 This is State Tech Hawaii, Community Matters here. Aloha! How are you doing? Gordo the Tech Star here. Welcome to another exciting and thrilling episode of Ibachi Talk. This is going to be fun today. We're going to talk about Bitcoin mining in more detail than you could possibly want, but we're going to make it so that actually you can actually understand it and not open up your own mining farm unless you've got a lot of boatload of money. Anyway, I got Andrew, the security guy with me. He's not feeling well. He's a little under the weather. Too much, too much, too much time. And I got JD, Jay Maurice, but I also actually call him JD because we go back since your first birthday. We've known you for long. You're the ultimate consummate tech guru guy that I've ever met my entire life. I watched you grow up through this whole industry. We'll talk about what you've done and we'll talk about what's happening in the Bitcoin mining space because you've been there, done that. So we're going to hear from someone who's been there first day. So grab a libation, pull up a chair, sit down. We're going to talk about Bitcoin mining past, present, and future. Oh, and happy new year, everybody. That's right, happy new year. Have a great new year. Nice to see you. JD flew all the way in from Japan just to be on this show. That's true. True. So hang on. Anyway, so JD, a little bit of background on yourself because where'd you grow up? I'm from Honolulu. So you grew up in Honolulu. And my family, you were the president of the board of the condominium that we lived in. That's right. So my family and you go way back. Yes. And I've been told you attended my first birthday party. I did. I attended your first. And John Young gave you a piece of artwork. I hope you still have it. Yeah, yeah, John Young. I got a lot of John Youngs actually. Yeah, that's awesome, awesome. So he's a rested soul, was a great artist here in Hawaii. For sure. And your mom, a special lady too. Unfortunately, she's not. Well, she's watching down on us right now. I'm sure she is. Yeah, so cool guy. But you've always been in tech. I've always been in tech. I started, I'd say I dropped out of school at 14 to work at a internet startup downtown. And what was that startup? That was called Pacific Interactive at the time. But then it was known as Systematrix later on. Yeah, so Earl Ford. Earl told you to drop out of school. Don't do the head shake in the eye flash. Wow. We love Earl, but I mean, jeez, 14 years. He gave me my first job. Were you like an intern? I was an intern at 14 at Systematrix. At 14. That's awesome. Yeah. At 14. You were in Pacific Business News at one time, if I recall. Yeah, I had this crazy idea to build a whole bunch of servers in the Pihana Pacific Data Center. Which is DR Fortress Resurrected. Yes, Pihana Pacific, then Equinix, then DR Fortress, yeah. So we're talking to this young man. This young man has grown up in this industry here. Sounds like true. And then I moved to Tokyo when I was 20 years old. And I think I had something to do with that. Yeah. Yeah, I think you did. Actually, that house party. That house party. Yeah. What happened? You got even trouble? We had a little house party, and he got introduced to a number of ladies from Japan. Oh, I see. So he chased some interests. And now you speak and write Japanese fluently. Well, I've lived in Tokyo for about 12 years. And I had a lot of time to pick it up. And also been on the countryside recently, so. When you moved there, you just fell in love with the culture, the. Yeah, I mean Tokyo is such a great city. And it's like the biggest metropolitan area in the whole world. And they have everything. They have huge companies and international business, everything, the culture, everything, the language. Everyone's so polite like Hawaii, but it's on a much larger scale. Yeah, I always felt when you moved there that that was going to be your spot. And so, and I met your fiance the other day there, lovely young lady. So that's congratulations on that. So, tremendous future ahead of you. And you're still so young. Yeah. So, and you were actually, you know, when I was, became the director of IT for the city and county of Honolulu. I had the swearing in ceremonies. I remember that. JD showed up. Right, of course, I was there. He couldn't believe he actually made it. Yeah, he couldn't either. He wasn't sure if he was really seeing what was going on. But he was, I have a picture of him in the movie and the whole gang. That's right. It's great to have you there. So, so let's kind of jump now into the, into the tech side. So, you know, you've been in tech, you built servers for him. So what did you do in Japan? We're going to do they keep that short because I want to talk about Bitcoin mining. So when I first got to Tokyo, I opened up my little consulting office and I had some consulting customers in Hawaii, but I didn't really know the Japanese language or the culture. It wasn't connected to anyone. And so I got a job at a Norwegian software company called Opera Software. Oh, very famous. Yeah, making web browsers. And I worked with all their Japanese customers. So every Japanese TV, we worked with like Nintendo Wii, Panasonic Blu-ray players, all these random Japanese devices, we would make the web browsers. They wrote the opera software that was the web browsers for all of those. Yeah, they made the software, they made the browser in Norway. We would port it to their, you know, proprietary CPUs. Oh, their chip, okay. Yeah. And we would deliver the browser to their customers in Japan and did that for a few years. Okay. So you did that for a few years and let's just fast forward in the when did you first start getting involved in Bitcoin and cryptocurrency? I guess about five or six years ago during the Mt. Cox days. Mt. Cox was a big one, right? They went belly up. Yeah. Yeah. I got my first Bitcoin at about $8, but I didn't get into it more serious until $8. Yeah. So I started getting into more serious when it was around $100. Me and a few friends, at the time Mt. Cox was, well, they had some issues to say the least, and you couldn't withdraw, you couldn't deposit money to them very quickly for a number of reasons unless you had a Japanese bank account because they were based in Tokyo. Okay. So I was able to get funds into Mt. Cox very quickly, purchase Bitcoins, and basically do some arbitrage trading. This is when Bitcoin was around $100. Yeah. And we kept doing that a few times. We would make 10, 20, 30% a week just doing arbitrage, arbitrage. Wow. Until the music stopped and Mt. Cox just kind of shut down. He went belly up. Yeah. So everyone... What happened to Bitcoin? What happened to it? What did it drop to? I mean, it spiked up to about $1,200. That was the peak of that bubble. And then when Mt. Cox crashed, it just crashed all the way back down to a couple hundred bucks. That can be easier. It was a couple hundred bucks. Yeah. So it wasn't dead, but... Right. But all of our Bitcoins were in Mt. Cox. That was the problem. And the problem is they couldn't get them out. Yeah. Well, they were already gone. Yeah. So they had taken them away. Yeah. Yeah. No insurance behind the Bitcoin. It didn't help solidify that as a particular form of fiat-like currency. And also, there was the... I think there was that in the broader industry, there was a lot of illicit things going on at Mt. Cox that they were selling, right? So everybody thought, well, that's what that's all about. Like, you know, the broader... Yeah. Those days of Bitcoin... People that didn't know, didn't know... Spice Road and all those days are gone. Right. Silk Road, yeah. Yeah. I'm sorry. Silk Road. Well, I think the dark net markets are stronger than ever, actually. Mm-hmm. You know, because if you shut down Silk Road, then 20 or 30 other will open up. Smaller ones have showed up. Yeah. And I think that market is probably doing just bigger. I'd say it's doing fine in ransomware. It isn't at space. So then, when did you get into the... Because you were an early miner of Bitcoin. Oh. No, Ethereum. Well, I started just as a hobby with Bitcoin. Okay. And the first serious mining farm I did was Ethereum. Ethereum. So we have a... I'll show you a picture of you and your mining farm when you were mining Ethereum. That will be one of the first ones. So there you are. Yeah. And where is that? So I built this farm in Compton, Los Angeles. Oh, another high district area. Yeah. We leased the dirtiest warehouse we could find, but it had a lot of electrical capacity. Okay. Wow. And me and a bunch of guys, we built about 100 or so GPU mining rigs. Okay. And it was really cool because with this farm, we kind of started Ethereum Classic. When Ethereum... Okay. Yeah. There was a smart contract called the Dow. Right. This was about a year or so ago. The Dow got hacked and Ethereum wanted to change the entire consensus rules of the system to basically refund the investors in the Dow. Okay. And... This is not the Dow as in the... The DAO. DAO, right. Yeah, DAO. And I said that goes against everything that cryptocurrencies were invented to fix. You can't reverse transactions in cryptocurrency. You can't just do a chargeback. You might as well just run a bank if you're going to do a chargeback. Right. Or do a bailout. So, I set all my miners to mine on the old consensus rules, which said that, yeah, you can't reverse the Dow's transactions. And that blockchain became known as Ethereum Classic. Okay. So, for a brief time, for about three days, I was the only mining farm mining Ethereum Classic. So I mined about 26,000 Ethereum Classic in three days. Wow. And then the first exchange, Polenix, started trading at like $1, $2 each. Right. Now I think it's about $35. Yeah, it's about $35 for that. So you did this, but what happened to that? We're going into too much detail. What happened to that mining farm that Ethereum mining farm? Well, let's just say we had some internal disputes and attorneys were involved. Okay. And we're leaving it at that. We're leaving it at that. And we're leaving it at that. So that was your first venture into this. So you got to know it and understand it. That was the first serious mining farm. I made a lot of mistakes, some with people, some with technology, some with trading, but I learned the industry. That's right. We learned by trial and error, not by trial and error. And your entire life has been a trial and error. I heard you say GPU. So we're using like NVIDIA. So were you, because they were early into GPU and GPU huge now with the new Titan and all that stuff. Yeah, they actually make GPUs specialized for mining right now. Okay. We were using totally off-the-shelf parts. Yeah. And it was just, a mining rig is basically a computer with several power supplies and lots of GPUs just running this mining software. Wow. And you just build a lot of these and you put them in a warehouse and you put lots of electricity into it and you overclock everything with custom BIOS ROM hacks. Wow. Crank it up. Yeah, sometimes fires break out. Yeah, I'm worried about that. And then the largest miners right now, so we'll go back to Bitcoin from a Bitcoin perspective. The Linus miners are rare. Can we hear about a bunch of places? Yeah, the Bitcoin mining is all centralized in China right now. Okay. Actually, one big mining company called Bitmain, they make these ant miners. Yes. They control the majority of the hash power in Bitcoin right now. And they mine almost half of the Bitcoins right now. Wow. And they're located in China. Yes. So I heard there's Bitcoin farms in Iceland. Yeah. There's many farms there because they have geothermal power. Okay. And it's very cold there. And so it makes sense to get cheap electricity and good cooling. There's a lot of space there. It's a good place to do it. That's how I originally started thinking about how to do mining is to get the electricity really low and the cooling and everything. And I realized that if your strategy and business sense with mining is correct, actually the electrical bill can be an insignificant part of the business. Okay, so cool. So we're actually, believe it or not, we're coming up on the break. Sure. And then what we're doing is we're going to come back and we'll talk about how much money you can make in Bitcoin mining or not. And then what you're doing going forward in this because you're starting a whole new project in this space. That's true. That's going to be awesome. Awesome. This has a sign he found during Christmas. A treat? He wants to show it to everybody. Right on. So we'll do that. Anyway, Gordo the techs are here. Andrew the security guy. Jay Maurice the Wiz is here. We're talking about cryptocurrencies Bitcoin and the next wave of our lives. See you in a minute. Game plans are made with responsibility in mind. Celebrations are underway. Ready for kickoff. MLS clubs and our supporters rise to the challenge. We make responsible decisions while we cheer on our heroes and toast their success. Elevate your match day experience. If you drink, never drive. History. Please join us. Hey, everybody. Welcome back to think tech studios. This is a boxy talk. We're talking Bitcoin. We're talking cryptocurrency. We're talking mining. And right now we're talking to Angus Angus. What's up, buddy? Good brother. Awesome. I got a little bit closer to my father. You do? Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. It's nice to meet you. You're like my brother. You know, it's one thing to watch you on TV. It's another thing to be right next to, you know, right next to you. The famous guy. I can meet you. You feel the heat. To meet me in personless. Anyway, you know, Christmas has passed, but you know, the other day I was walking around during Christmas, and we always have a ghost, Mr. Rick Trejo, our Hispanic ghost, and I found this for him. So show you, we signed on this thing, you know, it's for lease, not me dad. I agree. I love, I love people have intuition and do all these great stuff. That's a nice interpretation. It's a nice, it's New Year coming up. Yeah, Hogman A as we call it in Scotland. So you don't get to get black coal to you on Hogman A, so make sure you enjoy it. So as I say at the end of your segment, let your wing gain free. Where are you be? Aloha. Give me some more Bitcoin. Wow. Thanks Angus for that. For lease, Navidad. You get that? That's pretty, pretty sweet. So let's get into some. Let's get into some paper tech. Tell me, I want to know about the future so I don't want to put my money. So you obviously built the Ethereum mining farm in anticipation of making some good money. We did. And okay, glad to hear that. That's supposed to happen. And then so now you're getting back into this, but why would you get back into it when you've got like the big players like China and those players and such like that? There's, you know, Bitcoin is so huge. There's plenty of room even for small fish. Okay. You know, I'm kind of moving into Bitcoin mining now. Okay. And, you know, we place orders for hundreds of ASIC mining rigs. These are very different from the GPU mining rigs that I have. These are the new ones? Well, Bitcoin has been only ASIC mine for a long time now. But the newest, newest ASIC miners, you know, I'm placing order for a few hundred. And they say the smallest order they have after me is, you know, in the thousands of mining rigs. So it's, we're out. We're very small fish, but it's still big for us, you know. Yeah, I wish I had a picture of a mining rig because, well, you had a photo, but unfortunately it didn't convert across. But essentially it looks like a generator with a computer on it. It's a bunch of custom ASIC chips that do nothing but mine, Bitcoin. And they're just attached to this big heat sink with a bunch of big fans and it blows a ton of air through it, uses a ton of electricity. And we put them all into this small warehouse and, you know, we connect a whole megawatt of electricity or more to run all of these miners and we blow a lot of air through it in the countryside, in the mountains. So your next one is, for security reasons, is your next one in this country or is it in another country? No, I'm mining in Japan now. Okay. And the electricity there is very expensive compared to USA where I was mining before. How's it compared to Hawaii? Hawaii is insanely expensive. It's like 36 cents a kilowatt hour here. Yeah. I mean, if you have the best miners and you have a very efficient setup, you could probably still do very, very well in Hawaii. But if you are starting out, you'd probably want to do it somewhere in the Nevada desert, you know. Yeah, where they've got solar and they've got ways. I mean, I was talking to some of our legislators just last week and they were saying they want to get involved in this, be able to enable this kind of thing to happen. And I like to look on your face right now and I went and they said, actually I was talking to the governor and he said, why can't this not happen? I said, two reasons. One is cost of electricity. And second is our education system sucks and we're not educating people enough on. Well, it's just thinking. And that went face to face with the governor and I just said that. I was thinking HECO doesn't pay as much for their power as we pay for ours so maybe they could get in the money. Yeah, do you think they would? Yeah. Right. Think the PUC allowed that? Hey, the PUC just gave them an increase on us after doing all this solar stuff. Anyway, we digress. So come back to this. So now you're building or have built? We're building it now. Building it now. And we're probably going to start mining with our first farm in Japan in the next few months. And it's a one megawatt facility. Okay. And yeah, we just got the latest A6 and it's going to be awesome. So how many transactions can you say with a megawatt per hour? What do you project? So the way mining works is you're trying to solve the next block in the Bitcoin blockchain. Okay. And even with a huge one megawatt facility, I mean it's huge for us, we are only going to be able to solve a block maybe once every eight or 10 days after this thing is turned on. And you're going to get a small percentage of that, which will create another transaction that needs to be authenticated. Every block you solve in Bitcoin right now is 12 and a half Bitcoins for the block reward and maybe one or two Bitcoins for the transaction fees for all the transactions you include in that block. So you're looking at, let's say for the sake of argument, 14 Bitcoins. So 14, when you solve every time you solve one. And I'm going to sit here and do the math here while I'm sitting here. If you solve 14 every 10 days. 15,000 times 14 equals... What's the paper? Matt, did I just read that right? Yeah, if you solve one block in the Bitcoin blockchain, it's about a quarter million dollars right now. Yeah, $210,000. So what is your... How does it work? What are you looking at? Every 10 days, $210,000? Well, that's the thing, right? In the whole world, all the miners are trying to compete and they're coming out with new chips and the Bitcoin network readjusts the difficulty to make it harder to mine Bitcoin. So over time, the mining farm will mine less and less Bitcoin. Right. It's very competitive. Wow. So you've got to keep rolling out new versions of farms every... Yeah, and it all comes down to how much electricity you have, how much space you have. After a year or two, you might want to rip out your old gear and put in the newest gear. What about the software behind doing the Bitcoin mining? I mean, can you improve that to make it more efficient? Not from a consumption standpoint, but from a speed standpoint on how that's been coded, because you've been coding for decades. Well, everyone uses mining pools and we run our own private mining pool. But the mining software and the mining pool software, it's all pretty much the same. It comes down to raw computational power. Okay, so let me ask you this question. So I don't have the money to build a farm and do all this kind of stuff. Is there a way that someone can invest into someone like yourself who is building these farms and then you're like a startup? So I think it's Shark Tank or something like that where I'm going to put some money into this and then you're going to not guarantee me, but say essentially you could possibly get this return. For sure. The way we structure the new business is we're kind of like a vendor. And if you have space and power and the logistics to do it, we will essentially build a farm for you and we just take a percentage of the audience. Oh, my house on the big island. That's not a bad deal. Which is freaking cold all the time. It ain't that cold. This is a lot of heat. This is a lot of heat. It might turn your place into a mall and mall cabin. I could put it in the garage, man. It's like the garage is always in the 60s. I don't think it's big enough. I mean, you usually want to do at least one megawatt to start. Yeah, well, I don't know how much power you got there. Yeah, Helco thinks a lot. I'd be really happy if what I'm spending a little bit of it. He sucks up all of the... I would have no power forever. Yeah, so in Hawaii, it's kind of tough, but there are many places in the world where it just makes up. So legislators, can I just insert my little comment? Hawaii is kind of tough. Again, once again, you shut down Coinbase here. Shut down Coinbase. You make it real difficult for me to start up my ATM for Bitcoin purchasing. And now you've got an electricity bill that's, you know, off the scale and you said, oh, we want to bring Amazon here or we want to bring someone still here. Yeah, right. I just don't dream anymore. I'm going to compete. What's the future look like? I mean, so where's this going? I mean, you're dropping in, you're in the business of installing one megawatt farms or as big as they'll let you, you know, whatever they... Using Bitcoin to pay for it. But I mean, yeah. I mean, the future of Bitcoin, it's the new global financial system. Yeah. You know, we're talking about disrupting banks and government and this is going to change the world more than the internet has, right? It seems to be as quickly as anything I've ever seen. In our lifetime, you know, the internet has only had a few apps that really took on and they're mostly just communication or sharing some data. This is money. This is the internet of money. Yeah. And it's going to disrupt everything. Yeah. It's going to change the world. It's the biggest transfer of wealth in our lifetime. That's true. So think about it, the biggest transfer of wealth in our lifetime and governments think they're going to shut it down. Yeah. Well, how many, I mean... You know what? I can ignore the government when it comes to this. What's the market cat for to just augment it? On Bitcoin today, it's $260 billion today. $260 billion today. So what was it four years ago? What was it last year? Oh, it was like... Half of that last year? No, not even that way last. And we haven't started using it to buy things yet, which we can, though. A lot of us are holding it. Right. Right now, Bitcoin is really good at a store of value. Yes. And next, you're going to see the Layer 2 payment networks coming online. This is the Lightning network and all these payment channel things where it's going to be almost free to do transactions. And then not only will Bitcoin have the store of value, really solid, but it has the medium of exchange function of money. So here's the dilemma we have, and we're going to watch it unfold over the next number of years. I'm sitting on a US dollar that's worth so much, but it doesn't fluctuate in value like Bitcoin does. Sure. So I can go buy my Starbucks with it and so on. I'm sitting on a Bitcoin right now that can go from $20,000 like it was seven days ago to $13,000, which it was seven days later. So do I sit, hold on it, whatever? So I'm not... Personally, I'm not using it to buy anything yet. At what point do you think people start using it to buy things? Well, we used Bitcoin for years to buy a coffee at the cafe and whatnot. That's true. You gave me my first Bitcoin to buy Starbucks. I didn't even want to think of what I paid for that Starbucks. Yeah, that was inexpensive. In today's terms, yeah. But he's from the mining perspective, I love how they're making new Bitcoin. They're creating new Bitcoin by solving it. Right. Because until Bitcoin reaches a certain critical mass of mainstream adoption, the network collectively rewards the miners for providing that security, for running these big data centers of miners. And at a certain point, the block reward will get smaller and smaller, and the transaction fees will get bigger and bigger. And at that point, the miners will just be purely compensated on transaction fees alone. I see. That should not come close to the transaction fee on a credit card. But I'm saying but it's still... I hope not. Speculative now to be building mining. Silly jar, because you're betting on going to still make a bit more coin. I think it's going to make... You're going to be able to mine Bitcoin for years and years. Oh, so you're talking about maybe a decade or four. It's going to be a while before it comes down to... I mean, when Bitcoin is $100,000, or when Bitcoin is $1 million, when more and more people join the system, even if you can only mine a tiny fraction of a Bitcoin, it's going to be worth so much. And there's a finite number, 21 million, when the final number is worth $16 million. 21 million is going to be the cap on the books. The cap. So we can't print more coins. We can't print more money. Did they print coins? Actually, there was a guy selling them and there were actually... I saw a guy in New York was selling the Chuck E. Cheese coins. Chuck E. Cheese is going through Bitcoin. What an ass. People bought them. So, okay, we've got not too much time left. So what's your commentary on the future of where this thing is going and what's happening? I mean, simply put, Bitcoin is the future of money. You're talking total crypto-anarchism where banks are going to be printing money like crazy, but because of the fixed supply of Bitcoin, it's going to gain value very rapidly. You're going to see a hyperinflation of fiat currencies. You know, one Bitcoin is going to be worth millions of dollars because of the fixed supply. I mean, how many people do you know who own one ton of gold? You know? Yeah, true. Fort Knox, I don't even know what they own. That's a lot. I mean, if you do the math, there's only 21 million Bitcoins. How many people are in the world, right? That's right. There's only 5 million in Bitcoin right now. I think about 17 million have been mined already. Okay. And quite a number of them have been lost. No, but individuals, people that are invested, it's only like 5 million people who have invested in Bitcoin. Right, hardly any people are using it. So this is really the biggest transfer of wealth in our lifetime, and it's going to replace banks and fiat currency. You know, it'll be like the Internet. Maybe it takes 20, 30 years to reach mainstream adoption where everyone has Bitcoin in their pocket. It's coming. Pretty cool. That's all there will be. That's so awesome. Anyway, we've burned through 28 minutes. JD, we're going to, we'll Skype you in for an update. We've got to bring you in when you go back to Japan. We'll Skype you in. I'll come back for you, Gordo. Thank you. He's a millionaire sitting on all those Bitcoins. Mind you, he's lost. That's another story. This is not for the faint of heart. We've told everybody we're not giving investment advice. Cryptocurrencies are not for the faint of heart. Volatile. It's very volatile. You've got to believe in what's happening in the future. Anyway, we have somewhere around here, an autographed solo cup. I'm not quite finished yet. Number 145 in the series. So don't lose this puppy. It could be worth, well, it's only 145.000. Bitcoin could be one day. There's going to be a lot of zeros in there. Anyway, thank you for coming all the way from Japan. Celebrating Christmas with us. You head back shortly and keep us posted on what's going on. We didn't give you a heads up on this on what we do at the end of every show, but we'll do it and you can just look into the camera and look smart like you always do. So like we say at the end of every show, when you enjoy the show and he brought you talks to people, listen, one, two, three, how are you doing? Thank you. That's awesome. I could spend another two hours on this. Good job.