Oh boy, you are opening up a can of worms! Your questions are next-level and insightful, please give me time to prepare appropriate responses because they are deserved. Maybe we should make this the topic of our next interview, what do you think?

That would be amazing. Thanks for responding.

I will follow up with JP, but here is my view on it. First, a few points of distinction, not all Proof-of-Work monetary systems are the same. In the case of Bitcoin mining specifically I think what you are referring to is the "halving" in which the block reward is programmatically cut in half after a certain number of epochs (block amendments). This obviously has a consequence on the revenue side for miners. The ultimate consequence is really a confluence of the underlying bitcoin price, the miner electrical costs, the ASIC costs, and network difficulty before/after the halving. Miners that are efficient and already strategically positioned for this forecasted event will acquire market share while less efficient operators end up capitulating and get liquidated (with ASIC / hash power redistributed into the marketplace). This can lead to industry consolidation around mining pools and hash operators which is a concern for 51% attacks. Derivative markets do not ensure that market participants can't corner the market, particularly in this unregulated market. The underlying security issue you are referring to is ultimately a double-spend event lead by a 51%+ attack (miners that use their majority hashing power to spend an amount of Bitcoin twice by essentially temporarily re-writing some ledger history. This is an edge case scenario that at this point would cause more brand impact than monetary. The only entities remaining that could coordinate this would be either mining pools aggregating against their individual long term interests or by nation states that view the ecosystem as a threat to sovereign monetary policy or capital controls. Neither are impossible but highly unlikely. The network could persist, like in the case of Ethereum classic that has been attacked 4 times successfully with a 51% attack but still persists today. If this were to happen to Bitcoin it would simply set the moving back for a few years while investors / developers remediate the flaws and then restore liquidity to the system.

Santiago, thanks for the detailed explanation on the 51% attack probably; how bad would the damage be and can you ellaborate on what you mean by ''If this were to happen to Bitcoin it would simply set the moving back for a few years while investors / developers remediate the flaws and then restore liquidity to the system.''

@jayanth Yes, there was a typo in my statement, "moving" = "movement", because that's how I view the growth of this space, a movement towards decentralization, disintermediation, and disruption of incumbents. Traditional financial institutions provide a valuable set of services to society by assessing risk and/or allocating capital on behalf of savers / investors. The problem is that this responsibility has been handled poorly and in some cases leads to systemic risk, but I think I would be preaching to the choir here by saying that. With regards to Bitcoin, the movement I refer to specifically is the optionality of a supra-national settlement / collateral system which can store value over time without relying on the monetary policy choices of sovereign governments. The value of the ecosystem is therefore a network effect value from the consensus of the governed that the value is redeemable for other things of value (fiat or property). Bitcoin therefore acts as a "check out" system, or a vote of no-confidence in existing fiat systems. That being said, it is not intrinsically valuable (like food, water, clothing, etc.) as I define it, it's value by agreement. If you accept this premise, that consensus can be shattered (even temporarily) by anything that represents even the possibility of systemic shock. A 51% attack represents a systemic shock but because of the design of the protocol doesn't necessarily mean an ecosystem collapse. In summary, an attack would simply shake the confidence of the governed for a period of time for many participants until the realization set in that the attack does not mean the end but rather a learning opportunity for ameliorating the vulnerabilities of the system. This process takes time, confidence needs to be rebuilt, and liquidity would start to flow back into the system. It's the HODLers, development community, and miners that would have to "hold the line" while this process unfolds and because we are human, that would take time. Did this answer your question?

thanks mate, that was an incredibly thorough explanation and I'm sure all RV subscribers would be loving the amount of time your taking to answer questions in the comment section, It really helps beginners cement ideas :)

I think I like this comment, but I'm mildly suspicious. 😆

My pleasure Marius!

I like long winded posts! Your insights are spot on. The mining industry is absolutely a race to the bottom, it's algorithmically savage in it's competitiveness, and that's a good thing. Only the fittest at managing capital will survive the competition and as you pointed out materials and energy are at the root of that process. With respect to cash balances on mining operations what's not reflected are Bitcoins that have not been liquidated. Many of these operators operate under the principle that Bitcoin value in relative terms to fiat is accelerating according the Stock-to-Flow model, and therefore is non-linear. Ultimately this means that they do everything they can to not liquidate any Bitcoin and instead use it as collateral to maintain cash flow with lending products. The two rates, inflation of fiat vs. appreciation of Bitcoin can turn out to be beneficial for the savvy miner that learns how to arbitrage these rates. With regards to price appreciation impacting hashing power, that was addressed in the talk. Price always preceeds hashing power because the price is impacted by non-mining factors, like speculation, M&As, announcements, etc. The economics then appear favorable to mining but under the premise that the existing difficulty rate won't adjust. This means amateurs jump into the market but without a sustainable plan for when the price either corrects or the hashing power rises and yields drop. It's an incredibly interesting dynamic that will play itself out as the network and value of bitcoing grow. This effect is similar, but not identical, with other Proof-of-Work ecosystems and even other forms of compute up the stack. Each ecosystem has it's underlying tokenomic structures that inform the view of the investor and the deployer of capital. I'll ask JP about power provider credit backstops but I can share some tidbits from my own discussions with power producers. Many have been burned. There are power producers that try and address the volatility or depressed pricing of the energy markets with bitcoin mining only to find themselves paired up with an immature mining operator. In some cases they've even had stranded assets at the plant which were abandoned without consideration for disposal. It's an immature business yet but maturity is entering the space with operators like JP that have been through this cycle several times and have survived. Great comments and questions, thank you!

Excellent interview. I would like him to dive deeper into the future of the Mining industry, discuss more business models and talk about some of the creative ways Miners are positioning themselves to energy producers. Also to talk about how Miners will respond to a future where transaction fees are becoming more predominant as a revenue stream due to the scarcity and finality of the amount of available Bitcoin.

You got it J W. On the agenda for next time.

YES SIR! Will do. I take nomenclature and vernacular for granted because I've been down the rabbit hole for so long I forget what it was like. Please ask questions and we will augment the discussion herein. I appreciate the feedback.

Thank you!

Agreed, the pace of change is breathtaking and exciting. I do my best to stay ahead of it and bring that knowledge to the viewers.

LOL! I hear you! Please feel free to ask whatever questions you'd like and I'll do my best to answer or redirect.