WBD571 Audio Transcription

The White House is Wrong About Bitcoin Mining with Nic Carter

Release date: Monday 24th October

Note: the following is a transcription of my interview with Nic Carter. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

Nic Carter is a Partner at Castle Island Ventures and co-founder and Chairman of Coin Metrics. In this interview, we discuss the White House bitcoin mining research paper, regulation and the role of renewables in the energy mix.

“My whole objective here was just to really meticulously go through their document and show that they don’t have a better command of the facts then we do, they’re relying on bad data, they’re relying on bad sources and academics, and they should do better.”

— Nic Carter

Interview Transcription

Peter McCormack: All right, Nic, how are you doing, mate?

Nic Carter: Doing good.

Peter McCormack: Good to have you back on What Bitcoin Did, twice in two days.

Nic Carter: You keep making me do that.

Peter McCormack: Well, every time I come to Miami.

Nic Carter: A two for one.

Peter McCormack: Well, because sometimes we want to talk to you with somebody, and then while we're here, we want to talk to you on your own.

Nic Carter: We did it in Austin, now we're doing it here.

Peter McCormack: We're doing it here, man.  It's good to see you going out there doing some stuff for Bitcoin, working on Bitcoin, doing what you've done historically, which is excellent fucking work and we're very lucky to have you in the world of Bitcoin doing this.

Nic Carter: I'm not quitting, I'm still here.

Peter McCormack: Well, you're a bitcoiner, so that's why.

Nic Carter: I can't be fired, you can't fire me.

Peter McCormack: I can fire you from What Bitcoin Did.

Nic Carter: That's true.

Peter McCormack: Actually…!

Nic Carter: That would be a mercy; please do!

Peter McCormack: Fuck off!  Right, the White House Office of Science and Technology policy report on climate implications for crypto mining.

Nic Carter: Yeah.

Peter McCormack: Fucking wankers.  All right, so what's the name of the guy who did the report?

Nic Carter: We have to be nice, we can't be too mean to them; they're probably going to listen to this episode.

Peter McCormack: I wouldn't call doing the Pinocchio Scale particularly nice!

Nic Carter: That's what Snopes does, I think.  It's all about the fact-checking and the Pinocchios.

Peter McCormack: Right, okay, well let's dig into this.  So, I'd never heard of the White House Office of Science and Technology, don't know anything about them.

Nic Carter: Neither had I, to be honest.

Peter McCormack: Do we know what reports they've done on the use of energy within data centres, or anything else?

Nic Carter: I haven't looked at their corpus.  They probably have groused about Apple and Google.  One thing bitcoiners get wrong is they think only Bitcoin gets scrutiny on energy usage.  It is really every industry, we just get extra scrutiny and I do think it's disproportionate.  But it's not that other industries don't get asked about this stuff.

Peter McCormack: Right.  Well, listen, there's a lot we can cover here because there is the report, there's your reply to the report and then there's your notes on the report.  But let's start with talking about the report itself, who it was commissioned by specifically, why it was commissioned; what do we know about this?

Nic Carter: The report was commissioned by our dear President, Mr Biden.  He did an executive order and he commissioned a zillion reports and a few of them were on crypto; there were so many actually.  So, there's an executive order I think really on crypto and one of them was about the energy usage.  We know the White House has been thinking about this for a long time.  They actually had me in to talk about it, and I told them what I'm going to tell you now; they didn't listen, clearly.

Peter McCormack: Where?  Was that in a senate testimony?

Nic Carter: No, it was just a private briefing.

Peter McCormack: In the White House?

Nic Carter: Well, it was on Zoom, but many of the people listening were probably in their homes as well, but they were White House staff.

Peter McCormack: Is that slightly surreal that the White House is giving you a call and saying, "Hey, Nic Carter, the President wants some information from you"?

Nic Carter: Well, it's mostly annoying, to be honest with you, because they didn't listen to me, peter, they didn't listen.

Peter McCormack: For fuck's sake, Biden!

Nic Carter: So, what's even the point, what's the point, guys?

Peter McCormack: "I'm busy here"!

Nic Carter: I am busy, I was doing it out of the goodness of my heart, and then they totally disregard everything they said there with this horrible report.  So, I'm feeling very frustrated and disinclined to be helpful to them.

Peter McCormack: Well, if they're going to get their information from de Vries and ignore you, if feels a little bit like they maybe know the answer they want written, and then the go and write the answers they want.

Nic Carter: It's selective.  I know they have been talking to other bitcoiners too, so they have been doing some diligence.  They did have some parts of the report that echoed things that bitcoiners have said, especially about flared gas and using renewables and things like that, so they're not completely unaware of what bitcoiners have to say about mining, they're just very dismissive of those things.

So, yeah, Biden commission the report, and then it kind of looked like they did this in a hurry, to be honest with you; it didn't seem as rigorous as I would have expected, and basically they're just talking through the state of affairs, the status quo with Bitcoin mining, especially in the US, and then repeating a lot of the same talking points that we see, the critical ones, and basically they disparage a lot of the mitigating factors that bitcoiners like to bring up about mining, and they repeat a lot of hostile academia. 

They don't do a lot of original research of their own; that was one thing that disappointed me.  And they also then basically conclude by broadcasting extremely high standards for what Bitcoin miners should do in terms of being benign consumers of energy, which are standards I've not seen mentioned for any other industry.  And then they also mention some possible ways to tackle Bitcoin mining in the industry, including possible legislation, possible bans, things like that.

Peter McCormack: How much do we know about their strategy with regards to energy and climate; have they set any specific goals?

Nic Carter: Well, there's the ESG movement, which the Biden Administration is completely onboard with.  It basically involves waging political warfare on oil and gas producers.  So, through a variety of methods, they've made it difficult for, in particular oil and gas companies to operate, for firms that would be fracking and producing natural gas, to produce their natural gas.  They did this for the first two years of the Admin, and then now we're in the energy crisis and now it's more important than ever that we drill, that we produce natural gas and we ship it to Europe, which is in the midst of a much worse energy crisis. 

But because of the Administration's reticence to support the fossil industry for better, for worse, now there's a production crisis.  So, instead of encouraging domestic production, there's so many things they could have done.  They could have allowed pipeline construction, they could have done more permitting for natural gas, they could have not waged war through the SEC, through the financial sector, on these public companies that are exploring and penetrating these wells.  Now, they're going to places like Venezuela and lifting sanctions on Venezuela and asking for them to produce.  They're going to Saudi Arabia and begging them; embarrassing in my opinion.  They're begging Saudi Arabia to increase production, they're begging OPEC to increase production; it's not working, OPEC is cutting production.

We have an incredible abundance of energy in this country, and it's not really being taken advantage of.  Instead, we're in a weaker position, we're having to go to countries that don't like us very much and beg them to increase production.  Meanwhile, Europe is in the midst of a horrible energy crisis; we're basically bailing them out with liquid natural gas shipments from America, relatively cheap gas, which we're liquifying, shipping to Europe and helping them with their problems.  But yeah, the Admin could have done a lot more.  And the general trend from the Obama Admin through now has been to marginalise the American energy sector.

The other thing is there's been a ton of tax subsidies for wind and solar, which I support the emergence of wind and solar 100%, but it has meant that certain grids have become unbalanced, so they're very beholden to whether it's windy or not, and that has left them in a weaker state.  So, Texas, California, New England is also in a bad state, these are places where the grids are performing less than optimally, partly because there's been insufficient pipelines built, but also because there's been a huge emergence of subsidy-fed wind and solar, which isn't bad on its own, but it does mean that it's harder to balance the grid.

So, it's been a kind of anti-energy Administration so far from Biden, that's the general thrust of what they're doing.  Now they're trying to pivot a little bit.

Peter McCormack: Anti-energy, or anti-fossil fuel?

Nic Carter: Yeah, anti-thermal energy, thermal generation.  There hasn't been a big emphasis on nuclear unfortunately.  It's not like nuclear would solve our problems overnight because it takes so long, but there's been a lack of emphasis on nuclear.  I don't think there's been a new nuclear plant in the US permitted since the 1970s, or something unbelievable; it's been a long time.  So, there's a lot they could have done which would have mitigated the energy crisis we find ourselves in, and lessened our dependence on Venezuela and the Saudis and things like that.

But it seems like they are now realising politically, it's infeasible to have gas at $7 a gallon in this country, and to have these grids start to fail.  So, there might be an evolution in their tactics, but the generally messaging has been pretty hostile to fossil fuels.  Now, I'm not like an Alex Epstein kind of guy, where it's --

Peter McCormack: What do you make of him?

Nic Carter: I read his book.  I think it's actually useful to have a perspective like that.

Peter McCormack: Agreed.

Nic Carter: I don't agree fully with his view.  I'm more of a moderate; put me in the Troy Cross camp.  I do think we need an energy transition, but I think it's been done in an imprudent way, and I don't necessarily believe that we can follow the track that we're on, in terms of encouraging tons of wind and solar and batteries and have that be sufficient.  I'm not sure that's going to work in the current way it's envisioned.  It's causing issues here, in California, Texas, so we do need thermal energy to tide us over. 

Because it's been a rushed transition, we're now resorting back to coal, which is totally a step in the wrong direction.  Natural gas is much better than coal in terms of its emissions profile.  We didn't encourage it enough, and now you're seeing globally a ton of dependence on coal.  In New England, they could have built pipelines from these incredibly rich shale deposits that are nearby; instead, they're importing gas from Africa, they're burning oil, which is worse.  So, I just think there's been a lack of prudence and a lack of long-term thinking on this, or maybe a utopianism in terms of thinking the green transition can happen on this schedule.  I think it still can happen, but it's probably been too aggressive, is my view.

Peter McCormack: Right.  I find the Venezuela one super-interesting, because as a country which has been crushed by -- I mean, I'm not letting them off the hook, they've crushed themselves, but they've also been crushed by sanctions.  Now, to go to Venezuela and encourage them to -- I mean, what's the situation in Venezuela, because I knew what happened, it's a different type of oil, right; and the cost of mining the oil in Venezuela I think is more expensive than most other places, which is why they ended up closing a lot of their refineries because it was just too difficult to mine; that was my understanding?

Nic Carter: I'm definitely not an expert on Venezuelan oil.

Peter McCormack: I'm sure that's what I read.

Nic Carter: I mean, the sanctions, I believe, are mainly on the Maduro regime and affiliates.  I think part of the reason they're not producing a lot is because it's just been such chaos in their country.  I mean, it's very hard to have an industrial sector when you have hyperinflation.  So, that's my best guess as to what's going on there; there have been sanctions.  It is weird now that we're asking them, they're clearly not friendly regimes; we're asking them to up their production because we haven't done a good enough job domestically.

Peter McCormack: Which means the situation with the sanctions is likely to change.  But that could be a positive for Venezuela themselves, the people?

Nic Carter: Maybe, yeah, but it's not clear how much of that mineral wealth will trickle down to the people.

Peter McCormack: Well, almost certainly it won't.

Nic Carter: It will benefit the elites.

Peter McCormack: It will benefit the elites and the regime but at the same time, if there's a lifting of sanctions, that helps people.  I mean, I don't know what the net positive here is, but you would hope so.

Nic Carter: Yeah, hard to know.

Peter McCormack: Okay, so in terms of the report, let's start with the good bits because like you said, it wasn't all negative.  What were the things that impressed you with the report; were there any sections where you thought, "Actually, you've really paid attention here", or do you think it was just lip service?

Nic Carter: No, there are some decent bits.  They acknowledged the Bitcoin miners might be using renewables where there's a lack of local demand, so they acknowledged the location agnosticism of Bitcoin mining and they acknowledged that Bitcoin miners are active in places like West Texas where there's a lot of renewable generation and there's not a lot of demand, because there's insufficient transmission.  So, they did acknowledge that.  They then walked that back a little bit.

They also acknowledged that there is flare gas mining, which is actually a relatively small portion of Bitcoin's hashrate.  If I had to guess, I would say it was under 500 MW.

Peter McCormack: What is the percentage, even say in the US?

Nic Carter: Well, all of Bitcoin is around 10 GW, and so probably, if I'm doing the maths right, less than 5% of Bitcoin's hashrate, and maybe much less.

Peter McCormack: Is there a lot more opportunity to flare gas; is there an abundance of these wells that are, is it uncapped; how do they refer to them?

Nic Carter: Well, you can have economically stranded gas.  So, when you are extracting oil, it's kind of a mix of gas and oil most of the time, and when you do an initial penetration, you get a huge burst of gas.  Typically, that gets flared often because often there are no pipelines to capture it, there's no economical use for the gas; it would be too expensive to build the pipeline.  You want the oil, the gas is sort of a by-product, so that's where the flaring comes from.  And, if you add it all up, yes, this could power Bitcoin a couple of times over.  However, you would need miners to find that economical.  It's probably not economical to go and identify all the wells globally, get these gen sets installed, do little, small installations everywhere where the gas is flared.

So, I don't think that it will ever be 30% or 50% of Bitcoin's hashrate, flared gas mining.  I think you'll find other stranded energy sources.  Maybe you'll find a nuclear plant which can't sell power at night, you know, more, larger installations, larger generation assets which are underutilised; or windfarms that are unable to sell the power to the grid, things like that.

Peter McCormack: Do we know how much of Bitcoin mining, say again in the US, comes from the overproduction of energy from, say, windfarms?

Nic Carter: We don't know right now and that's part of the problem, because there have been no good bottom-up studies; it's only top-down studies.  So, Cambridge has the state-of-the-art study that just came out recently, it came out after this report, but their estimate was based on the energy mix at the state level or the national level.  So, they can triangulate Bitcoin hashrate to certain countries and to certain states in the US and provinces in China, but they didn't go the extra mile of looking at where the actual Bitcoin mines are and the local energy they're consuming. 

So, we still don't know and we still don't have a bottom-up registry.  I would love for this to exist.  I will help to bring it into existence if I can get the resources to do this.  I would love to have a bottom-up study where Bitcoin miners disclose freely what kind of energy source they're using.  They're not currently doing that, so we don't know and it's a shame, because I think the reality is actually really good.

Peter McCormack: Do you have any kind of best-guess estimates?

Nic Carter: We know a lot about the public miners in the US, so Terawulf, for instance.  A lot of the ones I've interviewed on my show, they use nuclear power, they use hydropower; Bitfarms uses a lot of hydropower; there's other renewable-focused miners, Iris Energy, CleanSpark.  Aspen Creek is an interesting one that just emerged; they are focusing on solar and wind.  So, there are individual miners that you can point to and be like, "Yes, they're using renewable", but there are also miners that are using thermal energy, there's no question about that.

Basically we have a data problem.  The question is, "What do you do when you're confronted with a lack of data?"  Do you make sweeping conclusions, which is what happens in the report; they rely on de Vries for all the emissions estimates.  Or, do you say, "Well, we don't know right now"?  I don't know.  I think you should probably hedge a little bit instead of claiming that you don't know what the answer is.

Peter McCormack: Is de Vries the guy up in Berkeley?  I think I'm blocked by him.

Nic Carter: So, de Vries is the Dutch central bank, he works for the Dutch central bank, and he runs Digiconomist.

Peter McCormack: There you go, yes.

Nic Carter: He is the most cited person in the report, by a lot, which is crazy because he's not an academic.

Peter McCormack: I'm sure I've been blocked by him.

Nic Carter: Yeah, he's not a good guy.

Peter McCormack: No, he's one of those people who clearly has a -- it's weird how you get this with Bitcoin, that people seem to just hate it.

Nic Carter: Yeah, so this guy's full-time hobby for the last eight years has been publishing erroneous estimates of Bitcoin's energy consumption, always aggressive estimates, ie whenever he does an estimate, it's way too high to make Bitcoin look bad.  So, he came up with the e-waste thing.  Whenever you hear about Bitcoin e-waste, it sources back to him, and he has his Energy Consumption Index and then Greenhouse Emissions Estimates, and they're all way, way too high.

If you look at any -- occasionally, real academics do studies, and they could devise their own estimates, like Cambridge for instance, and they come in way lower, like a third; much, much lower.

Peter McCormack: I'm going to jump around a bit, but in a scenario where more regulation would come in, what kind of regulation do you think would come from the federal government, and what would be left to the states, because I don't think the senators in Texas, where we were previously, would be very happy in a scenario where, say, proof of work was outlawed, because there's a lot of business, lot of jobs, lot of revenue generated in the state with miners?  So, what is the range of things that could happen?

Nic Carter: It's hard to know.  It really depends if they decide to go scorched earth on mining.  It would be weird for the US federal government to say, "This industry is a bad industry", and we know that there are all these public companies that have duly purchased energy with their PPAs; they have agreed to purchase energy for a number of years.  We are now outlying what they're doing, what kind of computation they're doing.  There's not a lot of precedent for that, there's not a lot of precedent for the US Government saying, "This is a bad industry.  Even though they're operating fully within the law, we're going to make it illegal".

Peter McCormack: So, do you see a scenario perhaps where it might be they ban mining which is directly burning fossil fuels?

Nic Carter: That's what the New York State, they passed a bill doing that.

Peter McCormack: Didn't it fail though?

Nic Carter: I don't think the Governor signed it, I think it might be outstanding.  I don't think she vetoed it either, but New York State basically passed a bill saying, "If you are a behind-the-metre miner using thermal generation, you can't mine Bitcoin", which was a reaction to the Green Energy plan in Upstate New York.

Peter McCormack: Is that the one that was closed and they spun it back up?

Nic Carter: It was a coal plant that they transformed into a natural gas plant, and then they were mining Bitcoin behind the metre, so to speak; and then also selling energy to the grid.  So in my mind, it's a good thing, because you went from coal to natural gas, which is much cleaner, and you are monetising it through mining but then also selling to the grid, so I don't have a problem with that.

Peter McCormack: Yeah.  And I'm not supporting it, but in a scenario where perhaps the mining of Bitcoin was outlawed using the burning of fossil fuels, I wonder what kind of reaction we would see, almost similar to when China banned mining; the ASICs just moved around the world and the hashrate was at an all-time high.  I wonder how many you would see leave the country, how much hashrate you would see leave the country; or, you would just see a bigger movement to be finding these other sources within the US?

Nic Carter: Well, I don't know what the federal government has in store, I don't think they have the political capital to really do something like that.  I would maybe compare it to prohibition.  Prohibition was a constitutional amendment, as in the prohibition of alcohol.  That required a lot of social demand for that.  The mining thing seems like fewer people care about it.  I mean, environmentalists care about it, but it's not something where you have rallies in the street about it.  So, I would be shocked if we got something at the federal level, at the states.

I could totally see state-level bans in the more progressive states, I could imagine that.  There's not a ton of mining in those states anyway.  What would happen, let's say just for the sake of argument, the US banned mining in this country entirely?  It would make Bitcoin's emissions' footprint worse, because the US is a relatively clean grid.  We have tons of wind and solar and more coming on the time.  The miners are really aggressively moving to scoop that up, especially if it can't reach demand centres, because that's a problem that we have with our grid, is that there's not enough transmission.  So, the energy doesn't necessarily always make it to the consumer.

So, mining would go to the other places where mining occurs, and we know where it happens: Kazakhstan, Russia, Iran, Venezuela.  Are those places where you want to send billions and billions of dollars of revenue?

Peter McCormack: They're pretty progressive nations with pretty progressive energy policies, aren't they?!

Nic Carter: Right!  So, the mining that occurs in these places is not clean.  Kazakhstan is with coal; Russia, I don't think it would be particularly clean, there's some hydro there; Venezuela, there's a fair amount of mining because there is subsidised electricity, so the Venezuelan individual citizens bought a bunch of ASICs and then the Venezuelan regime confiscated them, they stole them, and now the Venezuelan Secret Police, effectively, are doing the mining.  Do we want them to benefit from our ban of Bitcoin domestically?  I don't think that would be wise.

Peter McCormack: That's because you've gamed it out.

Nic Carter: Right, so it's about the second-order thinking.  Politicians, they live on the first order.

Peter McCormack: Well, so to these fuck-heads like de Vries, privileged people living in comfortable, nice western lives, who tend to not really spend much time thinking about perhaps things like what Alex Gladstein thinks with Bitcoin.  They don't think about the benefits that Bitcoin brings to multiple areas, not just the energy sector, but also in terms of human rights and activists.  They don't think that; they sit with their fucking Starbucks, and they want to ban something which we know definitely has a massive impact on people's lives.

Nic Carter: Yeah, I mean I'll compare it to gold.  So, gold mining objectively consumes more energy and it's much dirtier than Bitcoin.  Bitcoin is fully electrified; gold mining requires trucks that have diesel and enormous industrial machinery to sift through rock and stuff like that.  You can't electrify it; it can never be made sustainable.  Gold doesn't get the flack Bitcoin does as much, I don't know, I don't see a lot of people grousing about gold's energy consumption, maybe it happens, because gold is embedded culturally in a lot of different countries, less so in the US.

Peter McCormack: Well also, the central banks hold gold.

Nic Carter: They hold gold, yeah.  And even though a lot of people think it's this archaic relic, or whatever, gold's actually pretty useful.  A lot of individual people in India and China hold gold as a household savings device.  So, it is a little weird.  I think it's the newness of Bitcoin and the fact that it's not really that distributed globally.  I mean, maybe 100 million, 150 million people have touched Bitcoin, and so that's really the main problem, I would say, independent on all this discussion of energy; it's that it's new and that people don't see the utility.

Peter McCormack: And I also think there are people who heard about it early on, did not invest, and they're very bitter when they hear about some 26-year-old becoming worth tens of millions and they didn't do it.  Who was it, was it Craig Warmke?  We interviewed this guy, Craig Warmke, he's a philosopher, he wrote this paper.  What was that index they produced?

Danny Knowles: Oh, the salty index?

Peter McCormack: Yeah, the salty index, and he measured when journalists discovered Bitcoin and then over time, how much more salty their articles against Bitcoin became.  His thesis was that these people discovered Bitcoin early on, had every opportunity to invest in it, become supremely rich, and they didn't and they're just very bitter.  I think Nathaniel Popper is a great example of that.  I actually liked his book; it was the first thing I read on Bitcoin, I thought it was brilliant, and now I just see him as a bit of a dick who attacks the industry.

Nic Carter: Yeah, I mean Bitcoin has gone sideways for five years, give or take, now so maybe there'll be lots of that going forwards.  But the main issue I find is that people ideologically object to the idea of non-state money because they think we're opting out of the social contract.  If you're holding dollars and Treasury bills, you're kind of funding.

Danny Knowles: Here's his saltiness index!

Nic Carter: The saltshaker at the top!

Peter McCormack: I'd never noticed the saltshaker the first time.  That's fucking brilliant!

Nic Carter: Yeah, Craig is great.  I'm very glad that you're having more philosophers on the show.

Peter McCormack: They're some of my favourite shows to make.  I mean, that first show I did with Troy, I just sat there with a big grin.  Even with Craig, and look, not everyone loved the Craig show and I think Craig needs more time doing these, because it takes some learning, but I loved it, I just sat there listening, watching people run through ideas and question everything.  I find it fascinating.

Nic Carter: Craig wrote one of the best papers on Bitcoin.

Peter McCormack: Which one?

Nic Carter: I think it was called Electronic Coins.  I mean, it's from a philosophical perspective.  It's about, "What is a Bitcoin?" like what is the ontology of Bitcoin?

Danny Knowles: We've got Andrew Bailey tomorrow.

Nic Carter: That's great.  I mean, philosophy nerds like me, I'm very glad that there's a whole cohort of these guys.

Peter McCormack: Yeah, so we've got more philosophers coming in, we've got more progressives coming in.  The diversity coming into Bitcoin I think is super-interesting.  We do need more women, and we do need more people from minority groups.  I think I'm really going to piss somebody off and put a few people off now and am going to say, we don't just want it to be middle-class white people, we want to be fully represented, and we're going to make our effort.  We've always made the effort to try and have a diverse group of opinions, but I think it's now starting to happen.  We've jumped away from being just libertarians and conservatives, which is a good thing.

Nic Carter: Yeah, I mean there's been a concerted effort in the Bitcoin community to narrow the tent, to make it into a very small tent, and tie it to right-wing ideology and stuff like that, but that's not how you win.

Peter McCormack: No, I completely agree.  That's why when Pierre Rochard today was criticising progressives, I think he missed the point that conservatives and libertarians have been in Bitcoin for years, there hasn't really been a progressive movement.  We've actively tried to help construct one, and any progressive who wants to come on the show, we've invited them on and what's happened is, there are communities built, Margot, Troy, Mark Goodwin, Logan Bollinger; they've all grouped together and they're working together and I think that's a good thing.

When Elizabeth Warren is criticising Bitcoin, or AOC, the Squad, you don't want conservatives telling them why they're wrong because they're not going to listen.  What you want is a group of progressives coming saying, "Look, this is why you're wrong", because they're more likely to listen.  So, if we want Bitcoin to win, we have to touch every community and every subculture.  So, I think it's a good thing and I think Pierre missed the mark there.

Nic Carter: And just on that, I would say I think the most politically impactful people in Bitcoin going forward will not be the people from the orthodox "pure" group.

Peter McCormack: No, I agree with that.  I think also the longer you do this, the harder it is to have the empathy for people who don't understand this because you've been embedded in it for, I don't know how long you are.  I mean, I've been embedded deeply for five or six years, and aware of Bitcoin for eight.  Sometimes you forgot how much information you've consumed, how many things you've figured out, how many Nic Carter articles you've read or podcasts you've listened to, and how down the rabbit hole you are.  I can go home and most of my circles outside of this are not bitcoiners.  The only thing they know about Bitcoin is that it's my job, and suddenly even approaching the basics of understanding of the nature of money is very difficult.

I think the longer you've been in, the less empathy you have for these people, so you can get sucked into shouting out, "Have some fun staying poor", which we've all done; but actually, sometimes people just need to be sat down and given a bit of time.  And so, I think a new wave of people coming in right now is going to be very good for the next few years of Bitcoin.

Nic Carter: Yeah, I'm very excited about the new breed.

Peter McCormack: The new breed, of which Dylan LeClair wrote something very interesting today I'm going to have to dig out, have a look.  Okay, sorry, we're going round in circles here.  Going back to the positive points of the report, obviously he raises the idea that Bitcoin miners can support the grid, and that was a super interesting point, because that is something that can support every single state; grid stability is super-important.

Sometimes though I wonder, how much do we overstate things as a group of bitcoiners because it feels like a positive for Bitcoin; so do we overstate it?  You'll know better than me.  How credible are claims that Bitcoin mining can make a grid stronger; and how much did they touch on that in the report?

Nic Carter: Yeah, they mentioned it, they didn't give it a long treatment.  I mean, I'm one of the main proponents of this claim, so I'm partially responsible for the now widespread view within Bitcoin that miners can play this grid stabilisation role.  It's a complex topic.  Demand response is not that well understood, even in the energy sector, and trying to explain it to a lay person is also challenging.  So, it also very much depends on the ISO or RTO, so basically the subunit.  There's not just one grid in America, there's a whole bunch of geographic regions, and they all have different policies and also different jargon, different nomenclature. 

The one that I spend a lot of time on is Texas because it's very special and unique and it's islanded, which means it's not really connected to the rest of the American grid.  And it also has a lot of renewables.  The Texas grid has probably more renewables overall than maybe any other major one, aside from possibly California.

Peter McCormack: Kind of ironic really.

Nic Carter: Well, it's just blessed with wind and solar.  Yeah, so you might say, "Well, Texas is this ruby red state, why did they have so many renewables?"  Well, there's big federal credits for building wind and solar, and it happens to be the best place in North America to have both wind and solar.  So, if you think about the map of where it's windy in America, it's mostly west of the Mississippi.  And if you think about where it's sunny, it's the Southwest.  So, West Texas is very abundant in terms of wind and solar, so you've got tons and tons of wind and solar built there.

They also built out this big transmission line, called CREZ, which basically all this renewable generation is pumped up along the line.  It's like back in the old days when you'd build a railroad and people would build cities next to the railroad; it's like that.  And so, they have some enormous percentage of their grid, which is wind and solar, and that meant that there are negative prices a lot, or zero prices, because they couldn't really get all of that generation to the parts of Texas where people are consuming energy: Dallas, Fort Worth, Houston, Austin, more of that Southeast part of the state.

When you have wind and solar, they're more intermittent, you're dependent on the weather.  So, it is useful to have industrial consumers of energy being able to dial down their energy at a moment's notice.  Bitcoin miners are very suited for this, more so than I would say any other industrial consumer, because they're fully interruptible, they can interrupt their whole process at a moment's notice without really suffering any significant losses, aside from just the opportunity cost; they can dial down their entire consumption, not just partial.  If you think about an aluminium plant, they can dial down a portion of their generation but it takes time, they need notice, and it takes time to get it back online too.

If you think about other industrial consumers of energy, think about a hospital, they can't dial down their consumption, people would die; an office building, they can't just turn off the AC, people would complain.  So, Bitcoin miners are very good at this.  The report kind of dismisses it though, because they say the Bitcoin miners are the ones responsible for higher load anyway, and so by modulating their load when there's a grid scarcity, they're not being that helpful, because they accuse Bitcoin miners of causing the grid scarcity in the first place.  So, they are very dismissive of this grid stabilisation.

I would say Bitcoin miners, they are able to produce unique -- and Shaun Connell would be the guy who I think is the best at this, I'm certainly not an expert on energy; they're able to uniquely create these products.  In Texas, they call them ancillary services, where they can be highly configurable and the grid operator can almost take control of the miner and their energy consumption and modulate it in real time to meet the grid objectives.

But you're right, we can't overstate it.  I would say it's useful and I hope that miners provide more clarity around the extent to which they're doing this.  They also get compensated for it.  So, when miners are voluntarily curtailing their usage, they opt into these programmes, and the grid operator says, "Hey, I need you to turn off your equipment for two hours", they do get paid for that.  So, it's like they're selling insurance to the grid.

That's another thing that people complain about, it's like, "How dare they get paid when there's a grid scarcity event?"  Well, it's because it makes sense economically to pay them to turn off so that everybody else can benefit.  So, these are formal programmes, they are set up by the grid operators themselves.  Miners are very good at taking advantage of them, they're very suited to do that; that's a good feature.  We need more flexibility in the grid as we have more wind and solar, for sure.

Peter McCormack: I'm assuming the report didn't do this, but are you aware of any actual feedback directly from the grid and what they think about miners?  Are they like, "This is amazing for us, this changes the game for us, this does help us"?

Nic Carter: The Texas grid, where I'd say this is the most advanced, they're very aware of mining.  They have Brad Jones, who's the former CEO, I think, of ERCOT, who has said favourable things about it, and in particular the grid stabilisation.  All that said, now they're feeling a little overwhelmed by the number of miners that came in and asked to be grid connected, and so there's also a degree of trepidation where they are worried about -- they've got something like 30 GW worth of requests.  Some of them are very speculative, not serious requests, but some of them are real.  So now they're wondering how they're going to support all of this.

Peter McCormack: Are there any other grids looking at this at all, any other grids which are working with miners, or is it just ERCOT?

Nic Carter: For a long time, the grids weren't really aware of them.  I think now they are learning from Texas.  And so, you will see more direct engagement between miners and the grid operators, and maybe they will be designing more of these demand response programmes.  But yeah, my understanding is that in the US, the Texas grid is the most engaged.

Peter McCormack: Is there a possibility that this becomes too successful in the US, and leads to too much hashrate being within the US and presents a different type of risk?

Nic Carter: So, there's maybe 30% to 40% of Bitcoin hashrate in the US.

Peter McCormack: That feels like that's grown very quickly.

Nic Carter: Yeah, the China ban really accelerated it, but hashrate is technically -- or, energy consumption is not growing right now, it's actually declining.  So, it peaked at around 15 GW, give or take, and now it's around 10 GW.  So, this is another thing that people get wrong.  The hash price, which is a dollar-weighted price of what a unit of hashrate is worth, it's gone down.  So, miners are actually less incentivised to buy a powerplant or something, they're less economically able to do that because their margins have been really challenged.

So, miners aren't the menace to the grids that people think they are, just because their economics have changed, because hashrate has come up and the price of Bitcoin has come down.  So right now, miners are not outbidding other consumers.  Miners are less willing to pay up for energy because hashrate's come up, price of Bitcoin has come down.  If the price of Bitcoin goes to $1 million overnight, yes, miners are going to start buying powerplants and outbidding everybody for energy and then they will be a grid menace; but right now it's the opposite, they're becoming more benign when it comes to the grid.

Peter McCormack: We've had a lot of conversations on the show about mining and energy, probably a bit skewed more towards the energy side of things, and there are a lot of discussions within Bitcoin with regards to this.  I think we're all, as bitcoiners, united in the idea that Bitcoin and mining is good for the grids and can support things such as grid stabilisation.  But there is a clash around the energy mix and specifically with regards to perhaps climate change goals.  So, that means there's been a clash with regards to renewables, there's been a clash with regards to e-waste from renewables, whether renewables have actually weakened the grids; and when you dig into it, often you can find, at both ends of the spectrum, misleading information or skewed information.

I'll just give you one example.  There was a thing, I think it's Epstein's book, he talks about birds that are killed by turbines, which is obviously terrible and nobody wants that.  But when you actually do the research on how many birds die, it's a very small amount compared to the ones that just fly into windows or into cars or into buildings; but there is this skew of information.  From your perspective, what do you see the role of renewables within the energy mix; and what's your perspective on all of it?

Nic Carter: I mean, to be very clear, I think climate change is real.  I was called a climate denier by one of the authors of the report, which is pretty funny.

Peter McCormack: I mean, I think that's unambiguous now.

Nic Carter: I think we have to do something about it.  I think what happens in China and India matters a lot more than what we do in America actually.  If you look at the emissions of the West, Europe and America, they're falling; we're actually doing a pretty good job overall.  What really matters is actually what China does.  They're building 50 coal-powered powerplants right now, more than the rest of the world combined.

So the fate of the planet is really a function of what the number one emissions-emitting country is doing, which is China.  And then it also matters about the emerging middle class in India and maybe Africa and Southeast Asia; it matters whether they're able to decarbonise, and that kind of gets lost in the debate a bit.  Europe on the margin is not going to change things, and the US?  Maybe a little bit, but basically our emissions profile is coming down.

Renewables are definitely key to the transition, but you can definitely overdo it and then score own goals basically, so that's what happened.  The demand for coal has totally surged in Europe recently.  They did lean heavily into renewables and arguably, at least in the short term, it hasn't been a huge success.

Peter McCormack: Do you blame renewables for that, or an overreliance on energy from Russia?  That seems to be the primary issue, because the transition to green energy has been pretty good in Europe.  I think Iceland is entirely renewable now; I think, is it Denmark has been so successful, they're actually exporting renewable energy to other parts of Europe; it feels like the transition was fairly successful.  But the main issue, there wasn't a plan B for energy sovereignty in a scenario where we are now, which credit to him, I think Donald Trump pointed out to Germany.

Nic Carter: He did.  I mean, you have to do it in a realistic way.  So, I would argue their transition was unrealistic, because the premise was, "Cheap Russian gas will feed our industrial sector", and so the Germans turning off nuclear, you know, the Greens totally anti-nuclear in Germany, and Belgium just turned off a nuclear plant; that is the kind of stuff that's unforgiveable, in my view.  Yes, it's all well and good to build a lot of wind turbines and solar and stuff like that, even let's say Germany's not very good for wind and solar, but you have to do it in a realistic way; you have to have insurance, you have to have backup, and now they're going to take a step back.  The emissions intensity of Europe is going to go up.

In this country, I think there have been enormous federal subsidies for wind and solar and I think it is possible to overdo it, because the model of the grid generation is changing, where you have more intermittency, more weather reliance, as opposed to conventional generation, which is just very predictable.  And you will run into trouble if you have too much intermittent generation without enough batteries, for instance.  And it's sort of an open question as to whether we have even enough raw materials to build all those batteries; and there's an open question, "Is our supply chain now way too dependent on China?" so have we now surrendered our energy sovereignty.  Initially, we were dependent on the Middle East for oil and things like that.  Now that say we go super-renewable, are we now just dependent on China?

So, I think you do have to decarbonise.  Actually, the main thing that helped us decarbonise in the US over the last decade was natural gas, replacing coal generation with natural gas, and that's been a big success.

Peter McCormack: Going back to the report, let's talk about where it was particularly weak.

Nic Carter: I mean my main issue -- and I heard that they were surprised that I dug into the footnotes, which is like, how can you expect that I wouldn't read the footnotes?  My main issue is their reliance on sources which are not academic sources.  So, they cite de Vries something like 26 times in the report.  This guy's an anti-Bitcoin activist, he's not an academic.  He sometimes publishes stuff in journals, but he publishes in the commentary section which is not peer-reviewed.  So, it's like publishing a blog post and then just getting it hosted on the journalist's page.  It's a classic tactic that he uses, and people like him, to get press coverage, so that the press thinks it's academic, but it's not.

Peter McCormack: Do we know his incentives?

Nic Carter: Well I believe he still literally works for the Dutch central bank, but I don't think they're paying him to FUD Bitcoin or anything, I think the guy just hates Bitcoin.  It's like any of us; we support Bitcoin and so we do things outside of an economic incentive, we just have an ideological incentive.  I think it's the same for this guy.  He's clearly not interested in the truth because he never arrives at the truth.

Peter McCormack: Can you look up some of his stuff?

Danny Knowles: Yeah.

Peter McCormack: Does he have his own blog?

Nic Carter: It's Digiconomist.

Peter McCormack: And is it an anti-Bitcoin blog?

Nic Carter: Well, effectively yes.

Peter McCormack: What does he write about Ethereum's sustainability?

Nic Carter: He was pretty negative on Ethereum too, at least until the merge.

Peter McCormack: Dogeconomist?

Nic Carter: Yeah, so it used to be called The Dogeconomist and he was a Dogecoin blogger, and then he rebranded it as Digiconomist.

Peter McCormack: Oh, so he got rekt on Dogecoin rather than buying Bitcoin.

Nic Carter: This 72 Mt estimate, it's just not true.  If you compare it to the recent Cambridge report, Cambridge is much more rigorous, they're much more skilled.

Peter McCormack: Okay, so we'll just explain to people listening.  We're on digiconomist.net, so if you're not on the YouTube, we're on his website.  There's the Annualised Total Bitcoin Footprints, he's got the Carbon Footprint of 72.20 Mt -- what is Mt?

Nic Carter: Megatons.

Peter McCormack: Megatons of CO2, "Comparable to the carbon footprint of Turkmenistan". 

Nic Carter: All three of these are wrong, by the way.

Peter McCormack: How far wrong is that carbon footprint?

Nic Carter: So, go to the cbeci.org.  So, Cambridge just came out with an estimate, which is better.  I think their estimate is like half of that from the carbon footprint.

Peter McCormack: Is the carbon footprint increasing?

Nic Carter: It's decreasing right now because of Bitcoin's hashrate.  So, Cambridge just came out with -- yeah, go to the Greenhouse Gas Index on the left there, and their estimate is 53 Mt, so it's much less.

Peter McCormack: So, he's about 45% wrong.

Nic Carter: And keep in mind this is actually a conservative estimate from Cambridge, because they don't know directly what the miners are doing exactly.

Peter McCormack: Okay, that's the chart below, Danny.  Can you just click on that?  Yeah, so it is kind of trending up.

Nic Carter: Well, right now, Bitcoin's energy consumption is basically going down, because miners are going out of business because the price of Bitcoin is low.

Peter McCormack: Of course, because of the bear market.  But cycle-wise, it's kind of trending -- I don't know actually, look…

Nic Carter: Keep in mind, this is riven with its own data problems.  The reason it's so volatile is because the miners left China, and then there was the seasonal variation in China, so it went from hydro to coal to hydro.  I would say this should also be caveated heavily, because they don't have the direct data from the Bitcoin miners, but this is still a much more rigorous estimate than de Vries.

Peter McCormack:  I mean, if this was the source, you would trust it more.

Nic Carter: I would say this is a reasonable estimate.  De Vries comes in way high, but de Vries, his estimate is what gets cited in this report.  Now granted, this Cambridge Index didn't exist at the time that the report was written, but it just goes to show the US Government is citing bad data.  The better data that we have shows that de Vries is way off.

Peter McCormack: Danny, can you go back to Digiconomist?

Danny Knowles: Yeah.

Nic Carter: And also, I would note Cambridge is citing a lower estimate for just energy consumption too, much less.

Peter McCormack: So, it's 130 TW from de Vries.

Nic Carter: Go to the CBI Index.  105 TWh.

Peter McCormack: It's closer.  And then the e-waste, what's that?  40.79.

Nic Carter: So, Cambridge doesn't have an estimate for e-waste.  This number is a fiction, it's completely made up, and I can explain in detail why.  So, he did this paper where he says, "All Bitcoin ASICs, all the hardware, gets trashed every 1.3 years".

Peter McCormack: Okay, so we know it's at least five years.

Nic Carter: Yeah, so where does he get this number from?  He gets it from a law, called Koomey's Law, which is a number about the efficiency of computers growing over time.  It's not a Bitcoin-specific observation, it's just a very general observation around computing.  He misapplies it to Bitcoin.  He just assumes the Bitcoin miners throw out their machines every 1.3 years; completely false, it's more like 5 years, and they don't really throw out the machines, they either get them refurbished or they recycle them.  Machines are mostly made of aluminium.

Peter McCormack: I mean, I sold all my S9s, what was it, about 18 months ago?

Danny Knowles: Yeah.

Nic Carter: There's typically a willing buyer, so you just sell it on to someone else that maybe has cheaper access to electricity.  We know from looking at the blockchain, there's ways to estimate it.  You know that S9s were active in 2021.  That's six years after they first came out.  So, his estimate of e-waste, the whole thing relies on the assumption that the whole fleet of ASICs is junked every 1.3 years, which is just completely incompatible with reality!

Peter McCormack: Well, yeah.  So, this is what shows to me that he's an idiot, because anybody who does single Bitcoin transaction footprints, which we know -- I know right now, without even looking into it, he's doing it on single basechain transactions.

Nic Carter: I mean, these numbers are basically even more fictitious than the numbers above that he's basing these estimates on.

Peter McCormack: But not only are his numbers fictitious, but they don't actually take into account Lightning Network.  Look, all the things we know about, all the things we know, anybody who talks about the energy usage or number of transactions per second, based on basechain, already know they're an idiot, they haven't done the basic research.  But I guarantee he's been told this and he believed it.

Nic Carter: Well, so the guy, he's the guy that's responsible for this poor transaction energy estimate, he pioneered this horrible data point.  It's not that he's ignorant; he's malicious.  What's the law,  "Always assume ignorance, rather than malice"?  Not the case here.  We know that he knows better because he's been told many times.

Peter McCormack: But he chooses to ignore it.

Nic Carter: Yeah.  So for instance, a Bitcoin transaction can contain many thousands of outputs.  He doesn't take that into account of course.

Peter McCormack: Yeah, of course.

Nic Carter: Bitcoin transactions are not really associated with energy anyway.  The energy consumed by Bitcoin is more due to the issuance, it's not about the transactions, so the metric doesn't even make sense.  The e-waste part is completely preposterous in two ways: the first estimate is wrong; and also, Bitcoin transactions don't cause e-waste to occur.  An ASIC doesn't depreciate because it made a transaction.  It's not like the ASIC processes a transaction then parts of it fall off; that's just a completely insane thing to posit.

Peter McCormack: And also, you are using Bitcoin by not spending it sometimes.  A great example would be, again I've brought them up a few times recently, because I met Sam Abbassi, but Hoseki; do you know Hoseki?

Nic Carter: We're investors.

Peter McCormack: Oh, great, okay.  Yeah, we had Sam on the show.

Nic Carter: That's great.

Peter McCormack: He also came to Bedford.  But if anyone doesn't know them, they're solving the problem whereby if you've got Bitcoin collateral and maybe you want to buy a house and you want to use that as proof of your financial position, you don't have to actually send them the xPub or the zPub, you can just prove it.  But that's actually a usage, so you're using it while not creating a transaction.  So, it's much more nuanced than people like this fucking idiot don't consider.

Nic Carter: And I don't want to unnecessarily dump on de Vries --

Peter McCormack: I do!

Nic Carter: -- but the reason that it's important than we explain why he's totally wrong on this is because the US Government is citing him as an authority, which is bananas.

Peter McCormack: Yeah.  And that makes me wonder again what their intentions were.  Did they write the conclusion before they wrote the report, which I suspect probably is something that happened?

Nic Carter: So, yeah, I'm mixed on the ignorance versus malice thing for them.  I think they may have just been lazy, and they're like, "Yeah, we'll pick the first few results on Google Scholar and go for that".  Yeah, Digiconomist is not a reliable source, it's not something I would expect to see in a serious academic publication, so I think it's embarrassing.

Peter McCormack: But does the US Government ever produce serious academic publications, or is this consistent with everything they do?

Nic Carter: I mean, this is the Office of Science and Technology Policy.  It's basically the mouthpiece of the White House; you would expect them to have a high standard of rigour.

Peter McCormack: You would hope, but historically any government department, it doesn't matter whether that's in the UK or here, I think tends to recruit a lower standard of employee.

Nic Carter: Sure, yeah.  I mean, I don't really know who wrote it.  All I'll say is, if I was a college professor and I had assigned this paper --

Peter McCormack: Would it get an F?!

Nic Carter: -- and a student turned it into me, I would fail them, because it's not academic.  It's like they're relying on -- it's not like they're relying on Wikipedia, they're relying on sources that aren't good enough for Wikipedia.  If you check the Bitcoin Wikipedia page, Digiconomist was proposed as a citation and it didn't get in, it didn't meet Wikipedia's own standards.

Peter McCormack: Which are pretty low; it's a low bar!

Nic Carter: Right.  Good enough for the US Government, not good enough for Wikipedia.

Peter McCormack: Yeah, okay.  Can you talk to me about the Mora et al paper, and you say that cited our friend?

Nic Carter: This is just another shocker.  I think in my blog, I said something, "It's like you're reading an official report on space exploration and there's a link to a conspiracy website that says the Moon landing was faked".  This is on that level of crazy.  It's insane to me that the US Government cited Mora et al.  And probably, if they were to listen to this and respond, they would say something like, "Oh well, it was just a straight citation, it wasn't the cornerstone of the report".  It doesn't matter, it's discrediting, don't cite crazy conspiracy nonsense.

Danny Knowles: I think they'll be loads of people listening that don't know what Mora et al is.  Can you explain what that report was?

Nic Carter: You're telling me not everyone knows Mora et al 2018?  It's one of the most vexatious papers that's ever been written about Bitcoin's energy consumption.  Basically the title is something like, "Bitcoin's going to cause the world's climate to warm by 2°C"; obviously false.  It was a paper written by undergraduates of the University of Hawai'i as part of a class exercise in how to get a paper published.  The guy, Camilo Mora, was the professor; he didn't write any of the paper, his students wrote it.

Peter McCormack: What age students?

Nic Carter: Undergraduate, so I don't know what age.

Peter McCormack: Is that like 18 to 20?

Nic Carter: Yeah, 18 to 21.  The paper itself is crazy, so very briefly, it says that they follow the same Digiconomist model of energy transactions, that transactions have a payload of energy, which is not how it works.  And then they say they expect Bitcoin will follow an adoption curve whereby there's hundreds of billions of transactions per year, which is really not possible for Bitcoin, obviously.  Then they combine these two premises and say, "These hundreds of billions of transactions are going to carry all these kilowatt hours of energy, and so it's going to consume X amount of energy and that's going to cause all these emissions and that's going to warm the Earth by 2°".

Peter McCormack: So, it's very bad maths?

Nic Carter: The model isn't a model resembling Bitcoin.  It's like someone is creating a model of a house and they're actually describing a cow!  There's no resemblance between the model they posit of Bitcoin and Bitcoin.  So, they get this crazy implausible result, but the US Government cites it, and it's just so irresponsible.  It's an immediate sign to me that they didn't read the paper that they're citing, and just that they have super-low standards.

So, I find it very vexatious, because that Mora et al doesn't get cited by most academics that are writing about this; they know that it's a crazy paper.  If you go to the paper website on nature.com, you'll see there's three rebuttals on the front page, right there, published in the same journal.  So the journal even admits, "Hey, guys, you should probably read these three rebuttals; the paper's not sound", but they didn't bother, probably, going to the actual paper page on nature.com.

Peter McCormack: I can't believe we didn't ask Nate about that.

Nic Carter: I mean, he had the first-hand experience with that.

Peter McCormack: Okay, anything else before we start talking about their recommendations; anything else that was particularly…?

Nic Carter: Well, one of the things that really bothered me was, as I said, they admit that Bitcoin miners are helping grid flexibility and grid stabilisation, but they immediately write it off by saying, "Well, Bitcoin miners are causing this extra demand".  But what they don't understand is, having demand for power is good.  That means there's an economic subsidy to build new power.  We know the Bitcoin miners are causing the construction of new power, they are helping with the economics of renewables, such that renewables that might not be economical now are economical.  So, that's causing there to be more renewable power in existence than otherwise.

We know there are Bitcoin miners which have their specific mandate, which is to induce the construction of new renewables, specifically Aspen Creek.  I'm an investor, but this is their specific model.  They only operate if they can add power to the grid, clean power.  So, this is a Bitcoin miner that is specifically causing new power to be added to the grid.  So, the US Government is operating out of the zero-sum assumption, where there's no new supply contributed by Bitcoin; but that's a false assumption.

The existence of Bitcoin as this buyer of all these pockets of energy that might be stranded, or buyers of wind and solar energy that's not being monetised, that means there's more energy overall.  So, they're causing more supply to come into existence; they don't acknowledge that; that's a huge oversight in my mind.

The other thing that really bothered me was, they have this "can't win" approach basically.  They say, "Well, it doesn't matter the Bitcoin miners are using renewables, because all it means is that other users of renewables, now they're just pushed out of that power and they're just going to use coal or natural gas", so they call that "leakage", which is a horrible term.  So basically, they're dismissing the fact that Bitcoin miners are making a concerted effort to locate next to renewables and use those renewables because they're basically saying, "In our zero-sum scarcity mindset world, there's only a fixed amount of renewables, so it doesn't matter that you're consuming renewables".

They basically lay out an extremely narrow set of conditions under which Bitcoin miners could validly consumer energy, which is a crazy, impossible standard to meet, and it's not a standard that I see any other industry being subjected to.  So, the US Government doesn't go to some manufacturing industry and say, "Hey, guys, you have to use renewables, but you have to be additive with renewables, and you need to make sure that you're not using up scarce, renewable power that someone else might be using"; that doesn't happen. 

So, they're just laying out this crazy, impossible standard, which is why I say it's a can't-win approach; because even when miners are doing everything they can to be as clean and as sustainable as possible, the US Government doesn't give them any credit for that.  So that was to me the most irritating part of the report.

Peter McCormack: What, in terms of the recommendations, did they make; and is any part of that did you think, "Okay, that's productive", or is it all complete junk?

Nic Carter: Well, kind of vague.  So, one thing they said they want was they wanted more transparency from miners, which I completely agree with.  I've been involved in the Bitcoin Mining Council -- by the way, they didn't cite it at all, which is fine, I guess, if you think it's an industry group so you don't believe the data.  But they're citing --

Peter McCormack: Anti-industry.

Nic Carter: Exactly.  They're citing anti-proof-of-work lobbyists.  We didn't touch on it, but business academics that have this crypto carbon rating institute and they are funded by proof-of-stake protocols to create ESG reports for these proof-of-stake protocols, so obviously they're anti-proof-of-work biased.  So, the US Government is citing them, they're not citing any pro-Bitcoin industry groups, so it's completely unbalanced.  I forgot, what was the question?

Peter McCormack: What recommendations did they make, both positive and ridiculous?

Nic Carter: Oh yes, so they do ask for more transparency, which I agree with, we're on the same page.

Peter McCormack: Yeah, I would agree with that.

Nic Carter: I think Bitcoin miners, especially publicly traded ones, if you're a publicly traded company, by law you have to be transparent.  It's just that the security disclosures that you make don't pertain that much to your energy consumption.  So, I think miners should just be proactive and do it, basically, because right now they're not getting the message out about what kind of power they're using. 

The other recommendations were basically, "Congress should think about banning this", which would be very counterproductive.  As I said, it would just mean that miners elsewhere would be empowered, and overall Bitcoin emissions' footprint would go up.  So, that I obviously disagree with.

Peter McCormack: If there was a recommendation to ban it and it went to Congress, my assumption is, it's got more of a chance under a Biden Administration than, say, a Republican Administration, because there'd be enough Republicans within states like Texas to block this?

Nic Carter: Yeah, I mean the midterms are coming up, and the Republicans are almost certainly going to win the House and they might win the Senate.  So, this legislation wouldn't likely pass under those conditions.

Peter McCormack: Just for a tourist, can you explain the midterms and what that actually means?

Nic Carter: Well, just Congress is turning over, it's a lot of seats in Congress that are up for election.  Right now, it's fully blue, so the Senate is Democratic controlled, albeit it with a slim margin; the House is Democratic control; and the Presidency, obviously, is a Democrat.  So, that's why they've been able to pass legislation that they want.  In a few months' time, it will likely be divided, so the Presidency will still be a Democrat, but Congress at least one House of Congress, and they have to pass both Houses for a bill to pass, will be Republican.  So they won't be able to pass anything that's super-sweeping, hyper-progressive; and enough Republicans are pro-crypto that I think we would basically be safe at that point.

Peter McCormack: Yeah, so that goes back to the point that we need progressives to realise that Bitcoin is actually a progressive idea.

Nic Carter: They are.  Ro Khanna, for instance, is one really good example, super-progressive out in California, but he's pro-Bitcoin as well.

Peter McCormack: And Gillibrand's closer?

Nic Carter: Yeah.  I mean, there's others, like Darren Soto, there's plenty of Democratic allies that are working with Cynthia Lummis on stuff, on pro-crypto stuff, which is really interesting.

Peter McCormack: What can bitcoiners do to respond to this, to help, to support?

Nic Carter: I'm not going to sit here and claim that all Bitcoin miners are perfectly sustainable, they're not.  In fact, some of them are really not.  Some of them have committed PR own goals.  For instance, Marathon using the Hardin powerplant up in Montana, it's a coal plant, if you look at the 2,000 most polluting generation plants in North America, the Hardin plant is like 17th on the list of highest emissions per unit of energy created.  So, it's crazy that they basically activated that to mine Bitcoin with.

Peter McCormack: Marathon always seems to do stupid shit.

Nic Carter: I think if you're a visible, large, public Bitcoin miner, activating a coal plant that's super-dirty is a crazy thing to do; it's probably going to hurt you in the long run, even if the power is cheap.  So, I think Bitcoin miners should continue pushing to be sustainable, they should be transparent about what they're doing.  A lot of them are doing impressive work in terms of identifying the chain of renewables; in terms of opting into these demand response programmes; in terms of actually inducing the construction of renewables, they should talk about that.

Peter McCormack: What's going on with the Bitcoin Mining Council, because it kind of hit with a bang, there was a lot of work being done, some good Twitter Spaces.  I feel like I haven't heard from them much.  Has it quietened down, or is it I've just not noticed it?

Nic Carter: They do quarterly disclosures and according to them, the numbers are fairly good.  However, I found it to be a little black-boxy, so they just haven't been very detailed in terms of the data they're disclosing.

Peter McCormack: Do you think this work would be better done by somebody like the Bitcoin Policy Institute?

Nic Carter: I think what we need is either Cambridge to increase their efforts, because Cambridge did get cited in this report, because they actually are a non-partisan academic.  They didn't get cited enough, but they were cited.  We need them to reinforce their efforts and do more; or, we need alternatively other academic centres to get spun up and start to intermediate this, so talk to Bitcoin miners and help them disclose what their energy mix is.  I'm sure a lot of Bitcoin miners want to do this or would do this, but there's not the right venues to distribute it.

The US Government's not listening to the industry.  They didn't cite any BMC data whatsoever.  So, it's a big loss for the BMC, because they do all this work and the government didn't acknowledge it at all.  So, what we need are non-partisan groups, maybe lobbyists or the think tanks, like the Bitcoin Policy Org, would be suitable or useful there.  But I think what we really need is just entities that have no specific bias or mandate, that aren't even industry affiliated, that are servicing this data.

Peter McCormack: I wonder if we could tempt FREOPP into it?  I like the work that Avik Roy does, talking about raising up economic opportunity for those who need it most.  I think we've got a show out with him today.  I wonder, because they've talked about Bitcoin loosely, they've talked about closing the wealth gap; and I wonder if there's something they can do with explaining the benefits of Bitcoin.

Nic Carter: The burden is kind of on us to be transparent or clear about this.  We're not going to get Chinese or Kazak miners to dox themselves, or whatever; but more hashrate than ever is in lit western markets, more hashrate than ever is publicly traded.  The biggest miners in the world will probably also do a listing soon.  So, there is a better environment for this knowledge to be distributed than ever, but we're not doing a good job of it.  I think if we did a better job, it would be harder to issue talking points like this.  But we do need more detailed data, because really there's a data gap in this debate.  And where that gap exists, people like de Vries fill the gap.  You don't want de Vries to be filling your gaps.

Peter McCormack: Agreed.

Nic Carter: Some people asked me if I wanted to confront the authors of this report, or whatever.  I don't really even care to talk to them, to be honest.  My objective was to show that we, as bitcoiners, have a better understanding of this debate than they do, and I think I've proved that with this.  I mean, there are a lot of claims that are false.  If you look at the Pinocchios, it's covered in Pinocchios!  Even one of the first paragraphs bothered me so much, and it had ancillary claims that they didn't need to lie about, but they did.

That said this one thing.  Just for background context, they said, "There's X many billion in climate-change-related disasters this year", so I followed the link, and the link goes -- yeah, right there!

Peter McCormack: Three Pinocchios.

Nic Carter: So, I gave them three Pinocchios.  So they said, "Climate change is expensive: in 2021, it cost the US $145 billion".  You go to footnote 5, you follow the link, it's right at the end of the document, it's all the way at the bottom.  It's a document that says these are weather disasters.  So, there's a big difference between climate and weather.  These are not disasters -- it's a whole thing to go through it.

So, this is actually a government source too, so it's crazy that they got this wrong.  This is a figure tallying up all of the weather-related disasters.  Now, you can't attribute those all to climate, maybe some, but you can't attribute all weather events in the US to climate change.

Peter McCormack: Of course you can't.

Nic Carter: So, it's just a stupid thing to lie about.  Why would they lie about that?

Peter McCormack: Lie or lazy?

Nic Carter: Either, but there's a huge difference between the two.  I mean, maybe some smart scientist would be like, "Look, weather is 30% worse than ever because of climate change", but that's not what they're doing.  They're just attributing all weather events to climate change.  So, it's stupid stuff like that, which is like, "Why; why do that?"  So, yeah, my whole objective here was just to really meticulously go through their document and show that they don't have a better command of the facts that we do; they're relying on bad data; they're relying on bad sources and academics; and they should do better basically, and I hope they take that to heart.

Peter McCormack: And if people want to read your responses, it's niccarter.info?

Nic Carter: Yeah, it's all there.  And the annotated document, I don't even know if I would bother with it.  But the point is just to grade it like it's an academic exercise.

Peter McCormack: Fantastic, great work, Nic, appreciate you coming on and explaining this to everyone else and doing the work again.  I know you've had an interesting time in the last few months, but I think you're one of the most important people in Bitcoin and I love talking to you and I really appreciate everything you're doing to support the industry.  Keep going and whenever we're back here again, I'm sure we'll find an excuse to talk to you again.  Keep going, man.

Nic Carter: Thanks, Peter.