeah.

[00:21:17] Michael Schmid: I don’t know. It could also be technically three or four. Like yeah, it’s all possible. Like nothing prevents this, but I would need to look back, there are visualizers for this that actually create the whole chain and you can like visually see all the different blocks that were generated, 

[00:21:30] Preston Pysh: talk about the incentives for a miner to always want to be doing their work on top of the longest part of the chain.

[00:21:38] And so like why this isn’t a concern. So somebody who’s hearing this that’s non-technical or not familiar with this might be like, oh my God, this sounds really scary. But help them understand why there are financial incentives for miners to only perform work on the longest part of the chain. 

[00:21:52] Michael Schmid: Yeah, so we maybe need to shortly introduce what the miners actually do.

[00:21:56] Yeah. Yeah. So we talked about these batches before batches or blocks or just groups of transactions that get bundled together. And then that information is sent to every note, and that’s how the notes receive new transactions that are added to the lecture. And that happens every 10 minutes. Now, somebody needs to be able to do that, like in a system, if everybody at the same time just wait for 10 minutes and in 10 minutes tries to create a new block.

[00:22:23] Let’s say we have 200,000 notes. We would literally have 200,000 different blocks generated every 10 minutes. This would be a mess. Like we’re back to the old problem. So Satoshi had to find a way, how can we make sure that very few, preferably only one finds every 10 minutes, or can create such a block?

[00:22:43] And how they did this is they basically implemented lock into the system. So how this works without going too deep in technical is basically every block in order for a block to be valid by the Bitcoin blockchain to accept it, its hash needs to start with a specific amount of zeros. Now, a hash is a function that you can take a lot of data, which can be a block, which can be multiple megabytes big.

[00:23:11] That can basically, it’s a one way function to create from a lot of data into a small amount of data. In Bitcoin, this hash is 32 and digits long. It’s a Shaw 2 56. That’s where this word comes from. And this actually used in a lot of different, so cryptographic other ways use this all the time. But basically Bitcoin says in order to be a value block, the blocks hash need to start with zeros.

[00:23:36] Now the cool thing about hashing functions is let’s say you have the sentence, my name is Michael, and I create the hash from it. It has 32 random digits, and if I just add a.at the end, it’s not just the last number that changes of my hash, the whole hash completely changes. And what is even cooler, it’s, you cannot predict how it changes.

[00:23:58] The only way is to literally run the hash only. So what these miners basically have to do is they take the block with all the transactions in it, and they hash it first, and they look, is the hash, does it start with the correct zeroes? Most likely not, because to finding these many zeros is very unlikely.

[00:24:17] So what they do is they just add a number. It’s called a nons, a number used once in the block itself. So they add basically some randomness into the block and hash. Again. Does it start with amount of zeros? No. Okay, let’s do it again. So they basically just do this. These computers or these basic miners that people maybe have heard of, they can do this trillion times a second.

[00:24:41] So they’re so optimized that they can literally do this faster than we could even see. But basically that’s what they’re doing and what is really cool, and that’s another thing that’s Satoshi like figured out, is you can predict how fast the network will going to go find the block, if you know how many of these hashes per second that the network has.

[00:25:07] And so what they basically do that’s called difficulty adjustment. So, so basically, 

[00:25:12] Preston Pysh: let me put a little bit of context on this. So. Uh, let’s say that we monitor the network for two weeks and we find that we were expecting the network to find a block every 10 minutes over two weeks. But it found How many blocks is this?

[00:25:28] I should know this. I don’t remember. Uh, yes. It’s 2000 something. 2000 something. Yeah. Yeah. But let’s just say it’s around 2000 blocks over those two weeks. If it finds all those blocks in, call it, instead of it being 14 days, it finds ’em in 12 days. The network senses that there’s a whole lot of compute on the network.

[00:25:48] There is a lot of hashing on the network and it knows that it has to get more difficult because they’re finding the blocks too fast. It needs to be every 10 minutes. They’re basically finding it, call it every nine minutes or eight minutes, and so now it needs to get more difficult. If the network finds that 2000 blocks, and I know that’s not the right number.

[00:26:06] It’s somewhere 2016. It is 2016, thank you, 2016 blocks and it took 15 days or 16 days. Then you know, some of the hashing has come off the network and, and the puzzle needs to get a little easier. That’s how the protocol is sensing this in order to dynamically make an adjustment so that the coins that are being issued through this protocol and it has a terminal amount of coins of 21 million, that it stays on this exact pace.

[00:26:36] I. Over time because it can senses how much compute is on the network . 

[00:26:39] Michael Schmid: Exactly. And that’s just to appreciate the beauty of the system, that self-monitoring. So it literally, based on how fast the blocks were found, it can estimate how many hashes per second or how fast the network is. And then changes the difficulty based on, so we can find these 10 minutes.

[00:27:00] Like from an engineering point of view, like if you would ask me to build such a thing, you would say there needs to be a central authority that looks at this and says this is now what needs to happen. The fact that this is, that it has happened just by the nodes themselves. So how this works is the code that does this runs on every node in the world and they all come to the same conclusion even though the only information that you have.

[00:27:28] It’s literally just the last 2000 blocks and the next cool thing is they don’t even have the same time. Yeah. Like the time is basically, every computer maybe has a different time because time is not, it’s not defined a hundred percent what time it is right now. So, yeah, the beauty of all of this is, it’s almost magic.

[00:27:48] But that’s basically how, coming back to the analogy is that how we, how the network guarantees that there’s a block only every 10 minutes. Um, if it’s a bit faster, that’s it. But yes, over the long term. And the other cool thing is, and that’s sometimes confusing for people, sometimes just the average means sometimes we have no blocks for 20 minutes.

[00:28:10] And also sometimes we have three blocks within one minute. It’s the average. So it’s not every 10 minutes like a clock, it’s the average over two weeks. Um, so that’s also when people sometimes say like, when does my big transaction go through? Sometimes it takes really fast, sometimes it takes a bit longer.

[00:28:28] Preston Pysh: This might be too technical or might be going a little too deep while we’re still kind of covering the surface area of all of this. But one of the things that’s super, super important about Bitcoin versus any of these other quote unquote crypto blockchains is it’s not impacted by the clock. So when we, when we talk about this idea that your time might be different than somebody else’s time, and just think about it from a centralization standpoint.

[00:28:55] If somebody controls the clock and we say, we’re using this GPS time, which is being put out by whatever government, you can see how there could be a bit of a concern and an issue there from a centralized control standpoint of the overall network. The way that the miners look at this is, let’s say Michael found the block, he solved the puzzle, and he transmits to the network.

[00:29:20] Here’s the solution. I found it. Everybody on that network that’s looking at. His answer, almost like he filled out a test at school. When he’s saying, I found the answer, here’s the proof of work. All the ways that I went about to find it, you can verify it yourself. Everybody in the network is now taking that answer key that he just provided to the network, and they can immediately verify that he did in fact find the right answer.

[00:29:46] And as soon as the network gossips this across all the different nodes, then all the different miners that are trying to perform this work, they immediately want to start work on top of his solution. Because if they don’t, they’re going to lose money. They are going to basically just expend energy on an old problem that’s already been solved and nobody wants to do that.

[00:30:08] And because of this, this proof of work mechanism, you can see how the clock and the time doesn’t matter anymore. And the reason it doesn’t matter is because all you want to do is just work on the next problem. That you have verified yourself has been already answered, and it is already there, and that there’s a solution to it.

[00:30:27] Yep. And that’s super important because Gigi and some others have some fantastic articles about this idea of time and how Bitcoin has solved this time dilemma of centralized time, especially as you’re trying to globally sequence all of these transactions. Mm-hmm. And Bitcoin is the only thing that’s using proof of work, where time is not a centralized gatekeeper.

[00:30:52] Thing that can be manipulated by some outside entity. Call it a government. 

[00:30:56] Michael Schmid: Correct. And if we continue the energy, one of the things though is like why would all these miners do that? Right? So like these machines, this computational that guessing of this number with all the hashes to generate this 64 digits of 32 byte hash.

[00:31:13] This is a lot of energy. There might be people out there that are worried about the usage, all the energy usage. So we need to give these miners an incentive to actually do all of this because they would not spend millions of dollars on energy if they wouldn’t get anything back. And that’s where.

[00:31:28] Bitcoin again. It’s so beautiful. So a is they get all the transaction fees. So whenever my transaction, let’s say I send you a Bitcoin and I saying, Hey, like a couple of SATs can be used by the miner. So basically these, all these transactions that the miner ads to the block, all the transaction fees they pick out and they send to their own Bitcoin address, and that’s theirs.

[00:31:50] But also at the same time, they get a subsidy, meaning Bitcoin. Another issue was like, how do you actually distribute this 21 million? You can’t just give it to all to one person or a group of people. That will be the government again. Um, so instead we said, or Satoshi came up with this idea of giving it into every block.

[00:32:10] So the first blocks that were mined by miners, they had a subsidy of 50 Bitcoin in it. Meaning every time that a minor found a block, they generated themselves from out of thin air. Basically they created 50 additional Bitcoins and gave them to themselves. Now the network forces that they’re having, this goes down.

[00:32:32] So initially it was 50 and 25, 12, 6, and right now we are on three, um, Bitcoin, where these miners can give themselves a reward for all the work that they’re doing. 

[00:32:45] Preston Pysh: And Michael, just so people understand, so the rules of the protocol is if you find a block and it’s in the first, you know, set that, and how many blocks are in the four year period?

[00:32:56] Oh, it’s 210. 210,000 I think it is. I think it’s 210,000 check and make sure I’m, I’m right about that. So if you are in that first cohort of 210,000 blocks and you find the block, you can receive 50 Bitcoin from the protocol itself. And this is how the 21 million come into existence. Yeah. And then after that first 210,000 blocks, now you’re on the next set of 210,000 blocks.

[00:33:23] Now it’s 25 Bitcoin that you can receive for finding a block and then every 210,000 blocks. It keeps going down by half until you get to the terminal amount of 21 million Bitcoin being in existence. And there can never be more. Mike, we talk about the fees and how this is an auction style way of getting your transaction into a scarce amount of block space and why this is important and why the fees are important long term as this block subsidy that we just talked about continues to decline.

[00:33:54] Michael Schmid: Funny enough, in the very early days of Bitcoin, you actually could add a transaction for zero fees. They changed this at one point, but at the early times when we played with this and it had zero value or almost no value, you could do a transaction and people said, oh yeah, in the future you will need to add transaction fees to your transactions to actually get them confirmed.

[00:34:15] But in the beginning, there was, you can make a transaction with zero, and that’s what we did. But the good old days are over. And so the idea or the game plan of Bitcoin is that while right now, a lot of the reason that these miners do it is because right now for every block they get three Bitcoin out of it.

[00:34:36] Mm-hmm. Which on the time of this recording is around $300,000. That in the future, this is going to get so small, but as Bitcoin grows in value and the transaction values that actually get into the block that want to get confirmed in, blocks are so big, so much value that the people that want to have these transactions in them are willing to give up more value or money to the miners.

[00:35:03] So this is going to be a very interesting, nobody knows exactly what’s going to happen. 

[00:35:07] Yeah. 

[00:35:08] Michael Schmid: And this is a self model, like self controlling system by itself. Like if we saw, for example, during the last bull run, we had a lot of transactions towards the end and people paid hundreds and dollars of getting these transactions in, and miners actually made a lot of money.

[00:35:26] Mm-hmm. Um, with the transaction fees. And everybody was happy and everybody’s like, okay, this is going to go great right now. If you look at the blocks today or in the recent weeks, they’re almost empty. So there is a lot of concern of like, oh, are these miners going to survive? But that’s also, and again, the beautifulness of Bitcoin, it’s brutal.

[00:35:47] If you overdo yourself as a minor, if you predict something going to happen and it doesn’t happen, the network will just go there and will say, I’m not giving you that value anymore. And then it’s your problem as the minor, do you decide, do I take another loan? Do I sell off my minor? Things like that. So it’s like, and that’s the other thing.

[00:36:07] There are no bailouts, there’s no government that will come and like, oh, you are a minor, you spend a little bit too much and now you can’t survive. Here’s another check to survive. I. No, if you do it too much, the bit Bitcoin network will not give you anything anymore. And so it’s brutal, but it’s this system that controls itself and makes sure that things that should fail actually will fail.

[00:36:28] And that’s obviously what a lot of people are very excited about. 

[00:36:31] Preston Pysh: Something I used to hear a lot, but I don’t hear as much these days, is this argument from somebody who has never owned Bitcoin. They’re trying to learn more about it. They’ll say things like, well, I’ve seen enough hacks in my day. And enough people kind of lose their accounts or their accounts get hacked and their bank accounts get hacked.

[00:36:52] And like, why in the world would I ever own Bitcoin when something like that could happen? How do you address that person who says something like that? 

[00:37:01] Michael Schmid: I think we need to differentiate first. What does the hack really mean? And some of the hacks can still happen in Bitcoin and they do still happen. So, and these are specifically social engineering or where the user itself gets attacked.

[00:37:16] Not the protocol but the user. Correct. Yeah. And unfortunately people use these types of hacks and they also claim that the protocol got hacked. Like we just recently had the one with Coinbase where some of support engineers got bribed. They gave out some data and then, so what happened is that they figured out who the customers of Coinbase is and that they called them the hackers, called these people, claimed their Coinbase, and Can you please transfer money because your money is not safe anymore and whatever.

[00:37:47] And of course, big Bitcoin transactions happened. And then unfortunately people claim Bitcoin gets hacked and news outlets unfortunately don’t have enough time to research all of this. So they use the fanciest or the most clickbait title. And of course, Bitcoin hacked is the one that drives their value.

[00:38:05] I understand that part, but what we need to understand, these are hacks against the people. These are hack against the user. And unfortunately, I, having a security company myself, the weakest link is unfortunately always the user. So that is always possible. However, there are other types of hacks that have never happened in Bitcoin, and that’s specifically that the software has a buck.

[00:38:29] And what is really interesting there is. First of all, Bitcoin is open source, so anybody can look at the code of the Bitcoin, how these nodes work, how the miners work. All of that is completely open source. So the fact that if somebody would, that finds a bug in it would actually be able to train all the money of all the Bitcoin, let’s say.

[00:38:54] It’ll be a really big bug that this would be possible. There’s a massive incentive for people to actually try and find these bugs because the value that you get out of it is extremely large. If you find the bug in Bitcoin, you can make a lot of money very fast. So the fact that there is so much incentivation means that actually a lot of people are looking at that code.

[00:39:14] And I would claim that probably the Bitcoin code base is one of the most reviewed code in the world because there’s just so much incentivization to find a bug in it. And the fact that we never had a critical issue or that we had some smaller issues in the past, but they were fixed, that was like the really early days of Bitcoin where a lot of other things could also have this killed it.

[00:39:38] But if you look in the last couple of years, we never had a critical issue anymore, and the fact that there’s so much bounty or incentivization tells me as somebody that works with open source and security and software all the time, that there is an extremely small likelihood that the network itself could get attacked or has a bug that somebody has found but not used yet.

[00:40:02] All the other hacks that we hear, all of them have to do that. Some user, it can be a person of a company or an individual user got attacked. Brid social engineer. That’s what all the attacks have to do with. 

[00:40:14] Preston Pysh: I’ve seen this argument really kind of go away. Ever since you had mainstream Wall Street, call it Fidelity, BlackRock, all these big banks show up to the scene and they’re now leaning into Bitcoin very heavily, and it’s almost like everybody’s like, okay, well those institutions wouldn’t be here if there was software hack concerns.

[00:40:35] Right. With that said, what are your thoughts on a person who would say something like, well, I trust Fidelity and BlackRock to do this much more so than myself. What are your thoughts on this idea of self custody? And for people that maybe aren’t familiar with the terminology here, this is where you’re buying Bitcoin and you’re taking custody of these digital keys yourself and you’re managing it versus outsourcing it for, call it Fidelity or somebody else to do this on your behalf.

[00:41:05] Michael Schmid: So my first answer is that if you don’t feel comfortable, don’t force yourself. I think it’s definitely something that everybody has to become comfortable with. Think back again. The first time that you sat in a car and you sat at the intersection and there’s all these other cars rushing by and the teacher on the side tells you, okay, now go.

[00:41:25] I mean the sweat that you probably all had, that’s, and I totally understand this, that if I tell you. Yeah, you just have 12 words or 24 words. That is all your value of all your kids and your whole wealth is on these words. And if somebody finds these words, you have lost all your value. Like I feel like a person that drives a car first time is like, I’m literally going to die right now.

[00:41:49] So. But I do have to say like driving a car, this becomes easier over time. You get used to it. You understand more and more. So if there are people out there that feel like I want to learn but I don’t feel comfortable, but I want to buy Bitcoin, go ahead. Use these existing system, use the systems that you trust.

[00:42:10] But I think don’t stop there. Try to learn how these things work. There is a lot, lot, lot more of information out there. There are literally companies that you can pay that can help you. There is all your podcasts that you can listen. There is other ones, there is videos. There is like, one person I specifically want to highlight is BTT Sessions that does phenomenal YouTube videos that go step by step through it and really like start small, like start.

[00:42:44] Like driving a car, you’re not going on the highway right away. You go into the parking lot. So play around with a couple of sets, something that you feel comfortable losing, but try to or acknowledge this is a learning thing. Like all of us have to learn this. I recently, I have two kids, 1-year-old now, and I all I see them is falling and getting back up.

[00:43:08] That’s how they learn. So it’s the same, like this is a new technology. This does not exist for many, many years. Most people have either never heard of it or never got in touch with it. So yeah, give yourself time. But so far of all the people that I have helped, everybody has figured it out. They became comfortable over time and I think that’s really the thing is like, yeah, do it.

[00:43:33] But I think the really important thing is be aware also of the risks of using all these companies. Yeah. Because if you go to somebody. And they own your Bitcoin, and if they do something wrong, and we have had this, if you want to research, look for Mount Gox. It was the biggest exchange and they lost 90% of all their Bitcoin.

[00:43:54] I was one of them. And I’ve learned my lesson, and I’m not saying that the fatalities in the BlackRock will go down or will get hacked or will lose their Bitcoin, but the fact that there’s a non-zero chance of this, I feel much better knowing where all my Bitcoin is, who has access to them and how I protected them.

[00:44:15] Preston Pysh: Another consideration that I think is important for people to think about when it comes to self custody versus outsourcing it to somebody else is just what is this going to look like 10 years from now from a government standpoint? And, uh, you’re already seeing some countries that are implementing no capital gains tax on Bitcoin.

[00:44:36] And you have to ask yourself, why are they doing this? And for me, the sim, and I’m curious to hear your opinion, Michael, but my opinion is these countries want to attract Bitcoin into their domain and into their district as much as possible because they can see where a lot of this is going. And in order to do that, you can’t tax it very heavily.

[00:44:55] You actually want to reduce that tax burden so that more of it flows into your jurisdiction. And so you have to ask yourself, if I’m holding Bitcoin through some type of ETF wrapper, is that going to be taxed with capital gains? And I would imagine the answer is absolutely yes, versus if you’re actually custodying the real thing.

[00:45:14] I think you’re going to be treated potentially very differently in the future. So that would be the first incentive. The second incentive is the one that you just described, which is you’re trusting somebody to manage these keys and whether it’s FTX, Celsius, block by Mount Gox that you said, I mean, these are just callous examples over and over again, and I think something to really chew on is like, look at FTX.

[00:45:37] What did these people get paid back? Some of ’em have received, if you had coins on deposit, if you had Bitcoin on deposit, what did you get back in the settlement after all of this got worked out? Did you get Bitcoin or did you get dollar bills shoved down your throat? And it’s the latter. Yeah. You don’t get your Bitcoin back.

[00:45:56] They take that, they sell it, then they give you whatever they came up with in dollar terms. And the Bitcoin might be 10 times higher if you even get a settlement. Right. If you even get anything back, what they give you back is not the underlying thing that you were holding. They give you dollars back.

[00:46:12] And in many of these scenarios, I know in the FTX scenario, I think Bitcoin was four times higher, five times higher than what it was worth four times or five times as much. And instead they got the dollars back of the value when it went bankrupt. Yep. So these are just a couple things that I think should motivate a person, incentivize a person to, and I love your recommendation, Michael, of your comfort level’s.

[00:46:36] Really important here. Okay. Go out there. Get your feet wet. Learn, and if you do want to start trying out self custody, there’s so many great exchange. Uh, river, my God, they’re a sponsor of the show, but every person that has ever gone there and then had a conversation with me. And same if you’re over in Europe, relay incredible exchanges that when people go, they’re like, oh my God, this was so easy.

[00:47:01] This was, and now you might be leaving the coins on the exchange, but you have the option to self custody from something like that versus if you go out and buy an ETF. Yeah. So 

[00:47:11] Michael Schmid: yeah, I think it’s, no, I, I think you bring up a very good point. Yes. It’s a gradual improvement. Yeah. The thing that you will implement today doesn’t mean it’s the thing that you do tomorrow and it’s not the thing that you do end of the year.

[00:47:21] And also like Bitcoin itself, it’s a journey of trust. It, like I’ve seen this with so many friends that I tell them, like, we talk about this, they bring it up in some discussion and like there is the trust in the monetary system itself that you need to first gain. And for that you don’t need to run around with your 24 keys yet.

[00:47:42] Um, that’s then really when you really understand and you understand all the risks that then the bitcoin that you bought on the exchange. So it’s a lot of times, and we see this also like every time that the price goes up. The sale of all these self custody tools of the hardware wallets, they also spike because that’s when people realize the good thing is definitely that I have to say, compared to like many, many years ago, there were no exchanges.

[00:48:06] I can suggest. 

[00:48:07] Yeah, yeah, yeah, yeah. 

[00:48:09] Michael Schmid: There was literally like, ah, no idea. Because they were like some overseas somewhere. So I definitely trust, let’s say River or Relay in Europe much more to actually have my Bitcoin on the control than what we had available 10 years ago or even five years ago. But in the end.

[00:48:28] Yeah, you need to ask yourself, do you want to be in full control? Do you want to have access to all of it or do you want to trust somebody? And anybody, and that’s actually happened to me that ever had a bank account closed on them, knows how much of a feeling that can be when suddenly the money that you thought you have access to, you don’t have access to anymore.

[00:48:50] Yeah. Yeah. And we see this every time, like we saw it at the SVB like issues where the bank over the weekend, it was unclear if people have access to money. The companies that have Bitcoin or the people that have access to Bitcoin, they had access to liquidity. And that’s one of the things is like how big is the chance that you think that your bank, for whatever reason, suddenly is not available anymore?

[00:49:12] And if there is a non-zero chance, which I think there is, even though it’s maybe very small, but it is, you need to think about this. And that’s overall. I think also what we stopped doing in the past that people don’t actually care for themselves anymore. They outsource everything, including their whole well, and I think that’s what we see a lot, specifically if you meet other Bitcoin nurses, how much they take control of their own lives anymore.

[00:49:39] Yeah. And that’s a beautiful thing to see. 

[00:49:41] Preston Pysh: The last thing I want to talk to you about Yeah. Is something, a confusion that I see so much with people that even have been in the space for a while, is this idea of running a node versus mining. Yep. And people confusing these two things, or not even really understanding what a node is or why it’s important.

[00:50:01] Help people understand this difference between a node, a mining rig, and why this is important. 

[00:50:08] Michael Schmid: Yeah. Okay. So let’s go through the things. First of all, the node is basically decentralized lecture. Your node will have every transaction that ever happened. It’ll actively listen to new transactions that are distributed by the network.

[00:50:24] So there’s the thing called the Manpo, which is basically all transactions that want to become part of a block, and they are distributed by a system, and each of the node has their own little manpo where they keep all the unconfirmed transactions. That’s what the node does, and the nodes also enforce the actual consensus.

[00:50:44] That means my node, I’m connected to, let’s say six or eight other nodes. It’s a peer to peer network, so not every node is connected to every other node, but instead every node is connected to a couple of others. And because through this network, new information gets transferred in reasonable amount of time.

[00:51:02] Now what could happen is that I receive from some node, I receive a block that says, Hey, Preston gives themselves 22 million Bitcoin. Then my node looks at this and looks at all the transactions and it has computer code and you can read that’s open source code that it verifies are these valid transactions.

[00:51:21] And if they’re not, then my note says, yeah, I’m no one to talk to you anymore. And more importantly, I also don’t continue relay these blocks. So the only way that this network actually works is that every node is verifying. Every single block, every single transaction that gets mined gets verified. And that’s, for example, how a hard fork happens is that suddenly if different nodes don’t agree with each other, then they have a so-called chain split because maybe some people now suddenly believe there should be 42 million Bitcoin.

[00:51:56] And another thing, there should only be 21 million Bitcoin. So you then have a split where some no think this is the truth, and the other node think this is the truth, but the notes are the keeper of the record and they’re also the enforcer of the volatility. Now the miners, they actually don’t do any of all of this.

[00:52:16] The miner actually needs to talk to a note. So if you go back before we had pools, because pools solve another problem in mining, the miner directly talked to a note and said, give me all your transactions that you have that should be in the next block. And then the miner just does the hashing. So some people call a miner, actually a hatcher, because it’s actually, that’s all it’s doing.

[00:52:42] The miner talks to a node, asks it for the next block, and if it finds a block that fits the difficulty adjustment. The miner gives it back to the node. The node itself verifies, it says, yes, good job, miner or er. You found the correct requirement to do this bill block. And then the node distributes it to all the other nodes, and hopefully all the other nodes agree with you that this is a valid transaction or a value block.

[00:53:09] And they will distribute it. And then the next miner will say, oh, there’s a new block. I will now take this block to make my transactions in it. But in the end, every miner out there in the end also needs to run. At one point a Bitcoin node needs to be running. That is part of the network. So the thing that actually makes it all possible are the notes.

[00:53:30] The miners are literally just the thing that does the hashes very fast and, but they don’t actually have anything to say. It’s all done by the notes. 

[00:53:38] Preston Pysh: One physical way to kind of think about this. If I gave you a gold bar and you wanted to verify that it was real gold and it wasn’t like tungsten or lead in the middle of it or whatever material, you take the gold, you’d flatten it out and then you’d come in there with a spectral analyzer to verify that it’s whatever quality of gold throughout the entire gold bar.

[00:54:02] That process of analyzing the gold and figuring out whether it was authentic or not is the equivalent of running your own node. Yep. So let’s say Michael sent me Bitcoin and I’m not running my own node. And I say, here’s my address, and you basically take a screenshot on your phone and text it to me and say, here you go.

[00:54:22] I sent it to you. Here’s my proof. That is not proof. That is not, that is not good. As far as you verifying that what you actually received was real Bitcoin. If I run my own node and I receive this transaction, he says, here’s the transaction id, and I run it through my node, and my node verifies that that is a, in fact, a real block, and it was received at the address that I gave him.

[00:54:47] I am now conducting a full audit of not only my transaction, but of every single transaction that ever has happened in Bitcoin’s history. Clear back to the Genesis block by running my own note. And so you can see if you’re a person who’s holding a lot of Bitcoin or you’re receiving transactions in Bitcoin, you have an economic incentive to run your own node and to verify that what you’re receiving is in fact Bitcoin.

[00:55:13] In addition to that, it does other things, like we were talking about, it relays transactions to miners. It reinforces the code. You’re doing a lot of things. There’s one thing I’ve learned in Bitcoin. It’s not doing just one thing, uh, any part of this. It’s literally doing like five things simultaneously and reinforcing from an incentive standpoint.

[00:55:31] That’s just kind of miraculous, but that is something that I think is really important for people to kind of wrap their head. because you’ll hear this terminology. How many nodes are on the network right now, Michael? Is it like 20,000? 

[00:55:41] Michael Schmid: 20,000 is the number? Yeah. Yeah. 20,000. Wow. Which seems low. Like honestly, I would love to have it much higher.

[00:55:47] Yeah. Because even though, yes, it’s obviously like already with 20,000. It’s a secure enough network because to basically hack, one of the ways to hack the Baker Bitcoin network is to literally change the code on all 20,000 nodes. Mm-hmm. I mean, that’s almost impossible 

[00:56:02] Preston Pysh: because they’re geographically decentralized all over the world.

[00:56:06] You name it, country, there’s somebody there running, running a Bitcoin node. Exactly. 

[00:56:10] Michael Schmid: But it would obviously be much better that it’s 200,000 or 20 million because then it gets even stronger. And I do think as the Bitcoin community, we have, like we obviously we emphasize a lot around, yeah, take self custody, use hardware, wallets, and all these things.

[00:56:26] But hopefully, and there are projects out there now that actually try to install nodes much easier or like in more places. And one of the negative things, or one of the downsides of running a node is that unfortunately you actually have to have a. Right now it’s like a terabyte or a little bit more storage.

[00:56:44] Yeah. There’s actually projects, which again, there’s like fascinating things. You can literally condense the whole terabyte of data down into like a couple of kilobytes of data. Yeah. And so we could actually all run, like it would be possible to run Bitcoin notes on your phone or on every computer or on router at home.

[00:57:03] So that’s definitely something that big communities are working on, making this much, much easier. We always need. Notes that have the total history, but to just do transactions and being a part of the network and forcing the rules, you don’t need all the transactions. And that’s what we’re trying to do to make sure that we increase the amount of notes in the network.

[00:57:23] Preston Pysh: Yeah, we could go on and on. I don’t even know that we scratch the surface here, but what I’m curious is, is let’s put this out there. Yeah. I suspect we’re going to get some interesting feedback from folks. I’m sure people will say the topics that they wish we covered and maybe we can do that in some future episodes.

[00:57:40] And maybe we could even do like a spaces and Yeah. Bring, bring people up onto stage to get more. You know, because I’m throwing questions at you that I know I’ve heard through the years and they might not be the best questions, but maybe we can bring up some people and get some really candid questions in like a spaces and then maybe we can air that in the future.

[00:58:00] But I would like to continue this dialogue because I think it’s so important with the influx. I can’t even imagine how many new people have showed up to this space just in the past year. And this 101 type education I think is really important moving forward. And you’re the perfect guy to, to kind of break this down for folks.

[00:58:16] Thank you. And Michael, thank you for making time. Give people a quick rundown, like really quick rundown of. The super interesting stuff that you do in this space. because it is beyond interesting, but give them a quick rundown. All right. If you want to point them to your website or whatever, have at it. 

[00:58:32] Michael Schmid: Yeah.

[00:58:32] So last time we talked, I presented to you what we’re working on, on house heating because Yes, all these miners, they generate a lot of heat and we’re trying to recapture that. In the meantime. One of the interesting things that we learned is that it’s hard. Yeah. It’s hard to install hardware in people’s houses.

[00:58:49] Yeah. Um, and specifically, actually the hardest one is to. These plumbers, electricians, HVAC people to take something that hasn’t existed yet and install it in people’s houses. Yeah. And so this whole idea of installing in installing them, it’s still going on, but it just takes much, much longer. And I, myself personally, I’ve recently been also very busy with, like I said, I just recently had kids and things like that.

[00:59:16] So instead of actually pushing my own company, we’re starting to do a lot of advising. So there are other companies, for example, in Switzerland, there is now one that already has 30 different houses that heated with Bitcoin miners. Oh, wow. Fascinating to see. We’re seeing them popping up more and more like with district heating and stuff like that, that’s not yet installed in people’s houses, but it’s like in a community that heats their houses now with Bitcoin mining.

[00:59:40] So what I’m personally doing is a lot of consulting and just advising because I. Creating companies is hard. It takes a lot of time. It takes, uh, also money and, um, so I’m helping there. But on the other side, what is also really exciting is that all these miners, they’re completely proprietary. So today, while the software is mostly all open source, most of the hardware, unfortunately, is not.

[01:00:04] And there is a new foundation called the 2 56 Foundation, which tries to change this. And what we’re doing there is to basically create a complete mining solution that means from the hardware, so the little h board, to the control board, to the software, to the pool. So all layers of a miner, completely open source.

[01:00:28] Oh, I love it. If people 

[01:00:30] Preston Pysh: want to check this out, it’s 2 56. What? 

[01:00:32] Michael Schmid: It’s 2 56 foundation.org foundation. Okay. And what is actually really cool, their fundraiser, they found a block. Oh wow. So last year, beginning of this year, there was an event the, the Nashville Energy and Mining Summit. Yeah. And one day before that.

[01:00:51] We asked the community to send us hash rates. So instead of sending us Bitcoin, send us hash rate and we had up to one exo hash. That’s a lot of hashing that happened. So all kind of companies sent all hashes there and within eight hours we actually found a block. So the foundation got from like very few money to suddenly three Bitcoin that they had available.

[01:01:16] And what they’re doing now is they’re funding projects. One of them is mine. So there’s four projects that are currently being funded and together we are creating a complete hardware and software stack. That basically makes Bitcoin mining completely open source again, and if anybody that has heard around the Bidex project.

[01:01:36] Yeah, so it basically goes similar to that. Um, Bidex, the hardware is also open source. The software is also open source, but it’s more fun mining. There have been bid access that found blocks, which is great, but to really make big mining infrastructures, like for me, that wants to heat houses with it with a bitex, we’re not getting there.

[01:01:54] We just don’t generate enough heat. But we’ll be creating here. The first version is a hundred watt heater or heat generator, miner. And this can be scaled up. So to really create also open source hardware because unfortunately today every hardware that you can buy to mine, Bitcoin is completely proprietary.

[01:02:12] Mm. And we think this is a massive issue. It’s a massive risk. And so that’s what we’re trying to change. 

[01:02:17] Preston Pysh: I love it. I love it. Okay. We’ll have links to that in the show notes. Michael, thanks for making time. Truly, we have got to do this again in the future. And yeah, I really enjoyed it. Thank you. Thank you. 

[01:02:28] Outro: Thank you for listening to TIP. Make sure to follow Bitcoin Fundamentals on your favorite podcast app and never miss out on episodes. 

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